UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number: 0-27953
GOLDEN RIVER RESOURCES INC.
(Name of small business issuer in its charter)
NEVADA 98-0187538
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2420 PANDOSY STREET, KELOWNA, BRITISH COLUMBIA, CANADA V1Y 1T8
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (250) 717-1049
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.001 PAR VALUE
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $-0-
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: $1,084,660 as of September 22, 2000.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 17,653,072 AS OF JUNE 30, 2000
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Exhibit index on page 17. Page 1 of 32 pages
<PAGE>
PART I
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 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,
had been engaged in the acquisition and exploration of a precious mineral
property. It is now seeking a new business opportunity.
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 were subject to a restrictive legend which expired 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
that had been 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 Company has
determined not to pursue a transaction with Transmeridian.
On June 30, 2000, the Board of Directors determined not to continue with the
agreement on the Mexicana I property. Accordingly, both Rob Roy and La Mexicana
are inactive corporations.
On August 15, 2000, the Company signed a letter of intent with Columbus Networks
Corporation ("Columbus"), a private corporation incorporated under the laws of
British Columbia. The letter of intent contemplates that the Company will issue,
after a reverse stock split of its outstanding shares, its Common Stock for all
of the outstanding common stock of Columbus such that after the transaction, the
former Columbus shareholders will own approximately 70% of the then outstanding
Common Stock of the Company. If completed, the proposed transaction would be
accounted for as a reverse acquisition with Columbus identified as the acquirer.
Completion of the share exchange is subject to completion of due diligence,
shareholder and regulatory approval, and completion of definitive agreements.
The Company is currently engaged in a private placement of its Common Stock and
warrants to raise up to $500,000 in gross proceeds. The proceeds of the offering
are to be loaned to Columbus.
2
<PAGE>
As a result of the abandonment of the option to acquire the Mexicana I property
through La Mexicana, the Company has no current operations and no material
assets. As such, the Company can be defined as a "shell" company, whose sole
purpose at this time is to locate and consummate a merger or acquisition with a
private entity. The Board of Directors of the Company has elected to commence
implementation of the Company's principal business purpose, described below
under "Plan of Operation."
INVESTMENT COMPANY ACT OF 1940
Although the Company will be subject to regulation under the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), management believes the Company will not
be subject to regulation under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), insofar as the Company will not be engaged in
the business of investing or trading in securities. In the event the Company
engages in business combinations which result in the Company holding passive
investment interests in a number of entities, the Company could be subject to
regulation under the Investment Company Act. In such event, the Company would be
required to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act and, consequently, a
violation of such Act could subject the Company to material adverse
consequences.
FORWARD LOOKING STATEMENTS
Pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 (the "PSLRA"), the Company cautions readers regarding forward
looking statements found in the following discussion and elsewhere in this
report and in any other statement made by, or on the behalf of the Company,
whether or not in future filings with the Securities and Exchange Commission.
Forward-looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results or other
developments. Forward looking statements are necessarily based upon estimates
and assumptions that are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the
Company's control and many of which, with respect to future business decisions,
are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward-looking statements made by or on behalf of the Company. The
Company disclaims any obligation to update forward-looking statements.
PLAN OF OPERATION
The Company intends to seek to acquire assets or shares of an entity actively
engaged in a business that generates revenues, in exchange for its securities.
While the Company has entered into a letter of intent with Columbus, there is no
assurance that the proposed transaction will be completed. If the proposed
transaction is not completed, management intends to contact investment bankers,
corporate financial analysts, attorneys and other investment industry
professionals through various media.
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing the manner in which the transaction is
structured, the Company's Board of Directors expects that it will provide the
Company's shareholders with complete disclosure documentation concerning a
potential business opportunity and the structure of the proposed business
combination prior to consummation. Such disclosure is expected to be in the form
of a proxy, information statement, or report.
While such disclosure may include audited financial statements of such a target
entity, there is no assurance that such audited financial statements will be
available. The Board of Directors does intend to obtain certain assurances of
value of the target entity's assets prior to consummating such a transaction,
with further assurances that audited financial statements would be provided
within sixty days after closing. Closing documents will include representations
that the value of the assets conveyed to or otherwise so transferred will not
materially differ from the representations included in such closing documents,
or the transaction will be voidable.
3
<PAGE>
Due to the Company's intent to remain a shell company until a merger or
acquisition candidate is identified, it is anticipated that its cash
requirements will be minimal, and that all necessary capital, to the extent
required, will be provided by the directors or officers. The Company does not
anticipate that it will have to raise capital or acquire any plant or
significant equipment in the next twelve months, unless a merger or acquisition
target is identified.
GENERAL BUSINESS PLAN
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of an
Exchange Act registered corporation. The Company will not restrict its search to
any specific business, industry, or geographical location and the Company may
participate in a business venture of virtually any kind or nature. This
discussion of the proposed business is purposefully general and is not meant to
be restrictive of the Company's virtually unlimited discretion to search for and
enter into potential business opportunities. Management anticipates that it may
be able to participate in only one potential business venture because the
Company has nominal assets and limited financial resources. This lack of
diversification should be considered a substantial risk to shareholders of the
Company because it will not permit the Company to offset potential losses from
one venture against gains from another.
The Company may seek a business opportunity with entities that have recently
commenced operations, or that wish to utilize the public marketplace in order to
raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. The Company
may acquire assets and establish wholly-owned subsidiaries in various businesses
or acquire existing businesses as subsidiaries.
Management anticipates that the selection of a business opportunity in which to
participate will be complex and extremely risky. Due to general economic
conditions, rapid technological advances being made in some industries and
shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include, among other things, facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for incentive stock options or similar benefits to key employees, and
providing liquidity (subject to restrictions of applicable statutes) for all
shareholders. Potentially, available business opportunities may occur in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex.
The Company has, and will continue to have, no capital with which to provide the
owners of business opportunities with any significant cash or other assets.
However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a publicly registered company without incurring the cost and time
required to conduct an initial public offering. The owners of the business
opportunities will, however, incur significant legal and accounting costs in
connection with the acquisition of a business opportunity, including the costs
of preparing annual (Form 10-K or 10-KSB), quarterly (Form 10-Q or 10-QSB) and
current reports (Form 8-K), agreements and related documents. The Exchange Act
specifically requires that any merger or acquisition candidate comply with all
applicable reporting requirements, which include providing audited financial
statements to be included within the numerous filings required under the
Securities Exchange Act. Nevertheless, the officers and directors of the Company
have not conducted market research and are not aware of statistical data which
would support the perceived benefits of a merger or acquisition transaction for
the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under the
supervision of, the officers and directors of the Company, none of whom is a
professional business analyst. Management intends to concentrate on identifying
preliminary prospective business opportunities which may be brought to its
attention through present associations of the Company's officers and directors,
or by the Company's shareholders. In analyzing prospective business
opportunities, management will consider such matters as the available technical,
financial and managerial resources; working capital and other financial
requirements; history of operations, if any; prospects for the future; nature of
present and expected competition; the quality and experience of management
services which may be available and the depth of that management; the potential
for further research, development, or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact the proposed activities
of the Company; the potential for growth or expansion; the potential for profit;
the perceived public recognition of
4
<PAGE>
acceptance of products, services, or trades; name identification; and other
relevant factors. Officers and directors of the Company expect to meet
personally with management and key personnel of the business opportunity as part
of their "due diligence" investigation. To the extent possible, the Company
intends to utilize written reports and personal investigations to evaluate the
above factors. The Company will not acquire or merge with any company that
cannot provide audited financial statements within a reasonable period of time
after closing of the proposed transaction.
Management of the Company, while not especially experienced in matters relating
to the new business of the Company, shall rely upon their own efforts and, to a
much lesser extent, the efforts of the Company's shareholders, in accomplishing
the business purposes of the Company. It is not anticipated that any outside
consultants or advisors, except for the Company's legal counsel and accountants,
will be utilized by the Company to effectuate its business purposes. However, if
the Company does retain such an outside consultant or advisor, any cash fee
earned by such party will most likely be paid by the prospective
merger/acquisition candidate, as the Company has no cash assets with which to
pay such obligation. As of the date of this report, the Company does not have
any contracts or agreements with any outside consultants and none are
contemplated.
Management will not restrict the Company's search for any specific kind of
firms, but may acquire a venture that is in its preliminary or development stage
or is already operating. It is impossible to predict at this time the status of
any business in which the Company may become engaged, in that such business may
need to seek additional capital, may desire to have its shares publicly traded,
or may seek other perceived advantages which the Company may offer. Furthermore,
management does not intend to seek capital to finance the operation of any
acquired business opportunity until such time as the Company has successfully
consummated a merger or acquisition.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan. Because the Company has no capital with
which to pay these anticipated expenses, present management of the Company will
pay these charges with their personal funds, as interest free loans to the
Company. If additional funding is necessary, management and/or shareholders will
continue to provide capital or arrange for outside funding. However, the only
opportunity which management has to have these loans repaid will be from a
prospective merger or acquisition candidate. Management's agreements with the
Company contain no negative covenants that would impede or prevent consummation
of a proposed transaction. There is no assurance, however, that management will
continue to provide capital indefinitely if a merger candidate cannot be found.
If a merger candidate cannot be found in a reasonable period of time, management
may be required reconsider its business strategy, which could result in the
dissolution of the Company.
ACQUISITION OF OPPORTUNITIES
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. The Company may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
directors may, as part of the terms of the acquisition transaction, resign and
be replaced by new directors without a vote of the Company's shareholders or may
sell their stock in the Company. Any and all such sales will only be made in
compliance with the securities laws of the United States and any applicable
state.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance upon an exemption from registration under applicable federal
and state securities laws. In some circumstances, however, as a negotiated
element of its transaction, the Company may agree to register all or a part of
such securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after the Company has
successfully consummated a merger or acquisition and the Company is no longer
considered a "shell" company. Until a merger or acquisition is consummated, the
Company will not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into the trading
market may have a depressive effect on the value of the Company's securities.
5
<PAGE>
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company would retain 20% or less
of the issued and outstanding shares of the surviving entity, which would result
in significant dilution in the equity of such shareholders.
As part of the Company's "due diligence" investigation, officers and directors
of the Company will meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis of verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures to the extent of the Company's
limited financial resources and management expertise. The manner in which the
Company participates in an opportunity will depend on the nature of the
opportunity, the respective needs and desires of the Company and other parties,
the management of the opportunity and the relative negotiation strength of the
Company and such other management.
With respect to any merger or acquisition negotiations with target company
management is expected to focus on the percentage of the Company which the
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's shareholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage ownership may be
subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's then shareholders.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
some specific representations and warranties by all of the parties, will specify
certain events of default, will detail the terms of closing and the conditions
that must be satisfied by each of the parties prior to and after such closing,
will outline the manner of bearing costs, including costs associated with the
Company's attorneys and accountants, will set forth remedies on default and will
include miscellaneous other terms.
As stated previously, the Company will not acquire or merge with any entity that
cannot provide independent audited financial statements within a reasonable
period of time after closing of the proposed transaction. The Company is subject
to the reporting requirements of the Securities Exchange Act. Included in these
requirements is the affirmative duty of the Company to file independent audited
financial statements as part of its Form 8-K to be filed with the Securities and
Exchange Commission upon consummation of a merger or acquisition, as well as the
Company's audited financial statements included in its annual report on Form
10-K (or 10-KSB, as applicable). If such audited financial statements are not
available at closing, or within time parameters necessary to insure the
Company's compliance with the requirements of the Exchange Act, or if the
audited financial statements provided do not conform to the representations made
by the candidate to be acquired in the closing documents, the closing documents
will provide that the proposed transaction will be voidable at the discretion of
the present management of the Company. If such transaction is voided, the
agreement will also contain a provision providing for the acquisition entity to
reimburse the Company for all costs associated with the proposed transaction.
COMPETITION
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's combined extremely limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
6
<PAGE>
EMPLOYEES
As of September 25, 2000, the Company employed one person full-time and one
person part-time at its Kelowna office.
ITEM 2. DESCRIPTION OF PROPERTY.
La Mexicana, a wholly owned subsidiary of Rob Roy, acquired options to purchase
rights to certain mineral properties in Mexico. 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. In June 2000, the Company determined
to abandon the option on the Mexicana I property.
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.
LA MEXICANA
La Mexicana 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 required exercise by February 12, 2001.
The Company had not conducted any exploration on the Mexicana 1 property.
Subject to the availability of funds, the Company had planned 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 work program required a budget of approximately $96,000.
The Company determined that the property would require too much exploration and
development work and that it would be too difficult to raise the capital
necessary to carry out the proposed work program, given the depressed gold
exploration market. The Company paid acquisition costs of $307,500 and issued
500,000 shares prior to terminating the option.
ITEM 3. LEGAL PROCEEDINGS.
None.
7
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
8
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER 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 has been quoted on the OTC-BB from January 15, 1999 to December 1,
1999 and since July 21, 2000. From December 2, 1999 to July 21, 2000, the Common
Stock was quoted on the "pink sheets."
The following table lists the high and low bid prices quoted on the OTC-BB of
the National Association of Securities Dealers and pink sheets of the National
Quotation Bureau for shares of the Company's Common Stock for each of the fiscal
quarters since the Company's stock was first quoted.
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Quarter Ended High Bid Low Bid
March 31, 1999 $0.51 $0.34
June 30, 1999 $0.51 $0.31
September 30, 1999 $0.44 $0.09
December 31, 1999 $0.29 $0.01
March 31, 2000 $0.28 $0.02
June 30, 2000 $0.22 $0.10
</TABLE>
On September 22, 2000, the high and low bid prices were both $0.07.
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 Computershare Investor Services
(formerly 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 June 30, 2000, the shareholders' list for the Company's Common Stock showed
155 registered shareholders and 17,653,072 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 6. 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, since inception 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 fiscal years ended June 30, 2000 and
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
9
<PAGE>
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>
<S> <C> <C> <C>
Inception (June 13, 1997)
Year ended Year ended to June 30, 1998
June 30, 2000 June 30, 1999 (unaudited)
Revenues -- -- --
(Loss) from continuing
operations $ (578,584)
(Loss) per common share
$ (0.04) $ (0.15) $ (0.26)
June 30, 2000 June 30, 1999 June 30, 1998
Working capital (deficiency) $ (262,631) $ (170,390) $ (28,983)
Total assets $ 37,120 $ 72,797 $ 12,798
Long-term obligations $ -- -- --
</TABLE>
Results of Operations
During the fiscal year ended June 30, 2000, the Company incurred a loss of
$578,584. The Company's level of activity was lower in fiscal 2000, with the
Company focusing its efforts on regaining the listing of its Common Stock on the
OTC Bulletin Board. Accordingly, the Company did very little in the way of
exploration work on the Mexicana I property and other outside activities. The
loss included the write-off of $30,000 in option payments and $42,065 in
exploration costs on the Mexicana I property. See Part I - Item 2. Description
of Property. The most significant expenses incurred by the Company were for
consulting fees of $226,425, $215,720 of which was paid through the issuance of
shares of the Company's Common Stock and the granting of stock options. General
and administrative expenses were slightly higher in fiscal 2000 ($47,044 as
compared to $35,592 in 1999). However, travel and promotion decreased from
$136,384 in 1999 to $73,949 in 2000.
The Company's level of activity was substantially higher during the fiscal year
ended June 30, 1999, as compared to the previous period. Expenses were
$1,202,151 for 1999 as compared to $509,208 for 1998. The most significant
increases were in the areas of exploration of mineral properties ($245,210) due
to the drill program undertaken on the La Lajita property, professional fees
($152,065) primarily due to the legal and accounting expenses incurred with the
acquisition of Rob Roy, and travel and promotion ($136,384) due to travel to
Mexico and financial public relations work. Additionally, the Company wrote-off
$576,050 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 $534,214,
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.
Due to the lack of any revenues, and the cumulative losses of $2,289,943
incurred through June 30, 2000, 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. If it is unable to obtain such
financing, it may be unable to continue operations.
10
<PAGE>
LIQUIDITY AND 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, 2000, the
Company has raised $1,055,230, net of share issuance costs from the sale of its
Common Stock. In addition, 850,000 shares have been issued for mineral property
options and 1,932,200 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, as
well as loans from shareholders. 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.
Pursuant to an interim financing agreement dated January 24, 2000, the Company
borrowed $75,000 from an unrelated party. The interim financing bears interest
at 8%, is due in full by October 30, 2000, and is guaranteed by R. Bruce Manery
and Roger Watts, officers and directors of the Company. In addition, during the
fiscal year ended June 30, 2000, the Company borrowed $60,350 from various
shareholders. These advances do not bear interest, have no fixed terms of
repayment, and are not evidenced by any written agreements. The Company will
need to obtain additional funds through loans of this sort or the sale of its
equity securities to maintain its operations.
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. In June 2000, the Company terminated its option agreement and no
longer has any interest in any mineral properties.
At June 30, 2000, the Company had a working capital deficiency of $262,631. The
increase was due primarily to the loss incurred during the year then ended.
PLAN OF OPERATION
Of the $291,577 in current liabilities at June 30, 2000, $124,129 was for trade
and other obligations, and $75,000 had a October 30, 2000 repayment date. The
remaining amount of $92,448 does not have a fixed date for repayment.
As of June 30, 2000, the Company had approximately $20,000 cash on hand. The
Company is able to maintain an office, but is not able to service any existing
debt. The Company does not intend to hire any more full-time employees over the
next 12 months. The Company does not intend to make any purchases of plant or
equipment over the next 12 months.
ITEM 7. FINANCIAL STATEMENTS.
The audited financial statements of the Company for the fiscal years ended June
30, 2000 and 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, since inception 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.
11
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
12
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AGE POSITION
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 and
directors were elected on December 3, 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.
No other directorships are held by each director in any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 or any company registered as an investment company, under the Investment
Company Act of 1940.
Messrs. Dunn, Manery and Watts may be deemed to be "promoters" and "control
persons" of the Company, as that term in defined in the Securities Act of 1933.
There are no other control persons.
13
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During the fiscal year ended June 30, 2000, Messrs. Dunn, Manery and Watts were
required to file a Form 3 by January 3, 2000, the date on which the Company's
registration statement on Form 10-SB became effective. The Forms 3 for Messrs.
Manery and Watts were filed on January 7, 2000. The Form 3 for Mr. Dunn was
filed on February 8, 2000. There were no other known failures to file a report
required by Section 16(a) of the Securities Exchange Act of 1934.
ITEM 10. 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:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term Compensation
--------------------------- -----------
Annual Compensation Awards Payouts
--------- -------- ------------- ------------ -------------- -----------
Other
Annual Restrict- Securities
Name and Compensation ed Stock Underlying LTIP All Other
Principal Salary Bonus ($) Award(s) Options/ Payouts Compensation
Position Year ($) ($) ($) SARs (#) ($) ($)
------------------ -------- --------- -------- ------------- ------------ -------------- ----------- ---------------
David St. Clair 2000 -0- -0- -0- -0- -0- -0- $4,715
Clair Dunn, 1999 -0- -0- -0- -0- -0- -0- $18,333
President (1)<F1>
David Parsons, 1999 -0- -0- -0- -0- -0- -0- -0-
President (2)<F2>
Ryan 1999 -0- -0- -0- -0- -0- -0- -0-
Barnard, 1998 -0- -0- -0- -0- -0- -0- -0-
President (3)<F3>
Nolan Moss, 1998 -0- -0- -0- -0- -0- -0- -0-
President (4)<F4>
<FN>
(1)<F1> Mr. Dunn has been the President since April 7, 1999. The amount paid was for geological work.
(2)<F2> Mr. Parsons was the President from December 18, 1998 to April 7, 1999.
(3)<F3> Mr. Barnard was the President from April 3, 1998 to December 18, 1998.
(4)<F4> Mr. Moss was the President from June 17, 1997 to April 3, 1998.
</FN>
</TABLE>
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. On May 31, 2000, the
Company granted stock options to purchase 250,000 shares of Common Stock
exercisable at $0.10 per share for 5 years. The closing bid price at the date of
grant was $0.10 per share. The following officers and directors were granted
non-qualified stock options:
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Optionee Number of Options Granted
Roger Watts 150,000
Bruce Manery 150,000
David St. Clair Dunn 100,000
</TABLE>
The options vest December 23, 1999 and expire September 23, 2004.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Percent of total
Securities options/SARs granted
Underlying to employees in
Options/SARs fiscal year Exercise or base
Name granted (#) price ($/Sh) Expiration date
David St. Clair Dunn 100,000 25% $0.10 09/23/04
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option SAR Values
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Value of unexercised
unexercised in-the-money options/
options/SARs at SARs at FY-end ($)
FY-end (#) exercisable/
Shares acquired on exercisable/ unexercisable
Name exercise (#) Value realized ($) unexercisable
David St. Clair Dunn -0- -0- 100,000/0 0/0
</TABLE>
PLANS AND OTHER COMPENSATION
The Company paid management fees of $57,104 and $55,618 to Bruce Manery and
Roger Watts during the years ended June 30, 2000 and 1999, respectively.
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
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 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of June 30, 2000, 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.
15
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME SHARES OWNED COMMON STOCK OWNED(1)
<S> <C> <C>
DAVID ST. CLAIR DUNN(2)<F2> (3)<F3> 100,000 0.56%
1154 Marine Drive
Gibsons, British Columbia
Canada V0N 1V1
ROBERT BRUCE MANERY (3)<F3> (4)<F4> 195,200 1.09%
2420 Pandosy Street
Kelowna, British Columbia
Canada V1Y 1T8
ROGER WATTS (2)<F2> (4)<F4> 195,200 1.09%
200 - 537 Leon Avenue
Kelowna, British Columbia
Canada V1Y 2A9
67849 CAPITAL LTD. 1,182,200 6.70%
Box 209, Chancery Court
Leeward Highway
Turks and Caicos
West Indies
Twilight Enterprises JLK Ltd. 885,322 5.02%
Box 209, Chancery Court
Leeward Highway
Turks and Caicos
West Indies
ALL OFFICERS & DIRECTORS 490,400 2.72%
AS A GROUP(5)<F5>
-----------
<FN>
(1)<F1> This table is based on 17,653,072 shares of Common Stock outstanding on
June 30, 2000. If a person listed on this table has the right to obtain
additional shares of Common Stock within sixty (60) days from June 30,
2000, 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)<F2> 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)<F3> Includes options to purchase 100,000 shares of Common Stock. See Part
III - Item 10. Executive Compensation.
(4)<F4> Includes options to purchase 150,000 shares of Common Stock. See Part
III - Item 10. Executive Compensation.
(5)<F5> Includes options to purchase 400,000 shares of Common Stock. See Part
III - Item 10. Executive Compensation.
</FN>
</TABLE>
CHANGES IN CONTROL
We are not aware of any arrangements that may result in a change in control of
the Company.
16
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended June 30, 2000, the Company paid or accrued management fees
of $57,104 to officers and directors of the Company. At June 30, 2000, $84,417
payable to the directors is included in accounts payable.
On January 24, 2000, the Company borrowed $75,000 from a non-affiliated third
party with interest at 8% per annum. The loan is due in full by October 30, 2000
and has been guaranteed by Robert Bruce Manery and Roger Watts, officers and
directors of the Company. The lender received 150,000 shares of Common Stock
from a shareholder of the Company (who owns less than 5% of the shares of the
Company) as consideration for making the loan to the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
Regulation
S-B Number Document
<S> <C>
2.1 Offer to Purchase (1)<F1>
3.1 Articles of Incorporation (1)<F1>
3.2 Bylaws (1)<F1>
10.1 Mexicana I Agreement dated as of February 12, 1998 (1)<F1>
10.2 La Lajita Agreement dated as of February 12, 1998 (1)<F1>
10.3 1999 Stock Option Plan (1)<F1>
10.4 Agreement with Transmeridian Exploration Inc., as amended (1)<F1>
10.5 Letter of Intent with OREX Gold Mines Corporation (1)<F1>
10.6 Mexicana I Agreement dated as of November 12, 1999 (1)<F1>
10.7 Interim Financing Agreement (1)<F1>
21 Subsidiaries of the Registrant (1)<F1>
27 Financial Data Schedule
---------------
<FN>
(1)<F1> Incorporated by reference to the exhibits to the registrant's registration statement on Form 10-SB.
</FN>
</TABLE>
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GOLDEN RIVER RESOURCES INC.
Date: October 11, 2000 By:/S/ DAVID ST. CLAIR DUNN
--------------------------------
David St. Clair Dunn, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/S/ DAVID ST. CLAIR DUNN President and director
--------------------------------------------- (Principal Executive Officer) October 11, 2000
David St. Clair Dunn
/S/ ROBERT BRUCE MANERY
--------------------------------------------- Vice President Corporate Development October 11, 2000
Robert Bruce Manery Secretary and director (Principal
Accounting Officer)
/S/ ROGER D. WATTS
--------------------------------------------- Chairman of the Board of Directors October 11, 2000
Roger D. Watts (Principal Financial Officer)
</TABLE>
18
<PAGE>
Consolidated Financial Statements of
Golden River Resources Inc.
and subsidiaries
(A Development Stage Enterprise)
Year ended June 30, 2000
F-1
<PAGE>
Auditors' Report to the stockholders
We have audited the accompanying consolidated balance sheets of Golden River
Resources Inc. and subsidiaries (a development stage enterprise) as at June 30,
2000 and 1999, and the related consolidated statements of loss, stockholders'
deficiency and comprehensive income and cash flows for the years then ended and
the period from June 13, 1997 (inception) to June 30, 2000. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of the Company and
subsidiaries as at June 30, 2000 and 1999 and the results of their operations
and their cash flows for the years then ended and the period from June 13, 1997
(inception) to June 30, 2000, in accordance with accounting principles generally
accepted 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 $2,289,943. 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
August 18, 2000
F-2
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheet
June 30, 2000, and 1999
$ United States
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 19,865 $ 57,149
Prepaid expenses 9,081 6,220
------------ ------------
28,946 63,369
Capital assets (note 4) 8,174 9,428
------------ ------------
$ 37,120 $ 72,797
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities $ 124,129 $ 146,569
Due to shareholders (note 5) 21,468 12,190
Shares to be issued for services (note 8(d)) 10,630 75,000
Debt (note 6 ) 60,350 -
Interim financing payable (note 7) 75,000 -
------------ ------------
291,577 233,759
Subscription for shares (note 8(e)) 25,000 -
Stockholders' Deficiency
Capital stock (note 8) 17,653 1,537,475
Additional paid in capital 1,979,911 -
Deficit accumulated during the development stage (2,289,943) (1,711,359)
Accumulated other comprehensive income
Cumulative translation adjustment 12,922 12,922
------------ ------------
(279,457) (160,962)
Commitment (note 9)
Subsequent events (note 11)
------------ ------------
$ 37,120 $ 72,797
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
"Roger D. Watts" Director
---------------------------------------
"R. Bruce Manery" Director
---------------------------------------
F-3
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Consolidated Statements of Loss
Years ended June 30, 2000 and 1999
$ United States
<TABLE>
<CAPTION>
From Inception
(June 13, 1997)
to June 30, 2000 2000 1999
---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Expenses
Amortization $ 3,574 $ 2,342 $ 1,232
Consulting fees 229,246 226,425 -
Exploration of mineral properties 358,038 42,065 245,210
Foreign exchange (10,588) (10,588) -
General and administrative 109,437 47,044 35,592
Interest on long term debt 6,667 6,667 -
Option payments to acquire mineral properties 860,489 30,000 576,050
Professional fees 287,947 103,576 152,065
Management fees 182,412 57,104 55,618
Travel and promotion 262,721 73,949 136,384
------------ ------------ ------------
Loss $ 2,289,943 $ 578,584 $ 1,202,151
============ ============ ============
Weighted average number of shares 8,597,173 16,284,097 8,032,055
Loss per share $ (0.27) $ (0.04) $ (0.15)
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Consolidated Statement of Stockholders' Deficiency and Comprehensive Income
Years ended June 30, 2000 and 1999
$ United States
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Deficit Accumulated
Capital Stock Accumulated during Other
-------------------------- Additional the Development Comprehensive
Shares Amount Paid in Capital Stage Income Total
------------ ------------ --------------- ------------------ ------------- ------------
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
------------ ------------ ------------ ------------ ------------ ------------
3,437,634 463,380 - - - 463,380
Comprehensive income:
Loss - - - (509,208) - (509,208)
Foreign currency
translation adjustment - - - - 16,845 16,845
------------ ------------ ------------ ------------ ------------ ------------
Comprehensive income (loss) - - - (509,208) 16,845 (492,363)
------------ ------------ ------------ ------------ ------------ ------------
Rob Roy balance, June 30,
1998 (Unaudited) 3,437,634 463,380 - (509,208) 16,845 (28,983)
Issued for cash at Cdn $0.25
(US $0.17) per share 3,017,238 515,591 - - - 515,591
Share issue costs - (161,740) - - - (161,740)
Adjustment to record
business combination
with Golden River 8,368,000 720,244 - - - 720,244
------------ ------------ ------------ ------------ ------------ ------------
14,822,872 1,537,475 - (509,208) 16,845 1,045,112
Comprehensive income:
Loss - - - (1,202,151) - (1,202,151)
Foreign currency
translation adjustment - - - - (3,923) (3,923)
------------ ------------ ------------ ------------ ------------ ------------
Comprehensive loss - - - (1,202,151) (3,923) (1,206,074)
------------ ------------ ------------ ------------ ------------ ------------
Balance June 30, 1999 14,822,872 1,537,475 - (1,711,359) 12,922 (160,962)
Reversal of amount accrued in
1999 for share issue costs - 80,000 - - - 80,000
Restate capital stock to equal
par value of shares
outstanding - (1,602,652) 1,602,652 - - -
Issued for services (note 8)(b)) 750,000 750 74,250 - - 75,000
Issued for services (note 8(c)) 1,182,200 1,182 117,038 - - 118,220
Issued for cash at $0.10 per
share, net of share issue
costs 648,000 648 46,721 - - 47,369
Compensation cost of options
issued to non-employees
(note 8(f)) - - 97,500 - - 97,500
Shares issued pursuant to
Mineral Property agreement
@ $0.12 per share (note 9) 250,000 250 29,750 - - 30,000
Expenses incurred by
shareholder on behalf of
the Company (note 7) - - 12,000 - - 12,000
------------ ------------ ------------ ------------ ------------ ------------
17,653,072 17,653 1,979,911 (1,711,359) 12,922 299,127
Comprehensive income:
Loss - - - (578,584) - (578,584)
------------ ------------ ------------ ------------ ------------ ------------
Balance June 30, 2000 17,653,072 $ 17,653 $ 1,979,911 $(2,289,943) $ 12,922 $ (279,457)
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Years ended June 30, 2000 and 1999
$ United States
<TABLE>
<CAPTION>
From Inception
(June 13, 1997)
to June 30, 2000 2000 1999
---------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss $(2,289,943) $ (578,584) $(1,202,151)
Non cash items
Amortization 3,574 2,342 1,232
Mineral property option payments paid with
share consideration 60,000 30,000 30,000
Compensation cost of options issued to
non-employees 97,500 97,500 -
Amortization of expenses incurred by
shareholder on behalf of the Company 6,667 6,667 -
Consulting fees paid with share consideration 118,220 118,220 -
Accounts payable and accrued liabilities 124,129 57,560 29,789
Other 17,720 11,750 969
------------ ------------ ------------
(1,862,133) (254,545) (1,140,161)
Cash flows from investing activities:
Purchase of capital assets (11,748) (1,088) (10,660)
Cash flows from financing activities:
Issuance of capital stock 1,030,230 57,999 508,851
Subscription for shares 25,000 25,000 -
Proceeds of interim financing 75,000 75,000 -
Proceeds of debt 60,350 60,350 -
Proceeds from realization of net assets acquired
on the business combination with Golden River 690,244 - 690,244
------------ ------------ ------------
1,880,824 218,349 1,199,095
Foreign currency translation adjustment 12,922 - (3,923)
------------ ------------ ------------
Increase (decrease) in cash 19,865 (37,284) 44,351
Cash, beginning of period - 57,149 12,798
------------ ------------ ------------
Cash, end of period $ 19,865 $ 19,865 $ 57,149
============ ============ ============
Supplementary information
Interest paid - - -
Income taxes paid - - -
Non-cash investing and financing activities
Common shares issued for services 193,220 193,220 -
Common shares issued pursuant to
mineral property agreements 60,000 30,000 30,000
Common shares to be issued for share issue costs 10,630 10,630 -
Compensation cost of options issued to non-employees 97,500 97,500 -
Expenses incurred by shareholder on behalf
of the Company 12,000 12,000 -
Reversal of amount accrued in 1999 for share
issue costs 80,000 80,000 -
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (page 1)
Years ended June 30, 2000 and 1999
$ United States
--------------------------------------------------------------------------------
1. NATURE OF OPERATIONS:
Golden River Resources Inc. ("Golden River" or the "Company") was
incorporated on June 17, 1997 under the laws of Nevada and its principal
business activity was mineral property exploration and development. During
2000, the Company abandoned its remaining mineral property (note 9) and
ceased active operations. Prior to the Company's business combination with
Rob Roy Resources Inc. ("Rob Roy")(note 3), the Company was a shell
corporation with no operations since inception. Rob Roy was incorporated on
June 13, 1997 under the laws of British Columbia, Canada.
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 $2,289,943.
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. Subsequent to June 30, 2000,
the Company has entered into an agreement to acquire Columbus Networks
Corporation (note 11(b)). If completed as proposed, management intends
that the Company's future active operations will be based on Columbus'
business. Management intends to pursue financings to fund future
operations, although no firm financing sources have been identified. If
management is unable to generate sufficient cash to fund future
operating activities it may be required to reduce operations.
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. 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 of Rob Roy was
accounted for in these consolidated financial statements as a reverse
acquisition. Consequently, the 1999 consolidated statements of loss,
stockholders' deficiency and comprehensive income and cash flows
reflect the results from operations and cash flows of Rob Roy, the
legal subsidiary 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.
F-7
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (page 2)
Years ended June 30, 2000 and 1999
$ United States
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
c) Translation of Financial Statements
The functional currency of the Company and its subsidiary, Rob Roy
Resources Ltd., is the United States dollar. The Company's subsidiary
operates in Canada and its operations are conducted in Canadian
currency. The method of translation into United States dollars 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 $1.4839.
ii) Non-monetary assets and liabilities are translated at the rate of
exchange in effect at the date the transaction occurred.
iii) Expenses are translated at the rate of exchange in effect at the
transaction date.
iv) The net adjustment arising from the translation is included in the
consolidated statement of loss. During the year ended June 30,
1999, the functional currency of Rob Roy was the Canadian dollar.
Accordingly, the net adjustment arising from the translation was
recorded as a separate component of stockholders' deficiency
called "Cumulative translation adjustment" which is included in
"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 and debt as maturity dates
are not determinable and there is no active market for indebtedness of
this nature. The fair value of the interim financing payable
approximates its carrying amount due to the fixed interest rate of the
financing closely approximating floating rates at the financial
statement date. The maximum credit risk exposure for all financial
assets is the carrying amount of that asset.
F-8
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (page 3)
Years ended June 30, 2000 and 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>
g) Mineral properties
All costs associated with acquiring and exploring mineral properties
are expensed as incurred until such time as economic proven reserves
can be established.
h) Loss per share
Loss per share has been calculated using the weighted average number of
common shares outstanding during the period. The effect of the stock
options (note 8(g)), have not been included in the computation because
to do so would be anti-dilutive.
i) Accounting standards change
In June, 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities."
Adoption of this statement is not expected to impact the Company's
results of operations or financial position.
j) Stock option plan
During 1999, the Company adopted a stock option plan whereby directors,
officers, consultants and employees of the Company were granted the
right to subscribe for up to 10% of the issued and outstanding shares
of the Company. Options issued pursuant to the plan have a vesting
period of three months, expire five years from the date of issue and
have exercise prices equal to or greater than the fair market value of
the Company's common stock at the date of grant.
The Company applies APB Opinion No. 25 in accounting for stock options
granted to employees whereby compensation cost is recorded only to the
extent that the market price exceeds the exercise price at the date of
grant and, accordingly, no compensation cost will be recognized for its
employee stock options in the financial statements. Options granted to
non-employees are accounted for at their fair value at the date of
grant.
F-9
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (page 4)
Years ended June 30, 2000 and 1999
$ United States
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
k) Income taxes
The Company accounts for income taxes by the asset and liability
method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Although the Company has
consolidated loss carryforwards of approximately $2,200,000 available,
no amount has been reflected on the balance sheet for deferred income
taxes as any deferred income tax asset has been fully offset by a
valuation allowance.
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 was accounted for in these financial statements
as a reverse acquisition and the purchase method of accounting was 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. 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
<TABLE>
<CAPTION>
<S> <C>
Cash $ 34,761
Share subscriptions receivable 514,500
Due from related party 267,174
Current liabilities (96,191)
----------
Consideration given for net assets acquired 720,244
Common shares issued $ 720,244
==========
</TABLE>
F-10
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (page 5)
Years ended June 30, 2000 and 1999
$ United States
--------------------------------------------------------------------------------
3. Business combination (continued):
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>
<S> <C> <C> <C>
2000 Accumulated Net book Value
Cost amortization 2000
Furniture and equipment $ 7,717 $ 1,955 $ 5,762
Computer equipment 4,031 1,619 2,412
-------- ------- -------
$ 11,748 $ 3,574 $ 8,174
======== ======= =======
1999 Accumulated Net book Value
Cost amortization 1999
Furniture and equipment 6,629 628 6,001
Computer equipment 4,031 604 3,427
-------- ------- -------
10,660 1,232 9,428
======== ======= =======
</TABLE>
5. DUE TO SHAREHOLDERS:
The amount due to shareholders is unsecured and without interest or stated
terms of repayment.
6. DEBT
The debt represents advances made to the Company by shareholders who,
individually, own less than 5% of the outstanding shares of the Company.
The advances do not bear interest, have no fixed terms of repayment and are
not pursuant to a written agreement.
7. INTERIM FINANCING PAYABLE
On January 24, 2000, the Company signed an interim financing agreement with
an unrelated party for $75,000. The financing is due in full by October 30,
2000, bears interest at 8% and is guaranteed by two Directors of the
Company. In conjunction with signing the agreement, the lender received
150,000 common shares of the Company from a shareholder who owns less than
5% of the Company. The market value of shares at the time of the transfer,
aggregating $12,000, was recorded as prepaid interest and a capital
contribution in the accounts of the Company. This amount is amortized on a
straight line basis over the estimated nine month term of the interim
financing.
F-11
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (page 6)
Years ended June 30, 2000 and 1999
$ United States
--------------------------------------------------------------------------------
8. 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) During 1999, the Company received services for which it agreed to issue
750,000 common shares at their market value of $0.10 per share. The
shares were issued during 2000.
c) During 2000, the Company received services for which it issued
1,182,200 common shares at their market value of $0.10 per share.
d) During 2000, the Company received services for which it agreed to issue
88,587 common shares at their market value of $0.12 per share.
e) During 2000, the Company received $25,000 for subscriptions for 200,000
common shares of the Company.
f) During 2000, the Company issued 1,700,000 common share stock options.
These stock options have an exercise price of $0.10 per share and
expire on September 23, 2004. All options have vested as at June 30,
2000.
Of the options, 1,300,000 were granted to non-employees. The fair value
of $97,500 of these options has been determined using the Black Scholes
Method using the expected life to be the life of the options,
volatility factor of 95%, risk free rate of 5.5% and no assumed
dividend rate and has been included in the determination of the loss
for the year.
Had the Company determined compensation cost based on the fair value of
the 400,000 options issued to employees at the grant date under SFAS
No. 123, the Company's loss would have been increased to the pro forma
amounts indicated below:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2000 1999
Loss As reported $ 582,505 $ 1,202,151
Pro forma 612,505 1,202,151
</TABLE>
The above pro forma amount has been determined using the Black Scholes
Method using the expected life to be the life of the options,
volatility factor of 95%, risk free rate of 5.5% and no assumed
dividend rate.
F-12
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (page 7)
Years ended June 30, 2000 and 1999
$ United States
--------------------------------------------------------------------------------
9. COMMITMENT:
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 $50,000 semi-annually commencing January 1, 1998 until February
12, 2001, or until a positive bankable feasibility study is
completed, whichever is the earliest to occur;
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.
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, 2000, the Company has made option payments in the aggregate
amount of $307,500, 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 revised 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. During
2000, the Company issued the initial 250,000 shares required under the
revised terms of the original agreement at $0.12 per share, being the
market value of the stock at the date of issue.
During 2000, the Company elected to terminate the agreement and is no
longer committed to expend the above exploration amounts or issue further
common shares.
F-13
<PAGE>
Golden River Resources Inc.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (page 8)
Years ended June 30, 2000 and 1999
$ United States
--------------------------------------------------------------------------------
10. RELATED PARTY TRANSACTIONS:
During the year, the Company paid or accrued management fees of $57,104
(1999 - $55,618) to Directors of the Company. The Company also paid
consulting fees of $4,715 (1999 - $nil) to the President of the Company.
Included in accounts payable is $84,417 (1999 - $21,276) payable to three
of the Directors of the Company.
11. SUBSEQUENT EVENTS:
a) The shares referred to in note 8 (d) were issued.
b) On August 15, 2000, the Company signed a letter of intent with Columbus
Networks Corporation ("Columbus") a Canadian private corporation.
Columbus' major activity is the development of electronic recruitment
websites including the Education Canada Network. The letter states the
Company will issue, subsequent to a share consolidation, approximately
11,200,000 common shares for all of the outstanding common shares of
Columbus such that after the transaction the former Columbus
shareholders will own approximately 70% of the outstanding common stock
of the Company. The proposed transaction would be accounted for as a
reverse acquisition with Columbus identified as the acquirer. After the
proposed transaction, the Company's name will be changed to Columbus
Networks Corporation. Implementation of the share exchange is subject
to completion of due diligence, shareholder and regulatory approval and
completion of definitive agreements. The Company anticipates completing
its due diligence by October 15, 2000.
c) Subsequent to June 30, 2000, the Company received a subscription for
750,000 common shares for cash proceeds of $75,000.
12. COMPARATIVE FIGURES:
Certain of the comparative figures have been restated to conform with the
presentation adopted in the current year.
F-14
