U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _______
Commission file number 0-26705
GOLDSTATE CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0354425
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
3305 Spring Mountain Road, Suite 60
Las Vegas, Nevada 89102
(Address of Principal Executive Offices)
(888) 228-5526
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No ___
<PAGE>
Check here if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this Form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State the issuer's revenues for its more recent fiscal year (ending
December 31, 1999): $ -0-.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity, as
of January 31, 2000: $721,503.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the most practicable date:
Class Outstanding as of March 22, 2000
Common Stock, $.0003 par value 14,131,500
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
Goldstate Corporation, which currently trades on the OTC Bulletin Board
under the symbol "GDSA" (referred to in this Form 10-KSB as "GDSA"), is
primarily engaged in the business of exploration of gold and precious metals in
the United States. In 1996, GDSA was incorporated under the laws of the State of
Nevada under the name Image Perfect Incorporated to conduct a marketing and
public relations business involving greeting cards, gift items and paper
products. On December 12, 1996, the corporate name was changed to Dynacom
Telecommunications Corporation and the business focus was redirected to the
finance and purchase of ownership interests in telecommunication companies that
installed and operated wireless telecommunication systems in Africa, the Middle
East, and countries in the former Soviet Union. During late 1997, control and
management changed, the corporate name was changed to Goldstate Corporation, and
the primary business focus was redirected to the exploration of gold and
precious metals in the United States.
GDSA owns fifty-one percent (51%) of a future profit sharing interest in
profits to be realized from the exploration of 439 unpatented lode mining claims
located in Lincoln and Gooding Counties, in south-central Idaho (the "Blackhawk
II Property"). GDSA is considered to be in the exploration stage without any
assurance that the Blackhawk II Property contains a commercially viable mineral
deposit (a reserve).
Business of GDSA
GDSA holds possessory title to 439 contiguous unpatented lode mining claims
on the Blackhawk II Property and owns fifty-one percent (51%) of a future profit
sharing interest in profits to be realized from the exploration of the 439
unpatented lode mining claims on the Blackhawk II Property. GDSA entered into a
joint venture agreement with Intergold Corporation, a Nevada corporation
("IGCO") and its wholly-owned private subsidiary, International Gold
Corporation, a Nevada corporation ("INGC"), pertaining to the joint exploration
of gold and silver on the Blackhawk II Property (the "Joint Venture Agreement").
The Joint Venture Agreement was entered into primarily to utilize, maximize
and enhance the complementary exploratory technologies of GDSA and IGCO. Under
the terms of the Joint Venture Agreement, GDSA paid $100,000 for reimbursement
of previously incurred expenses and issued 1,000,000 shares of its restricted
Common Stock to IGCO in exchange for the purchase of the future profit sharing
interest in profits. Pursuant to the terms of the Joint Venture Agreement, GDSA
is to conduct work programs involving exploration of the mining claims on the
Blackhawk II Property in the minimum annual amount of $250,000 for each calendar
year, which commenced January 1, 1998 and continuing through the year 2000. GDSA
is also to be the operating partner, contribute all future capital requirements,
and be responsible solely for all project funding. In consideration, GDSA is to
receive eighty percent (80%) of all net profits realized from the joint venture
until its invested capital is repaid, and IGCO and INGC are to receive twenty
percent (20%) of the net profits realized from the joint venture. After the
invested capital of GDSA has been repatriated, GDSA is to then receive fifty-one
percent (51%) of the net profits realized from the joint venture, and IGCO and
INGC are to retain forty-nine percent (49%) of the net profits realized from the
joint venture.
During fiscal year 1999, management of GDSA intended to begin geological
survey of the Blackhawk II Property by an initial mapping of the area for
exploration. Management further intended to make preliminary investigations for
property exploration on the Blackhawk II Property in the following areas: (i)
claims maintenance, (ii) preliminary consulting reports and metallurgical study,
(iii) regional exploratory drilling and surface sample assay testing.
<PAGE>
INGC, on behalf of IGCO, and AuRIC Metallurgical Laboratories, LLC, of Salt
Lake City, Utah ("AuRIC") had entered into an Agreement for Services dated March
18, 1999 (the "Agreement for Services") whereby AuRIC agreed to perform certain
services, including the development of proprietary technology and know-how
relating to fire and chemical assay analysis techniques and metallurgical ore
extraction procedures developed specifically for the exploration of properties
of IGCO.
INGC, on behalf of IGCO had also retained the services of Dames & Moore, an
internationally recognized engineering and consulting firm ("Dames & Moore") to
provide validation audits of each major step of the assay procedures conducted
by AuRIC. In November of 1998, according to independent testing conducted by
Dames & Moore, Dames & Moore validated AuRIC's fire assay and parallel chemical
leach procedures as a method to verify the existence of mineralization. The
positive outcome of the testing program conducted by Dames & Moore formed the
subject of a November 30, 1998 and subsequently dated reports regarding IGCO's
properties. Dames & Moore verified the fire and chemical assay techniques and
procedures developed by AuRIC and their repeatability.
AuRIC and Geneva Resources, Inc., a Nevada corporation ("Geneva") entered
into a Technology License Agreement dated March 17, 1999 (the "License
Agreement") whereby AuRIC agreed to supply the proprietary technology to Geneva
and grant to Geneva the right to sub-license the proprietary technology to GDSA
for use on the Blackhawk II Property. Therefore, GDSA and Geneva entered into a
Technology Sub-License Agreement dated March 18, 1999 (the "Sub-License
Agreement") whereby GDSA acquired from Geneva a sub-license to utilize AuRIC's
proprietary information and related precious metals recovery processes to carry
out assay testing and chemical leach analysis of core samples derived from any
subsequent drilling on the Blackhawk II Property.
Pursuant to certain contractual terms and provisions, AuRIC and Dames &
Moore have not been successful in transferring the proprietary fire assay
technology to Geneva or to any independent third party assay laboratory.
Therefore, on September 27, 1999, Geneva and INGC, on behalf of IGCO, initiated
legal proceedings against AuRIC for multiple breaches of contract stemming from
the Agreement for Services and the License Agreement and against Dames & Moore
in a declaratory relief cause of action. See "Item 3. Legal Proceedings".
Subsequent to initiation of legal proceedings against AuRIC and Dames &
Moore, during November 1999, IGCO engaged the services of Strathcona Mineral
Services Limited ("Strathcona") to review the available data from AuRIC and
Dames & Moore and provide independent assay and metallurgical recovery testing
relating to IGCO's properties. Strathcona engaged the laboratories of Lakefield
Research and Activation Laboratories for testing and analysis. Strathcona
reported that both laboratories could not find gold above the minimum detection
limits in the samples, and concluded that based on the samples provided, gold
and silver were not present in economic quantities on IGCO's properties.
During November 1999, IGCO also engaged Mineral Science, Limited of London,
England ("Mineral Science"), which obtained the services of the internationally
recognized facilities of OMAC Laboratories Ltd to provide fire assay and
geochemical analysis and CSMA Consultants Ltd. to perform leach testing on the
properties of IGCO. The results obtained from Mineral Science confirmed and
reiterated the negative findings of Strathcona, that gold values were below the
detection limits on the properties of IGCO.
<PAGE>
Due to the litigation, there have been delays in the transfer of technology
under the Sub-License Agreement between GDSA and Geneva. There is a chance that
the transfer of technology under the Sub-License Agreement may never occur, or
at a minimum, will be delayed pending the outcome of the litigation described in
"Item 3. Legal Proceedings".
As of the date of this Annual Report, management of GDSA has suspended
exploration of the Blackhawk II Property indefinitely due to (i) the independent
assessment information from Strathcona and Mineral Science which does not
support the assay and metallurgical recovery testing results of AuRIC and Dames
& Moore, (ii) the existence of multiple breaches of contract by AuRIC under the
Agreement for Services and License Agreement, (iii) the ensuing litigation
against AuRIC and Dames & Moore. Furthermore, management of GDSA and IGCO are
currently involved in negotiations regarding the temporary suspension of GDSA's
obligations and duties under the Joint Venture Agreement until resolution of the
litigation against AuRIC and Dames & Moore, (iv) the rock type of GDSA's
Blackhawk II claims is thought to be similar to that of INGC's and IGCO's
Blackhawk claims and without the alleged assay and metallurgical recovery
technology allegedly developed by Auric and confirmed by Dames & Moore, GDSA
deems the probability of commercial grade gold or silver located in the
Blackhawk II claims to be nil at the current date, and (v) the transfer of the
alleged assay and metallurgical recovery technology allegedly developed by Auric
and confirmed by Dames & Moore and to be obtained by GDSA under the Sub-License
Agreement with Geneva is delayed at minimum, and may not ever be transferred.
Management of GDSA and IGCO are currently involved in negotiations
regarding the temporary suspension of GDSA's obligations and duties under the
Joint Venture Agreement until resolution of the litigation against AuRIC and
Dames & Moore.
New Business Endeavors
Management of GDSA has currently been undertaking research relating to
prospective new business endeavors and possible new acquisitions. This research
may result in GDSA entering into business operations that are not in the
minerals exploration field.
ITEM 2. PROPERTIES
Except as described above, GDSA does not own any other real estate or other
properties. GDSA leases office space and its offices are located at 3305 Spring
Mountain Road, Suite 60, Las Vegas, Nevada 89102.
ITEM 3. LEGAL PROCEEDINGS
On September 27, 1999, Geneva and INGC, on behalf of IGCO, initiated legal
proceedings against AuRIC and Dames & Moore by filing a complaint in the
District Court of the Third Judicial District for Salt Lake City, State of Utah.
INGC and AuRIC had entered into the Agreement for Services whereby AuRIC
agreed to perform certain services, including the development of proprietary
technology and know-how relating to fire and chemical assay analysis techniques
and metallurgical ore extraction procedures developed specifically for
properties of IGCO. Dames & Moore subsequently verified the fire and chemical
assay techniques and procedures developed by AuRIC, their repeatability, and
confirmed preliminary metallurgical recovery testing. Geneva and AuRIC thus
entered into the License Agreement whereby AuRIC agreed to supply the
proprietary technology to Geneva and grant to Geneva the right to sub-license
the proprietary technology to GDSA for use on the Blackhawk II Property. GDSA
and Geneva simultaneously entered into the Sub-License Agreement whereby GDSA
acquired from Geneva a sub-license to utilize such proprietary information and
related precious metals recovery processes on the Blackhawk II Property.
<PAGE>
On September 27, 1999, Geneva and INGC, on behalf of IGCO, initiated legal
proceedings against AuRIC for: (i) multiple breaches of contract relating to the
Agreement for Services and the License Agreement, respectively, including, but
not limited to, establishment and facilitation of the proprietary technology and
fire assay procedures developed by AuRIC at an independent assay lab and failure
to deliver the proprietary technology and procedures to IGCO, Geneva and Dames &
Moore; (ii) breach of the implied covenant of good faith and fair dealing; (iii)
negligent misrepresentation; (iv) specific performance, (v) non-disclosure
injunction; (vi) failure by AuRIC to repay advances, and (vii) quantum
meruit/unjust enrichment. INGC, on behalf of IGCO, also named Dames & Moore in
the legal proceeding in a declaratory relief cause of action.
On October 8, 1999, Geneva and INGC, on behalf of IGCO, amended the
complaint by naming as defendants AuRIC, Dames & Moore, Ahmet Altinay General
Manager of AuRIC, and Richard Daniele, Chief Metallurgist for Dames & Moore and
specifying damages in excess of $10,000,000. The damages sought by Geneva and
INGC, on behalf of IGCO, are based on the general claims and causes of action
set forth in the amended complaint relating to reliance on the assays and
representations made by AuRIC, the actions and engineering reports produced by
Dames & Moore and, specifically, the negligent misrepresentations and
inaccuracies contained within some or all of those Dames & Moore reports and
breaches of contract by AuRIC and Dames & Moore.
Geneva and INGC, on behalf of IGCO, are currently pursuing all such legal
actions and reviewing further legal remedies against AuRIC and Dames & Moore.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of GDSA's shareholders through the
solicitation of proxies or otherwise during fiscal year ended December 31, 1999.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Goldstate Corporation's common stock is traded on the OTC Bulletin Board
under the symbol "GDSA". The market for GDSA's common stock is limited, volatile
and sporadic. The following table sets forth the high and low sales prices
relating to GDSA's common stock for the last two fiscal years. These quotations
reflect inter-dealer prices without retail mark-up, mark-down, or commissions,
and may not reflect actual transactions.
<PAGE>
FISCAL YEARS ENDED
------------------------------------------------------------
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------------------------------------
HIGH BID LOW BID HIGH BID LOW BID
------------------------------------------------------------
First Quarter $0.210 $0.135 $0.69 $0.25
Second Quarter $0.312 $0.125 $0.70 $0.35
Third Quarter $0.150 $0.090 $0.38 $0.15
Fourth Quarter $0.090 $0.001 $0.23 $0.14
Holders
As of January 31, 2000, GDSA had approximately 37 shareholders of record.
Dividends
No dividends have ever been declared by the board of directors of GDSA on
its common stock. During the fiscal year ended December 31, 1999, GDSA did not
pay any dividends on its preferred stock. GDSA's losses do not currently
indicate the ability to pay any cash dividends, and GDSA does not indicate the
intention of paying cash dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
The following discussions of GDSA's results of operations and financial
position should be read in conjunction with the financial statements and notes
pertaining to them that appear elsewhere in this Form 10-KSB.
For Fiscal Year Ended December 31, 1999 compared with Fiscal Year Ended December
31, 1998
General
As of the date of this Annual Report, there has been no income realized
from the business operations of GDSA. GDSA's primary source of cash has been
from advances made to GDSA.
<PAGE>
Results of Operations
GDSA's net losses for fiscal year ended December 31, 1999 were
approximately $1,838,352 compared to a net loss of approximately $439,473 for
fiscal year ended 1998.
During fiscal year ended 1999, GDSA recorded operating expenses of
$1,772,475 as compared to $410,256 of operating expenses recorded in the same
period for fiscal year ended 1998. Property exploration expenses increased in
the approximate amount of $839,549 during fiscal year ended 1999 compared to
fiscal year 1998. The increase in property exploration expenses resulted
primarily from (i) GDSA's required issuance of common shares and promissory
notes under the Sub-License Agreement that GDSA acquired from Geneva to utilize
AuRIC's proprietary information and related precious metals recovery processes,
and (ii) the characterization of the valuation of GDSA's interest pursuant to
the Joint Venture Agreement as an impairment loss (due to the inability to value
future cash flows from such interest). Administrative expenses also increased by
approximately $522,670 during fiscal year ended 1999 compared to 1998. This
increase in administrative expenses was due primarily to an increase in overhead
and administrative expenses resulting from the increasing scale and scope of
overall corporate activity pertaining to the exploration and administration of
the Blackhawk II Property.
Liquidity and Capital Resources
As of fiscal year ended December 31, 1999, GDSA's total assets were $248
compared to total assets of $171,147 for fiscal year ended 1998. This decrease
in assets from fiscal year ended 1998 was due primarily to the
re-characterization of GDSA's interest pursuant to the Joint Venture Agreement,
originally valued and classified as a $170,000 asset, to an impairment loss. As
of fiscal year ended December 31, 1999, GDSA's total liabilities were $1,256,459
compared to total liabilities of $557,515 for fiscal year ended 1998. This
increase in liabilities from fiscal year ended 1998 was due primarily to (i) the
promissory notes issued by GDSA to Geneva and AuRIC in the amount of $250,000
each pursuant to the terms and conditions of the Sub-License Agreement, and (ii)
cash advances in the approximate amount of $96,295 made to GDSA and relating
accrued interest expense.
Stockholders' Deficit increased from $(386,368) for fiscal year ended
December 31, 1998 to $(1,256,211) for fiscal year ended December 31, 1999.
ITEM 7. FINANCIAL STATEMENTS
The information required under Item 310(a) of Regulation S-B is included in
this report as set forth in the "Index to Financial Statement".
Index to Financial Statements
Report of Independent Public Accountants
Balance Sheet
Statements of Operations
Statements of Stockholders' Equity
Statement of Cash Flow
Notes to Financial Statements
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
TABLE OF CONTENTS
-----------------
Page
----
Independent Auditors' Opinion 1
Balance Sheet 2
Statements of Operations 3
Statements of Cash Flows 4
Statement of Stockholders' Equity 5
Notes to Financial Statements 6 - 14
<PAGE>
Johnson, Holscher & Company, P.C.
Certified Public Accountants
Stockholders and Board of Directors
Goldstate Corporation
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the balance sheets of Goldstate Corporation (the Company), as of
December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years ended December 31,
1999 and 1998 and for the period from inception (February 28, 1996) to December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Goldstate Corporation as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years ended December 31, 1999 and 1998, and for the period from
inception (February 28, 1996) to December 31, 1999, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not generated revenues from operations,
has a working capital deficit of $1,256,211 and a stockholders' deficit of
$1,256,211, which raises substantial doubt about its ability to continue as a
going concern. The Company has established a plan to continue operations through
additional stock offerings and advances as outlined in Note 1. The financial
statements do not include any adjustments that might result if management's plan
is unsuccessful.
/s/ Johnson, Holscher & Company, P.C.
- -------------------------------------
Johnson, Holscher & Company, P.C.
Greenwood Village, Colorado
January 31, 2000
1
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Balance Sheet
December 31, December 31,
1999 1998
----------- -----------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 248 $ 877
Interest in unpatented mining claims -- 170,000
Goodwill -- 270
----------- -----------
Total Assets $ 248 $ 171,147
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ 12,428 $ 58,509
Advances payable 334,321 238,026
Accrued interest payable 114,205 67,980
Directors fees payable 24,000 18,000
Notes payable (net of discounts $3,495 & $0) 771,505 175,000
----------- -----------
Total Liabilities 1,256,459 557,515
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized 25,000,000 shares;
issued and outstanding 0 shares at December 31, 1999 and 1998 -- --
Common stock $.0003 par value; authorized 75,000,000 shares;
issued and outstanding 14,131,500 and 8,738,800 at December 31, 1999
and 1998 respectively 4,544 2,926
Paid - in capital 1,964,172 997,281
Accumulated deficit through development stage (3,224,927) (1,386,575)
----------- -----------
Total Stockholders' Equity (Deficit) (1,256,211) (386,368)
----------- -----------
Total Liabilities and Stockholders' Equity $ 248 $ 171,147
=========== ===========
See accompanying summary of accounting policies
and notes to financial statements.
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Operations
Inception
For the 3 Months For the 12 Months (February 28,
Ended Dec. 31, Ended Dec. 31, 1996) to
---------------------------- ---------------------------- December 31,
1999 1998 1999 1998 1999
------------ ------------ ------------ ------------ ------------
REVENUES
<S> <C> <C> <C> <C> <C>
Other income $ -- $ -- $ -- $ -- $ 1,026
------------ ------------ ------------ ------------ ------------
Total Revenues -- -- -- -- 1,026
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
PROPERTY EXPLORATION EXPENSES
Research and Development - Sublicense
Agreement -- -- 666,852 -- 666,852
Claims maintenance fees, exploration,
and staking costs 732 -- 46,602 43,905 190,507
Impairment loss related to profit sharing
interest -- -- 170,000 -- 170,000
------------ ------------ ------------ ------------ ------------
Total Property Exploration Expenses 732 -- 883,454 43,905 1,027,359
------------ ------------ ------------ ------------ ------------
ADMINISTRATIVE EXPENSES
Overhead and Administration 105,825 75,000 888,295 300,000 1,668,295
Legal and accounting (43,895) 44,359 (13,252) 50,237 78,638
Directors fees 1,500 1,500 6,000 6,000 24,000
Internet design and access -- -- -- 3,461 5,172
Printing and stationary 306 (1,943) 306 1,798 4,566
Transfer agent 250 155 760 1,568 2,873
News wire services (975) (1,180) 100 1,150 4,100
Courier and postage 165 14 1,133 966 10,761
Reports/information/subscripitions 2,347 -- 4,433 925 37,763
Bank charges 24 24 108 151 475
Office supplies (163) -- 450 95 6,460
Consultants -- -- -- -- 88,190
Office rent 475 -- 475 -- 42,508
Telephone and fax 202 -- 213 -- 35,769
Wages and salaries -- -- -- -- 22,444
Travel -- -- -- -- 16,731
Auto -- -- -- -- 7,259
Promotion -- -- -- -- 7,165
Miscellaneous -- -- -- -- 1,410
Computer supplies -- -- -- -- 159
------------ ------------ ------------ ------------ ------------
Total Administrative Expenses 66,061 117,929 889,021 366,351 2,064,738
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 66,793 117,929 1,772,475 410,256 3,092,097
------------ ------------ ------------ ------------ ------------
Income (Loss) from Operations (66,793) (117,929) (1,772,475) (410,256) (3,091,071)
OTHER INCOME (EXPENSES)
Other Income -- -- -- -- --
Interest Income -- 1 -- 1 1
Interest Expense (22,789) (8,879) (65,877) (29,218) (133,857)
------------ ------------ ------------ ------------ ------------
Net (Loss) $ (89,582) $ (126,807) $ (1,838,352) $ (439,473) $ (3,224,927)
============ ============ ============ ============ ============
Earnings (Loss) Per Share - Basic $ (0.006) $ (0.015) $ (0.143) $ (0.053) $ (0.388)
============ ============ ============ ============ ============
Weighted Average Number of
Common Shares Outstanding 14,131,302 8,738,800 12,823,321 8,248,663 8,317,562
============ ============ ============ ============ ============
See accompanying summary of accounting policies
and notes to financial statements.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Inception
For the 3 Months For the 12 Months (February 28,
Ended Dec. 31, Ended Dec. 31, 1996) to
-------------------------- -------------------------- December 31,
1999 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net (loss) $ (89,582) $ (126,807) $(1,838,352) $ (439,473) $(3,224,927)
Adjustments to reconcile net (loss) to cash
used by operating activities
Amortization and depreciation -- -- -- -- 90
Impairment loss on profit sharing interest -- -- 170,000 -- 170,000
Non-cash technology sub-license expenses -- -- 690,000 -- 690,000
Net discount recognized on technology notes payable 6,250 -- (3,495) (3,495)
Changes in Assets and Liabilities
Accounts payable (41,580) 41,235 (37,572) 41,235 20,937
Director fees payable 1,500 1,500 6,000 6,000 24,000
Accrued interest payable 16,539 8,879 46,225 29,218 114,205
----------- ----------- ----------- ----------- -----------
Net Cash Flows Used for Operating Activities (106,873) (75,193) (967,194) (363,020) (2,209,190)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment (purchases) dispositions -- -- -- (90)
Organization costs -- -- 270 -- --
----------- ----------- ----------- ----------- -----------
Net Cash Flows Provided (Used) for
Investing Activities -- -- 270 -- (90)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock -- -- 1,305 690 4,231
Additional paid-in capital -- -- 868,695 459,310 1,703,149
Offering costs -- -- -- -- (7,173)
Advances received 106,325 78,200 944,295 496,181 1,880,521
Advances repaid -- (3,200) (848,000) (698,200) (1,546,200)
Proceeds from notes payable -- -- 0 105,000 105,000
----------- ----------- ----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 106,325 75,000 966,295 362,981 2,139,528
----------- ----------- ----------- ----------- -----------
Net increase in cash (548) (193) (629) (39) (69,752)
Cash and cash equivalents - Beginning of period 796 1,070 877 916 --
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents - End of period $ 248 $ 877 $ 248 $ 877 $ 248
=========== =========== =========== =========== ===========
Schedule of Non-Cash Investing and Financing Activities:
- --------------------------------------------------------
During 1998, the Company exchanged 1,000,000 restricted common shares for a profit sharing interest in 439 lode-mining claims.
The Company accrued interest on notes payable of $46,225 and $29,218 for the twelve month periods ended December 31, 1999 and 1998,
respectively. The Company has not paid any accrued interest. The Company has also recognized an additional $19,653 of imputed
interest during 1999.
The Company issued 42,500 shares of common stock in settlement of a $8,509 vendor payable during 1999.
The Company issued $600,000 of notes payable and $90,000 of stock pursuant to the technology sub-license agreement. The Company
recorded a discount of $23,148 on the notes payable upon issuance.
See accompanying summary of accounting policies
and notes to financial statements.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Common Stock During
--------------------------- Paid - in Development
Shares Amount Capital Stage Total
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, February 28, 1996 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock for cash
($.001 par per share, total of $.004 per share) 3,038,000 3,038 9,342 0 12,380
Less offering costs 0 0 (7,173) 0 (7,173)
Stock Split 6,076,000 0 0 0 0
Net income (loss), February 28, 1996
(inception) to December 31, 1996 0 0 0 (4,164) (4,164)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 9,114,000 3,038 2,169 (4,164) 1,043
Shares redeemed (5,500,200) (1,650) 1,650 0 0
Issuance of common stock SEC Reg D-504 for cash
($.0003 par per share, total of $.20 per share) 1,825,000 548 364,452 0 365,000
Net loss, Year ended December 31, 1997 0 0 0 (942,938) (942,938)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 5,438,800 1,936 368,271 (947,102) (576,895)
Issuance of common stock pursuant to profit sharing
agreement ($.0003 par per share, total of $.17 per share) 1,000,000 300 169,700 0 170,000
Issuance of common stock SEC Reg D-504 for cash
($.0003 par per share, total of $.20 per share) 2,300,000 690 459,310 0 460,000
Net Loss, Year ended December 31, 1998 0 0 0 (439,473) (439,473)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 8,738,800 $ 2,926 $ 997,281 $(1,386,575) $ (386,368)
Issuance of common stock in settlement of vendor
($.0003 par per share, total of $.20 per share) 42,500 13 8,496 0 8,509
Issuance of common stock pursuant to Technology
Sublicense Agreement ($.0003 par per share, total of
$.09 per share) 1,000,000 300 89,700 0 90,000
Issuance of Common Stock SEC Reg D-504 for cash
($.003 par per share, total of $.20 per share) 4,350,000 1,305 868,695 0 870,000
Adjustment of Shares outstanding ($.003 par per share) 200 0 0 0 0
Net Loss, Year ended December 31, 1999 0 0 0 (1,838,352) (1,838,352)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 14,131,500 $ 4,544 $ 1,964,172 $(3,224,927) $(1,256,211)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
5
</TABLE>
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Goldstate Corporation (the Company) was incorporated on February 28, 1996
under the laws of the State of Nevada. The Company is an exploration stage
company.
The Company's principal operations are the exploration of 439 unpatented
lode-mining claims in the State of Idaho pursuant to a profit sharing
agreement as discussed in Note 4. Effective January 2000, the Company along
with its Joint Venture partner Intergold Corporation has ceased to explore
the claims, due to unconfirmed assay and metallurgical recovery testing
results.
Basis of Accounting
-------------------
The Company utilizes the accrual basis of accounting. Financial statements
have been prepared using generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Research, Development and Exploration Costs
-------------------------------------------
Research, development and exploration costs are expensed as incurred.
Cash Equivalents
----------------
For purposes of the Statement of Cash Flows, cash equivalents are defined
as investments with original maturities of three months or less.
6
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Going Concern and Continued Operations
--------------------------------------
As of December 31, 1999, the Company had not generated revenues from
operations and had working capital and stockholders' deficits of
$1,256,211. Subsequent to December 31, 1999, the Company has ceased
exploration of the joint venture lode mining claims located in the State of
Idaho, pending the outcome of Intergold Corporation and Geneva Resources,
Inc.'s ongoing litigation with regard to the transfer of technology
pursuant to the Sub-license Agreement between the Company and Geneva
Resources, Inc. There is a chance that the technology to be transferred
under the Sub-license Agreement may be delayed indefinitely, or cancelled
all together, depending on the outcome of the Intergold/Geneva litigation.
The Company expects to fund ongoing operations for the next twelve months
through a combination of advances and future common stock offerings. The
Company has been undertaking research relating to new business endeavors
and possible new acquisitions. This research may result in the Company
entering into business operations and possible acquisitions that are not in
the minerals exploration field. On January 24, 2000, the Company authorized
the execution of agreements for the settlement of outstanding advances and
accrued interest payable through the issuance of common stock (Note 10).
Earnings Per Share
------------------
As of December 31, 1999, there were 1,000,000 options exercisable to
purchase common stock and notes payable that can be converted in to
1,375,000 shares of common stock. As these options and convertible notes
payable would have an antidilutive effect on the presentation of loss per
share, a diluted loss per share calculation is not presented.
NOTE 2: TECHNOLOGY SUB-LICENSE AGREEMENT
In March of 1999, the Company entered into a definitive sub-license
agreement with Geneva Resources, Inc. ("Geneva"), to utilize assay and
metallurgical technology, know-how, and rights to technological processes
developed for the Blackhawk mineralization by Auric Metallurgical
Laboratories, Inc. ("Auric"). This sub-license is for non-exclusive use in
the Company's claim area in the State of Idaho for a period not less than
40 years. Pursuant to this agreement, the Company was to issue 500,000
restricted common shares to Geneva Resources, Inc. ("Geneva") and the
Company also issued 1,000,000 restricted common shares to AuRIC.
7
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
NOTE 2: TECHNOLOGY SUB-LICENSE AGREEMENT (Continued)
Pursuant to the same agreement the Company also issued promissory notes to
both Geneva and AuRIC in the amount of $250,000 to each company. These are
3% interest bearing notes and are payable upon the transfer of the
technology. As these notes bear interest below market value, the Company
has used an imputed interest rate of 8%. The imputed value of these notes
at issuance was $238,426 to each company.
Pursuant to an amendment to the above agreement, the Company issued a
convertible promissory note to Geneva in the amount of $100,000 that is
convertible to 500,000 restricted common shares upon demand, and bears
simple interest at the rate of 8% per annum. This promissory note is in
lieu of the 500,000 restricted common shares required by the agreement.
This promissory note is convertible into 500,000 shares of the Company's
common stock at the option of Geneva after October 7, 1999.
As of December 31, 1999 the promissory notes and common stock have been
issued to the various parties, however, the related technology has not been
transferred, and has not proven reliable. These promissory notes become due
and payable upon the transfer of the technology. Transfer of the technology
was scheduled to occur after completion of pilot scale testing. The
technology was scheduled for transfer during 1999, however legal
proceedings initiated by Intergold Corporation (the Company's joint venture
partner) and Geneva against Auric and Dames & Moore has impacted the
schedule for transfer (see Note 9 - Contingencies). The Company has
expensed the amounts paid pursuant to the agreement as research and
development expense.
8
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
NOTE 3: INVESTMENTS
Investment in Profit Sharing Interest
-------------------------------------
On December 11, 1997, Intergold Corporation and its subsidiary entered into
a profit sharing agreement with the Company. Under terms of the agreement,
Intergold received 1,000,000 restricted shares of common stock in the
Company in exchange for the sale of a future profit sharing interest. The
Company will be responsible to provide all funding and will be the
operating partner. The Company will initially retain 80% of the profits
resulting from the agreement. After the Company is repaid all of its
invested capital, the profit distribution will be 51% to the Company and
49% to Intergold Corporation. There are 439 unpatented lode-mining claims
that form the subject of this arrangement known as Blackhawk II. These
claims were transferred from Intergold Corporation to the Company via
quitclaim deed on June 10, 1999. As of December 31, 1999 there were no
jointly controlled assets pursuant to the agreement.
The Company now owns a profit sharing interest in 439 unpatented
lode-mining claims. As the 1,000,000 shares of common stock could not be
marketed for a period of twelve months from the date of issuance, the
Company had valued the profit sharing interest at 50% of the trading value
as of the date of issuance, $170,000. As of September 30, 1999, the
Company's management determined that future cash flows from the profit
sharing interest could not be estimated, and that, absent the ability to
value the future cash flows, the value of the asset had been impaired. This
valuation adjustment is shown as a $170,000 impairment loss on the
Statement of Operations. Subsequent to December 31, 1999, the Company
indefinitely ceased exploration of the 439 unpatented lode-mining claims.
The consolidation method is being utilized to account for the joint venture
agreement with Intergold Corporation. The Company will have majority
accounting control over the exploration of the claims. As of December 31,
1999, no profit had been generated by the exploration of the claims.
The sole director and officer of Goldstate Corporation is also a director
of Intergold Corporation.
9
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
NOTE 4: ADVANCES AND NOTES PAYABLE
Advances are comprised of the following:
Advances
--------
The Company at December 31, 1999 had advances, payable on demand, bearing
10% simple interest, to the following affiliated companies:
Amerocan Marketing, Inc. $ 46,500
Tri-Star Financial Services, Inc. 526
Investor Communications International, Inc. 287,295
--------
$334,321
========
Notes Payable
-------------
The Company had Notes Payable at December 31, 1999 as follows:
Brent Pierce $ 75,000
Rising Sun Capital Corporation 100,000
Geneva Resources, Inc. 100,000
Geneva Resources, Inc. 250,000
Discount for imputed interest on Geneva Resources, Inc. (1,748)
AuRIC Metallurgical Laboratories, LLC 250,000
Discount for imputed interest on AuRIC Labs (1,747)
---------
$ 771,505
=========
Accrued Interest Payable to December 31, 1999 from Advances and Notes
Payable was $114,205.
The Company has entered into two promissory notes with Brent Pierce. The
first note, dated July 31, 1997, is for $70,000. The second note is dated
February 3, 1998 and is for $5,000. The notes bear an 8% interest rate and
are due on demand. The notes are convertible, after October 7, 1999, at the
option of the holder into 350,000 and 25,000 shares of common stock,
respectively.
The Company has also issued a $100,000 note, dated March 5, 1998, to Rising
Sun Capital Corporation. The note bears interest at 8% and is due on
demand. The note is convertible at the option of the holder into 500,000
shares of common stock.
10
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
NOTE 4: ADVANCES AND NOTES PAYABLE (Continued)
Note agreements executed in 1999 relate to requirements under the
Technology Sub-license agreement that the Company executed on March 18,
1999 (see Note 3).
Pursuant to the Technology Sub-license agreement, the Company issued
promissory notes to both Geneva and AuRIC in the amount of $250,000 to each
company. These are 3% interest bearing notes and are payable upon the
transfer of the technology. These notes have been discounted to bear an
imputed interest rate of 8%.
Pursuant to an amendment to the Technology Sub-License agreement, the
Company has issued a convertible promissory note to Geneva Resources, Inc.
("Geneva") in the amount of $100,000 that is convertible to 500,000
restricted common shares upon demand, and bears interest at the rate of 8%
per annum.
NOTE 5: STOCKHOLDERS' EQUITY
Common Stock
------------
Pursuant to a July 30, 1997 Offering Memorandum, the Company issued, under
SEC Rule 504 of Regulation D, 2,625,000 shares of common stock at $.0003
par value for $525,000 during 1997 and 1998.
Pursuant to a March 3, 1998 Offering Memorandum, the Company has issued
1,500,000 shares of common stock at $.0003 par value for $300,000 during
1998.
The Company issued 1,000,000 common shares to Intergold Corporation
pursuant to a profit sharing agreement as detailed in Note 3.
Pursuant an $8,509 debt settlement agreement, the Company issued 42,500
shares of common stock on January 15, 1999.
On March 18, 1999, the Company issued 1,000,000 shares of common stock to
AuRIC Metallurgical Laboratories, LLC pursuant to terms and conditions of
the Technology Sub-license Agreement executed on March 18, 1999 as detailed
in Note 2.
Pursuant to a March 15, 1999 Offering Memorandum, the Company has issued
4,350,000 shares of common stock at $.0003 par value for $870,000.
11
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
NOTE 5: STOCKHOLDERS' EQUITY (Continued)
The private placement memorandum dated March 15, 1999 generated $870,000 of
additional operating funds that were utilized primarily on management and
administration relating to development programs for metallurgical
technology and planning for the Blackhawk II Property as well as repayment
of advances to companies which provided past management services, and for
general working capital for the continued exploration of the Company's
Blackhawk II claims.
Preferred Stock
---------------
Pursuant to a Board resolution, the Corporation has authorized the creation
of preferred stock and related rights. The Company also filed a
"Certificate of Designation of Series A Preferred Stock" with the Nevada
Secretary of State on May 8, 1998. The Company has not issued any shares of
preferred stock as of December 31, 1999.
NOTE 6: EMPLOYEE STOCK OPTION PLAN
On March 1, 1999 the Company authorized an Employee Stock Option Plan. The
plan authorized the issuance of 1,500,000 options that can be exercised at
$.15 per share of common stock. Options granted expire March 1, 2019. The
options are non-cancelable once granted. Shares, which may be acquired
through the plan, may be authorized but unissued shares of common stock or
issued shares of common stock held in the Company's treasury. Options
granted under the plan will not be in lieu of salary or other compensation
for services.
During the twelve month period ending December 31, 1999, the Board of
Directors of the Company authorized the grant of stock options to certain
officers, directors and consultants. The options granted consisted of
1,000,000 options with an exercise price of $.15 per share of common stock.
Selected information regarding the options as of December 31, 1999 and 1998
are as follows:
12
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
NOTE 6: EMPLOYEE STOCK OPTION PLAN (Continued)
December 31, 1999 December 31, 1998
---------------------- ------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Options Price Options Price
------- ----- ------- -----
Outstanding at Beg. of Period -0- -0- -0- -0-
Outstanding at End of Period 1,000,000 $.15/share -0- -0-
Exercisable at End of Period 1,000,000 $.15/share -0- -0-
Options Granted 1,000,000 $.15/share -0- -0-
Options Exercised -0- -0- -0- -0-
Options Forfeited -0- -0- -0- -0-
Options Expired -0- -0- -0- -0-
As of December 31, 1999, outstanding options have an exercise price of $.15
per share. The weighted average exercise price of all options outstanding
is $.15 per share of common stock and the weighted average remaining
contractual life is 19 years 65 days. There are 1,000,000 options that are
exercisable with a weighted average exercise price of $.15 per share of
common stock.
NOTE 7: MANAGEMENT SERVICES AGREEMENT
The Company has entered into a management services agreement with Tri Star
Financial Services, Inc ("Tri Star") to provide management of the
day-to-day operations of the Company. The management services agreement
required a monthly payment not to exceed $100,000 for services rendered.
This contract runs from January 1, 1999 through June 30, 1999. The
individuals comprising the management team provided by Tri Star are the
same individuals managing the operations of Intergold Corporation.
The Company entered into a similar management services agreement with
Investor Communications, Inc. during the second quarter. This contract
started July 1, 1999 and is for 24 months at a cost to not exceed $75,000
per month for the first twelve months. The management team provided by
Investor Communications is the same group provided by Tri Star.
The sole director and officer of the Company is not an officer, director,
employee or a part of the management team provided by Tri Star or Investor
Communications, Inc.
13
<PAGE>
GOLDSTATE CORPORATION
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
NOTE 8: INCOME TAXES
The Company incurred an operating loss for the year ended December 31, 1999
and 1998 of $1,335,550, and $363,074, respectively. The Company had adopted
FASB No. 109 for reporting purposes.
As of December 31, 1999 and 1998, the Company had net operating loss carry
forwards of $2,477,744 and $1,142,194, respectively, which expire between
the years 2011 - 2019. The deferred tax assets resulting from these carry
forwards were as follows:
1999 1998
---- ----
Deferred Tax Asset $ 842,433 $ 388,346
Less Valuation of Net Assets (842,433) (388,346)
--------- ---------
Balance at End of Year $ -0- $ -0-
========= =========
NOTE 9: CONTINGENCIES
On October 8, 1999, the Company's joint venture partner, Intergold
Corporation ("IGCO"), its wholly owned subsidiary, International Gold
Corporation ("IGC"), , and Geneva Resources, Inc. initiated a legal
complaint against AuRIC Metallurgical Laboratories, LLC ("AuRIC"), Dames &
Moore, Ahmet Altinay, General Manager of AuRIC, and Richard Daniele, Chief
Metallurgist for Dames & Moore. The damages sought by IGCO/IGC/Geneva are
to be determined in court. The damages incurred stem from reliance on
assays and representations made by AuRIC and upon actions and engineering
reports produced by Dames & Moore related to the Blackhawk claims.
IGCO/IGC/Geneva also alleges there were breaches of contract by AuRIC and
Dames and Moore, as well as other causes of action. This legal proceeding
affected the timing of technology to be transferred from Geneva to the
Company that was scheduled initially before the end of 1999. Subsequent to
December 31, 1999, IGC and the Company have ceased exploration of the
lode-mining claims comprising the profit sharing agreement (Note 3).
NOTE 10: SUBSEQUENT EVENTS
On January 24, 2000, the Company authorized the future execution of
agreements for the settlement of advances and accrued interest payable
through the issuance of common stock. The Company is settling advances and
associated accrued interest totaling $401,968 at $.0175 per share, which
represents a 14% discounted value of the common stock as of January 24,
2000, for a total of 22,970,000 shares.
14
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OF ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Identification of Directors and Executive Officers
The directors and executive officers of GDSA are as follows:
Name Age Position with IGCO
- ---- --- ------------------
Harold Gooding 37 Director and President,
Secretary/Treasurer
HAROLD GOODING has been a Director and the President, Secretary/Treasurer
of GDSA since September 16, 1997. From April 1993 to August of 1994, Mr. Gooding
worked in sales in the water treatment industry with Osmonics, located in
Minnetonka, Minnesota. Osmonics is a diversified multi company entity that
caters to various facets of the water treatment industry. As sales manager, Mr.
Gooding was responsible for the sale of large scale water treatment systems for
industrial applications requiring consistent water quality such as the beverage
bottling industry. From April 1994 to August of 1995, Mr. Gooding was the sales
manager for the northeast region for Ultra Pure Water Systems (U.S.A.), Inc.,
located in Massachusetts. From August 1995 until summer of 1998, Mr. Gooding was
employed as an international sales manager with Cambridge Applied Systems based
out of Medford, Massachusetts, where he was responsible for the manufacture and
sale of the viscosity system. From mid 1998 to current, Mr. Gooding has provided
the role of international sales manager to Photofabrication Engineering, Inc.
where he is responsible for the sales and distribution of precision metal
products to the aerospace and micro electronic industry, and was recently
appointed Director of Marketing and Sales for the Mayer Treat Company which
specialized in horticultural design and landscape maintenance. Mr. Gooding has
previously held the position of president and a director of Vega-Atlantic
Corporation, an OTC Bulletin Board company that was formerly marketing point of
entry water treatment appliances for commercial and residential use before
changing business focus and direction to gold exploration. Mr. Gooding is also a
director of Intergold Corporation, an OTC Bulletin Board company, which is
exploring the Blackhawk II claims in joint venture with GDSA.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires GDSA's directors and officers,
and the persons who beneficially own more than ten percent of the common stock
of GDSA, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Copies of all filed reports are required to
be furnished to GDSA pursuant to Rule 16a-3 promulgated under the Exchange Act.
Based solely on the reports received by GDSA and on the representations of the
reporting persons, GDSA believes that these persons have complied with all
applicable filing requirements during the fiscal year ended December 31, 1999.
ITEM 10. EXECUTIVE COMPENSATION
Compensation of Officers and Directors
As of the date of this Annual Report, directors of GDSA accrue $500 per
month in director's fees for their roles as directors. Harold Gooding accrued
$6,000 during fiscal year 1999 as compensation for his role as a director of
GDSA. Officers and directors of GDSA are reimbursed for any out-of-pocket
expenses incurred by them on behalf of GDSA.
For the fiscal year ended December 31, 1999, GDSA accrued approximately
$6,000; such expenses have not been paid to its directors as executive
compensation. As of fiscal year ended December 31, 1999, GDSA has (i) accrued
approximately $600,500 and paid approximately $838,000 to Tristar Financial
Services, Inc. ("Tristar") for managerial and administrative services rendered,
and (ii) accrued approximately $297,295 and paid approximately $10,000 to
Investment Communications International, Inc. ("ICI" for managerial and
administrative services rendered. See "Summary Compensation Table" below.
<PAGE>
Pursuant to the consulting services and management agreement with Tristar,
which was dated January 1, 1998 and terminated June 30, 1999, and ICI dated July
1, 1999, respectively, services rendered or to be rendered pursuant to the terms
and provisions of the respective agreements are (i) financial, such as business
planning, capital and operating budgeting, bookkeeping, financial statement
services, auditor liaison, banking, record keeping and documentation, database
records, (ii) gold and silver exploration management, such as administration of
metallurgical development, metallurgical liaison, BLM liaison, engineering
company liaison, drilling administration, geologist liaison, mapping, survey and
catalogue, geostatistical liaison, environmental research, geological reports
compilation, (iii) administration, such as legal liaison, corporate minute book
maintenance, and record keeping, corporate secretarial services, printing and
production, office and general duties, international business relations,
corporate information distribution and public relations, and media liaison.
All executive officers and directors of GDSA are reimbursed for any
out-of-pocket expenses incurred on behalf of GDSA. Executive compensation is
subject to change concurrent with GDSA requirements. Mr. Harold Gooding is not
an officer or director of either Tristar or ICI, nor does GDSA own of record
capital stock of either Tristar or ICI, Neither Tristar nor ICI own of record
any capital stock of GDSA.
Summary Compensation Table
Annual Compensation Awards Payouts
--------------------- ---------- -------
$ $ $ $ # $ $
Name and Position Salary Bonus Other RSA Options LTIP Other
- ----------------- ------ ----- ----- --- ------- ---- -----
Brian Harris 1997 0 0 0 0 0 0 0
Pres./Director
Ronald Lambrecht 1997 0 0 0 0 0 0 0
Secy./Director
Harold Gooding 1997 0 0 0 0 0 0 0
Pres./Director 1998 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0
Non-Qualified Stock Option Plan
During fiscal year ended 1999, the Board of Directors of GDSA authorized
the grant of stock options to certain officers, directors and significant
consultants as reflected below in the "Aggregated Options/SAR Exercises and
Fiscal Year-End Options/SAR Value Table". As of the date of this Annual Report,
none of the officers, directors or significant consultants have exercised such
stock options.
Aggregated Options/SAR Exercises and Fiscal Year-End Options/SAR Value Table
- --------------------------------------------------------------------------------
Number of Date of Grant Exercise Price Date of
Shares Granted Expiration
- --------------------------------------------------------------------------------
Gino Cicci 200,000 15-Jun-99 $0.15 March 1, 2019
Grant Atkins 300,000 15-Mar-99 $0.15 March 1, 2019
Brent Pierce 300,000 15-Mar-99 $0.15 March 1, 2019
Harold Gooding 100,000 15-Mar-99 $0.15 March 1, 2019
Marcus Johnson 100,000 15-Mar-99 $0.19 March 1, 2019
TOTAL 1,000,000
- --------------------------------------------------------------------------------
No share options have been exercised as at the date of this Annual Report.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GOLDSTATE CORPORATION
Dated: March 29, 2000 By: /s/ Harold Gooding
- --------------------- ----------------------
Harold Gooding, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 248
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 248
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 248
<CURRENT-LIABILITIES> 1,256,459
<BONDS> 0
0
0
<COMMON> 4,544
<OTHER-SE> 1,964,172
<TOTAL-LIABILITY-AND-EQUITY> 248
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,772,475
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,877
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,838,352)
<EPS-BASIC> (0.143)
<EPS-DILUTED> (0.143)
</TABLE>
