UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
AMENDMENT NO. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
GOLDEN RIVER RESOURCES INC.
(Name of Small Business Issuer in its Charter)
NEVADA 98-0187538
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2420 PANDOSY STREET, KELOWNA, BRITISH COLUMBIA, CANADA, V1Y 1T8
(Address of principal executive offices)
Issuer's Telephone Number: (250) 717-1049
Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of class)
<PAGE>
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
CORPORATE HISTORY
As used herein, the term "Company" refers to Golden River Resources Inc., a
corporation incorporated under the laws of Nevada. The Company is engaged in the
exploration of its precious mineral resource property. The Company indirectly,
through subsidiaries, owns an interest in a mineral property located in Durango
State, Mexico. This interest is comprised of an option to acquire an interest in
a mineral property in consideration of cash payments, share issuances and
exploration expenditures.
The Company was incorporated under the laws of the State of Nevada on June 17,
1997. The Company has one subsidiary: Rob Roy Resources Inc. ("Rob Roy"), all of
the shares of which are owned directly by the Company. Rob Roy owns all of the
shares of La Mexicana Resources S.A. de C.V. ("La Mexicana"). The Company,
through its subsidiaries, is engaged in the acquisition and exploration of a
precious mineral property.
In May 1998, the Company completed a private placement of 3,568,000 shares of
its Common Stock, resulting in gross proceeds of $35,680. In June 1998, the
Company sold 200,000 shares of Common Stock for gross proceeds of $10,000. In
December 1998, the Company sold 1,800,000 shares of Common Stock for gross
proceeds of $90,000.
On March 10, 1999, the Company completed the purchase of all of the issued and
outstanding shares of Rob Roy, a non-reporting company incorporated in British
Columbia, Canada, on June 13, 1997. The Company issued, on a one-for-one basis,
6,454,872 shares of its Common Stock (the "Takeover Shares") in exchange for
6,454,872 common shares without par value of Rob Roy. Certificates for 15% of
the Takeover Shares issued to Rob Roy's shareholders were subject to a
restrictive legend which expired on May 11, 1999; certificates for an additional
15% of the Takeover Shares were subject to a restrictive legend which expired on
September 11, 1999; and the certificates for the balance of 70% of the Takeover
Shares are subject to a restrictive legend expiring on January 11, 2000.
After the completion of the purchase, Rob Roy became a subsidiary of the
Company. Rob Roy owns 100% of the shares of La Mexicana, a company incorporated
pursuant to the laws of Mexico on February 12, 1998. La Mexicana is a company
engaged in the acquisition and exploration of a natural resource property
located in the area of Durango, Mexico. Rob Roy does not have an interest in any
other companies.
The Company engaged in two other private placements of Common Stock: 2,000,000
shares for gross proceeds of $700,000 in April 1999 and 750,000 shares in
September 1999 to satisfy an obligation to pay for services.
On October 13, 1999, the Company entered into an agreement with Peter Holstein,
on behalf of himself and all other shareholders of Transmeridian Exploration
Inc., a British Virgin Islands company engaged in oil and gas exploration
("Transmeridian"), to purchase all of the issued and outstanding shares of
Transmeridian by issuing shares of Common Stock of the Company. The number of
shares issued are to be determined by the net asset value of the oil and gas
properties owned by Transmeridian at the closing date divided by $5.00 for
proven reserves and $10.00 for probable reserves. An independent and certified
oil and gas valuator is to be engaged to value the Transmeridian assets.
Consummation of the acquisition of Transmeridian is subject to several
conditions, including satisfactory due diligence of Transmeridian, its net asset
value, and its principals; execution of a formal purchase agreement; approval of
the transaction by the shareholders
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of the Company; the furnishing of financial statements by Transmeridian which
will meet the requirements of the Securities and Exchange Commission; and the
execution of a satisfactory employment agreement with Peter Holstein. If the
acquisition is completed, the Company will use its reasonable best efforts to
change its name to "Transmeridian Exploration Inc.", and to arrange for a
private placement in the minimum amount of $2,000,000 to cover immediate working
capital and project costs. Also upon closing, Peter Holstein will have the right
to designate four persons for appointment to the board of directors of the
Company. Since the Company has just started its due diligence work on
Transmeridian, management does not know whether the acquisition will be
consummated or when closing would occur. If the acquisition were to occur, the
Company would be entering into a different line of business, oil and gas
exploration, which entails risks different from those encountered in the mining
industry. Further, if the acquisition were to occur, the Company would also face
the risk of doing business in Russia, Kazakhstan, and Turkmenistan.
On October 25, 1999, the Company entered into a nonbinding letter of intent with
OREX Gold Mines Corporation to use its method for processing gold ores.
Management anticipates that the process may be useful in connection with the
Mexicana I property if the Company's exploration work on the property yields
promising results. The OREX method is apparently one that is non-toxic, as
opposed to the conventional cyanide leaching method. The Company is still
investigating this method. The parties have not yet negotiated any terms of a
working relationship.
MINING OPERATIONS AND RISKS
The mining property is an exploration property and does not have any proven
mineral reserves. Should mineral reserves be discovered on the property, it is
anticipated that the minerals would be predominately gold and silver. See Part I
- - Item 3. Description of Property below. Development of the mining property will
only follow upon obtaining satisfactory results from an exploration program.
Exploration for and the development of natural resources involve a high degree
of risk and few properties which are explored are ultimately developed into
producing properties. There is no assurance that the Company's exploration
activities will result in any discoveries of commercial bodies of ore. The long
term profitability of the Company's operations will be in part directly related
to the cost and success, if any, of its exploration programs, which may be
affected by a number of factors. Additional substantial risks exist should the
Company undertake any type of development work.
Exploration for natural resources involves many risks, which even a combination
of experience, knowledge, and careful evaluation may not be able to overcome.
Operations in which the Company has a direct or indirect interest will be
subject to all the hazards and risks normally incident to exploration for
resources, any of which could result in work stoppages, damage to persons or
property, and possible environmental damage. Although the Company has or will
obtain liability insurance in an amount which it considers adequate, the nature
of these risks is such that liabilities might exceed policy limits, the
liabilities and hazards might not be insurable risks, or the Company might not
elect to insure itself against such liabilities due to the high premium costs or
other reasons, in which event the Company could incur significant costs that
could have a material adverse effect upon its financial condition.
All phases of the Company's operations are subject to environmental regulation.
Generally, environmental legislation is evolving in a manner which will require
stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects,
and a heightened degree of responsibility for companies and their officers,
directors, and employees. There is no assurance that future changes in
environmental regulation, if any, will not adversely affect the Company's
operations. Environmental permits are not required for the proposed Phase 1 and
2 exploration programs on the La Mexicana property.
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Before drilling and any major surface disturbance, it will be necessary to file
a report on the flora of the area. For mine development, it would be necessary
to obtain state and municipal approval with similar, but less stringent
requirements than in the United States or Canada. Given the early stage of
exploration, it is premature to discuss the specifics of the environmental
permitting process, since the size, type, and existence of an ore body has not
been defined, and there is no assurance that an ore body will be located on the
property.
Although the Company has or intends to obtain title opinions for any concessions
in which it has or will acquire a material interest, there is no guarantee that
title to such concessions will not be challenged or impugned. In some countries,
the system for recording title to the rights to explore, develop, and mine
natural resources is such that a title opinion provides only minimal comfort
that the holder has title. Also, in many countries claims have been made and new
claims are being made by aboriginal peoples that call into question the rights
granted by the governments of these countries.
The Company's revenues, if any, are expected to be in large part derived from
the extraction and sale of base and precious metals such as gold and silver. The
price of those commodities has fluctuated widely, particularly in recent years,
and is affected by numerous factors beyond the Company's control including
international, economic, and political trends, expectations of inflation,
currency exchange fluctuations, interest rates, global or regional consumptive
patterns, speculative activities, and increased production due to new extraction
developments and improved extraction and production methods. The effect of these
factors on the price of base and precious metals, and therefore the economic
viability of the Company's exploration project, cannot accurately be predicted.
There are many individuals and companies that are engaged in the mining
business. Some of which are very large, established mining companies with
substantial capabilities and long earning records. The Company may be at a
competitive disadvantage in acquiring mining properties or in purchasing,
leasing, or obtaining mining equipment since it must compete with these
individuals and companies, most of which have greater financial resources and
larger technical staffs than the Company. There can be no assurance that the
Company will be successful in prospecting for or acquiring additional mining
claims or leases, or in arranging for their exploration.
Water is essential in all phases of the exploration and development of mineral
properties and the milling of any ore obtained as a result. It is used in such
processes as exploration drilling, leaching, placer mining, dredging, testing,
and hydraulic mining. Furthermore, any water that may be found will be subject
to acquisition pursuant to state, federal and foreign water law, and its use
will be subject to regulation pursuant to local, state, federal and foreign
water quality standards. Management does not expect any significant difficulties
with respect to this matter. Water sufficient for mining purposes is available
on the La Mexicana concession.
MINERAL INDUSTRY OF MEXICO
The Mexican government commenced privatization efforts in the late part of the
1980's. The Mining Law of 1992 generally encourages domestic investment and
foreign participation in the mining industry. The Mining Law permits direct
investment, with up to 100% of equity, in exploration works and activities and
allows, through a 30-year trust mechanism, up to 100% foreign participation in
mineral production.
In addition, in 1989 Mexico reduced the corporate income tax to 35% and in 1991
eliminated the mineral production tax.
Government approval is not required for the proposed Phase 1 work program on the
La Mexicana project. An environmental assessment report must be filed for the
specific areas disturbed in Phase 2.
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This will be done when these areas are outlined. The filing of the environmental
assessment report is a minor expense in the overall budget. Besides an operating
license, it will be necessary to obtain permits for water well usage, water
discharge, land use, explosives, and hazardous materials handling. The Company
is not aware of any major environmental or regulatory issues that might impede
its exploration efforts on the La Mexicana property. See Part I - Item 3.
Description of Property below.
EMPLOYEES
As of the date of this registration statement, the Company employs two people
full-time at its Kelowna office and technical staff to carry out its projects in
Mexico on an as-needed basis, including the President of the Company, David St.
Clair Dunn, P. Geo.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Effective March 10, 1999, the Company completed the acquisition of 100% of the
outstanding common shares of Rob Roy. As the Rob Roy shareholders obtained
effective control of the Company through the exchange of their shares of Rob Roy
for shares of the Company, the acquisition has been accounted for in these
consolidated financial statements as a reverse acquisition. Consequently, the
consolidated statements of loss and deficit and changes in cash flows reflect
the results from operations and changes in financial position of Rob Roy, the
legal subsidiary, for the year ended June 30, 1999 combined with those of the
Company, the legal parent, from the date of acquisition on March 10, 1999, in
accordance with generally accepted accounting principles for reverse
acquisitions. In addition, the comparative figures are those of Rob Roy, the
legal subsidiary.
The Company's fiscal year end is June 30. The following is a summary of certain
selected financial information for the three months ended September 30, 1999,
the fiscal year ended June 30, 1999, and the period from its date of
incorporation to June 30, 1998. Reference should be made to the financial
statements attached to this registration statement to put the following summary
in context. All dollar figures referred to in this section relating to the
Company are listed in US dollars unless otherwise noted.
<TABLE>
<CAPTION>
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INCEPTION (JUNE 13, 1997)
THREE MONTHS ENDED YEAR ENDED JUNE 30, 1999 TO JUNE 30, 1998
SEPTEMBER 30, 1999 (UNAUDITED)
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<S> <C> <C> <C>
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Revenues -- -- --
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(Loss) from continuing
operations $ (101,055) $ (1,160,315) $ (254,769)
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(Loss) per common
share $ (0.01) $ (0.15) $ (0.13)
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<CAPTION>
SEPTEMBER 30, 1999 JUNE 30, 1999 JUNE 30, 1998
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<S> <C> <C> <C>
Working capital
(deficiency) $ (254,700) $ (170,390) $ (28,983)
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Total assets $ 353,939 $ 391,193 $ 258,820
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Long-term obligations $ 60,350 -- --
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</TABLE>
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RESULTS OF OPERATIONS
The Company's level of activity was substantially higher in during the fiscal
year ended June 30, 1999, as compared to the previous period. Expenses were
$1,160,315 for 1999 as compared to $254,769 for 1998. The most significant
increases were in the areas of exploration of mineral properties ($174,447) due
to the drill program undertaken on the La Lajita property, professional fees
($119,759) primarily due to the legal and accounting expenses incurred with the
acquisition of Rob Roy, and travel and promotion ($83,996) due to travel to
Mexico and financial public relations work. Additionally, the Company wrote-off
$534,214 in 1999 upon its decision to abandon the La Lajita property. After
completing the exploration program on the La Lajita property, the Company
decided to terminate its option. The Company made option payments of $516,714,
issued 350,000 shares valued at $17,500, and incurred exploration expenditures
in excess of $300,000 prior to terminating its option in September 1999.
From June to July, 1999, a 943.9-meter diamond drilling program was carried out
on the La Lajita property in the area recommended by the Company's consulting
geologists as having the highest possibility of containing an open pittable
precious metals resource. The results obtained by the Company in September 1999
revealed that the drilling did not outline sufficient mineralization (material
containing minerals of value) at high enough grades to continue exploration of
the property. While underground mining targets with good potential remain on the
property, they do not fit the Company's corporate objectives.
During the three months ended September 30, 1999, the Company incurred a loss of
$101,055 due to expenditures for exploration of mineral properties ($40,121),
professional fees ($22,665), travel and promotion ($20,394), and general and
administrative ($17,313).
Due to the lack of any revenues, and the cumulative losses of $1,415,084
incurred through June 30, 1999, and $1,516,139 through September 30, 1999, there
is a substantial doubt about the Company's ability to continue as a going
concern, as noted in the report of the independent auditors on the Company's
financial statements. The Company requires additional financing to continue
operations and to undertake the exploration programs described below. If it is
unable to obtain such financing, it may be unable to continue operations or
engage in the exploration programs.
FINANCIAL CONDITION
Since inception, the Company's capital resources have been limited. The Company
has had to rely upon the sale of equity securities for cash required to fund the
administration of the Company. From its inception through June 30, 1999, the
Company has raised $730,823, net of share issuance costs from the sale of its
Common Stock. In addition, 600,000 shares have been issued for mineral property
options and 200,000 shares have been issued for services. Since the Company does
not expect to generate any revenues in the near future, it will have to continue
to rely upon sales of equity and debt securities to raise capital. It follows
that there can be no assurance that financing, whether debt or equity, will
always be available to the Company in the amount required at any particular time
or for any particular period or, if available, that it can be obtained on terms
satisfactory to the Company.
At June 30, 1999, the Company had a working capital deficiency of $170,390, as
compared to $28,983 at June 30, 1998. The increase in the working capital
deficiency can be attributed to the cash outlays for payments on mineral
properties and mineral property exploration made during the fiscal year ended
June 30, 1999. The cash outlays were as follows:
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<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
OPTION PAYMENTS ON MINERAL
PROPERTIES INCLUDING VALUE
PROPERTY ADDED TAXES EXPLORATION EXPENDITURES TOTAL
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<S> <C> <C> <C>
La Lajita $372,294 $245,210 $617,504
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La Mexicana $204,294 -- $204,294
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$576,588 $245,210 $821,798
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</TABLE>
Other than as described under "Properties of La Mexicana", the Company does not
have any interest in any properties. In Note 1 to the audited financial
statements, it is noted that "the recoverability of the amount shown for mineral
properties of $318,396 as at June 30, 1999 is dependent upon the discovery of
economically recoverable mineral reserves, the ability of the Company to obtain
the necessary financing to complete the exploration and development of the
mineral properties, future profitable production or proceeds from the
disposition of the mineral properties and the Company's ability to complete its
obligations." This amount represents approximately 81% and 90% of the Company's
total assets at June 30, 1999 and September 30, 1999, respectively.
At September 30, 1999, the Company had a working capital deficiency of $254,700.
The increase was due primarily to the loss incurred during the three months then
ended.
PLAN OF OPERATION
In addition to option payments of $5,000 due toward the January 1, 2000
installment , the Company is required to invest a total of $300,000 on or before
June 12, 2000 on work commitments. The Company plans to conduct a Phase 1
regional geochemical survey over the La Mexicana property at a cost of
approximately $19,000. The Phase 1 program will be followed by a Phase 2 program
at a cost of approximately $77,000. The Company does not presently have the
funds available for either the Phase 1 or Phase 2 program and will have to raise
additional funds by way of debt or equity in order to finance same. It does not
have any arrangements for such funding at present. See Part I - Item 3.
Description of Property, below, for more detail on the proposed work programs of
the Company. If the Company were unable to raise the funds necessary to satisfy
the option payment and work commitment requirements, the Company would seek an
extension from the optionor of the Mexicana I property.
In addition to the property obligations described in the preceding paragraph,
the Company has only normal trade obligations. The officers and directors of the
Company and the persons to whom the long-term debt of $60,350 is owed, have not
given the Company a fixed date for repayment.
As of September 30, 1999, the Company had approximately $20,000 cash on hand,
which will be sufficient to satisfy its cash requirements for the next twelve
months of minimal operations. The Company would be able to maintain an office,
but would not be able to undertake the exploration programs on the property,
make any option payments, or service any existing debt. The Company does not
intend to hire any more full-time employees over the next 12 months. Subject to
the availability of funds the Company will hire additional employees and
consultants on a part-time basis in order to carry out its proposed work
programs. The Company does not intend to make any purchases of plant or
equipment over the next 12 months.
If the Transmeridian transaction should be completed, the Company would be
required to arrange for a private placement in the minimum amount of $2,000,000
to cover immediate working capital and project costs. Since the Company has just
started its due diligence work on Transmeridian, management does not know
whether the acquisition will be consummated or when closing would occur.
Accordingly, the Company has not made any plans with respect to a proposed
private placement.
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YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue refers to the inability of computer and other information
technology systems to properly process date and time information due to the
programming of a two digit year rather than a four digit year. The risk is that
a system will recognize the digits "00" as 1900 rather than the year 2000, or
that the system may not recognize "00" as a year at all. As a result, computers
and embedded processing systems may be at risk of malfunctioning, particularly
during the transition from 1999 to 2000.
The Company has completed its assessment of the impact of Year 2000 issues on
its business operations. The Year 2000 issue may affect the Company in four
principal areas including: (1) computer systems such as personal computers,
operating systems, business software, and application software including
accounting systems, technical support software and administration software; (2)
field assets (primarily embedded systems) such as programmable logic controllers
and equipment control panels; (3) other systems such as telephones, photocopiers
and facsimile machines; and (4) third-party suppliers and service providers such
as banks and insurance companies.
To date, the Company has implemented and tested its computer software and
hardware for Year 2000 compliance and has concluded that its hardware and
software is Year 2000 compliant.
The Company's Year 2000 program is designed to reduce the Company's risk of
material losses due to the Year 2000 issue. Management does not anticipate any
material adverse effect from the Year 2000 issue; however, the Company cannot be
certain that it will not suffer material adverse effects in the event that third
parties upon which the Company is dependent are unable to resolve their Year
2000 issues.
ITEM 3. DESCRIPTION OF PROPERTY
PROPERTY SUMMARY
La Mexicana, a wholly owned subsidiary of Rob Roy, acquired options to purchase
rights to certain mineral properties in Mexico pursuant to certain agreements
described below. La Mexicana's main focus had been on the La Lajita and Mexicana
1 properties located near Durango, Mexico. After performing a drill program on
the La Lajita property, the Company decided that the La Lajita property did not
warrant any further work and terminated its option on that property in September
1999.
TERMS OF OPTION ON MEXICANA 1
La Mexicana has entered into an agreement in writing (the "Alcaraz Agreement")
dated February 12, 1998 and amended as of November 12, 1999, with ING.
Cuitlahuac Rangel Alcaraz ("Alcaraz"), an arm's length party, to acquire the
right and option to purchase an undivided 70% interest in the Mexicana I
property located near Durango, Mexico. The option must be exercised by February
12, 2001. The Alcaraz Agreement requires the following payments, share issuances
and exploration expenditures:
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<TABLE>
<CAPTION>
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REQUIREMENT STATUS
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<S> <C>
a) US$25,000 on or before the execution of the Alcaraz Agreement Paid
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b) US$25,000 upon execution of the Alcaraz Agreement Paid
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c) US$50,000 on January 1, 1998 and every six months thereafter January 1, 1998; July 1,
until February 12, 2001, or until a positive bankable feasibility 1998; January 1, 1999;
study is completed, whichever is the earliest to occur* and July 1, 1999 payments
made, and $45,000 of the
January 1, 2000 payment
made
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d) 250,000 shares upon the approval of the Alcaraz Agreement by Issued March 1999
any regulatory authority having jurisdiction
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e) a further 750,000 shares of the Company within three years of Not due
the issuance under paragraph (d) above, with a minimum of
250,000 shares to be issued by February 12, 2000
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f) a minimum amount of US$1,500,000 shall be invested on work Not
commitments, according to the following budget schedule:
US$300,000 on or before June 12, 2000, and US$1,000,000 on or
before February 12, 2001
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</TABLE>
*While the Agreement states that payments are to be made in August and February
of each year, in practice, Alcaraz has expected, and the Company has paid,
installments in January and July of each year.
La Mexicana shall also be responsible for the payment of value added tax of 15%
on property payments and for mining taxes required to keep the property in good
standing.
Alcaraz is the beneficial and registered concessionaire of 100% of the
Exploration Mining Concession of the Mexicana 1 lot. During the term of this
Agreement the Company has the exclusive right to explore the Property, subject
to the Company obtaining appropriate surface rights and governmental
authorizations.
The Alcaraz Agreement provides that after the exercise of the option, Alcaraz
and the Company shall either become co-concessionaires of the Property or
incorporate a new company that shall acquire the title to the Property.
MEXICANA 1 GROUP OF CLAIMS
LOCATION, ACCESS, PHYSIOGRAPHY AND POPULATION
Mexicana 1 property is located in the Municipality of Pueblo Nuevo, State of
Durango, Mexico. The property consists of 20,477 hectares in three adjoining
rectangular blocks.
Road access to the property is from El Salto on Highway 40 south, 50 kilometers
to La Puerta, then southwest 10 kilometers to Cofradia, then 28 kilometers (2.5
hours) on a dirt track east to Los Naranjos. The western part of the Property
can be accessed from the state of Sinola to the town of La Escondida, just
inside the western edge of the property. The rest of the property is covered by
networks of well-used trails.
Elevations on the property range from 290 meters on the San Antonio de Animas
River in the southwestern corner of the property, to 2,520 meters in the
northeast corner.
See the map on the following page.
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[GENERAL LOCATION MAP OF THE LA LAJITA & LA MEXICANA PROJECTS]
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HISTORY AND PREVIOUS WORK
The only previous work seen was the La Mexicana excavations or workings. These
consist of two adits (horizontal or nearly horizontal passages driven from the
surface for the working of a mine) driven approximately five meters on narrow
quartz veins on the west side of the arroyo of the Los Naranjos River. The
Mexicana I monument is located in front of these workings, about 1.0 kilometers
down the Los Naranjos River northwest of Los Naranjos. There are artisinal
workers working the river gravels on a small scale, especially on the junction
of the Arroyo of the Los Naranjos River and the Arroyo of the San Antonio de
Animas River.
PROPERTY GEOLOGY
The Mexicana 1 property lies within the Sierra Madre Occidental Geological
province, which is a 1200 kilometer long north-west trending belt of volcanic
rocks 200 to 300 kilometers wide. Regional, northwest trending faults (breaks in
rocks with noticeable movement or displacement of the rocks on either side of
the break) are common throughout the province.
Gold mineralization in the area is found mainly in epithermal to mesothermal
quartz veins and stockworks associated with caldera (collapsed volcano)
complexes. Radiating faults, concentric ring faults, and particularly, their
junctions in the caldera, are favorable areas for mineralization.
The Mexicana 1 property covers an approximately 15.0 meter diameter caldera,
centered three kilometers west-northwest of Los Naranjos, on the San Antonio de
Animas River. A granitic intrusion (a body of igneous rock formed below the
surface)was observed in this area.
Two major structures were observed on the property and can be traced on
satellite photographs. One structure trends 50 kilometers northwest through Los
Naranjos. The Los Naranjos River follows part of this structure. The second
structure trends east-northeast and can be traced for 55 kilometers. The San
Antonio de Animas River follows this structure for 15 kilometers from two
kilometers above its junction with Los Naranjos River to the west-southwest. The
junction of these structures is a very prospective area. It lies on the eastern
boundary of Mexicana 1 property.
WORK PROGRAMS
The Company has not conducted any exploration on the Mexicana 1 property.
Subject to the availability of funds, the Company plans to conduct a systematic
regional mineral exploration program, consisting of regional scale stream
geochemical sampling and rock sampling to test the area in the first quarter of
2000. The following table outlines the proposed budget for the La Mexicana
property for the first quarter of 2000:
PROPOSED BUDGET FOR LA MEXICANA (IN US $):
PHASE 1
Research: Government mining and geological information and
claim status.........................................$ 1,950
Regional geochemical and examination of showings
Geologist: 20 days @ $338.50/day.............. 6,770
Assistant: 15 days @ $118.50/day.............. 1,778
Vehicle: 15 days @ $68/day.................. 1,020
Travel: 2 @ $677........................... 1,354
Room and board: 30 days @ $34/day.................. 1,020
Assays: 300 samples @ $10/sample........... 3,000
Communication: ................................... 339
Expendables: ................................... 339
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Report preparation .................................. 677
Contingency: .................................. 753
-------------
Total Phase 1...................................................$ 19,000
-------------
PHASE 2 (Geological mapping, geochemical surveys, trenching and detailed
sampling)
Geologist: 40 days @ $338.50/day......$ 13,540
Assistants: 2 for 30 days @ $135/day... 8,100
Vehicle: 2 for 30 days @ $68/day.... 4,080
Travel: 3 @ $677................... 2,031
Room and board: 90 days @ $47/day.......... 4,230
Assays: 2,100 @ $10/sample......... 21,000
Communications: ........................... 1,693
Expendables: ........................... 2,640
Local labor: 4 for 15 days @ $27/day.... 1,620
Mules: 4 for 15 days @ $27/day.... 1,620
Backhoe or small cat: 20 days @ $339/day......... 6,780
Mob or demob for equipment........................... 1,354
Report preparation: ........................... 1,354
Contingency: ........................... 6,958
-------------
Total Phase 2...................................................$ 77,000
-------------
TOTAL PHASES 1 AND 2............................................$ 96,000
=============
LA LAJITA
La Mexicana entered into an agreement (the "Fuerte Mayo Agreement") dated
February 12, 1998 with Fuerte Mayo S.A. de C.V. ("Fuerte Mayo"), an arm's length
party, to acquire the right and option to purchase an undivided 60% interest in
the La Esperanza, Guadalupe and Ampl. de Guadalupe mining Lots and the Santa
Nino and Dos Hermanos mining lots located near Durango, Mexico.
An initial program of 943.9 meters of diamond drilling in 13 holes was carried
out by Britton Hermanos, S.A. de C.V. under the supervision of Company personnel
from April to June 1999.
After completing the exploration program on the La Lajita property, the Company
decided to terminate its option since the drilling did not outline an open
pittable resource of sufficient size to meet the Company's objectives. The
Company paid acquisition costs $492,500, issued 350,000 shares and incurred
exploration expenditures in excess of $300,000 on the La Lajita property prior
to terminating its option.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 16, 1999, the outstanding Common
Stock of the Company owned or of record or beneficially by each person who owned
of record, or was known by the Company to own beneficially, more than 5% of the
Company's Common Stock, and the name and shareholdings of each Officer and
Director and all Officers and Directors as a group.
12
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
NAME SHARES OWNED COMMON STOCK OWNED(1)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DAVID ST. CLAIR DUNN(2) (3) 100,000 0.67%
1154 Marine Drive
Gibsons, British Columbia
Canada V0N 1V1
- ----------------------------------------------------------------------------------------------------------------------
ROBERT BRUCE MANERY (2)(4) 182,658 1.16%
2420 Pandosy Street
Kelowna, British Columbia
Canada V1Y 1T8
- ----------------------------------------------------------------------------------------------------------------------
ROGER WATTS(2)(4) 195,200 1.30%
200-537 Leon Avenue
Kelowna, British Columbia
Canada V1Y 2A9
- ----------------------------------------------------------------------------------------------------------------------
MISCHCORP LTD. 800,000 5.14%
Box 209, Chancery Court
Leeward Highway
Turks and Caicos
West Indies
- ----------------------------------------------------------------------------------------------------------------------
ALL OFFICERS & DIRECTORS 477,858 2.99%
AS A GROUP(5)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This table is based on 15,572,874 shares of Common Stock outstanding on
November 16, 1999. If a person listed on this table has the right to obtain
additional shares of Common Stock within sixty (60) days from November 16,
1999, the additional shares are deemed to be outstanding for the purpose of
computing the percentage of class owned by such person, but are not deemed
to be outstanding for the purpose of computing the percentage of any other
person.
(2) These individuals are the officers and directors of the Company and may be
deemed to be "parents" of the Company as that term is defined in the rules
and regulations promulgated under the federal securities laws.
(3) Includes options to purchase 100,000 shares of Common Stock. See Part I -
Item 6. Executive Compensation.
(4) Includes options to purchase 150,000 shares of Common Stock. See Part I -
Item 6. Executive Compensation.
(5) Includes options to purchase 400,000 shares of Common Stock. See Part I -
Item 6. Executive Compensation.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, age, and position of each officer and
director of the Company. No director of the Company has been a director or
officer of a company registered under the 1934 Act. Further, no directors or
officers, promoters or control persons of the Company have in the past five
years been involved in any bankruptcy, criminal proceedings or securities
infractions.
13
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NAME AGE POSITION
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
David St. Clair Dunn 47 President, Director
- ----------------------------------------------------------------------------------------------------------------------
Robert Bruce Manery 52 Vice-President Corporate Development, Secretary, Director
- ----------------------------------------------------------------------------------------------------------------------
Roger Watts 54 Chairman of the Board, Director
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
All directors of the Company have served since April 7, 1999. The officers were
elected on April 7, 1999, and will serve for one year or until their respective
successors are elected and qualified.
DAVID ST. CLAIR DUNN - PRESIDENT, DIRECTOR
Self-Employed consulting geologist. Vice President of Exploration and director
from April 1998 to April 1999 of ESM Resources Ltd., Vancouver, British
Columbia, a company engaged in mineral exploration. Director of Hyperion
Resources Corp. from September 1997 to December, 1998, Vancouver, British
Columbia, a mineral exploration company. Vice President Exploration of
Consolidated Silver Tusk Mines Ltd., Vancouver, British Columbia, from May 1997
to December 1997. From November 1993 to November 1996 was the vice president and
a director of Pioneer Metals Corp., Vancouver, British Columbia. From May 1990
to May 1993 was a consulting geologist to various public companies. Mr. Dunn is
a registered professional geoscientist with the British Columbia Association of
Professional Engineers and Geoscientists. He graduated from the University of
British Columbia in Vancouver, with a Bachelor of Science degree in geology.
ROBERT BRUCE MANERY - VICE-PRESIDENT CORPORATE DEVELOPMENT,
SECRETARY, DIRECTOR
Since April 1975 has been the President of RB Graphics Canada Inc., Kelowna,
British Columbia, an advertising and marketing company involved in the marketing
of international trade shows. Also President of One of a Kind Incorporated, a
company involved in the marketing of syndicated radio shows in North America
(the Champ) and the marketing of international art and wine exposes from May
1991 to present. Mr. Manery does not have any previous mining experience.
ROGER WATTS - CHAIRMAN OF THE BOARD OF DIRECTORS
Barrister and Solicitor. Senior partner with the law firm of Salloum, Doak,
Kelowna, British Columbia, since 1990
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth information for all persons who have served as
the chief executive officer of the Company since its inception in June 1997:
14
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
--------------------------- -----------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------- -------- ------------- ------------ -------------- -----------
OTHER
ANNUAL RESTRICT- SECURITIES
NAME AND COMPEN- ED STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS SATION AWARD(S) OPTIONS/ PAYOUTS COMPEN-
POSITION YEAR ($) ($) ($) ($) SARS (#) ($) SATION ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David St. Clair 1999 -0- -0- -0- -0- -0- -0- $18,333
Dunn, President (1)
- ----------------------------------------------------------------------------------------------------------------------
David Parsons, 1999 -0- -0- -0- -0- -0- -0- -0-
President (2)
- ----------------------------------------------------------------------------------------------------------------------
Ryan Barnard, 1999 -0- -0- -0- -0- -0- -0- -0-
President 1998 -0- -0- -0- -0- -0- -0- -0-
(3)
- ----------------------------------------------------------------------------------------------------------------------
Nolan Moss, 1998 -0- -0- -0- -0- -0- -0- -0-
President (4)
</TABLE>
(1) Mr. Dunn has been the President since April 7, 1999. The amount paid was
for geological work.
(2) Mr. Parsons was the President from December 18, 1998 to April 7, 1999.
(3) Mr. Barnard was the President from April 3, 1998 to December 18, 1998.
(4) Mr. Moss was the President from June 17, 1997 to April 3, 1998.
OPTIONS GRANTED DURING THE MOST RECENTLY COMPLETED FISCAL YEAR
During the fiscal year ended June 30, 1999, the Board of Directors of the
Company adopted a stock option plan, whereby directors, officers and employees
of the Company were granted the right to subscribe for up to 10% of the issued
and outstanding shares of the Company at prices to be fixed at the time of
grant. No options were granted under this plan during the fiscal year ended June
30, 1999. On September 23, 1999, the Company granted stock options to purchase
1,450,000 shares of Common Stock exercisable at a price of $0.10 per share for 5
years. On September 22, 1999, the average of the bid prices was $0.115. Pursuant
to the terms of the plan, the option price for non-qualified options is to be no
less than 85% of fair market value as of date of grant. Accordingly, the options
were granted with an option price of $0.10 per share. The following officers and
directors were granted non-qualified stock options:
----------------------------------------------------------------------
OPTIONEE NUMBER OF OPTIONS GRANTED
----------------------------------------------------------------------
Roger Watts 150,000
----------------------------------------------------------------------
Bruce Manery 150,000
----------------------------------------------------------------------
David St. Clair Dunn 100,000
----------------------------------------------------------------------
The options vest December 23, 1999 and expire September 23, 2004.
PLANS AND OTHER COMPENSATION
The Company paid management fees of $55,618 to Bruce Manery and Roger Watts
during the year ended June 30, 1999.
15
<PAGE>
No "Long Term Incentive Plan" has been instituted by the Company and none are
proposed at this time. Accordingly, there is no LTIP Awards Table set out in
this registration statement. The Company does not have a "Compensation
Committee".
No pension plans or retirement benefit plans have been instituted by the Company
and none are proposed at this time.
PROPOSED COMPENSATION
The Company anticipates it will pay to David St. Clair Dunn, its president,
compensation of $30,000 during the current fiscal year for geological work to be
billed at his customary rates. Bruce Manery and Roger Watts are each paid
Cdn.$3,500 per month as management fees.
In addition to the foregoing, officers and directors are also entitled to the
reimbursement of all reasonable business expenses.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At June 30, 1999 and September 30, 1999, $12,190 was owed to officers and
directors of the Company for management fees.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized share capital of the Company consists of 50,000,000 shares of
Common Stock at $0.001 par value and 1,000,000 shares of preferred stock
("Preferred Stock") at $0.01 par value. As at September 30, 1999, the Company
has a total of 14,822,872 shares of Common Stock issued and outstanding and no
shares of Preferred Stock issued and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share for each share held
of record on all matters submitted to a vote of stockholders. Holders of Common
Stock do not have cumulative voting rights, and therefore the holders of a
majority of the shares of Common Stock voting for the election of directors may
elect all of the Company's Directors standing for election. Subject to
preferences that may be applicable to the holders of outstanding shares of
Preferred Stock, if any, the holders of Common Stock are entitled to receive
such lawful dividends as may be declared by the Board of Directors. In the event
of a liquidation, dissolution or winding up of the affairs of the Company,
whether voluntary or involuntary, and subject to the rights of the holders of
outstanding shares of Preferred Stock, if any, the holders of shares of Common
Stock shall be entitled to receive pro rata all of the remaining assets of the
Company available for distribution to its stockholders. The Common Stock has no
preemptive, redemption, conversion or subscription rights. All outstanding
shares of Common Stock are fully paid and non-assessable. The issuance of Common
Stock or of rights to purchase Common Stock could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of the outstanding voting stock of the
Company.
PREFERRED STOCK
The Articles of Incorporation of the Company authorize the board of Directors to
issue, by resolution, 1,000,000 shares of Preferred Stock, in classes, having
such designations, preferences, rights and limitations and on such terms and
conditions as the board of Directors may from time to time
16
<PAGE>
determine, including the rights, if any, of the holders of such Preferred Stock
with respect to voting, dividends, redemptions, liquidation and conversion. As
at September 30, 1999, no classes of Preferred Stock have been designated and no
shares have been issued.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
The Company's Common Stock is quoted on the OTC Bulletin Board system of the
National Association of Securities Dealers with the symbol GDRV. The Company's
Common Stock was first quoted on the OTC-BB on January 15, 1999.
The following table lists the high and low bid prices quoted on the OTC-BB of
the National Association of Securities Dealers for shares of the Company's
Common Stock for each of the fiscal quarters since the Company's stock was first
quoted on such bulletin board system.
- -------------------------------------------------------------------------------
FISCAL QUARTER ENDED HIGH BID LOW BID
- -------------------------------------------------------------------------------
March 31, 1999 $0.5100 $0.3400
- -------------------------------------------------------------------------------
June 30, 1999 $0.5100 $0.3125
- -------------------------------------------------------------------------------
September 30, 1999 $0.4375 $0.0900
- -------------------------------------------------------------------------------
December 31, 1999 $0.2900 $0.0100
- -------------------------------------------------------------------------------
On January 5, 2000, the high and low bid prices were both $0.08.
The high and low bid quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
The Company's Common Stock is issued in registered form and the following
information is taken from the records of American Securities Transfer and Trust
Inc., of 12039 W. Alameda Parkway, Suite Z-2, Lakewood, Colorado 80228, the
registrar and transfer agent for the Common Stock.
On November 16, 1999, the shareholders' list for the Company's Common Stock
showed 150 registered shareholders and 15,572,874 shares outstanding.
The Company has not paid dividends in the past and it does not expect to have
the ability to pay dividends in the near future. If the Company generates
earnings in the future, it expects that they will be retained to finance further
growth and, when appropriate, retire debt. The Directors of the Company will
determine if and when dividends should be declared and paid in the future based
on the Company's financial position at the relevant time. All of the Company's
shares are entitled to an equal share in any dividends declared and paid.
ITEM 2. LEGAL PROCEEDINGS
The officers and directors of the Company certify that to the best of their
knowledge, neither the Company nor any of its officers and directors are parties
to any legal proceeding or litigation. Further, the officers and directors know
of no threatened or contemplated legal proceedings or litigation. None of the
officers and directors has been convicted of a felony and none have been
convicted of any criminal offense, felony or misdemeanor relating to securities
or performance in corporate office. To the best knowledge of the officers and
directors, no investigations of felonies, misfeasance in office or securities
investigations are either pending or threatened at this time.
17
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on accounting
and financial disclosure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding the issuance and sales of securities of
the Company, without registration, since its inception in June 1997. No such
sales involved the use of an underwriter and no commissions were paid in
connection with the sale of any securities.
(a) During the period from the date of formation of the Company on June 17,
1997 to June 30, 1998, the Company issued 3,768,000 shares of Common
Stock. 3,568,000 shares were issued at a price of $0.01 per share in a
private placement which took place from April 29, 1998 to June 9, 1998,
to 39 persons associated with the founder of the Company, Ryan Barnard.
200,000 shares were issued at a price of $0.05 per share in a private
placement which took place from June 16, 1998 to June 22, 1998, to
Tecumseth Holdings Ltd. and Twilight Enterprises JLK Ltd. The higher
price was deemed to be justified due to certain developments among Rob
Roy, the Company, and the Mexicana I property. Specifically, on May 27,
1998, the Company obtained an assignment of the option agreement from
La Mexicana. Thus, if the then proposed acquisition of Rob Roy were to
fail, the Company would still have an option on the Mexicana I property
and would not have to rely on the efforts of Rob Roy or its subsidiary,
La Mexicana. The Company relied upon the exemption from registration
contained in Section 504 of Regulation D of the Securities Act of 1933,
as amended.
(b) In January and March 1999, a total of 600,000 shares of Common Stock
were issued as part of the Company's option payments for the La
Mexicana and La Lajita properties. The shares were valued at $0.05 per
share. The Company relied upon the exemption contained in Rule 504 with
respect to 250,000 of these and 350,000 shares were issued in reliance
on Section 4(2).
(c) In December 1998 and January 1999, 200,000 shares were issued to
Twilight Enterprises JLK Ltd. for services valued at $0.05 per share
and 1,800,000 shares were sold for $0.05 per share to Cannonbridge
Capital Corp., Brian Trowbridge, and Mischcorp Ltd. in reliance on the
exemption from registration contained in Rule 504. The price of $0.05
per share was based on transactions which occurred at roughly the same
time.
(d) In connection with the takeover of Rob Roy in March 1999, 6,454,872
shares were issued in exchange of the Rob Roy shares. The Company
relied upon Regulation S with respect to 4,518,410 of these shares and
1,936,462 shares were issued in reliance on the exemption contained in
Rule 504 of Regulation D.
(e) In April 1999, the Company sold 2,000,000 shares at $0.35 per share to
Messina Holdings Ltd. and 67849 Capital Ltd. pursuant to the exemption
from registration contained in Rule 504. The subscription agreements
were entered into just prior to the commencement of trading of the
Company's shares. The opening closing bid price on January 20, 1999 was
$.40 per share.
(f) In September 1999, the Company issued 750,000 shares at $0.10 per share
to Twilight Enterprises JLK Ltd. for services rendered pursuant to the
exemption from registration contained in Section 4(2).
18
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.7502 of the General Corporation Law of Nevada and Article VI of the
Company's Articles of Incorporation permit the Company to indemnify its officers
and directors and certain other persons against expenses in defense of a suit to
which they are parties by reason of such office, so long as the persons
conducted themselves in good faith and the persons reasonably believed that
their conduct was in the Company's best interests or not opposed to the
Company's best interests, and with respect to any criminal action or proceeding,
had no reasonable cause to believe their conduct was unlawful. Indemnification
is not permitted in connection with a proceeding by or in the right of the
corporation in which the officer or director was adjudged liable to the
corporation or in connection with any other proceeding charging that the officer
or director derived an improper personal benefit, whether or not involving
action in an official capacity.
PART F/S
FINANCIAL STATEMENTS
The audited financial statements of the Company for the fiscal year ended June
30, 1999, with comparative figures to June 30, 1998 are attached hereto as pages
F-1 to F-14. Effective March 10, 1999, the Company completed the acquisition of
100% of the outstanding common shares of Rob Roy. As the Rob Roy shareholders
obtained effective control of the Company through the exchange of their shares
of Rob Roy for shares of the Company, the acquisition has been accounted for in
these consolidated financial statements as a reverse acquisition. Consequently,
the consolidated statements of loss and deficit and changes in cash flows
reflect the results from operations and changes in financial position of Rob
Roy, the legal subsidiary, for the year ended June 30, 1999 combined with those
of the Company, the legal parent, from the date of acquisition on March 10,
1999, in accordance with generally accepted accounting principles for reverse
acquisitions. In addition, the comparative figures are those of Rob Roy, the
legal subsidiary.
The unaudited financial statements of the Company as of and for the three months
ended September 30, 1999 are attached hereto as pages F-15 to F-21.
19
<PAGE>
PART III
The following exhibits are included with this registration statement:
REGULATION
S-B NUMBER DOCUMENT
2.1 Offer to Purchase*
3.1 Articles of Incorporation*
3.2 Bylaws*
10.1 Mexicana I Agreement dated as of February 12, 1998*
10.2 La Lajita Agreement dated as of February 12, 1998*
10.3 1999 Stock Option Plan*
10.4 Agreement with Transmeridian Exploration Inc., as
amended*
10.5 Letter of Intent with OREX Gold Mines Corporation*
10.6 Mexicana I Agreement dated as of November 12, 1999
21 Subsidiaries of the Registrant*
27 Financial Data Schedule
*Filed previously
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOLDEN RIVER RESOURCES INC.
Date: January 19, 2000 By: /s/ Robert Bruce Manery
----------------------------------
Robert Bruce Manery, Secretary
20
Consolidated Financial Statements of
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Year ended June 30, 1999
F-1
<PAGE>
AUDITORS' REPORT TO THE STOCKHOLDERS
We have audited the accompanying consolidated balance sheet of Golden River
Resources Inc. and subsidiaries, an exploration stage enterprise, as at June 30,
1999 and the consolidated statements of loss, stockholders' equity and
comprehensive income and cash flows for the year then ended. 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
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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 1999 consolidated financial statements, referred to above,
present fairly, in all material respects, the financial position of the Company
and subsidiaries as at June 30, 1999 and the results of their operations and
their cash flows for the year then ended in accordance with generally accepted
accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the consolidated financial
statements, the Company, to date, has generated no revenues and has cumulative
losses since inception of $1,415,084. These factors, among others, as discussed
in Note 2 a), raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/KPMG LLP
Kelowna, Canada
September 7, 1999, except as to note 11, which is as of September 23, 1999 and
note 5 b) which is as of November 12, 1999.
F-2
<PAGE>
<TABLE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Consolidated Balance Sheet
June 30, 1999, and 1998
$ United States
<CAPTION>
==============================================================================================================
1999 1998
(Unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash $ 57,149 $ 12,798
Prepaid expense 6,220 -
---------------------------------------------------------------------------------------------------------
63,369 12,798
Capital assets (note 4) 9,428 -
Mineral properties (note 5) 318,396 246,022
- --------------------------------------------------------------------------------------------------------------
$ 391,193 $ 258,820
==============================================================================================================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 146,569 $ 36,780
Due to shareholders (note 6) 12,190 5,001
Shares to be issued for services (note 7) 75,000 -
---------------------------------------------------------------------------------------------------------
233,759 41,781
Stockholders' Equity
Capital stock 1,567,475 463,380
Deficit accumulated during the exploration stage (1,415,084) (254,769)
Accumulated other comprehensive income 5,043 8,428
---------------------------------------------------------------------------------------------------------
157,434 217,039
Subsequent events (note 11)
- --------------------------------------------------------------------------------------------------------------
$ 391,193 $ 258,820
==============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ ROGER S. WATTS Director
- ---------------------------------------
/s/ R. BRUCE MANERY Director
- ---------------------------------------
F-3
<PAGE>
<TABLE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Consolidated Statement of Loss
Year ended June 30, 1999, and from inception on June 13, 1997 to June 30, 1998
$ United States
==============================================================================================================
From Inception
(June 13, 1997)
to June 30, 1999 1999 1998
(Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Amortization $ 1,232 $ 1,232 $ -
Consulting fees 2,821 - 2,821
Exploration of mineral properties 315,973 245,210 70,763
General and administrative 62,393 35,592 26,801
Option payments to acquire mineral properties
written off 534,214 534,214 -
Professional fees 184,371 152,065 32,306
Management fees 125,308 55,618 69,690
Travel and promotion 188,772 136,384 52,388
- --------------------------------------------------------------------------------------------------------------
Loss $ 1,415,084 $ 1,160,315 $ 254,769
==============================================================================================================
Weighted average number of shares 7,599,495 1,894,809
Loss per share $ (0.15) $ (0.13)
==============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Consolidated Statement of Stockholders' Equity and Comprehensive Income
Year ended June 30, 1999, and from inception on June 13, 1997 to June 30, 1998
$ United States
<CAPTION>
==============================================================================================================
Deficit
Accumulated Accumulated
During the Other Total
CAPITAL STOCK Exploration Comprehensive Stockholders
Shares Amount Stage Income Equity
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rob Roy
Issued for cash at Cdn $0.01
(US $0.007) per share 750,000 $ 5,115 - - $ 5,115
Issued for cash at Cdn $0.25
(US $0.17) per share 2,687,634 458,265 - - 458,265
Loss - - $ (254,769) - (254,769)
Foreign currency translation adjustment - - - $ 8,428 8,428
- --------------------------------------------------------------------------------------------------------------
Rob Roy balance, June 30, 1998
(Unaudited) 3,437,634 463,380 (254,769) 8,428 217,039
Issued for cash at Cdn $0.25
(US $0.17) per share 3,017,238 515,591 - - 515,591
Foreign currency translation
adjustment - - - 1,014 1,014
- --------------------------------------------------------------------------------------------------------------
Rob Roy balance, March 10, 1999
exchanged into Golden River
common shares at 1 share for each
Rob Roy share 6,454,872 978,971 (254,769) 9,442 733,644
==============================================================================================================
Golden River
Issued for cash at $0.01 per share 3,568,000 35,680 - - 35,680
Issued for cash at $0.05 per share 200,000 10,000 - - 10,000
Share issue costs - (9,446) - - (9,446)
- --------------------------------------------------------------------------------------------------------------
Golden River balance, June 30, 1998
(Unaudited) 3,768,000 36,234 - - 36,234
Issued for cash at $0.05 per share 1,800,000 90,000 - - 90,000
Issued pursuant to mineral property
option agreements at $0.05 per share 600,000 30,000 - - 30,000
Issued for services at $0.05 per share 200,000 10,000 - - 10,000
Issued for cash at $0.35 per share 2,000,000 700,000 - - 700,000
Share issue costs - (265,592) - - (265,592)
- --------------------------------------------------------------------------------------------------------------
Golden River balance, March 10, 1999
prior to the business combination
with Rob Roy 8,368,000 600,642 - - 600,642
Adjustment to record business
combination
Shares of Golden River issued to
acquire shares of Rob Roy (above),
recorded at the fair value of
Golden River net assets (note 3) 6,454,872 750,244 - - 750,244
Increase in the book value of Golden
River's capital stock to that of Rob Roy - 216,589 (254,769) 9,442 (28,738)
Loss (1,160,315) (1,160,315)
Foreign currency translation adjustment - - - (4,399) (4,399)
- --------------------------------------------------------------------------------------------------------------
Balance June 30, 1999 14,822,872 1,567,475 (1,415,084) 5,043 157,434
==============================================================================================================
</TABLE>
Refer to note 2 b) for basis of presentation and consolidation.
F-5
<PAGE>
<TABLE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Consolidated Statement of Cash Flows
Year ended June 30, 1999, and from inception on June 13, 1997 to June 30, 1998
$ United States
<CAPTION>
==============================================================================================================
From Inception
(June 13, 1997)
to June 30, 1999 1999 1998
(Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash spent on mineral property exploration $ (315,973) $ (245,210) $ (70,763)
Cash paid to suppliers and management (471,453) (329,228) (142,225)
- --------------------------------------------------------------------------------------------------------------
(787,426) (574,438) (212,988)
Cash flows from investing activities:
Purchase of capital assets (10,699) (10,699) -
Option payments on mineral properties (822,610) (576,588) (246,022)
- --------------------------------------------------------------------------------------------------------------
(833,309) (587,287) (246,022)
- --------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance of capital stock 1,673,560 1,210,180 463,380
Foreign currency translation adjustment 4,324 (4,104) 8,428
- --------------------------------------------------------------------------------------------------------------
Increase in cash 57,149 44,351 12,798
Cash, beginning of period - 12,798 -
- --------------------------------------------------------------------------------------------------------------
Cash, end of period $ 57,149 $ 57,149 $ 12,798
==============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Notes to Consolidated Financial Statements (page 1)
Year ended June 30, 1999
$ United States
================================================================================
1. NATURE OF OPERATIONS
Golden River Resources Inc. ("Golden River" or the "Company") is
incorporated under the laws of Nevada and its principal business activity
is mineral property exploration and development.
The Company, through mineral property option agreements (note 5), is in the
process of exploring and developing mineral properties and has not yet
determined whether these properties contain mineral reserves that are
economically recoverable. The recoverability of the amount shown for
mineral properties of $318,396 as at June 30, 1999 is dependent upon the
discovery of economically recoverable mineral reserves, the ability of the
Company to obtain the necessary financing to complete the exploration and
development of the mineral properties, future profitable production or
proceeds from the disposition of the mineral properties and the Company's
ability to complete its obligations.
Title to mineral properties involves certain inherent risks due to the
difficulties of determining the validity of certain claims as well as the
potential for problems arising from the frequently ambiguous conveyancing
history characteristic of many mining properties. The Company has
investigated title to all of the mineral properties to which it has an
option to acquire an interest and, to the best of its knowledge, title to
all of these properties is in good standing. The properties in which the
Company has committed to earn an interest are located in Durango, Mexico
and the Company is therefore relying on title opinion by legal counsel who
are basing such opinions on the laws of Durango.
2. SIGNIFICANT ACCOUNTING POLICIES:
a) Going concern
These financial statements have been prepared on the going concern
basis, which assumes the realization of assets and liquidation of
liabilities in the normal course of business. As shown in the
consolidated financial statements, to date, the Company has generated
no revenues and has cumulative losses since inception of $1,415,084. In
addition, as noted in note 5 b), the Company is committed to
significant payments pursuant to a mineral property option agreement.
These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The Company's ability
to continue as a going concern is dependent on its ability to generate
future profitable operations and receive continued financial support
from its shareholders and other investors.
b) Basis of presentation and consolidation:
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
F-7
<PAGE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Notes to Consolidated Financial Statements (page 2)
Year ended June 30, 1999
$ United States
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
b) Basis of presentation and consolidation (continued):
Effective March 10, 1999, the Company completed the acquisition of 100%
of the outstanding common shares of Rob Roy Resources Ltd. ("Rob Roy").
As the Rob Roy shareholders obtained effective control of the Company
through the exchange of their shares of Rob Roy for shares of the
Company, the acquisition of Rob Roy has been accounted for in these
consolidated financial statements as a reverse acquisition.
Consequently, the consolidated statements of loss, stockholders' equity
and comprehensive income and cash flows reflect the results from
operations and cash flows of Rob Roy, the legal subsidiary, for the
year ended June 30, 1999, combined with those of Golden River, the
legal parent, from acquisition on March 10, 1999, in accordance with
generally accepted accounting principles for reverse acquisitions.
Amounts prior to March 10, 1999 are those of Rob Roy.
c) Translation of Financial Statements
The Company's subsidiary, Rob Roy Resources Ltd., operates in Canada and
its operations are conducted in Canadian currency.
These statements have been translated into United States dollars. The
method of translation applied is as follows:
i) Assets and liabilities are translated at the rate of exchange in
effect at the balance sheet date, being US $1.00 per Cdn $1.4630.
ii) Expenses are translated at the exchange rate in effect at the
transaction date.
iii) The net adjustment arising from the translation is recorded as a
separate component of stockholders' equity called "accumulated
other comprehensive income".
d) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
e) Financial instruments
The fair values of cash and accounts payable and accrued liabilities
approximate their carrying values due to the relatively short periods
to maturity of these instruments. It is not possible to determine the
fair value of amounts due to shareholders as a maturity date is not
determinable. The maximum credit risk exposure for all financial assets
is the carrying amount of that asset.
F-8
<PAGE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Notes to Consolidated Financial Statements (page 3)
Year ended June 30, 1999
$ United States
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
f) Capital assets
Capital assets are stated at cost. Amortization is provided using the
following methods and annual rates which are intended to amortize the
cost of assets over their estimated useful life:
<TABLE>
<CAPTION>
====================================================================================================
Asset Method Rate
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Furniture and equipment Declining balance 20%
Computer equipment Declining balance 30%
----------------------------------------------------------------------------------------------------
</TABLE>
Amortization is provided at one-half the annual rates in the year of
acquisition.
g) Mineral properties:
The amount shown for mineral properties is comprised of the direct
costs of acquiring the properties including any value added taxes. All
other costs, including administrative overhead, are expensed as
incurred. Mineral properties acquired for share consideration are
recorded at the fair value of the shares at the date of acquisition.
Management periodically reviews the carrying values of its investments
in mineral properties with internal and external mining professionals.
A decision to abandon, reduce or expand activity on a specific project
is based upon many factors including general and specific assessments
of mineral reserves, anticipated future mineral prices, anticipated
costs of developing and operating a producing mine, the expiration date
of mineral property leases and the general likelihood that the Company
will continue exploration on the project. The Company does not set a
pre-determined holding period for properties with unproven reserves.
However, properties which have not demonstrated suitable prospects at
the conclusion of each phase of an exploration program are re-evaluated
to determine if future exploration is warranted and that carrying
values are appropriate.
If a mineral property is abandoned or it is determined that its
carrying value cannot be supported by future production or sale on an
un-discounted cash flow basis, the related costs are charged against
operations in the year of abandonment or determination of impairment of
value. The amounts recorded as mineral properties represent unamortized
acquisition costs to date and do not necessarily reflect present or
future values.
The accumulated costs of mineral properties that are developed to the
stage of commercial production will be amortized to operations through
unit of production depletion based on proven and probable reserves.
F-9
<PAGE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Notes to Consolidated Financial Statements (page 4)
Year ended June 30, 1999
$ United States
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
h) Exploration costs
In order to comply with directives from the Securities and Exchange
Commission ("SEC") with respect to accounting for exploration
expenditures, the Company has expensed all costs associated with the
exploration of properties in which the Company holds options to acquire
an interest. Under Canadian generally accepted accounting principles
("GAAP"), these expenditures would have been capitalized with the
acquisition costs of the mineral properties. Had the Company accounted
for these transactions using Canadian GAAP, the effect on the
consolidated financial statements would have been as follows:
<TABLE>
<CAPTION>
=====================================================================================================
Mineral Properties Deficit Loss for the Period
1999 1998 1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As stated $ 318,396 $ 246,022 $ 1,415,084 $ 254,769 $ 1,160,315 $ 254,769
As restated under
Canadian GAAP $ 326,055 $ 316,785 $ 1,407,425 $ 184,006 $ 1,152,656 $ 184,006
=====================================================================================================
</TABLE>
i) Loss per share
Loss per share has been calculated using the weighted average number of
common shares outstanding during the period.
j) Accounting standards change
In June, 1998, the Financial Accounting Standards Board issued SFAS no.
133, "Accounting for Derivative Instruments and Hedging Activities."
Management is in the process of reviewing this new standard. Adoption
of this statement is not expected to have a significant impact on the
results of operations or financial position.
3. BUSINESS COMBINATION:
Effective March 10, 1999, Golden River and Rob Roy executed their business
combination agreement. Golden River issued 6,454,872 common shares to the
shareholders of Rob Roy in consideration for all of the issued and
outstanding common shares of Rob Roy on the basis of one common share of
Golden River for each common share of Rob Roy. As the former shareholders
of Rob Roy obtained effective control of the Company through the share
exchange, this transaction has been accounted for in these financial
statements as a reverse acquisition and the purchase method of accounting
has been applied. Under reverse acquisition accounting, Rob Roy is
considered to have acquired Golden River with the results of Golden River's
operations included in the consolidated financial statements from the date
of acquisition. Rob Roy is considered the continuing entity and
consequently, the amounts prior to March 10, 1999 are those of Rob Roy.
F-10
<PAGE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Notes to Consolidated Financial Statements (page 5)
Year ended June 30, 1999
$ United States
================================================================================
3. BUSINESS COMBINATION (CONTINUED):
Prior to the business combination with Rob Roy, Golden River was deemed a
shell corporation with no operations since inception on June 17, 1997.
Equity financing was raised prior to March 10, 1999 in anticipation of the
business combination. Accordingly, the acquisition has been recorded at the
fair value of the tangible net assets of Golden River at the date of
acquisition. The acquisition details are as follows:
Net assets acquired
Cash $ 34,761
Share subscriptions receivable 514,500
Due from related party 267,174
Option payments on mineral properties 30,000
Current liabilities (96,191)
------------------------------------------------------------------
Consideration given for net assets acquired 750,244
Common shares issued $ 750,244
------------------------------------------------------------------
As the continuing entity is deemed to be Rob Roy, capital stock of Golden
River has been increased by $216,589 as a result of accounting for this
combination as a reverse acquisition. Proforma results for periods prior to
the acquisition have not been provided as such results would not be
significantly different from those reported.
The amount due from related party was receivable from Rob Roy Resources
Ltd. and has been eliminated upon consolidation of the Company and Rob Roy.
The share subscriptions receivable were collected subsequent to the
business combination on March 10, 1999.
4. CAPITAL ASSETS:
<TABLE>
<CAPTION>
=================================================================================================================
1999 Accumulated Net book
Cost amortization value
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and equipment $ 6,668 $ 667 $ 6,001
Computer equipment 4,031 604 3,427
-----------------------------------------------------------------------------------------------------------------
$ 10,699 $ 1,271 $ 9,428
=================================================================================================================
</TABLE>
5. MINERAL PROPERTIES:
<TABLE>
<CAPTION>
=================================================================================================================
1999 June 30, 1998 Option Payments On Mineral Write Down of June 30, 1999
(Unaudited) Properties Including Value Mineral Properties
Added Taxes
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
La Lajita $144,420 $389,794 $ (534,214) -
La Mexicana 101,602 216,794 - $318,396
-----------------------------------------------------------------------------------------------------------------
$246,022 $606,588 $ (534,214) $318,396
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================================
1998 June 13, 1997 Option Payments On Mineral Write Down of June 30, 1998
Properties Including Value Mineral Properties (Unaudited)
Added Taxes (Unaudited)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
La Lajita - $ 144,420 - $144,420
La Mexicana - 101,602 - 101,602
-----------------------------------------------------------------------------------------------------------------
- $ 246,022 - $246,022
=================================================================================================================
</TABLE>
F-11
<PAGE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Notes to Consolidated Financial Statements (page 6)
Year ended June 30, 1999
$ United States
================================================================================
5. MINERAL PROPERTIES (CONTINUED):
a) La Lajita
Pursuant to an option agreement with an effective date of July 1, 1997,
as evidenced in writing on February 12, 1998, the Company acquired an
option to earn a 60% interest in five mineral claims located in the
Municipality of Pueblo Nuevo, State of Durango, Mexico.
The agreement required periodic option payments, the issuance of
capital stock and a commitment to undertake minimum exploration
expenditures on the properties over a term of three years.
To June 30, 1999, the Company made option payments in the aggregate
amount of $534,214, including the prepayment of $75,000 due July 1,
1999, and 350,000 shares at an agreed price of $0.05 per share, and
incurred exploration expenditures in excess of $300,000 with respect to
the properties.
Subsequent to June 30, 1999, the Company elected to abandon the La
Lajita properties. As a result, all costs incurred in connection with
the acquisition of these mineral properties have been written off as at
June 30, 1999.
b) La Mexicana
Pursuant to an option agreement with an effective date of July 1, 1997,
as evidenced in writing on February 12, 1998, the Company acquired an
option to earn a 70% interest in mineral claims located in the
Municipality of Pueblo Nuevo, State of Durango, Mexico. The agreement
requires the following:
o an initial payment of $50,000;
o an additional $250,000, payable $50,000 semi-annually commencing
January 1, 1998;
o the issuance of 250,000 common shares at an agreed price of $0.05
per share on the effective date that the Company became listed on
a recognized quotation system (being March 10, 1999); and
o the issuance of a further 250,000 shares at an agreed price of
$0.05 per share on each of September 10, 1999, March 10, 2000 and
September 20, 2000.
F-12
<PAGE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Notes to Consolidated Financial Statements (page 7)
Year ended June 30, 1999
$ United States
================================================================================
5. MINERAL PROPERTIES (CONTINUED):
In addition, under the terms of the agreement, the Company must make
exploration expenditures on the claims in the amount of $300,000 by June
30, 1998, $500,000 by June 30, 1999 and $700,000 by June 30, 2000. The
Company is also responsible for the payment of any value added taxes on the
property.
As at June 30, 1999, the Company has made option payments in the aggregate
amount of $307,500, including prepayment of the $50,000 payment due July 1,
1999 and $45,000 on account of the payment due January 1, 2000, but has
only made nominal exploration expenditures of the nature outlined in the
agreement. However, effective November 12, 1999 the Company signed an
amended agreement which revises the terms of the original agreement as
follows:
o the Company must make exploration expenditures on the claims in the
amount of $300,000 by June 12, 2000 and $1,200,000 by February 12,
2001; and
o the Company must issue 750,000 common shares prior to March 10, 2002
with a minimum of 250,000 shares issued by February 12, 2000.
6. DUE TO SHAREHOLDERS:
The amount due to shareholders is unsecured and without interest or stated
terms of repayment.
7. CAPITAL STOCK:
a) Authorized:
50,000,000 common shares with a par value of $0.001 per share
1,000,000 preferred shares with a par value of $0.01 per share
b) As at June 30, 1999, 7,115,678 common shares were subject to hold
periods under which the holder's right to sell such shares is
restricted.
c) During 1999, the Company received services for which it agreed to issue
750,000 Common shares at $0.10 per share subsequent to June 30, 1999.
8. RELATED PARTY TRANSACTIONS
During the year, the Company paid or accrued management fees of $55,618
(1998 - $69,690) to Directors of the Company.
9. COMPARATIVE FIGURES
Certain of the comparative figures have been restated to conform with the
presentation adopted in the current year.
F-13
<PAGE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Notes to Consolidated Financial Statements (page 8)
Year ended June 30, 1999
$ United States
================================================================================
10. STATEMENT OF CASH FLOWS
Cash flows from operating activities prepared under the indirect method are
as follows:
<TABLE>
<CAPTION>
=========================================================================================================
From inception
(June 13, 1997) to
June 30, 1999 1999 1998
(Unaudited)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loss $ (1,415,084) $ (1,160,315) $ (254,769)
Non cash items
Amortization 1,232 1,232 -
Option payments to acquire mineral properties
written off 534,214 534,214 -
Accounts payable and accrued liabilities 86,242 49,462 36,780
Other changes in non-cash working capital 5,970 969 5,001
---------------------------------------------------------------------------------------------------------
$ (787,426) $ (574,438) $ (212,988)
=========================================================================================================
</TABLE>
11. SUBSEQUENT EVENTS
Subsequent to June 30, 1999, the Company received a loan in the amount of
$60,350. The loan is unsecured, does not bear interest and has no fixed
terms of repayment.
On September 23, 1999, the Company issued 1,450,000 common share stock
options. These stock options have an exercise price of $0.10 per share and
expire on September 23, 2004.
12. THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
F-14
<PAGE>
Consolidated Financial Statements of
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Three month period ended, September 30, 1999
(Unaudited - see Notice to Reader)
F-15
<PAGE>
NOTICE TO READER
We have compiled the consolidated balance sheet of Golden River Resources Inc.
as at September 30, 1999 and the consolidated statements of loss and cash flows
for the three month period then ended from information provided by management.
We have not audited, reviewed or otherwise attempted to verify the accuracy or
completeness of such information. Readers are cautioned that these statements
may not be appropriate for their purposes.
/S/KPMG LLP
Chartered Accountants
December 13, 1999
F-16
<PAGE>
<TABLE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Consolidated Balance Sheet
$ United States
September 30, 1999 and 1998
(Unaudited - see Notice to Reader)
<CAPTION>
==============================================================================================================
1999 1998
(Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash $ 21,089 $ 35,646
Prepaid expense 5,588 -
---------------------------------------------------------------------------------------------------------
26,677 35,646
Capital assets, net of amortization 8,866 -
Mineral properties 318,396 408,870
- --------------------------------------------------------------------------------------------------------------
$ 353,939 $ 444,516
==============================================================================================================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 140,928 $ 39,338
Due to shareholders 22,229 74,499
Shares to be issued for cash - 157,201
Shares to be issued for services 118,220 -
---------------------------------------------------------------------------------------------------------
281,377 271,038
Long term debt 60,350 -
Stockholders' Equity
Capital stock 1,524,255 469,994
Deficit accumulated during the exploration stage (1,516,139) (306,369)
Accumulated other comprehensive income 4,096 9,853
---------------------------------------------------------------------------------------------------------
12,212 173,478
- --------------------------------------------------------------------------------------------------------------
$ 353,939 $ 444,516
==============================================================================================================
</TABLE>
The basis of measurement and the disclosures in these financial statements are
not necessarily in accordance with generally accepted accounting principles.
On behalf of the Board:
/S/ ROGER S. WATTS Director
- -----------------------------------------
/S/ R. BRUCE MANERY Director
- -----------------------------------------
F-17
<PAGE>
<TABLE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Consolidated Statement of Loss
$ United States
Three month period ended September 30, 1999 and 1998
(Unaudited - see Notice to Reader)
<CAPTION>
==============================================================================================================
From Inception
(June 13, 1997)
to September 30, 1999 1999 1998
(Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Amortization $ 1,794 $ 562 $ -
Consulting fees 2,821 - -
Exploration of mineral properties 356,094 40,121 1,472
General and administrative 79,706 17,313 18,431
Management fees 125,308 - -
Option payments to acquire mineral
properties written off 534,214 - -
Professional fees 207,036 22,665 14,005
Travel and promotion 209,166 20,394 17,692
---------------------------------------------------------------------------------------------------------
1,516,139 101,055 51,600
- --------------------------------------------------------------------------------------------------------------
Loss $ (1,516,139) $ (101,055) $ (51,600)
==============================================================================================================
Weighted average number of shares 15,059,285 3,461,982
Earnings per share $ (0.01) $ (0.01)
==============================================================================================================
</TABLE>
The basis of measurement and the disclosures in these financial statements are
not necessarily in accordance with generally accepted accounting principles.
F-18
<PAGE>
<TABLE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Consolidated Statement of Cash Flows
$ United States
Three month period ended September 30, 1999 and 1998
(Unaudited - see Notice to Reader)
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
From Inception
(June 13, 1997)
to September 30, 1999 1999 1998
(Unaudited) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Loss $ (1,516,139) $ (101,055) $ (51,600)
Cash flows from operating activities:
Items not involving cash:
Amortization 1,794 562 -
Option payments to acquire mineral
properties written off 534,214 - -
Accounts payable and accrued liabilities 80,601 (5,641) 159,759
Other changes in non-cash operating
working capital 16,641 10,671 69,498
---------------------------------------------------------------------------------------------------------
(882,889) (95,463) 177,657
Cash flows from investing activities:
Purchase of capital assets (10,699) - -
Option payments on mineral properties (822,610) - (162,848)
---------------------------------------------------------------------------------------------------------
(833,309) - (162,848)
Cash flows from financing activities:
Proceeds from long term debt 60,350 60,350 -
Issuance of capital stock 1,673,560 - 6,614
---------------------------------------------------------------------------------------------------------
1,733,910 60,350 6,614
Foreign currency translation adjustment 3,377 (947) 1,425
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 21,089 (36,060) 22,848
Cash position, beginning of period - 57,149 12,798
- --------------------------------------------------------------------------------------------------------------
Cash position, end of period $ 21,089 $ 21,089 $ 35,646
==============================================================================================================
</TABLE>
The basis of measurement and the disclosures in these financial statements are
not necessarily in accordance with generally accepted accounting principles.
F-19
<PAGE>
<TABLE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Consolidated Statement of Stockholders' Equity and Comprehensive Income
$ United States
Three month period ended September 30, 1999 and 1998
(Unaudited - see Notice to Reader)
<CAPTION>
==============================================================================================================
Deficit
Accumulated Accumulated
During the Other Total
CAPITAL STOCK Exploration Comprehensive Stockholders
Shares Amount Stage Income Equity
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Golden River balance, June 30, 1999 14,822,872 $ 1,567,475 $ (1,415,084) $ 5,043 $ 157,434
Loss - - (101,055) - (101,055)
- --------------------------------------------------------------------------------------------------------------
Foreign currency translation adjustment - - - (947) (947)
Issued for services 750,000 75,000 - - 75,000
- --------------------------------------------------------------------------------------------------------------
Share issue costs - (118,220) - - (118,220)
Balance September 30, 1999
(Unaudited) 15,572,872 $ 1,524,255 $ (1,516,139) $ 4,096 $ 12,212
==============================================================================================================
</TABLE>
F-20
<PAGE>
GOLDEN RIVER RESOURCES INC.
(An Exploration Stage Enterprise)
Notes to Consolidated Financial Statements
$ United States
Three month period ended September 30, 1999 and 1998 (Unaudited - see Notice to
Reader)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES:
a) Translation of Financial Statements
The Company's subsidiary, Rob Roy Resources Ltd., operates in Canada and
its operations are conducted in Canadian currency.
These consolidated statements are presented in United States currency for
the convenience of readers accustomed to United States currency. The
method of translation applied is as follows:
i) Monetary assets and liabilities are translated at the rate of
exchange in effect at the balance sheet date, being US $1.00 per
Cdn $1.4768.
ii) Non-monetary assets and liabilities are translated at the rate of
exchange in effect at the date the transaction occurred.
iii) Revenues and expenses are translated at the exchange rate in
effect at the transaction date.
iv) The net adjustment arising from the translation is recorded as a
separate component of stockholders' equity called "foreign
currency translation adjustment".
b) Exploration costs
In order to comply with directives from the Securities and Exchange
Commission ("SEC") with respect to accounting for exploration
expenditures, the Company has expensed all costs associated with the
exploration of properties held by the Company. Under Canadian generally
accepted accounting principles ("GAAP"), these expenditures would have
been capitalized and included with the acquisition costs of the mineral
properties held by the Company. Had the Company accounted for these
transactions using Canadian GAAP, the effect on the consolidated
financial statements would have been as follows:
<TABLE>
<CAPTION>
=====================================================================================================
Mineral Properties Deficit Loss for the Period
1999 1998 1999 1998 1999 1998
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As stated $ 318,396 $ 408,870 $ 1,516,139 $ 306,369 $ 101,055 $ 51,600
As restated under
Canadian GAAP $ 366,676 $ 481,105 $ 1,467,859 $ 234,134 $ 60,934 $ 50,128
=====================================================================================================
</TABLE>
F-21
<PAGE>
MEXICANA I
THIS AGREEMENT dated as of the 12th day of November, 1999.
BETWEEN:
ING. CUITLAHUAC RANGEL ALCARAZ, a businessman, having an
address at Dakota No. 204 - 203, Col. Napoles, 03810 Mexico,
D.F. married under the separate property regime as is
evidenced with a copy of the marriage certificate attached
hereto as Schedule "A"
(hereinafter called "Alcaraz")
AND:
LA MEXICANA RESOURCES S.A. DE C.V., a body corporate and
having an office at Paseo De La Reforma 450, Lomas de
Chapultepec, 11000 Mexico, D.F.
(hereinafter called the "Company")
WHEREAS pursuant to an agreement (the "Option Agreement") dated the 12th day of
February, 1998, Alcaraz granted an option to the Company to acquire a 70%
interest in the "Mexicana 1" Lot (as described in the Option Agreement).
AND WHEREAS Alcaraz has previously verbally agreed to an extension of the time
required for the work commitment of US$300,000 due on or before February 12,
1999, and the issuances of shares, and the parties have now agreed to a further
extension.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
of the covenants hereinafter set forth the parties hereto covenant and agree as
follows:
1. Section 2.1(e) of the Option Agreement be deleted in its entirety and
be replaced with the following:
(e) a further 750,000 shares of Pubco within three years of the
Listing Date, with a minimum of 250,000 shares to be issued by
February 12, 2000;
2. Section 2.1(f) of the Option Agreement be deleted in its entirety and
be replaced with the following:
(f) a minimum amount of US$1,500,000 shall be invested in work
commitments, according to the following budget schedule:
<PAGE>
(i) US$300,000 on or before June 12, 2000,
(ii) US$1,000,000 on or February 12, 2001
IN WITNESS WHEREOF the parties have hereunto caused these presents to be
executed as of the day and year first above written.
ING. Cuitlahuac Rangel ALCARAZ
LA MEXICANA RESOURCES S.A. de C.V.
Per:
Authorized Signatory
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE FISCAL YEAR ENDED JUNE 30, 1999,
AND THE UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
AND THE NOTES THERETO, WHICH MAY BE FOUND BEGINNING ON PAGE F-1 OF THE COMPANY'S
FORM 10-SB REGISTRATION STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-1999
<PERIOD-START> JUL-01-1999 JUL-01-1998
<PERIOD-END> SEP-30-1999 JUN-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 21,089 57,149
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 26,677 63,369
<PP&E> 10,699 10,699
<DEPRECIATION> 1,833 1,271
<TOTAL-ASSETS> 353,939 391,193
<CURRENT-LIABILITIES> 281,377 233,759
<BONDS> 60,350 0
0 0
0 0
<COMMON> 1,524,255 1,567,475
<OTHER-SE> (1,512,043) (1,410,041)
<TOTAL-LIABILITY-AND-EQUITY> 353,939 391,193
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 101,055 1,160,315
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (101,055) (1,160,315)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (101,055) (1,160,315)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (101,055) (1,160,315)
<EPS-BASIC> (0.01) (0.15)
<EPS-DILUTED> (0.01) (0.15)
</TABLE>
