FORM 10-QSB/A
AMENDMENT NO. 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-9137
U.S. GOLD CORPORATION
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0796160
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
55 Madison, Suite 745
Denver, Colorado 80206
(Address of principal executive offices)
(303) 322-8002
(Issuer's telephone number)
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
Class Outstanding as of
July 31, 1995
Common Stock, $0.10 par value 13,775,505
U.S. GOLD CORPORATION
CONSOLIDATED BALANCE SHEET
June 30,1995
ASSETS
Current assets:
Cash and cash equivalents $ 450,687
Interest receivable 117,245
Dividend receivable 135,000
Note receivable, current portion 650,000
Prepaids and other current assets 7,188
Total current assets 1,360,120
Investment in Tonkin Springs Project
Joint Venture 2,317,704
Note receivable, non-current portion 1,601,120
Investment in Gold Capital Common Stock 270,000
Investment in Gold Capital Preferred Stock 3,000,000
Deferred tax assets, net 451,474
Other assets, net of depreciation 30,492
TOTAL ASSETS $ 9,030,910
LIABILITIES, DEFERRED CREDITS AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 197,050
Notes payable 300,000
Total current liabilities 497,050
Reserve for reclamation 640,000
Total liabilities and reserve 1,137,050
Deferred gain on sale of Tonkin
Springs interest 3,133,455
Shareholders' equity:
Common stock, $.10 par value, 15,000,000
shares authorized; 13,775,505 shares
issued and outstanding 1,377,551
Additional paid-in capital 31,976,546
Deficit (28,593,692)
Total Shareholders' equity 4,760,405
TOTAL LIABILITIES, DEFERRED CREDITS
AND SHAREHOLDERS' EQUITY $ 9,030,910
See accompanying notes to consolidated financial statements.
U.S. GOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 1995 and 1994
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Installment gain on sale
of Tonkin Springs
interest $523,891 $ 89,454 $523,891 $178,908
Production royalty - - - 100,000
Interest income 56,908 54,779 123,087 111,279
Dividend income 67,500 67,500 135,000 135,000
Other income 18 33 9,036 33
648,317 211,766 791,014 525,220
Other costs and expenses:
General and administrative 258,803 112,250 401,516 396,479
Interest 21,102 3,866 34,289 8,373
Depreciation and amortization 1,138 1,804 2,646 3,650
Total expense 281,043 117,920 438,451 408,502
Income before income taxes 367,274 93,846 352,563 116,718
Provision for income taxes - - - -
Net income $367,274 $ 93,846 $352,563 $116,718
Per share data:
Net income $0.03 $0.01 $0.02 $0.01
Weighted average shares and
share and equivalents
outstanding 14,514,943 14,536,481 14,427,810 14,523,293
See accompanying notes to consolidated financial statements.
U.S. GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1995 and 1994
(Unaudited)
June 30, June 30,
1995 1994
Cash flows from operating activities:
Production royalty $ - $ 100,000
Cash paid to suppliers and employees (275,456) (373,470)
Cash used in operating activities (275,456) (273,470)
Cash flows from investing activities:
Cash received from sale of Tonkin
Springs interest 998,880 250,000
Cash received for 1994 accrued
interest on note 234,158 -
Capital expenditures - (17,054)
Sale of assets 9,000 -
Cash provided by investing activities 1,242,038 232,946
Cash flows from financing activities:
Payment on income tax obligation (534,152) -
Repay borrowings under note payable - (132,929)
Cash provided by (used in) financing
activities (534,152) (132,929)
Increase (decrease) in cash
and equivalents 432,430 (173,453)
Cash and equivalents, beginning 18,257 200,289
Cash and equivalents, ending $ 450,687 $ 26,836
Reconciliation of net income (loss) to
cash used in operating activities:
Net income $ 352,563 $ 116,718
Items not requiring (providing) cash:
Interest income (117,245) (111,250)
Dividend income (135,000) (135,000)
Interest expense 8,967 8,373
Depreciation, depletion and amortization 2,646 3,650
Investment gain on sale of Tonkin
Springs interest (523,891) (178,908)
(Increase) decrease in current assets
related to operations 38,228 (32,391)
Increase (decrease) in current liabilities
related to operations (444,428) 53,698
Decrease (increase) in other assets,
long term 1,093,616 1,640
Cash used in operating activities $ 275,456 $ 273,470
See accompanying notes to consolidated financial statements.
U.S. GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, as well as the accounts
of Tonkin Springs Venture Limited Partnership ("TSVLP").
Significant intercompany accounts and transactions have been
eliminated.
The balance sheet of the Company as of June 30, 1995 and the
results of operations and cash flows for the three and six month
periods ended June 30, 1995 and 1994, have not been examined by
independent certified public accountants. However, in the opinion
of management, the accompanying unaudited consolidated financial
statements contain all necessary adjustments in order to make the
financial statements not misleading.
The results of operations for the three and six month periods ended
June 30, 1995 and 1994 are not necessarily indicative of the
results to be expected for the full years. These financial
statements should be read in conjunction with the Company's annual
report on Form 10-KSB filed with the Securities & Exchange
Commission for the year ended December 31, 1994.
2. Sale of 60% Interest in Tonkin Springs Project
On December 31, 1993, TSVLP, a partnership owned by subsidiaries of
U.S. Gold Corporation (the "Company"), sold a 60 percent undivided
interest in the Tonkin Springs Properties and Obligations (the
"Properties") to Gold Capital Corporation, a Colorado corporation.
TSVLP retained a 40 percent undivided interest in the Properties.
Immediately after the conveyance to Gold Capital, TSVLP and Gold
Capital each made their respective interest in the Properties
subject to a mining joint venture ("Project Joint Venture"), to
operate and manage the Properties. Ownership in the Project Joint
Venture is: TSVLP- 40 percent, Gold Capital- 60 percent. Gold
Capital is manager of the Properties under the Project Joint
Venture.
Gold Capital purchased its 60 percent undivided interest in the
Properties from TSVLP for a purchase price and other consideration
of approximately $7,960,000 representing the estimated fair market
value of the assets purchased. The purchase price included
$200,000 in cash at Closing; delivery of a mortgage note in the
amount of $3.8 million (the "Promissory Note"); 300,000 shares of
unregistered Gold Capital's Series A Preferred Stock ("Preferred
Stock") having an assigned value of $3 million, and the assumption
of 60 percent of a reclamation obligation recorded at $960,000.
Through June 30, 1995, the Company has received $1,548,880 in
principal payments on the Promissory Note with a balance of
$2,251,120 remaining. The Promissory Note, as amended June 22,
1995, is collateralized by Gold Capital's 60% interest in the
Properties and the Project Joint Venture and accrues interest at a
fixed rate of 7.5% on the unpaid principal balance. As amended
June 22, 1995, the remaining principal balance is due as follows:
Monthly installments of $50,000 until Gold Capital has raised an
aggregate of $4,000,000 in new financing, or until paid in full.
$75,000 per month until the note is paid in full subsequent to Gold
Capital raising an aggregate of $4,000,000 in new financing.
The future annual minimum principal payments (at the $50,000 per
month level) as of June 30, 1995 are as follows:
1995 350,000
1996 600,000
1997 600,000
1998 600,000
1999 101,920
$2,251,920
The Company has agreed to convert its 300,000 shares of Gold
Capital preferred stock into 1,500,000 shares of Gold Capital
common stock, but not sooner than November 30, 1995 without the
prior approval of Gold Capital. The Preferred Stock includes
covenants requiring Gold Capital, among other covenants, to pay to
the holder of the Preferred Stock a mandatory annual 9 % dividend
(based on the $10 per share stated value which totals $3 million
aggregate valuation) payable annually in cash or at the option of
the issuer in common stock of Gold Capital. The 1994 dividend in
the amount of $270,000 was satisfied with the issuance of 127,702
shares of unregistered common shares of Gold Capital ($2.11/share).
For the six months ended June 30, 1995 and 1994, the accrued
Preferred Stock dividend totaled $135,000. Mandatory dividends on
the preferred stock will cease to accrue as of November 30, 1995
regardless of the date of conversion. Conversion of that equity
interest by TSVLP would result in the Company owning approximately
24% of the outstanding common stock of Gold Capital, without taking
into account other changes subsequent to the date hereof.
Gold Capital is required to fund 100% of the holding, development
and administrative costs relating to the Properties until
commencement of commercial production. Gold Capital shall be
reimbursed for expenditures, up to $6 million ("Reimbursable
Costs"), from a preferential portion of cash flows from the
operations of the Properties, if any. Expenditures in excess of $6
million will be considered contributions to the Project Joint
Venture by Gold Capital. Through June 30, 1995, Gold Capital has
incurred approximately $1,115,800 in net Reimbursable Costs.
The Company is recognizing the gain from the sale of the 60%
interest in the Tonkin Springs Properties to Gold Capital using the
installment method of accounting. For the six month periods ended
June 30, 1995 and 1994, 11% ($523,891) and 2% ($89,454),
respectively, of the gain was recognized.
3. Tonkin Springs Venture Limited Partnership
The Company holds its interest in the Project Joint Venture through
TSVLP, a partnership which is owned by subsidiaries of the Company,
Tonkin Springs Gold Mining Company ("TSGMC") (99.5% general
partner) and U.S. Environmental Corporation ("USEC") (0.5% limited
partner).
The following is the statement of operations and condensed balance
sheet for TSVLP as of and for the six months ended June 30, 1995.
STATEMENT OF OPERATIONS Six Months Ended
June 30, 1995
Revenues:
Installment gain on sale of
Tonkin Springs interest $ 324,713
Interest income 123,087
Dividend income 135,000
Total revenues 582,800
Costs and expenses:
General, administrative and other 148,559
Related party interest expense (to TSGMC) 53,137
Total expenses 201,696
Net income $ 381,104
BALANCE SHEET June 30, 1995
Assets:
Current assets
Cash $ 140,033
Interest receivable 117,245
Dividend receivable 135,000
Note receivable, current portion 650,000
Total current assets 1,042,278
Investment in Project Joint Venture 3,339,001
Note receivable, non-current portion 1,601,920
Investment in Gold Capital Common Stock 270,000
Investment in Gold Capital Preferred Stock 3,000,000
Other assets 2,303
Total Assets $9,255,502
Liabilities and Partners' Interest:
Current liabilities $ 55,803
Note payable to general partner-TSGMC 137,640
Reserve for reclamation 640,000
Deferred gain on sale of Tonkin Springs interest 1,942,140
Total current liabilities and deferred gain 2,775,583
Partners' interest
Subsidiaries of U.S. Gold-
Partners' initial interest 6,825,286
Accumulated loss (345,367)
Partners' Interest 6,479,919
Total Liabilities and Partners' Interest $9,255,502
Note A. The partnership agreement has been amended to, among other
things, eliminate the requirement that the general partner fund
TSVLP activities by contributions. The amended agreement provides
at the option of the general partner, the ability to make secured
loans to TSVLP to fund activities. TSGMC and TSVLP have
established an amended $1,250,000 intercompany secured note payable
arrangement whereby TSGMC can provide funds, support and services
to TSVLP. The note bears interest at 2% over prime and is
repayable no later than December 31, 1996. As of June 30, 1995,
net borrowing under this note arrangement was $137,640 representing
cash advances to the Partnership, charges for personnel time,
general overhead, expenses related to or made in support of TSVLP
business interests, and accrued interest.
Note B. TSVLP and Gold Capital are jointly responsible for
reclamation of disturbance of the Properties, proportionate to
their respective interest in the Project Joint Venture. The
current estimate of reclamation cost, on a 100% basis, totals
approximately $1.47 million of which the Company reflects $640,000
on its balance sheet related to its 40% share. Actual reclamation,
generally, will be commenced upon the completion of operations at
the Properties. Bonding of reclamation under various Nevada and
Federal Bureau of Land Management agencies, currently set at $1.3
million, is the responsibility of Gold Capital under the terms of
the Project Joint Venture.
4. Condensed Financial Information of Tonkin Springs Project Joint
Venture, unaudited
As noted in Footnote 2 above, effective December 31, 1993, TSVLP
sold a 60 percent undivided interest in the Properties to Gold
Capital and the parties each made their respective interest in the
Properties subject to the Project Joint Venture. Gold Capital is
manager of the Properties under the Project Joint Venture. The
following is the condensed balance sheet of the Project Joint
Venture as of June 30, 1995, all costs associated with the
Properties have been funded by Gold Capital and capitalized in
property development:
BALANCE SHEET June 30, 1995
Assets:
Property, plant & equipment-
Milling, plant and production equipment $ 7,479,043
Buildings 2,232,963
Vehicles and trailers 104,000
Property development costs 2,228,291
12,044,297
Assets held for sale 241,316
Deposits and other assets 10,125
Total assets $12,295,738
Reserves and Project Joint Venturers' Interest:
Reserve for reclamation $ 1,469,900
Venturers' Interest-
Gold Capital's interest 8,116,837
TSVLP's interest 2,699,001
Total venturers' interest 10,815,838
Total reserves and venturers' interest $12,285,738
Note A. Effective July 12, 1995, TSVLP and Gold Capital sold
certain Project Joint Venture surplus grinding equipment for a net
sales price of $630,000. TSVLP will receive its 40% share
($152,000) of the net proceeds from this sale as a distribution
from the Project Joint Venture.
5. Royalty Purchase and Restructuring with NERCO,
Discharge/Conversion of Secured Debt
On February 21, 1992, the Company, among other things, restructured
its interests with NERCO Minerals Company related to the Cripple
Creek-Victor mining district of Colorado. Under this restructured
royalty, the Company received minimum royalty payments of $50,000
per month through February, 1994. Subsequent to the February, 1994
payment, the Company has no further interest in the Cripple Creek-
Victor mining district.
Also on February 21, 1992, in a Loan Settlement Agreement with its
senior secured lender, The French American Banking Corporation
("FABC"), the Company discharged its debt to FABC in the
approximate amount of $19,136,000 and terminated all prior security
interests related thereto. As part of the consideration to FABC
under the Loan Settlement Agreement, the Company (i) assigned to
FABC a limited Residual Royalty from NERCO after the February, 1994
payment described above, and (ii) entered into an agreement between
TSGMC and FABC entitled "Agreement To Pay Distributions," which
requires TSGMC to pay a limited portion of certain distributions
from TSVLP to FABC. TSVLP has complete control of such
distributions, if any, to TSGMC and USEC. Under the terms of the
Agreement To Pay Distributions, TSGMC is required to pay to FABC
(i) the first $30,000 in cash or value of asset distributions, as
defined in such agreement, received from TSVLP, plus (ii) an amount
equal to 50% of such retained distributions in cash or value of
asset distributions after TSGMC has first received and retained
$500,000 of such retained distributions. This obligation to FABC
shall terminate after FABC has been paid a total of $2,030,000
thereunder.
6. Short-term Borrowing
Effective August 23, 1993, the Company entered into an unsecured
loan agreement with Placer Dome U.S. Inc. ("PDUS") under which PDUS
loaned $300,000 to U.S. Gold. On July 14, 1995 the Company repaid
this loan with accrued interest. Through June 30, 1995, accrued
interest on the PDUS loan amounted to approximately $29,330. PDUS
is beneficial owner of approximately 7% of the outstanding shares
of common stock of U.S. Gold.
PART II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
Changes in Financial Condition
On December 31, 1993, TSVLP, a partnership owned 100% by
subsidiaries of U.S. Gold Corporation (the "Company"), sold a 60
percent undivided interest in the Tonkin Springs Properties and
Obligations (the "Properties") to Gold Capital Corporation ("Gold
Capital") and the parties formed a joint venture to operate the
Properties (the "Project Joint Venture"). The Company retained a
40% interest in the Properties and Project Joint Venture. Gold
Capital is manager of the Project Joint Venture.
Gold Capital purchased its 60 percent interest in the Properties
from the Company for total consideration of approximately
$7,960,000 which included a mortgage note for $3.8 million (the
"Note") and 300,000 shares of Gold Capital's Series A Preferred
Convertible Stock ("Preferred Stock") having an assigned value of
$3 million.
For the six month period ended June 30, 1995, the Company received
$878,472 in principal payments on the Note with $2,251,120
remaining due as of that date. The Note, as amended, requires
payments of $50,000 per month until Gold Capital has raised an
additional $4 million in financing, after which monthly payments
increase to $75,000 per month until paid in full. The Note is
collateralized by Gold Capital's 60% interest in the Properties and
the Project Joint Venture and accrues interest at 7.5%. Interest
on the Note for 1994 was received in April, 1995. Payment of
subsequent years interest is due at the end of each respective
calendar year.
The Company has agreed to convert its Preferred Stock into
1,500,000 shares of Gold Capital common stock, but not sooner than
November 30, 1995. Such conversion would result in the Company
owning approximately 24% of the outstanding common stock of Gold
Capital based upon its current capitalization. The Preferred Stock
accrues dividends at 9% per annum based on the $3 million aggregate
valuation, payable in cash or in common stock of Gold Capital. The
1994 dividend ($270,000) was paid with 127,702 shares of
unregistered common shares ($2.11/share). As of June 30, 1995,
accrued Preferred Stock dividends totals $135,000. Dividends will
cease to accrue as of November 30, 1995 regardless of the date of
conversion.
Gold Capital is required to fund 100% of the costs relating to the
Properties until commencement of commercial production. Through
June 30, 1995, Gold Capital has incurred approximately $1,115,800
in net costs for the Properties. Gold Capital shall be reimbursed
for such expenditures, up to $6 million ("Reimbursable Costs"),
from a preferential portion of cash flows from operations, if any.
Expenditures in excess of $6 million will be considered
contributions to the Project Joint Venture by Gold Capital. Until
Gold Capital recovers its Reimbursable Costs it is entitled to 84%
of net cash flows of the Project Joint Venture with 16% to be paid
to the Company. In January, 1995, Gold Capital obtained a project
feasibility study from a outside engineering firm, which study
confirms the economic viability of producing gold from a milling
and heap leach operation at Tonkin Springs. Subject to certain
conditions and assumptions set forth therein, the feasibility study
concludes that gold can be successfully mined over the estimated
five-year initial phase of the project. Assuming Gold Capital is
successful in raising the necessary funding it is Gold Capital's
intent to recommence gold production at the Project.
Liquidity and Capital Resources
In June, 1995, Gold Capital made principal payments of $860,000
under the Note after Gold Capital received a cash infusion from the
sale of $2.5 million in equity. In addition, during the remainder
of 1995, a minimum of $350,000 in note payments are scheduled to be
received by the Company, along with accrued interest payable
December 31, 1995. In June, 1995, the Company fully paid and
discharged its obligations to the Internal Revenue Service ("IRS")
related to a 1993 income tax liability and the Federal Tax Lien has
been released. In July, 1995, the Project Joint Venture sold
certain surplus equipment from which the Company will receive its
40% share ($252,000) as a distribution. These various payments are
the only sources of working capital anticipated by the Company
during the remainder of 1995. In July, 1995, the Company repaid an
unsecured loan from Placer Dome U.S. Inc. in the principal amount
of $300,000 plus accrued interest of $30,016.
As discussed above, the Company is dependent upon receipt of the
various payments from Gold Capital, and from its share of
distributions, if any, from operations of the Project Joint
Venture, to provide the Company funding for its obligations and to
pay corporate overhead.
Results of Operations - 1995 Compared to 1994
The Company is recognizing the gain from the sale of the 60%
interest in the Tonkin Springs Properties to Gold Capital using the
installment method of accounting as the purchase price
consideration from Gold Capital becomes reasonably assured. For
the six month periods ended June 30, 1995 and 1994, 11% ($523,891)
and 2% ($89,454), respectively, of the gain was recognized. At
June 30, 1995, $3,133,445 of the gain remains deferred and is
anticipated to be recognized as income from Gold Capital as
provided under installment sale accounting. For the six months
ended June 30, 1995, $123,087 in interest income related to the
Promissory Note as well as $135,000 of dividend income related to
the Preferred Stock, was accrued in income compared to $111,279 and
$135,000, respectively, for the same period of 1994.
During 1994, the Company received the final $100,000 in royalty
payments related to the Nerco Royalty Purchase and Restructuring
Agreement dated February 21, 1992. With these payments, the
Company had no further interest in the Cripple Creek-Victor mining
district.
General and Administrative expenses increased $5,037 during the six
month period ended June 30, 1995, compared to the corresponding
period of 1994. The increase in expenses for 1995 compared to 1994
generally reflect lower legal expenses primarily related to the
1993 dispute with Denay, increased allocations of overhead and
staff support to Gold Capital under an office and staff support
agreement, offset by higher employee compensation expenses.
Interest expense for the six month period ended June 30, 1995 was
$34,289, and related primarily to the unsecured loan from PDUS, and
interest on the IRS tax obligation. In the 1994 period, interest
expense of $8,373 related primarily to the PDUS note.
For the three months ended June 30, 1995, net income totalled
$367,274 compared to $93,846 in the corresponding period of 1994,
an increase of $273,428. Installment gain on the sale of the
Tonkin Springs interest represented $434,437 of the increase,
offset in part by higher interest expense related to the IRS tax
obligation, as well as higher employee compensation expenses.
Net cash used in operations increased slightly to $275,456 for the
six month period ended June 30, 1995, from $273,470 in 1994,
reflecting the decrease in the Nerco Royalty and a decrease in cash
paid to suppliers.
PART II
1. No report required.
2. No report required.
3. No report required.
4. No report required.
5. No report required.
6.a Exhibit 11 - Statement re: Computation of Per Share Earnings.
SIGNATURES
In accordance with the requirements of the Securities and Exchange
Act of 1934, the registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
U.S. GOLD CORPORATION
Dated: July 31, 1995 By /s/ William W. Reid
William W. Reid, President and
Chief Financial Officer
U.S. GOLD CORPORATION
Exhibit 11 to Form 10-QSB
for the Three and Six Month Period Ended June 30, 1995 and 1994
Computation of Weighted Average Shares Outstanding Used in Earnings
Per Share Calculations:
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Total shares issued,
beginning 13,775,505 13,768,800 13,768,800 13,768,800
Weighted average of
common stock issued
for cash with exercise
of stock option,
$.28/share - - 5,588 -
Weighted average
shares issued 13,775,505 13,768,800 13,774,388 13,768,800
Weighted average of
common stock
equivalents (1):
Unexercised stock
options 1,243,295 1,250,000 1,243,295 1,250,000
Less: Buy back of
common shares under
treasury stock method
using average price (503,857) (482,319) (589,873) (495,507)
14,514,943 14,536,481 14,427,810 14,523,293
(1) Fully diluted computations not made as total shares and
share equivalents outstanding would be effected by less than 3% in
both periods.
