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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[x] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended 4/30/96
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to ________.
Commission File No. 1-3896
BULLION MONARCH COMPANY
(Name of small business issuer in its charter)
Utah 82-0198422
- ---------------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
216 E. 1300 S., Orem, Utah 84058
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (801) 221-9893
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ----------------------------------- -----------------------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock No Par Value
----------------------------------------
(Title of class)
Check whether the Issuer (1) filed all reports required to be filed by
sections 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.
(1) Yes [ ] No [x] (2) Yes [x] No [ ]
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Indicate by check if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this form 10-KSB
or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year: 4/30/96 $1,457,383
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the average bid and asked price of such stock in the
over-the-counter market on 4/30/96 was $8,072,366
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ] NA
As of 4/30/96 the Issuer had outstanding 18,772,943 shares of its no par,
common stock.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Bullion Monarch Company (hereinafter known as the "Company") is a natural
resource Company engaged in acquiring, exploring, leasing, joint venturing,
and selling mining properties. Substantially all of the Company's
operations are located in the Western United States, in the states of Nevada,
Utah and Montana.
The Company continues to actively pursue its long-held corporate strategy
of exploring and acquiring land positions in close proximity to major mining
operations and/or properties with known deposits, for development with
joint-venture partners or sale to third parties. Bullion locates and
explores potential properties, with the idea of developing them to the point
of production, while turning over the day to day operation to independent
third parties.
HISTORY AND ORGANIZATION
The Company was incorporated in the state of Utah on May 13, 1948 under
the name of Bullion Monarch Uranium Company, and is publicly held. In
February of 1969 the Company entered into a business merger with M. M. & S.
Exploration Company a Nevada corporation, pursuant to which M .M. & S took
over management of Bullion Monarch Company.
Bullion Monarch was organized during the uranium boom and operated in the
1950's. Bullion later ventured into precious metals and oil.
M. M. & S. Exploration Co. was organized in August of 1955 under the
leadership of Robert D. Morris Sr., and set out to become a significant
player in the mining industry. The Company's first success was in the now
famous Carlin Gold Trend. Two mines were developed and operated; The
Bootstrap Mine and Bluestar Mine in the late 1950's and early 1960's.
Newmont Mining was introduced to the area by M. M. & S. Exploration in the
late 1950's.
Bullion built a flotation concentration plant during the late 1960's
about one mile from Austin, Nevada to process the old silver mine dumps. Due
to the decline in the price of silver only about 50,000 tons were processed.
The plant was then used as a custom mill to process: flourspar, antimony,
gold, silver and tungsten from other sources. The Austin plant has not
operated since 1989.
BUSINESS OPERATIONS
GENERAL
Bullion Monarch Company derives its revenues from exploring, acquiring
and developing mining properties in the Western United States, primarily in
the State of Nevada. The Company has been involved in mining in Nevada and
more particularly in the Carlin Trend, for many years. The Company's mining
interests in Nevada are vital to its future prospects for success. Total ore
production from mining in Nevada provides 64% of total U.S. ore production
with a significant percentage coming from mines in the Carlin Trend. In
addition to its property interests in Nevada, management feels that its
knowledge and experience in mining in the state of Nevada is a valuable asset
to Bullion Monarch. The past ten years have been extremely difficult for
many "junior" mining companies because changes in environmental and
investment regulation have made it more expensive to meet tougher standards
and more difficult to raise capital. Primarily because of the experience and
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knowledge of Bullion's President, R. Don Morris, the Company has been able to
retain control of valuable mining interests, in an incredibly challenging
environment.
Through its activities the Bullion Monarch has acquired various rights,
royalties and interests in mining properties with great appeal to outside
parties. The Company develops its properties in partnership with companies
who the have the capital necessary to fund the large and expensive programs
required to bring properties into production. The Company has entered into
agreements with various parties to fund the exploration and development of
some of its more promising properties. The Company benefits from these
agreements by giving up a percentage of its interest in the properties in
exchange for cash payments and commitments from its partners to spend
pre-determined amounts, in the further exploration and development of the
Company's properties. A summary description of the Company's properties can
be found in ITEM 2.
COMPETITION
The Company competes with major mining companies for the acquisition of
new mining properties. Bullion has limited financing; many companies with
which Bullion competes have greater resources, and are more financially
secure. However, the demand for precious metals is such that once a metal is
produced it can be sold at an established market price which has made the
exploration and production of such mineral resources, while highly
speculative, highly lucrative.
EMPLOYEES
In December 1995 the Company entered into employment contracts with three
of its officers and one consultant who had been providing management services
for the past several years without contracts and with very limited
compensation. Management believes that offering employment and compensation
to these individuals will have a significant positive impact on the future
success of the Company. A brief background of each employee is found in Item
9.
ITEM 2. DESCRIPTION OF PROPERTIES
NEVADA
BULLION MINE PROPERTY: Bullion Monarch Company holds a staged royalty
interest on the property presently being drilled jointly by NEWMONT MINING
COMPANY and BARRICK GOLD CORP., who own lease rights to the property. The
Company holds a 4% Net Smelter Return (NSR) until five hundred thousand
($500,000) is paid, 2% NSR until one million ($1,000,000) is paid and a 1%
royalty thereafter. The property is presently being explored and has a
drill indicated resource upwards of 3.75 million ounces. The 40 % Barrick
interest was acquired from High Desert Mineral Resources of Nevada as the
major part of a $75.8 million sale in December 1995. The property is
adjacent to Newmont's Carlin Gold No.1 Mine and is located in Sections 1,
2, 10, 11 and 12 T35N, R50E Eureka County, Nevada.
NORTH PIPELINE 440 ACRES PROPERTY: GOLD VALLEY RESOURCES INC. has agreed to
explore the property to earn-in a 75% interest. Under the terms of the
agreement Gold Valley will pay
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$62,500 in cash plus and additional $300,000 in cash or acceptable
securities and spend $1,900,000 in exploration by the third anniversary.
Bullion Monarch retains a 25% carried interest. The property is located
in Section 9, T29N, R47E, Lander County, Nevada approximately seven miles
north of Placer Dome's Pipeline deposit (a deposit with a reported
12 million ounces of gold reserves).
SOUTH BULLION PROPERTY: in 1995 Cypress Gold approached the Company with a
proposal to renegotiate the option which they held on the South Bullion
property. Management declined and reached an agreement under more
favorable terms with GOLD VALLEY RESOURCES INC. which requires Gold Valley
to pay $187,500 in cash on signing plus $900,000 in cash or acceptable
securities. Gold Valley will spend a minimum of $200,000 as a work
commitment in the first year. Bullion retains a 25% carried interest in
the property. A gold resource of 400,000 ounces was defined by Newmont
Mining prior to Bullion's acquisition of the property leases in a land
trade with Newmont. The property lies at the Southern end of the Carlin
Trend five miles south of Newmont's Rain Mine.
WILLOW CREEK PROPERTY: Bullion Monarch is joint-ventured on this property
with KNOMEX RESOURCES INC. And GOLD VALLEY RESOURCES INC. and has a 25%
carried interest. The property is located at the northern end of the
Carlin Trend in Elko County, Nevada and consists of 34 unpatented lode
mining claims covering approximately 680 acres. A drill program of two 800
foot holes along with geochemical mapping is under way.
MAGGIE CREEK EAST PROPERTY (SCHROEDER MOUNTAIN): this property is located
approximately eight miles north of Carlin, Nevada. It is situated adjacent
to Newmont's Maggie Creek claims to the west and consists of approximately
1900 acres. Bullion has a one third interest in these claims with its
partners MINEX EXPLORATION and KLONDEX GOLD & SILVER COMPANY. Evaluation
work is ongoing.
SWALES MOUNTAIN PROPERTY: Bullion owns a 50% interest in 16 unpatented
claims mining claims (approximately 320 acres) on Swales Mountain located
in Elko County, Nevada. The remaining interest is held by Klondex Gold &
Silver Company. Surface geology is similar to that in the Carlin Mine
area, located 10-15 miles east of the property.
SOUTH MAGGIE PROPERTY: this property is located at Sec. 12 and 14 T33N,
R51E just south of and bordering on Newmonts Gold Quarry/Maggie Creek
deposits. Bullion holds a 3% net smelter return royalty.
PRINCE OF WALES AND COMMODORE MINES: Bullion holds a 100% interest in six
patented mining claims in the Rush Valley Mining District an old but very
productive mining area in Tooele County, located 10 miles south of
Stockton, Utah. KENNECOTT MINING has been actively drilling claims
approximately one mile west of this property.
MONARCH MILL: Bullion owns an undivided one half interest in the Monarch
Mill situated in Sections 12 and 13, T19N, R43E, in Lander
County, approximately 2
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miles northwest of Austin in Central Nevada. The mill is a floatation
concentrator and would require permit renewals before becoming operational.
GOLD STANDARD OF NEVADA, INC. owns the remaining interest. Negotiations are
on-going with third parties to joint venture the milling and smelting
facilities.
BENTLEY MINE: Bullion owns a 5% royalty from production on the property,
located on seven lode mining claims near Battle Mountain. There are no
operations on the property at this time.
MELROSE MONTANA PROPERTY: Bullion owns a 100% interest in six patented
mining claims in Madison County, Montana, T2S, R8W. This lead/silver
property was last mined in the 1950's and early 1960's. There are no
immediate plans for this property.
ITEM 3. LEGAL PROCEEDINGS
As of this date, there are no legal proceedings against this Company or by
this Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting the following individuals were elected
directors:
R. Don Morris
Peter A. Passaro
James A. Morris
Philip L. Manning
Please see PART II, ITEM 5 for a complete listing of officers and directors.
Additionally, the CPA firm of Christensen, Gyllenskog & Co. P. C. as
independent and public accountants for the Company were ratified.
The shareholders ratified and approved all actions taken by the Board of
Directors since the last annual meeting of the shareholders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market. Set
forth below is the high and low bid quotations for the Company's common stock,
for each quarter of the fiscal years ended April 30, 1996, as reported based
on inter-dealer bid quotations, without mark-up, markdown,
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commissions, or adjustments (which may not reflect actual transactions).
Trading activity in Bullion Monarch increased dramatically in 1996. As
events favorable to Bullion Monarch became public, the stock began a steady
upward climb reaching a high of $.4375. Bullion Monarch Company stock is traded
under the symbol: BMRK.
Quarter Ended: Low Bid High Bid
(common stock) (common stock)
July 31, 1995 $ 0.05 $ 0.10
October 31, 1995 $ 0.06 $ 0.25
January 31, 1996 $ 0.125 $ 0.43
April 30, 1996 $ 0.1875 $ 0.4375
The Company has declared no cash dividends on its shares of common stock
during the most recent fiscal year and does not intend to do so in the
foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY
The Company's liquidity position as of April 30, 1996 as compared with the
same period for 1995 is summarized as follows:
1996 1995
CURRENT ASSETS $1,882,357 $615,042
CURRENT LIABILITIES 392,801 516,810
DIFFERENCE 1,489,556 98,232
INCREASE OR (DECREASE) IN WORKING 1,391,324 150,575
CAPITAL FOR THE YEAR
The Financial Statements reflect that the current ratio for the Company is
4.79 to 1 and there was a increase in working capital for the year of
$1,391,324. The Company's current liabilities ($392,801) are in large part
made up of deferred taxes on the installment sale of the South Bullion property.
Management has improved the liquidity of the Company, by successfully leveraging
its assets through joint-ventures on its properties with capital intensive
companies. Management believes that
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the agreements reached this year and those which are in process to be culminated
at a later date, will provide sufficient liquidity for the Company to fund
ongoing operations for the foreseeable future.
IMPACT OF INFLATION
In the past, inflation was a significant factor to be dealt with by the
Company and the economy in general. Inflation over the past several years has
not been a significant factor, and precious metal prices have not had great
fluctuations. It is management's continuing policy to deal with precious metal
properties which historically react in a favorably to inflationary pressure.
Inflation is presently not a problem due in part to small, stable rates of
inflation. Current precious metal prices remain relatively constant which has
exerted a stabilizing influence upon the Company's overall operating plans.
The historical method of accounting does not take into account the rise in
real property values due to inflation. The Company therefore feels many of its
assets are undervalued for general accounting purposes. The Company's ability
to operate profitably is controlled to a large extent by world market conditions
over which Bullion has no control.
RESULTS OF OPERATIONS
Management is pleased with the results achieved this year. The Company
operated at a profit for the second consecutive year. The Company was
successful in structuring two joint-ventures, in which it raised $300,000 in
cash, received a commitment for exploration of the two properties, and retained
a 25% carried interest in each. The cash raised from these and other subsequent
deals will provide management with the operating budget necessary, to be much
more pro-active in enhancing the value of the Company than in the past.
In reviewing the Financial Statements, the Company has taken a conservative
posture. The market value of the assets reflected in the statements is
considerably higher than their cost or book value. The South Bullion property
for example has a current book value of less than thirty thousand dollars
($30,000). However, a 75% interest in the property was sold to Gold Valley
Exploration for over one million dollars ($1,087,500). Bullion retains a 25%
carried interest in this property.
Bullion's management believes that some mining properties and the Austin
Mill could be sold for amounts in excess of their book value, if necessary, to
maintain a strong liquidity position. The net gain in operations of $836,334
was primarily attributable to the sale to Gold Valley Resources of the South
Bullion property. Additionally, the Company reached agreements on outstanding
liabilities, in which balances owing, were retired for common stock of the
Company. This agreement significantly reduced the total current liabilities.
RECENT DEVELOPMENTS
In December 1995 Barrick Gold Corp. purchased from High Desert Mineral
Resources, a 40% interest in the Bullion Mine Property for $75.8 million.
Newmont Mining and Barrick Gold are
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drilling the property jointly. In management's view that this transaction adds
significantly to the value of Bullion Monarch's staged royalty interest in the
Bullion Mine. It is management's opinion that there will be additional reserves
identified as exploration work continues on this property.
MINING EXPLORATION; CERTAIN NEGATIVE CONSIDERATIONS
Each of the Company's properties requiring additional exploration and
development has been retained based upon management's belief that they contain
minerals in commercial quantities. Such beliefs are based upon underlying
geological criteria and other information. However, management can give no
assurance whether commercial quantities will be found and if so, that production
will ensue.
It is possible that the Federal Government, through the EPA or other
Federal or State agencies, may impose more restrictive laws and regulations
which may adversely affect the exploration and development of mining claims in
general and those of the Company in particular. Financial commitments necessary
to comply with such laws, could restrict the ability of the Company to explore
and develop its properties.
The drilling of mining properties in exploration of ore deposits, can be
adversely affected by inclimate weather conditions.
LOOKING FORWARD
After several difficult years, Bullion Monarch is now in a financial
position which will allow management to aggressively explore properties for
possible acquisition and to seek development partners for its existing
properties. Discussions are in progress with various parties which may
significantly benefit the Company. It is management's opinion that the Company
has an excellent inventory of promising properties which could have a positive
impact on operations and profits in the future. Management believes that the
present price of its stock does not reflect the actual value of the Company.
Accordingly, management is working with outside analysts and consultants to aid
in disseminating positive information about the Company's progress to
institutional investors. Management is excited about the progress made during
the past year and is very optimistic about the future of Bullion Monarch.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements and Supplementary Data are set forth beginning after
page 10.
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
OFFICER OR DIRECTOR
NAME AGE POSITION/DIRECTOR CLASS SINCE
- ---- --- ----------------------- -------------------
CLASS III DIRECTORS
(TERM EXPIRES 1999)
Peter Passaro 48 Chairman of the Board, CEO 1991
R. Don Morris 52 President, COO, Director 1969
CLASS II DIRECTORS
(TERM EXPIRES 1998)
James A. Morris 28 Sec./Tres., Director 1992
CLASS I DIRECTORS
(TERM EXPIRES 1997)
Philip L. Manning 37 Director 1995
BIOGRAPHICAL INFORMATION
PETER PASSARO, age 48, has served on the Board of Directors since May 1,
1991. Mr. Passaro is a 1968 graduate of the University of Connecticut with a
degree in Political Science, and is president and C.E.O. of E&P Foundry for the
past 19 years. He has worked in the foundry business for the past 23 years. Mr.
Passaro has been hired as C.E.O. for the Company.
JAMES ANDREW MORRIS, age 28, is the Secretary/Treasurer of Bullion Monarch
Company. Mr. Morris is a graduate of Brigham Young University, receiving a
Bachelor of Science degree in Business Management. Mr. Morris is owner/operator
of a Las Vegas Discount Golf and Tennis franchise in Orem, Utah.
R. DON MORRIS, age 52, has been a director since 1969. Mr. Morris received
a Bachelor of Science degree in Geology from Brigham Young University in 1966
and worked on a full time basis for Bullion from 1966 to 1984. Mr. Morris
agreed to an employment contract with the Company, and now serves as president
and Chief Operating Officer.
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PHILIP L. MANNING, age 37, is a graduate of Brigham Young University and
holds a Master of International Management degree from The American Graduate
School of International Management. Over the past 12 years, he has worked as an
investment manager in evaluating, investing in and managing businesses for
William Wright Associates and as a Financial Consultant for Merrill Lynch. He
is currently self-employed in the investment industry.
ITEM 10. EXECUTIVE COMPENSATION
From 1973 to 1995, no officer or director received remuneration or
compensation which equaled or exceeded $50,000 in one year. In December of
1995 Bullion Monarch reached employment agreements with its officers and
directors.
The following information is given with respect to the fiscal year ending
4/30/94 for the five highest paid executive officers of the Company, and for
all officers and directors as a group.
(A) (B) (C) (D)
NAME OF INDIVIDUAL CAPACITY IN WHICH AGGREGATE OF CASH EQUIVALENT
CONTINGENT OR REMUNERATION WAS AND SALARIES AND PERSONAL
IDENTITY OF GROUP RECEIVED FEES BENEFITS
REMUNERATION
R. Don Morris Director/C.O.O. 60,000 None
Peter Passaro Director/C.E.O. 32,000 None
James A. Morris Sec/Treasure 36,000 None
Philip L. Manning Director 16,000 None
--------
Total $144,000
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
1. Security Ownership of Certain (10%) Beneficial Owners:
R. Don Morris is the only shareholder holding 10% or more of the common
shares of the Company.
2. Security Ownership of Management
* (1) Peter Passaro 902,000 4.8%
303 Cedar Lane
New Cannan, CT
06840
*(2) James A. Morris 455,000 2.4%
1226 N. 1380 W.
Mapleton, UT
84664
*(3) R. Don Morris 3,140,000 16.7%
216 E. 1300 S.
Orem, UT
84058
*(4) Philip L. Manning 50,000 Less than 1%
10024 Oak Road West
Cedar Hills, UT
84062
2. See "Management and Executive Officers of Registrant" for biographical
information.
3. MAJOR ISSUANCE OF STOCK SINCE THE LAST ANNUAL REPORT:
There were 4,162,000 shares of common stock issued since the last annual
report to retire amounts due to related parties. This amount significantly
reduces the current liabilities account.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K FINANCIAL STATEMENTS:
None.
REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the last fiscal quarter of its
fiscal year ended April 30, 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BULLION MONARCH COMPANY
By:
-----------------------------------
R. Don Morris, President
(Principal Executive Officer)
and director
Date: September ____, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
NAME AND TITLE DATE
-------------- ----
- ---------------------------------- September ____, 1996
R. Don Morris, President
(Principal Executive Officer)
and Director
- ---------------------------------- September ____, 1996
James A. Morris, Sec. / Treasurer
(Principal Accounting Officer)
and Director
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BULLION MONARCH COMPANY AND SUBSIDIARY
APRIL 30, 1996 AND 1995
CONSOLIDATED FINANCIAL STATEMENTS
(WITH INDEPENDENT AUDITOR'S REPORT)
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[Letterhead]
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors
Bullion Monarch Company
We have audited the accompanying consolidated balance sheets of Bullion
Monarch Company and Subsidiary as of April 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the two years then ended. 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
audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 Bullion
Monarch Company and Subsidiary as of April 30, 1996 and 1995, and the results
of its operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
not experienced regular operations for several years. Reference is made to
Note 2 concerning the Notes Receivable and Accrued Interest Receivable
aggregating $511,703 from a joint venture partner as of April 30, 1996.
Realization of these receivables is dependent upon the operation or sale of
the mill at Austin, Nevada. The ultimate outcome of this uncertainty cannot
presently be determined. Accordingly, the consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
CHRISTENSEN, GYLLENSKOG & CO., P.C.
Midvale, Utah
August 31, 1996
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BULLION MONARCH COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
APRIL 30, APRIL 30,
1996 1995
--------- ---------
ASSETS
------
Current Assets:
Cash $ 169,654 $ 5,103
Receivables:
Notes 1,513,397 313,397
Interest 198,306 264,542
---------- ----------
Total receivables 1,711,703 577,939
Deposit 1,000 10,000
Deferred income taxes, current - 22,000
---------- ----------
TOTAL CURRENT ASSETS 1,882,357 615,042
Investment in Equity Securities, at
lower of cost or market - 22,500
Investment in Equity Securities available
for sale 133,562 -
Mining Properties, at cost 368,281 390,031
Property, Plant and Equipment, at cost,
net of accumulated depreciation 97,580 95,241
Deferred Income Taxes, net - 104,000
Other Assets 5,000 5,000
---------- ----------
TOTAL ASSETS $2,486,780 $1,231,814
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable 15,741 12,632
Accrued expenses 63,935 49,547
Amounts due related parties 41,451 454,631
Deferred income taxes payable 271,674 -
---------- ----------
TOTAL CURRENT LIABILITIES 392,801 516,810
---------- ----------
Commitments and Contingent Liabilities
Stockholders' Equity:
Common stock, no par value; authorized
100,000,000 and 15,000,000 shares for 1996
and 1995; issued 18,772,943 and 14,515,193
respectively 3,398,105 2,972,330
Unrealized gain on securities available
for sale 116,866 -
Accumulated deficit (1,415,485) (2,251,819)
---------- ----------
2,099,486 720,511
Less 7,500 treasury shares, at cost 5,507 5,507
---------- ----------
Total stockholders' equity 2,093,979 715,004
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,486,780 $1,231,814
---------- ----------
---------- ----------
See auditors' report and notes to consolidated financial statements.
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BULLION MONARCH COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 1996 AND 1995
1996 1995
---------- ---------
Revenues:
Sale of mining properties $1,341,250 $ -
Rents 5,000 5,000
Option income 79,793 149,996
Interest 31,340 31,340
Forgiveness of debt income - 51,240
---------- ---------
TOTAL REVENUES 1,457,383 237,576
---------- ---------
Costs and expenses:
Cost of mining properties 21,750 -
Mining costs 400 1,533
General and administrative expenses 221,377 116,379
Interest expense - 8,315
Depreciation expense 25,086 21,601
Minority interest in loss of subsidiary (11,174) (17,374)
---------- ---------
TOTAL COSTS AND EXPENSES 257,439 130,454
---------- ---------
Income from operations 1,199,944 107,122
Other income (expense):
Gain on sale of securities 34,185 -
---------- ---------
Income before income taxes 1,234,129 107,122
Provision for income taxes (benefit) 397,795 (125,853)
---------- ---------
NET INCOME $ 836,334 $ 232,975
---------- ---------
---------- ---------
Earnings per share:
Net income per common share $ .050 $ .016
---------- ---------
---------- ---------
See auditors' report and notes to consolidated financial statements.
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BULLION MONARCH COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Unrealized Accumulated
Shares Amount Gain (Deficit)
---------- ---------- ---------- -----------
Balance April 30, 1994 14,515,193 $2,972,330 - (2,484,794)
Net income - - - 232,975
---------- ---------- ---------- -----------
Balance April 30, 1995 14,515,193 2,972,330 - (2,251,819)
Common stock issued for
retirement of debt 4,257,750 425,775 - -
Unrealized gain on secur-
ities available for sale - - 116,866 -
Net income - - - 836,334
---------- ---------- ---------- -----------
Balance April 30, 1996 18,772,943 $3,398,105 116,866 (1,415,485)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
See auditors' report and notes to consolidated financial statements.
<PAGE>
BULLION MONARCH COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended April 30, 1996 and 1995
1996 1995
----------- ----------
Cash flows from operating activities:
Net income (loss) $ 836,334 $ 232,975
----------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 25,086 21,602
Forgiveness of debt income - (51,240)
(Gain) loss on disposal of property (153,685) -
(Increase) in notes receivable (1,200,000) -
(Increase) decrease in interest receivable 66,236 (33,714)
Decrease in other assets 9,000 -
(Decrease) in bank overdraft - (4,142)
Increase (decrease) in accounts payable 4,384 (45,255)
Increase in accrued expenses 14,388 14,446
Increase in amounts due related parties 11,320 6,431
Increase (decrease) in deferred income taxes 397,674 (126,000)
----------- ----------
Total adjustments (825,597) (217,872)
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,737 15,103
----------- ---------
Cash flows from investing activities:
Cash deposit for the purchase of property - (10,000)
Purchase of property and equipment for cash (27,425) -
----------- ----------
Cash proceeds from the sale of property 181,239 -
----------- ----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 153,814 (10,000)
----------- ----------
Cash flows from financing activities:
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES - -
----------- ----------
Net increase (decrease) in cash and equivalents 164,551 5,103
Cash and equivalents, beginning of year 5,103 -
----------- ----------
Cash and cash equivalents, end of year $ 169,654 $ 5,103
----------- ----------
----------- ----------
See auditors' report and notes to consolidated financial statements.
<PAGE>
BULLION MONARCH COMPANY AND SUBSIDIARY
CASH FLOW STATEMENTS
For the Years Ended April 30, 1996 and 1995
1996 1995
---------- ---------
Supplemental Disclosure of Cash Flow Information:
- -------------------------------------------------
Cash paid during the year for:
Income taxes $ 100 $ 147
---------- ---------
---------- ---------
Supplemental Disclosure of Noncash Financing Transaction:
- ---------------------------------------------------------
In 1996, the Company issued 4,257,750 shares of restricted common stock at
$.10 per share for a total of $425,750 to retire certain obligations to
shareholders and creditors per approval of the Company's Board of Directors.
See auditors' report and notes to consolidated financial statements.
<PAGE>
BULLION MONARCH COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation and Operations:
The consolidated financial statements include the accounts of Bullion
Monarch Company (The Company) and its 50% owned subsidiary Monarch
Milling-joint venture. The Company owns mining properties in Nevada,
Utah and Montana. During the year ended April 30, 1996 the articles
of incorporation were amended to change the authorized number of
shares and the par value of the shares that may be issued to one
hundred million no par shares.
The consolidated financial statement have been prepared in conformity
with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ from those
estimates.
B. Mining Properties:
The total investment in mining properties will be amortized on a
composite unit-of-production method. As of April 30, 1996 and 1995,
no amortization has been reflected in the accompanying financial
statements since such amounts have been determined to be insignificant
and the Company has essentially been in a non-operating mode.
The Company capitalizes costs for mining properties by individual
property and defers such costs for later amortization only if the
prospects for economic production are reasonably certain. Capitalized
costs are expensed in the period when the determination has been made
that economic production does not appear reasonably certain.
C. Property, Plant and Equipment and Related Accumulated Depreciation:
Property, plant and equipment are stated at cost. Maintenance and
repair expenditures are charged to income as incurred; renewals and
betterments are capitalized. Gains and losses on sales or other
dispositions of property are reflected in earnings, and adjustments of
the accumulated reserves for depreciation are made upon retirement of
property. Depreciation is as follows:
Method Lives
------------- -----------
Machinery and Equipment ACRS/MACRS 5-10 years
Office Furniture ACRS/MACRS 5- 7 years
Mill and Buildings Straight-Line 15-20 years
D. Income Taxes:
Deferred income taxes are recognized for income and expense items that
are reported in different years for financial reporting purposes and
income tax purposes. The financial statements currently have three
significant timing differences which necessitate deferred tax assets
or liabilities. A deferred federal tax liability arises from
reporting earnings on the sale of two mining properties (note 5) and a
partnership interest (note 2) on the installment method of
<PAGE>
BULLION MONARCH COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
reporting which is different for income tax purposes than it is for
financial statement purposes. At ApriL 30, 1996 Bullion had a
deferred tax gain of $1,092,000 on the mining properties sale and
$262,000 associated with the partnership interest sale. At that
date Bullion had a net operating loss carry forward of approximately
$752,000. In applying the principles of FAS No. 109 Bullion offset
net operating loss carryforward against the deferred gains of
$1,092,000 and $262,000. Using a tax rate of 39% for the deferred
gains and 34% for the federal net operating loss carryforward, a
net deferred tax liability of $271,674 resulted. Because the
deferred gain on the mining properties is expected to be realized
in the next fiscal year, the deferred tax liability has been shown
as a current liability.
E. Per Share Data:
Per share data is based on the weighted average number of
common shares outstanding during each period.
F. Cash and Cash Equivalents:
For purposes of the consolidated statements of cash flows,
the Company considers short-term investments purchased with
maturities at date of purchase of three months or less to be cash
equivalents.
G. Reclassifications:
Certain 1995 amounts have been reclassified to conform with
1996 classifications. Such reclassifications had no effect on
reported net income.
2. MONARCH MILLING-JOINT VENTURE
In 1979, Bullion entered into an agreement with PBL Mining, an
Illinois partnership, subsequently changed to American Mining Trust
(AMT), wherein Bullion sold a 50% interest in a joint venture called
Monarch Milling to AMT. Monarch Milling was established to own,
refurbish and operate a concentrating mill located at Austin, Lender
County, Nevada.
In 1980 AMT sold its 50% interest in Monarch Milling to Bullion Metals,
a Nevada corporation subsequently changed to Gold Standard of Nevada,
Inc. (Gold Standard). In conjunction with the sale, Gold Standard
assumed the AMT note with Bullion. The note has a current balance of
$313,397, bears interest at 10%, and requires annual payments of
$60,000. Gold Standard is currently in default on the payment of the
note and interest. For financial statement presentation, Gold Standard's
minority interest in the consolidated financial statements has been
reclassified against interest receivable. No allowance for doubtful
collectibility of the note and interest has been reflected in the
financial statements since it is management's opinion that Gold
Standard's equity in the market value of the joint venture assets
(primarily the mill in Austin, Nevada) is sufficient to cover any
indebtedness from Gold Standard to Bullion. The receivables have been
classified as current since they are in default and therefore currently
due, even though their collectibility within the next fiscal year is
doubtful, unless the mill is sold. Negotiations are currently on-going
with two groups who are interested in refurbishing and operating the
mill under a joint venture agreement with Monarch Milling or actually
purchasing the mill.
<PAGE>
BULLION MONARCH COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
3. PROPERTY, PLANT AND EQUIPMENT
Property plant and equipment is summarized as follows:
Accumulated Net
Cost Depreciation Value
-------- ------------ ------
April 30, 1996:
Land $ 6,690 - 6,690
Vehicle 22,000 3,060 18,940
Machinery and equipment 123,668 118,467 5,201
Office furniture 5,999 5,888 111
Mill and buildings 763,162 696,524 66,638
-------- ------- ------
$921,519 823,939 97,580
-------- ------- ------
-------- ------- ------
April 30, 1996:
Land $ 6,690 - 6,690
Machinery and equipment 118,668 118,467 201
Office furniture 5,574 5,463 111
Mill and buildings 763,162 674,923 88,239
-------- ------- ------
$894,094 798,853 95,241
-------- ------- ------
-------- ------- ------
4. INVESTMENT IN EQUITY SECURITIES
Bullion received 225,000 shares of a private company's stock in a
previous year as partial payment from the sale of two mining
properties. The shares have been valued at a nominal value of $.10
per share for financial statement purposes through April 30, 1995.
During the year ended April 30, 1996, the private company was acquired
by a public Canadian company. Bullion received shares in the public
company on a share for share basis. During the year Bullion sold
58,048 shares of the public company for $40,000. At April 30, 1996
the remaining 166,952 shares have been reflected in the financial
statements as investment in equity securities available for sale and
have been valued at their market value of $133,562. The unrealized
gain of $116,866 has been reflected as an equity adjustment in the
balance sheet.
5. MINING PROPERTIES
Mining properties and claims have been reflected at historical cost
which, in managements opinion, is less than market value for each
property or claim.
Bullion had previously traded some joint claims in which they had a
90% interest for a 90% interest in five mineral lease and surface use
agreements (South Bullion Property). Bullion and their joint claim
partner also retained a 3% net smelter royalty in the claims that they
traded. Bullion and their joint claim partner assumed the minimum
annual royalty payments due on the leases. During the year ended
April 30, 1996 the Company sold a 75% beneficial interest in the South
Bullion property and another property which was 100% owned by the
Company. The total consideration to be received for the two
properties was $1,450,000 of which 10% of 75% of the total consideration
would be paid to the Company's joint claim partner and the balance to the
Company. $250,000 was received at April 30, 1996 and the balance of
$1,200,000 was to be paid in cash or
<PAGE>
BULLION MONARCH COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
5. MINING PROPERTIES, CONTINUED
acceptable securities by April 30, 1997. The buyer agreed to expend
$2,100,000 in an approved exploration program on the properties over a
three year period. Additionally, the buyer agreed to pay all the
minimum annual royalty payments on the South Bullion property and any
other taxes and fees associated with both properties. The Company
would retain a 25% beneficial interest in both properties.
Bullion remains contingently liable to pay the minimum annual royalty
payments on the South Bullion Property if the sales agreement is
terminated. At April 30, 1996 Bullion was contingently liable on the
following lease commitments on the South Bullion Property to retain
their mineral rights:
Fiscal Year Ending Minimum Annual Royalty
------------------ ----------------------
April 30, 1997 $51,250
April 30, 1998 51,250
April 30, 1999 54,250
April 30, 2000 54,250
April 30, 2001 56,500
April 30, 2002 56,500
6. INCOME TAXES
The Company's effective tax rate differs from the expected federal
income tax rate as follows:
1996 1995
---- ----
Income tax expense at statutory rate $419,604 36,421
Reduction in tax from application of NOL - (36,421)
Tax benefit created from remaining NOL - (194,000)
Increase (decrease) in valuation allowance (68,000) 68,000
State income tax, net of federal benefit 40,722 147
Changes in tax rate of deferred tax
liability 5,469 -
-------- --------
Provision for income taxes (benefit) $397,795 (125,853)
-------- --------
-------- --------
The components of the deferred tax assets and liabilities are as
follows:
1996 1995
---- ----
Deferred tax assets:
Net operating loss carryforward $255,697 296,180
Net operating loss carryforward - state 689 -
--------- -------
Total deferred tax assets 256,386 296,180
Less valuation allowance - (68,000)
--------- -------
Total deferred tax assets, net of
valuation allowance 256,386 228,180
--------- -------
Deferred tax liabilities:
Deferred gain on partnership interest
sale 102,180 102,180
Deferred gain on sale of mining
properties 425,880 -
--------- -------
Total deferred tax liabilities 528,060 102,180
--------- -------
Net deferred tax asset (liability) $(271,675) 126,000
--------- -------
--------- -------
<PAGE>
BULLION MONARCH COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
6. INCOME TAXES, CONTINUED
Bullion currently has a net operating loss carryforward of
approximately $752,000 which is available to offset the deferred
gains mentioned in footnotes 1 and 5. The net operating loss expires
in tax years from April 30, 1997 through April 30, 2009.
7. RELATED PARTY TRANSACTIONS
As of April 30, 1996 and 1995, the company was liable to certain
individuals who are shareholders and/or officers/directors for cash
advances made to or for the Company, unpaid salaries or director fees
and unreimbursed travel expenses. The total due to these related parties
totaled $454,631 at April 30, 1995 and $41,451 at April 30, 1996. During
the year ended April 30, 1996 the Company issued 4,162,000 shares of
restricted common stock at .10 per share for a total of $416,200 to
retire certain obligations to these related parties.
No interest has been accrued on any of the payables except two 10%
interest bearing notes totaling $22,000 at April 30, 1995 to an
officer/directors. Total accrued interest included in the related
party payable at April 30, 1995 was $4,463. These notes and accrued
interest were paid off during 1996 by the issuance of restricted
common shares as indicated in the preceding paragraph.
At January 1, 1996 the Company entered into employment agreements with
four employee/shareholders. The agreements are for a period of six
years with automatically renewable three year terms. The compensation
ranges from $48,000 to $84,000 per year for each employee.
8. INCENTIVE STOCK OPTION AGREEMENT
On December 5, 1995, the Company adopted an incentive stock option plan
for employees, officers, consultants, and directors. The plan is
intended to qualify under Section 422 of the Internal Revenue Code.
Under the terms of the plan, options to purchase common stock are
granted at not less than the estimated fair market value at the date of
the grant and are exercisable during specified future periods.
A summary of options granted is as follows:
Grant Date Shares Under Option Option Price per Share
---------- ------------------- ----------------------
Dec. 5, 1995 750,000 $.55
Dec. 5, 1995 1,250,000 .325
All options expire ten years from the date of the grant.
9. COMMITMENTS AND CONTINGENT LIABILITIES
As indicated in note 5, the Company is contingently liable for minimal
annual royalty payments on the South Bullion property if the company
that purchased the 75% beneficial interest in that property defaults on
its contract payments.
<PAGE>
BULLION MONARCH COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
10. SUBSEQUENT EVENTS
Subsequent to year end a Nevada corporation acquired 727,272 common
shares of the Company's stock for $.55 per share in a private
placement offering. The total purchase price of $400,000 also
included a warrant to purchase an additional 727,272 shares at $.75
per share. The warrant expires two years after the date it was
acquired.
Subsequent to year end, the Company and a joint venture partner
entered into a mining lease and option to purchase agreement on
certain unpatented mining claims situated in Elko County Nevada. They
then sold a 50% working interest in the property. The acquiring
company earns their 50% working interest by issuing 200,000 treasury
common shares, by making $1,100,000 in option payments, and by
expending $2,000,000 on the property over three years.
Subsequent to year end, the Board of Directors approved the
redemption of up to 250,000 shares of common stock from the Company's
president at $.70 per share.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<CASH> 169,654
<SECURITIES> 133,562
<RECEIVABLES> 1,711,703
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,882,357
<PP&E> 921,519
<DEPRECIATION> 823,939
<TOTAL-ASSETS> 2,486,780
<CURRENT-LIABILITIES> 392,801
<BONDS> 0
0
0
<COMMON> 3,398,105
<OTHER-SE> (1,415,485)
<TOTAL-LIABILITY-AND-EQUITY> 2,486,780
<SALES> 1,341,250
<TOTAL-REVENUES> 1,457,383
<CGS> 0
<TOTAL-COSTS> 257,439
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,234,129
<INCOME-TAX> 397,795
<INCOME-CONTINUING> 836,334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 836,334
<EPS-PRIMARY> .050
<EPS-DILUTED> .050
</TABLE>
