U.S. 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 [Fee Required]
For the fiscal year ended December 31, 1995
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ________ to __________
Commission file number 0-9137
U.S. GOLD CORPORATION
(Name of small business issuer in its charter)
Colorado 84-0796160
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Madison, Suite 700, Denver, Colorado 80206
(Address of principal executive office) (Zip Code)
Issuer's telephone number (303) 322-8002
Securities registered pursuant to Section 12(b) of the Exchange
Act:
Title of each class Name of each exchange on which registered
None N/A
Securities registered pursuant to Section 12(g) of the Exchange
Act:
Common Stock, $0.10 par value
(Title of class)
Check whether the issuer (1) has 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. Yes X No
Check if there is no disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X].
State issuer's revenues for its most recent fiscal year.
$1,367,557 in revenues for year ended December 31, 1995.
The aggregate market value (at the last trade price of $1.03 per
share) of the Common Stock of U.S. Gold Corporation held by
nonaffiliates as of March 19, 1996 was approximately $14,179,000.
As of March 19, 1996, there were 13,806,505 shares of Common Stock,
par value $0.10, outstanding.
Transitional Small Business Disclosure Format (check one):
yes no x
PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development
U.S. Gold Corporation (the "Company") was organized under the laws
of the State of Colorado on July 24, 1979 under the name Silver
State Mining Corporation. On June 21, 1988, the Company, pursuant
to a vote of its shareholders, changed its name from Silver State
Mining Corporation to U.S. Gold Corporation. Since its inception,
the Company has been engaged in the exploration for, development
of, and the production and sale of gold and silver.
The Company's principal property is Tonkin Springs ("Tonkin
Springs") which interest is held by Tonkin Springs Venture Limited
Partnership ("TSVLP"), a Nevada limited partnership owned 100% by
wholly-owned subsidiaries of the Company. On December 31, 1993,
TSVLP sold a 60 percent undivided interest in Tonkin Springs to
Gold Capital Corporation ("Gold Capital"), a Colorado corporation.
TSVLP retained a 40 percent undivided interest in Tonkin Springs.
During 1990, the Company completed construction of its milling
facility at Tonkin Springs and operated the integrated mill
facility in a start-up mode commencing March, 1990. However,
because of severe liquidity problems the Company put the operation
on stand-by status beginning in June, 1990, while the Company
negotiated and concluded a transaction on February 13, 1991 with
Denay Creek Gold Mining Company and Homestake Nevada Corporation,
both wholly-owned subsidiaries of Homestake Mining Company of
California ("Denay"). In that transaction, the Company sold 51%
undivided interest in the Tonkin Springs project to Denay and the
parties contributed their respective interests in the Tonkin
Springs project into the TSVLP. Denay conducted and funded
exploration and other activities at Tonkin Springs until its
withdrawal from TSVLP effective October 9, 1992. Upon the
withdrawal of Denay, the Company, through its wholly-owned
subsidiaries, became the 100% owner of TSVLP and assumed
responsibility for management and funding of the Tonkin Springs
project until the transaction with Gold Capital effective December
31, 1993, referred to above.
Business
General
The Company is primarily engaged in the precious metal mining
business in the continental United States, however, it may also
evaluate properties outside the United States. The Company,
through its wholly-owned subsidiaries, owns an interest in the
Tonkin Springs gold mine located in Eureka County, Nevada.
As a gold mining company, the Company's activities include, at
various times and to various degrees, exploration, land
acquisition, geological evaluation and feasibility studies of
properties and, where warranted, development and construction of
mining and processing facilities, mining and processing and the
sale of gold and other metal by-products. The Company also may
enter into joint ventures or partnerships to accomplish these
activities. All refined bullion is either sold to outside
companies, delivered in satisfaction of forward sale delivery
contracts, or held in inventory for later disposition. The Company
also may enter into joint undertakings with other companies to
accomplish the same purposes.
Sale of 60% Interest in Tonkin Springs Properties to Gold Capital
On December 31, 1993 (the "Closing"), TSVLP sold a 60 percent
undivided interest in the Tonkin Springs properties and obligations
(the "Properties") to Gold Capital. TSVLP retained a 40 percent
undivided interest in the Properties. Immediately after the
conveyance to Gold Capital and effective December 31, 1993, TSVLP
and Gold Capital each made their respective interest in Tonkin
Springs subject to the Tonkin Springs Project Joint Venture
("Project Joint Venture") with Gold Capital designated manager.
Gold Capital is responsible for funding of all costs related to
Tonkin Springs until defined commercial production, if any, is
achieved.
Gold Capital purchased its 60 percent undivided interest in the
Properties from TSVLP for a purchase price and other consideration
of approximately $7,830,000 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
Gold Capital's Series A Convertible Preferred Stock ("Gold Capital
Preferred Stock") having an assigned value of $3 million, and the
assumption of 60 percent of a reclamation obligation recorded at
$960,000. During 1994 and 1995 TSVLP received $1,848,080 in
principal payments on the Promissory Note with a balance of
$1,951,920 remaining due to TSVLP at December 31, 1995. The
Promissory Note 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.
TSVLP agreed to convert its Gold Capital Preferred Stock into
1,500,000 shares of Gold Capital common stock but not prior to
November 30, 1995, as provided in the Commitment and Agreement to
Convert dated June 22, 1995. The Gold Capital Preferred Stock, as
amended June 22, 1995, included a covenant requiring Gold Capital
to pay a 9% annualized rate dividend through November 30, 1995
(based on the $10 per share stated value which totals $3 million
aggregate valuation) and payable at the option of Gold Capital in
cash or its common stock. The 1994 dividend in the amount of
$270,000 was satisfied in 1995 with the issuance to TSVLP of
127,702 unregistered common shares of Gold Capital and the 1995
dividend, through the November 30, 1995 dividend cessation date, in
the amount of $247,500 was accrued at December 31, 1995, and
satisfied in February, 1996 with the issuance to TSVLP of 147,816
unregistered common shares of Gold Capital. If conversion of the
Preferred Stock into common equity of Gold Capital by TSVLP had
taken place effective December 31, 1995, and considering the 1994
and 1995 dividend paid in common stock, TSVLP would have then owned
approximately 27% of the outstanding common stock of Gold Capital.
However, TSVLP has assigned its voting rights to its shares of
Gold Capital common stock to Mr. John Young, president of Gold
Capital and Royalstar, for a period of up to five years as provided
in the Shareholders Agreement dated June 22, 1995. Pursuant to
the Registration Rights Agreement dated March 27, 1995, Gold
Capital has agreed to use its best efforts to register all common
stock received by TSVLP. William W. Reid, president of the
Company, was appointed a member of the board of directors of Gold
Capital after Closing pursuant to the Gold Capital Preferred Stock
covenants.
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 and will not be subject to preferential
distributions. Through December 31, 1995, Gold Capital has
reported that it has incurred approximately $2,173,000 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 1995 and 1994, 14.8%
($702,828) and 7.2% ($339,702), respectively, of the gain was
recognized. As of December 31, 1995, $2,954,518 of the gain (62%)
is deferred and is anticipated to be recognized as income as
provided under the installment method of accounting.
Loan Settlement Agreement with FABC, Royalty Restructuring with
Nerco
Effective February 21, 1993, the Company entered into a Loan
Settlement Agreement with its former senior secured lender, French
American Banking Corporation ("FABC"). As partial consideration to
FABC under that agreement, the Company assigned a Residual Royalty
from Nerco Minerals Company ("NERCO") under a Royalty Restructuring
Agreement covering certain mineral interests in the Cripple
Creek/Victor mining district of Colorado to FABC, and entered into
an agreement between Tonkin Springs Gold Mining Company ("TSGMC"),
a wholly owned subsidiary of the Company, and FABC entitled
"Agreement To Pay Distributions," which requires TSGMC to pay a
limited portion of certain distributions, if any, from TSVLP to
FABC. TSVLP has complete control of such distributions, if any, to
TSGMC. Under the terms of the Agreement To Pay Distributions,
TSGMC is required to pay to FABC (i) the first $30,000 of retained
distributions, as defined in such agreement, received from the
TSVLP, plus (ii) an amount equal to 50% of such retained
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. In conjunction with the Loan Settlement Agreement, as
well as conversion of the 10.93% convertible debentures, both
effective February 21, 1992, the Company agreed to use its best
efforts to register approximately 5,304,545 shares of common stock
of the Company issued to and retained by FABC with the Securities
and Exchange Commission and to maintain the effectiveness of such
registration for a period of two years. There can be no assurance,
however, that the Company will be successful in its efforts to have
the shares so registered.
Competitive Business Conditions
The exploration for, and the development and acquisition of gold
properties are subject to intense competition. Companies with
greater financial resources, larger staffs, more experience, and
more equipment for exploration and development may be in a better
position than the Company to compete for such mineral properties.
The Company's present limited cash flow means that its ability to
compete for properties to be explored and developed is more limited
than in the past. The Company believes that competition for
acquiring mineral prospects will continue to be intense in the
future. The Company may have to undertake greater risks than more
established companies in order to compete. The market price for
gold depends on numerous factors beyond the Company's control,
including production or sales by other gold producing nations.
Major Customers
Sales of refined gold and silver bullion derived from operating
properties in the past have been made to unaffiliated companies.
The Company believes that the loss of these customers would not
affect its business.
Patents, Trademarks, Licenses, Franchises, Concessions
The Company co-owns with Denay three United States patents and two
Republic of South Africa patents covering various aspects of its
bio-oxidation technology. If feasible, the Company intends to
exploit its bio-oxidation expertise, technology and patents derived
from activities at Tonkin Springs to help create business
opportunities in the gold mining business. The Company owns by
itself two Chilean patents related to its bio-oxidation technology.
No research and development expenditures have been incurred by the
Company during the last two years.
The Company does not own any trademarks, licenses, franchises or
concessions, except mining interests granted by governmental
authorities and private landowners. No portion of its business is
subject to re-negotiation of profits or termination of contracts or
subcontracts at the election of the government.
Government Regulations
In connection with mining, milling and exploration activities, the
Company is subject to extensive Federal, state and local laws and
regulations governing the protection of the environment, including
laws and regulations relating to air and water quality, mining
reclamation, waste disposal, and the protection of endangered or
threatened species.
Numerous and in some regards conflicting bills have been introduced
and are now pending in the U.S. Congress which would supplant or
radically alter the provisions of the Mining Law of 1872. In
enacted, such legislation could substantially increase the cost of
holding unpatented mining claims and could impair the ability of
companies to develop mineral resources on unpatented mining claims.
Under the terms of these bills, the ability of companies to a
obtain patent on unpatented mining claims would be nullified or
substantially impaired, and most contain provisions for the payment
of royalties to the federal government in respect of production
from unpatented mining claims, which could adversely affect the
potential for development of such claims and the economics of
operating new or even existing mines on federal unpatented mining
claims. The Company's financial performance could therefore be
affected adversely by passage of such legislation. Pending
possible reform of the Mining Law of 1872, Congress has put in
place a moratorium which prohibits acceptance or processing of most
mineral patent applications. It is not possible to predict whether
any change in the Mining Law of 1872 will, in fact, be enacted or,
if enacted, the form the changes may take.
Costs and Effects of Compliance with Environmental Laws
In connection with its mining, milling and exploration activities,
the Company is required to comply with various federal, state and
local laws and regulations pertaining to the discharge of materials
into the environment or otherwise relating to the protection of the
environment. The Company or joint venture participants have
obtained, or are in the process of obtaining, environmental
permits, licenses or approvals required for its operations.
Management of the Company is not aware of any material violations
of environmental permits, licenses or approvals issued with respect
to the Company's operations.
The Company, TSVLP, owns of a 40% interest in the Tonkin Springs
Properties, is jointly responsible for the reclamation obligations
related to disturbances at the Properties. A reclamation plan and
projected cost estimate for the Properties was prepared by TSVLP in
1993 and estimated the reclamation costs associated with current
disturbances at the Properties at approximately $1.4 million. The
plan was filed with appropriate governmental agencies (the Nevada
Department of Environmental Protection and the Federal Bureau of
Land Management). Bonding is the responsibility of Gold Capital
under the terms of the Project Joint Venture.
The Company has transferred its interest in several mining
properties over the past years. The Company could remain
potentially liable for environmental enforcement actions related to
its prior ownership interest of such properties. However, the
Company has no reasonable belief that any violation of relevant
environmental laws or regulations has occurred regarding these
transferred properties. The Company is not currently subject to
any material pending administrative or judicial enforcement
proceedings arising under environmental laws or regulations.
Environmental laws and regulations may be adopted and enacted in
the future which may have an impact on the Company's operations.
The Company cannot now accurately predict or estimate the impact of
any such future laws or regulations on its operations.
Employees
At December 31, 1995, the Company had 5 employees, each of which
were employed on a full-time basis.
ITEM 2. DESCRIPTION OF PROPERTIES.
Tonkin Springs Properties
General
The Company through TSVLP (which is wholly-owned by subsidiaries of
the Company) holds a 40% undivided ownership interest in the Tonkin
Springs Properties, Eureka County, Nevada ("Properties" or
"Project"), subject to the Project Joint Venture. Gold Capital
owns the remaining 60% undivided interest in the Properties, and is
Project Joint Venture manager. The Properties are located on the
Battle Mountain-Cortez Trend, approximately 45 miles northwest of
Eureka, Nevada. The transaction with Gold Capital was effective
December 31, 1993, all as discussed further in "Item 1. Description
of Business, Sale of 60% Interest in Tonkin Springs Property to
Gold Capital," and below.
Sale of 60% Interest to Gold Capital
On December 31, 1993, TSVLP sold a 60 percent undivided interest in
the Properties to Gold Capital for total consideration of $7.8
million, as further discussed in "Item 1. Description of Business-
Sale of 60% Interest in Tonkin Springs Properties to Gold Capital".
TSVLP retained a 40 percent undivided interest in the Properties.
General
Tonkin Springs is an open-pit gold mining and processing project
consisting of unpatented mining claims, an integrated milling
facility, and support facilities on approximately 14,980 acres of
Federal land located along the Battle Mountain - Cortez Trend
approximately 45 miles northwest of the town of Eureka in Eureka
County, Nevada. Gold Capital obtained a feasibility study from a
outside engineering firm in January, 1995, which represents an
estimate of 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
additional capital, it is Gold Capital's intention to recommence
gold production at the Project. To accomplish this objective, Gold
Capital must re-establish or amend the permits that are required to
operate the Project, construct an "on-off" impermeable leach pad to
accommodate crushed mineralized material, reconfigure the existing
crushing arrangement and commence mining operations. Sufficient
overburden removal and development work has been accomplished to
date to allow the mining of mineralized material to commence
quickly.
Part of the mineralized material at the Project is contained in
sulfides and will require pre-treatment prior to the conventional
mill processing. For this reason, Gold Capital has indicated that
it intends to construct a leach pad and pre-oxidize the mineralized
material through bio-oxidation prior to conventional carbon-in-
leach processing. Mining is proposed to commence initially at the
TSP-1 pit of the Project. An important part of the mineralized
material at the Project is in the oxide form (the "Tonkin North
deposit") and is amenable to conventional heap leach extraction
methods. The Tonkin North deposit is proposed by Gold Capital to
be placed in production after the first year of operations.
An additional component of the mineralized material at the Project
is contained in lower grade sulfides which can be mined in
conjunction with both the milling and Tonkin North operations.
Gold Capital has indicated that it proposes to pre-oxidize this
mineralized material in a similar fashion to that used prior to
conventional milling. After oxidation however, Gold Capital
intends to convey the lower grade mineralized material to the new
oxide leach pad constructed in conjunction with the Tonkin North
operations where Gold Capital intends to utilize conventional heap
leach extraction methods.
Proposed Operations
Assuming Gold Capital is successful in raising the necessary
additional capital, it is Gold Capital's intention to recommence
gold production at the Project.
Mining at the Tonkin Springs Project is planned to be accomplished
by conventional open pit methods utilizing a contractor. Gold
Capital has indicated that after mining, the mineralized material
will be crushed and then placed on an impervious asphalt pad where
it will be treated with acid, other chemicals and certain bacteria
acting as catalysts to oxidize the sulfides present. This
oxidation process is estimated to take approximately 30 to 45 days
per batch of mineralized material. When this process is complete,
the crushed and oxidized mineralized material will be washed on the
heap with water and a neutralizing agent to remove acid accumulated
during the oxidation process. Oxidized mineralized material will
then be transported to the existing mill storage facility for
further processing.
The pre-treated oxidized mineralized material will then be
processed in the existing milling facility utilizing a conventional
carbon-in-leach process. In this milling process, the oxidized
mineralized material is ground and then treated with conventional
cyanide in solution with activated carbon. This activated carbon
adsorbs any gold present. The gold bearing carbon is separated
from the slurry, processed for gold recovery and reactivated for
use. The barren slurry is then discharged to the tailing facility.
Gold is removed from the carbon using a hot, caustic cyanide
solution and extracted from the solution by electrowining and
further processed and melted with fluxes to produce dore bullion.
The dore would then be shipped by armored carrier to a refinery for
final processing.
The current mining plan developed by Gold Capital calls for mining
to commence initially at the TSP-1, the first of several pits.
Scheduled production anticipates mining from TSP-1 for 12 full
calendar quarters. It is anticipated that mining of the second pit
area, known as TSP-6, will be initiated at the beginning of year
two and completed in approximately five fiscal quarters. Mining at
the third pit, known as O-15, is expected to be commenced during
the second year of mining operations.
The Tonkin North oxide pit development plan is envisioned as a
separate heap leach operation to be initiated subsequent to
commencement of milling operations as discussed above.
Approximately $4 million in additional capital expense is estimated
for placing the Tonkin North mineralized material in production.
Such estimate includes additional necessary permits, design and
construction of the heap leach pad, design and construction of the
solution pond and related support facilities. Gold Capital
anticipates, although there is no assurance, that such capital
expenditures will be funded from future production.
The low grade sulfide mineralized material will be pretreated and
bio-oxidized in the same manner as the high grade sulfide, but
instead of final processing through the conventional mill, this
material will then be processed in a conventional heap leach
operation.
Access to the Project is provided by a county maintained road.
Electrical power is provided through a substation located near the
mill and operated by Sierra Pacific Power Company. Water is
available through production wells which have been established on
the site. The Project also contains an assay laboratory and
metallurgical pilot plant testing lab. In addition to the heavy
equipment shop for repair and maintenance of mining equipment, a
repair shop and warehouse building is situated adjacent to the mill
building. The site also contains facilities to store and
distribute propane, diesel fuel and gasoline. An administrative
building is available to office management and administrative
personnel. Potable water will be brought in from outside the
Project.
Geology
Host rocks for gold mineralization at Tonkin Springs consist of a
sequence of Paleozoic rocks that were subsequently faulted,
intruded and mineralized. Gold-bearing solutions originated at
depth and migrated up along fracture systems until reaching
fractured rock or chemically favorable rock suitable for deposition
of mineralized material. Later volcanism, faulting, erosion and
sedimentation affected the mineralized material.
Claims
The Tonkin Springs Project consists of a total of 1,059 claims. Of
that amount, an aggregate of 207 of the unpatented mining claims
covered by the Project are leased from unaffiliated third parties
pursuant to two mining leases. The Campbell/Simpson Lease, which
covers 197 claims, has an initial term which expires December 31,
2006 and may be extended from year to year, up to a maximum term of
99 years, by production from the leased claims. The Buffington
Lease, which covers 10 claims, has an initial term which expires
August 9, 1996, and may be extended from year to year by production
from the leased claims or by continued payment of advance
royalties. Each lease contains certain conditions and other
requirements for annual payments, as well as expenditures or work
to be performed in order to retain the leased claims.
The Campbell/Simpson lease requires an annual advance royalty in
the amount of $150,000, or the value of 450 ounces of gold,
whichever is greater, which royalty is payable in January of each
year. The lease also requires production royalties of 5% of the
gross sales price of gold or silver but provides for recapture of
annual advance royalties previously paid. The Project Joint
Venture is required to perform an annual work commitment and the
lease includes a defined area of interst extending from the
boundaries of certain claims. Certain of the claims which are
included in the Campbell/Simpson lease are also subject to a 1% net
smelter return royalty (defined as gross revenues from sales of
minerals, less refining costs, transportation costs, severance,
production and sales taxes, and sales commissions) payable to
Precambrian Exploration, Inc. after $15,000,000 in gross revenues
are realized from the claims.
The Buffington lease requires nominal payment of an initial advance
royalty and 5% of all net returns following commencement of
production.
An aggregate of 848 of the unpatented mining claims covered by the
Project, as well as 4 millsites, are owned jointly by the TSVLP and
Gold Capital. A total of 317 of these claims are subject to a
royalty of 2% of net smelter returns, which becomes payable to
Precambrian Exploration, Inc. after $50 million in gross revenues
is realized from the claims. Precambrian Exploration, Inc. is an
unaffiliated third party and predecessor in interest to the claims.
Precambrian may elect to receive such royalty "in kind," upon
proper notice to the Project Joint Venture. The remaining 531
claims and the millsites are not subject to any royalties. The
Project Joint Venture is required to perform all assessment work
required under state and Federal law to hold the claims.
In March, 1994, the Project Joint Venture acquired 215 claims
covering approximately 4,400 acres in the vicinity of the Tonkin
Springs Project from an unaffiliated third party for consideration
totalling $54,000. The claims are subject to a royalty of 1% of
net smelter returns for gold when the indexed price of gold is $350
per ounce or more, and a royalty of 1% of net smelter returns for
silver when the indexed price of silver is $3.50 per ounce or more.
No royalties are payable at lower indexed prices. The indexed
prices shall reflect adjustments based on the Producer's Price
Index, sub-index Finished Goods Excluding Foods, as published by
the United States Department of Commerce. During 1995, TSVLP
assigned its interest in approximately 247 claims mineral
encompassing to the Project Joint Venture. The Company and TSVLP
believes that the carrying value of the foregoing mineral claims to
be diminutive.
History of Property
In late 1989, the Company substantially completed construction of
a 1,500 ton-per-day milling facility at Tonkin Springs designed to
utilize stirred-tank bioleaching technology in the pre-oxidation
step for sulfide gold ores to allow subsequent extraction of the
gold through the conventional carbon-in-leach mill process. The
construction cost of the mill was approximately $31 million. The
Company operated the integrated mill facility in a start-up mode
commencing in March, 1990. However, the mill facility did not
reach commercial operation by June, 1990, and because of severe
liquidity problems the Company put the operation on stand-by status
beginning in June, 1990, while the Company concluded a transaction
with Denay on February 13, 1991 discussed further below. During
1990, in anticipation of results of the 1991 Closing, the Company
reduced its carrying value in the Properties and charged operations
for $29.6 million. In the February 13, 1991 Denay transaction,
TSGMC sold a 51 percent undivided interest in the Properties to
Denay and the parties contributed their respective interests in the
Properties into the TSVLP. Ownership in the TSVLP was initially:
TSGMC- 49 percent, Denay- 51 percent, with Denay and TSGMC general
partners and Homestake Nevada a limited Partner. Denay was
initially designated manager of the Properties.
Denay purchased its 51 percent undivided interest in the Properties
in exchange for forgiveness by Denay of an aggregate of $4.5
million in short term debt of the Company purchased by Denay from
certain creditors for an aggregate cash price of $3.5 million.
Denay also committed to make certain expenditures through TSVLP for
the benefit of the Properties. In particular, Denay was required
to expend a minimum aggregate $2 million on exploration of the
Properties and to fund other property costs. Effective October 9,
1992, Denay withdrew from TSVLP. Such withdrawal was provided for
and governed by the Limited Partnership Agreement between the
parties dated February 11, 1991, and as provided thereunder the
partnership interest of the withdrawing parties reverted to TSGMC
and U.S. Environmental Corporation ("USEC"), both wholly-owned
subsidiaries of the Company. The Company's interest in TSVLP is
held 99.5% by TSGMC and 0.5% by USEC. During the period of Denay
involvement, Denay expended approximately $2.49 million on
exploration and approximately $1.84 million on other property
costs.
Upon the withdrawal by Denay from the TSVLP, the Company
effectively acquired Denay's 51% ownership of the partnership and
assumed responsibility for the reclamation of the properties.
Effective December 31, 1992, the Company recorded a $1.6 million
estimated reclamation cost for the Properties as an obligation and,
reflected this amount as an acquisition cost of the Denay's 51%
partnership interest thereby increasing its investment in the
TSVLP. As noted above, effective December 31, 1993, the Company
sold a 60 percent undivided interest in the Properties to Gold
Capital.
ITEM 3. LEGAL PROCEEDINGS.
There are no legal proceedings known by the Company to be pending
nor threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock trades on The Nasdaq SmallCap Market
tier of The Nasdaq Stock Market under the symbol "USGL." The
tables below set forth the high and low sales prices for the
Company's common stock as quoted by Nasdaq for the fiscal years
ended December 31, 1995 and 1994. Quotations represent prices
between dealers, do not include retail markups, markdowns or
commissions, and do not necessarily represent prices at which
actual transactions were effected.
Fiscal Year Ended
December 31, 1995 High Low
First Quarter $ 0.688 $ 0.375
Second Quarter $ 0.813 $ 0.656
Third Quarter $ 1.250 $ 0.712
Fourth Quarter $ 1.563 $ 0.712
Fiscal Year Ended
December 31, 1994 High Low
First Quarter $ 0.938 $ 0.563
Second Quarter $ 0.719 $ 0.625
Third Quarter $ 0.719 $ 0.438
Fourth Quarter $ 0.563 $ 0.375
As of March 19, 1996, there were approximately 8,280 record holders
for the Company's common stock.
No dividends have ever been paid with respect to the Company's
common stock and the Company does not anticipate the payment of
dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF
OPERATIONS
Changes in Financial Condition
On December 31, 1993 (the "Closing"), 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. TSVLP retained a
40 percent undivided interest in the Properties. Immediately
thereafter, TSVLP and Gold Capital each made their respective
interest in the Properties subject to the Tonkin Springs Project
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 $7,830,000 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 ("Gold Capital
Preferred Stock") having an assigned value of $3 million, and the
assumption of 60 percent of a reclamation obligation recorded at
$960,000.
Through 1995, the Company has received $1,848,080 in principal
payments on the Promissory Note with $1,951,920 remaining due at
December 31, 1995. The Promissory Note, as amended June 22, 1995,
requires monthly payments by Gold Capital of $50,000 until Gold
Capital has raised an aggregate of $4,000,000 in new financing, or
until paid in full, and $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 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. Interest on the Promissory Note for 1995
amounted to $195,572 and was received in full during March, 1996.
Payment of subsequent years interest is due at the end of each
respective calendar year.
TSVLP entered into the Commitment and Agreement to Convert with
Gold Capital dated June 22, 1995, whereby it agreed to convert its
300,000 shares of Gold Capital Preferred Stock into 1,500,000
shares of Gold Capital common stock, but not prior to November 30,
1995. The Gold Capital Preferred Stock, as amended June 22, 1995,
included covenants requiring Gold Capital, among other covenants,
to pay TSVLP a mandatory annual 9% dividend (based on the $10 per
share stated value which totals $3 million aggregate valuation)
through November 30, 1995. Such dividends are payable annually in
cash or at the option of Gold Capital by issuance to TSVLP of Gold
Capital unregistered common stock. The 1994 dividend in the
amount of $270,000 was satisfied with the issuance of 127,702
shares of Gold Capital common stock, and the 1995 dividend (through
November 30, 1995) in the amount of $247,500 was accrued at
December 31, 1995 and satisfied by the issuance of 147,816 shares
of common stock of Gold Capital received by TSVLP in February,
1996. The aggregate carrying value of the 275,518 shares of Gold
Capital common shares received as dividends is $517,500
($1.88/share), and the market price of such shares as of March 20,
1996 was bid $1.25 and ask $1.63. If conversion of the Preferred
Stock into common equity of Gold Capital by TSVLP had taken place
effective December 31, 1995, and considering the 1994 and 1995
dividend paid in common stock, TSVLP would have then owned
approximately 27% of the outstanding common stock of Gold Capital.
However, TSVLP has assigned its voting rights to these Gold
Capital shares for a period of up to 5 years to Mr. John Young,
president of both Gold Capital and Royalstar Resources Ltd, as
provided in the Shareholders Agreement dated June 22, 1995.
Pursuant to the Registration Rights Agreement dated March 27, 1995,
Gold Capital has agreed to use its best efforts to register all
common stock received by TSVLP.
Gold Capital is required to fund 100% of the holding, development
and administrative costs relating to the Properties until
commencement of commercial production. Through December 31, 1995,
Gold Capital has incurred approximately $2,173,000 in net costs for
the Project Joint Venture. 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. In January, 1995, Gold Capital obtained a project
feasibility study from an 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 additional capital, it is Gold
Capital's intention to recommence gold production at the Project.
Liquidity and Capital Resources
During 1996, TSVLP anticipates receipt of a minimum of $650,000 in
principal payments from Gold Capital plus accrued interest under
the Promissory Note. These payments are the only source of working
capital anticipated during 1996 unless the Tonkin Springs Project
commences commercial production with cash flow, if any, distributed
to TSVLP. Therefore, the sufficiency of the Company's working
capital is dependent upon Gold Capital's continuing performance
under the terms of various agreements, which raises substantial
doubt about the ability to continue as a going concern. Management
plans to monitor Gold Capital's performance under the various terms
of the agreements and, if required, to exercise its rights as
provided in a security agreement dated December 31, 1993, under
which the Company holds a security interest in Gold Capital's 60%
interest in the Properties and Project Joint Venture. The
consolidated financial statements do not include any adjustments
for the uncertainty that Gold Capital may not continue to perform
as required under various agreements.
Net cash used in operations increased from $595,136 for 1994 to
$1,236,869 for 1995, reflecting the decrease in the Nerco Royalty
of $100,000, the increase in cash paid to suppliers, lenders and
employees, and full payment of a Federal tax obligation. Cash flow
from investing activities increased from $546,033 for 1994 to
$1,772,349 in 1995, primarily reflecting principle and interest
payments received under the note from Gold Capital and TSVLP's
share of the net proceeds related to the sale of assets from the
Properties, discussed further below. Cash used in financing
activities increased from $132,929 in 1994 to $319,411 in 1995,
reflecting the full repayment of a unsecured loan during 1995 from
Placer Dome U.S. Inc. ("PDUS") in the principal amount of $300,000
plus accrued interest of $30,016. PDUS is beneficial owner of
approximately 7% of the outstanding shares of common stock of U.S.
Gold.
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. In
1995, 14.8% ($702,828) of the gain was recognized reflecting
principal payments received on the Promissory Note while in 1994,
7.2% ($339,702) of the gain was recognized based upon Promissory
Note payments. At December 31, 1995, 62% ($2,954,518) of the gain
remains deferred and is anticipated to be recognized as income from
Gold Capital as provided under installment sale accounting. During
1995, $195,572 in interest income related to the Promissory Note as
well as $247,500 of dividend income related to the Gold Capital
Preferred Stock, was accrued, compared to interest income of
$234,214 and dividend income of $270,000 recognized during 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, and thereafter the Company has
no further interest in the Cripple Creek-Victor mining district.
In addition, during 1995, the Tonkin Springs Project Joint Venture,
of which the Company holds a 40% interest through TSVLP, sold a
surplus sag mill from the project distributing $252,000 to TSVLP
representing it's share of the net proceeds from the sale. The
Company, through TSVLP recognized a gain on its share of this sale
of $196,375.
General and Administrative expenses increased approximately $44,451
in 1995 compared to 1994. The small increase in expenses for 1995
compared to 1994 generally reflect higher employee compensation
expense and costs associated with an expanded investor relations
program, offset in part by greater costs allocated and charged to
Gold Capital Corporation for office and staff support.
Interest expense during 1995 was $27,369, and related primarily to
the Federal tax liability, and interest on the unsecured note in
favor of PDUS paid in full in July, 1995.
Upon finalization of the Company's 1993 Federal income tax return,
a liability of $451,474 for 1993 alternative minimum tax was
computed. During 1995, the Company completed payments including
penalty and interest to the IRS related this liability in the
amount of $534,152. During 1995, the Company received a federal
tax refund in the amount of $145,741 including interest and
refunded penalties, as 1994 tax losses were carried back and
applied against the 1993 alternative minimum tax payment. The
Company has recorded a deferred tax asset of $837,322 and a
valuation allowance of $613,700 as of December 31, 1995. The
Company believes that it is more likely than not that the net
deferred asset will be realized. Therefore, no valuation allowance
has been provided for the $223,622 net deferred asset.
Other
In March 1995, the Financial Accounting Standards Board issued a
new statement titled "Accounting for Impairment of Long-Lived
Assets" (FAS 121). This new standard is effective for years
beginning after December 15, 1995 and would change the Company's
method of determining impairment of long-lived assets. Although
the Company has not performed a detailed analysis of the impact of
this new standard on the Company's financial statements, the
Company does not believe that adoption of the new standard will
have a material effect on the financial statements. In October
1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation" (FAS
123). The new standard is effective for fiscal years beginning
after December 15, 1995. FAS 123 encourages, but does not require,
companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments to employees based upon
fair value. Companies that do not adopt the fair value accounting
rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity
instruments with non-employees for goods or services must be
accounted for on the fair value method. The Company currently does
not intend to adopt the fair value accounting prescribed by FAS
123, and will be subject only to the disclosure requirements
prescribed by FAS 123. However, the Company intends to continue
its analysis of FAS 123 and may elect to adopt its provisions in
the future.
Numerous and in some regards conflicting bills have been introduced
and are now pending in the U.S. Congress which would supplant or
radically alter the provisions of the Mining Law of 1872. In
enacted, such legislation could substantially increase the cost of
holding unpatented mining claims and could impair the ability of
companies to develop mineral resources on unpatented mining claims.
Under the terms of these bills, the ability of companies to a
obtain patent on unpatented mining claims would be nullified or
substantially impaired, and most contain provisions for the payment
of royalties to the federal government in respect of production
from unpatented mining claims, which could adversely affect the
potential for development of such claims and the economics of
operating new or even existing mines on federal unpatented mining
claims. The Company's financial performance could therefore be
affected adversely by passage of such legislation. Pending
possible reform of the Mining Law of 1872, Congress has put in
place a moratorium which prohibits acceptance or processing of most
mineral patent applications. It is not possible to predict whether
any change in the Mining Law of 1872 will, in fact, be enacted or,
if enacted, the form the changes may take.
ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements Page
Report of Independent Certified Public Accountants F-1
Consolidated Statements of Operations for the years
ended December 31, 1995 and 1994 F-3
Consolidated Balance Sheet at December 31, 1995 F-4
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
U.S. Gold Corporation
We have audited the accompanying consolidated balance sheet of U.S.
Gold Corporation (the Company) as of December 31, 1995 and the
related consolidated statements of operations, changes in
shareholders' equity and cash flows for the year ended December 31,
1995. 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 upon our audit.
We conducted our audit in accordance with generally accepted
auditing standards. These 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 consolidated
financial statement presentation. We believe that our audit
provides 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 as of December 31, 1995, and the results of
their operation and their cash flows for the year ended December
31, 1995, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, the
Company sold a 60 percent interest in the Tonkin Springs Project.
The sufficiency of the Company's working capital is dependent upon
the purchaser's continuing performance under the terms of the
related agreement, which raises substantial doubt about its ability
to continue as a going concern. Management's plan in regard to
this matter is also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
BDO Seidman, LLP
Certified Public Accountants
March 8, 1996
Denver, Colorado
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
U.S. Gold Corporation
We have audited the accompanying consolidated statement of
operations and changes in shareholders' equity and cash flows of
U.S. Gold Corporation (the Company) for the year ended December 31,
1994. 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 upon our audit.
We conducted our audit in accordance with generally accepted
auditing standards. These 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 consolidated
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the results of
their operations and their cash flows for the year ended December
31, 1994, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, the
Company sold a 60 percent interest in the Tonkin Springs Project.
The sufficiency of the Company's working capital is dependent upon
the purchaser's continuing performance under the terms of the
related agreement, which raises substantial doubt about its ability
to continue as a going concern. Management's plan in regard to
this matter is also described in Note 2. The consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Mitchell Finley and Company
Certified Public Accountants
April 14, 1995
Denver, Colorado
U.S. GOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1995 and 1994
1995 1994
Installment gain on sale of
Tonkin Springs interest $702,828 $339,702
Production royalty - 100,000
Interest income 201,723 234,214
Dividend income 247,500 270,000
Gain on sale of assets 215,506 32,533
1,367,557 976,449
Costs and expenses:
General and administrative 762,829 718,378
Interest 27,369 47,527
Depreciation, depletion
and amortization 5,725 6,144
795,923 772,049
Income before income taxes 571,634 204,400
Provision (benefit) for
income taxes - -
Net income $571,634 $204,400
Per share data:
Net income $0.04 $0.01
Weighted average shares and
share equivalents outstanding 14,591,970 14,469,226
The accompanying notes are an integral part of these consolidated
financial statements.
U.S. GOLD CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS December 31, 1995
Current assets:
Cash and cash equivalents $234,326
Interest receivable 195,572
Dividend receivable 247,500
Note receivable, current portion 650,000
Federal tax refund 95,182
Other current assets 86,257
Total current assets 1,508,837
Investment in Tonkin Springs
Project Joint Venture 2,262,578
Note receivable, non-current portion 1,301,920
Investment in Gold Capital Preferred Stock 3,000,000
Investment in Gold Capital Common Stock 270,000
Deferred tax assets, net 223,662
Property and equipment, net of $100,768
in accumulated depreciation 61,887
$8,628,884
LIABILITIES, DEFERRED CREDITS AND SHAREHOLDERS' EQUITY
Total current liabilities - accounts payable $46,171
Reserve for reclamation 640,000
Deferred gain on sale of Tonkin Springs interest 2,954,518
Commitments and contingencies -
Shareholders' equity:
Common stock, $.10 par value, 15,000,000 shares
authorized; 13,806,505 shares issued and outstanding 1,380,651
Additional paid-in capital 31,982,165
Accumulated deficit (28,374,621)
4,988,195
$8,628,884
The accompanying notes are an integral part of these consolidated
financial statements.
U.S.GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
Common Stock Additional Accumulated
Par Paid-in Earnings
Shares Value Capital (Deficit)
Balance,
January 1, 1993 13,768,800 $1,376,880 $31,975,331 $(29,150,655)
Net income 204,400
Balance,
December 31, 1994 13,768,800 1,376,880 31,975,331 (28,946,255)
Exercise of stock
options for cash 37,705 3,771 6,834 -
Net income 571,634
Balance,
December 31, 1995 13,806,505 $1,380,651 $31,982,165 $(28,374,621)
The accompanying notes are an integral part of these consolidated
financial statements.
U.S. GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995 1994
Cash flows from operating activities:
Production royalty $0 $100,000
Cash paid to suppliers and employees (822,052) (695,192)
Interest received 963 56
Interest paid (27,369) -
Payment of income tax obligation (534,152) -
Receipt of refund from IRS 145,741 -
Cash used in operating activities (1,236,869) ( 595,136)
Cash flows from investing activities:
Cash received from sale of
Tonkin Springs interest 1,298,080 550,000
Cash received for 1994 accrued
interest on note 234,158 -
Capital expenditures (31,129) (13,000)
Sale of assets 271,240 9,033
Cash provided by investing activities 1,772,349 546,033
Cash flows from financing activities:
Repay borrowings under note payable (330,016) (132,929)
Exercise of stock options for cash 10,605 -
Cash used in financing activities (319,411) (132,929)
Increase (decrease) in cash
and cash equivalents 216,069 (182,032)
Cash and cash equivalents,
beginning of year 18,257 200,289
Cash and cash equivalents, end of year $234,326 $18,257
Reconciliation of net income to
cash used in operating activities:
Net income $571,634 $204,400
Items not requiring (providing) cash:
Interest income (195,572) (234,158)
Dividend income (247,500) (270,000)
Interest payable - 45,568
Depreciation, depletion and amortization 5,725 6,144
Investment gain on sale of Tonkin
Springs interest (702,828) (339,702)
Gain on sale of assets (215,506) (32,533)
Increase in current assets related
to operations (83,042) (28,469)
Increase (decrease) in current liabilities
related to operations (369,780) 53,614
Cash used in operating activities $(1,236,869) $(595,136)
The accompanying notes are an integral part of these consolidated
financial statements.
U.S. GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of presentation: U.S. Gold Corporation (the Company) was
organized under the laws of the State of Colorado on July 14, 1979.
Since its inception, the Company has been engaged in the
exploration for, development of, and the production and sale of
gold and silver.
Basis of consolidation: The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiar-
ies, as well as the accounts of the Tonkin Springs Venture Limited
Partnership (TSVLP). Significant intercompany accounts and
transactions have been eliminated.
Statements of cash flows: The Company considers cash in banks,
deposits in transit, and highly liquid debt instruments purchased
with original maturities of three months or less to be cash and
cash equivalents.
Investments: Investment in Gold Capital preferred stock and common
stock is accounted for under the cost method of accounting. These
investments are evaluated periodically and carried at the lower of
cost or estimated net realizable value.
Investment in Tonkin Springs Project Joint Venture is accounted for
under the equity method of accounting. Under the equity method of
accounting, the original investment is recorded at cost and
adjusted by the Company's share of undistributed earnings, losses
and distributions. This investment is evaluated periodically and
carried at its estimated realizable value.
Property, plant and equipment: Property, plant and equipment are
carried at cost not in excess of their estimated net realizable
value. Normal maintenance and repairs are charged to earnings
while expenditures for major betterments are capitalized. Gains or
losses on disposition are recognized in operations.
Exploration and development costs: General exploration costs are
expensed as incurred while exploration and acquisition costs
related to projects are deferred until the properties are put into
commercial production, sold, or abandoned. Mine development costs
incurred either to develop new ore deposits, expand the capacity of
operating mines, or to develop mine areas substantially in advance
of current production are also deferred. Costs incurred to
maintain current production or to maintain properties on a standby
basis are charged to operations. Costs of abandoned projects are
charged to operations upon abandonment. The Company evaluates, at
least quarterly, the carrying value of capitalized mining costs and
related property, plant and equipment costs to determine if these
costs are in excess of their net realizable value and if an
impairment needs to be recorded.
Depreciation, depletion and amortization: Depreciation of
property, plant and equipment is computed using the units-of-
production and straight-line methods, depending upon which method
more accurately reflects the related assets' use. Mine development
costs are charged to operations using the units-of-production
method based on estimated ounces of gold to be recovered.
Property reclamation costs: The estimated reclamation cost
obligation related to present disturbances at the Tonkin Springs
Properties is carried as a liability. Changes to these estimates,
or the estimated reclamation costs associated with other mineral
properties, are accrued and charged over the expected life of each
property using the units of production method. Ongoing environmen-
tal and reclamation expenditures are expensed as incurred.
Per share amounts: Per share amounts are computed by dividing net
income by the weighted average of shares outstanding during the
year plus share equivalents. Share equivalents include the effects
of outstanding stock options.
Income Taxes: The Company accounts for income taxes under
Statement of Financial Accounting Standards No. 109 (SFAS No. 109.)
Temporary differences are differences between the tax basis of
assets and liabilities and their reported amounts in the financial
statements that will result in taxable or deductible amounts in
future years.
Concentration of risks: The Company's financial instruments that
are exposed to concentration of credit risk consists primarily of
cash equivalent balances in excess of the insurance provided by
federal insurance authorities. The Company's note receivable and
investments in Gold Capital's preferred and common stock are
exposed to concentration of credit risk primarily because these
balances are dependent upon the successful operation of Gold
Capital.
Use of estimates: The preparation of the Company's consolidated
financial statements in conformity with generally accepted
accounting principles requires the Company's management to make
estimates and assumptions that affect the amounts of assets and
liabilities, the disclosure 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.
Impact of Recently Issued Accounting Standards:
In March 1995, the Financial Accounting Standards Board issued a
new statement titled Accounting for Impairment of Long-Lived Assets
(FAS 121). This new standard is effective for years beginning
after December 15, 1995 and would change the Company's method of
determining impairment of long-lived assets. Although the Company
has not performed a detailed analysis of the impact of this new
standard on the Company's financial statements, the Company does
not believe that adoption of the new standard will have a material
effect on the financial statements.
In October 1995, the Financial Accounting Standards Board issued a
new statement titled Accounting for Stock-Based Compensation (FAS
123). The new standard is effective for fiscal years beginning
after December 15, 1995. FAS 123 encourages, but does not require,
companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments to employees based upon
fair value. Companies that do not adopt the fair value accounting
rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity
instruments with non-employees for goods or services must be
accounted for on the fair value method. The Company currently does
not intend to adopt the fair value accounting prescribed by FAS
123, and will be subject only to the disclosure requirements
prescribed by FAS 123. However, the Company intends to continue
its analysis of FAS 123 and may elect to adopt its provisions in
the future.
2. Sale of 60% Interest in Tonkin Springs Project
On December 31, 1993 (the Closing), 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. TSVLP retained a 40
percent undivided interest in the Properties. Immediately after
the conveyance to Gold Capital and effective December 31, 1993,
TSVLP and Gold Capital each made their respective interest in the
Properties subject to a mining joint venture, the Tonkin Springs
Project 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 $7,830,000 representing the estimated fair market
value of the assets. 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 (Gold Capital Preferred Stock)
having an assigned value of $3 million, and the assumption of 60
percent of a reclamation obligation recorded at $960,000.
Through December 31, 1995, TSVLP has received $1,848,080 in
principal payments on the Promissory Note with a balance of
$1,951,920 remaining due at December 31, 1995. The Promissory
Note, as amended June 21 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. Interest on the Promissory Note for fiscal year 1995
amounted to $195,572 which was received in full in March, 1996.
Payment of subsequent years interest is due at the end of each
respective calendar year.
Remaining principal balance is due in monthly installments of
$50,000 until Gold Capital has raised an aggregate of $4,000,000 in
new financing, or until paid in full, increasing to $75,000 per
month until the note is paid in full subsequent to Gold Capital
raising $4,000,000 in new financing.
TSVLP and the Company have a potential significant credit risk
related to the Promissory Note from Gold Capital which has a
balance of $1,951,920 as of December 31, 1995. Credit risk
represents the accounting loss that would be recognized at the
reporting date if the parties failed completely to perform as
provided under its agreements. However, a large portion of any
risk associated with the Promissory Note is mitigated since under
installment accounting, TSVLP has deferred a portion of the gain on
the sale of the Tonkin Springs Properties and, in addition, as
provided under the Promissory Note and related security agreement,
TSVLP holds a security interest in Gold Capital's interest in the
Tonkin Springs Project and Project Joint Venture.
2. Sale of 60% Interest in Tonkin Springs Project, continued
The future annual minimum principal payments (at the $50,000 per
month level) are as follows:
1996 $650,000
1997 600,000
1998 600,000
1999 101,920
$1,951,920
Effective June 22, 1995, Gold Capital completed the sale of
2,200,000 shares of its common stock in a private placement to
Royalstar Resources Ltd.(Royalstar), a company organized and
existing under the laws of Canada with shares traded on the
Vancouver Stock Exchange. TSVLP and the Company, in order to
facilitate the Royalstar private placement investment into Gold
Capital i) amended the Secured Promissory Note, as discussed above,
ii) entered into the Commitment and Agreement to Convert, and iii)
entered into the Shareholders' Agreement by and between TSVLP, the
Company,
Gold Capital, Royalstar and certain directors of Gold Capital, as
further discussed below. From a portion of the proceeds from the
sale of stock by Gold Capital to Royalstar, Gold Capital paid
approximately $1 million to TSVLP as principal payments under the
Promissory Note and accounts payable.
Under the Commitment and Agreement to Convert, TSVLP agreed to
convert its 300,000 shares of Gold Capital Preferred Stock into
1,500,000 shares of Gold Capital common stock, but not before
November 30, 1995. In addition, the mandatory 9% annualized stock
dividend requirement under the Gold Capital Preferred Stock
terminated November 30, 1995, regardless of the future date of
TSVLP conversion.
Under the Shareholders' Agreement dated June 22, 1995:
Royalstar, as majority owner of Gold Capital, agreed for a period
of five years to support the nomination and election of certain
individuals to Gold Capital's board of directors, including a
member recommended by TSVLP.
TSVLP granted a proxy to Mr. John Young, the President and Chief
Executive Officer of Royalstar which continues until June, 2000 and
provides that Mr. Young can vote all common shares of Gold Capital
standing in the name of TSVLP or the Company in all matters
submitted to shareholders of Gold Capital. This proxy terminates
as to any shares sold or transferred to third parties and in
addition, terminates if Mr. Young is no longer president of
Royalstar or Gold Capital, and TSVLP and the Company gave to
Royalstar a first right of refusal as relates to sales by TSVLP or
the Company of shares of Gold Capital common stock to third
parties.
As noted above, the Gold Capital Preferred Stock, as amended June
22, 1995, required Gold Capital to pay a mandatory annual 9%
dividend through November 30, 1995 (based on the $10 per share
stated value, or $3 million aggregate valuation). Such dividends
were payable at the option of Gold Capital in cash or its
unregistered common stock. The 1994 dividend ($270,000) was
satisfied with the issuance of 127,702 shares of common shares of
Gold Capital and the 1995 dividend ($247,500 through November 30,
1995) was satisfied by the issuance of 147,816 shares issued to the
Company in February, 1996. If conversion of the Preferred Stock
into common equity of Gold Capital by TSVLP had taken place
effective December 31, 1995, and considering the 1994 and 1995
dividend paid in common stock, TSVLP would have then owned
approximately 27% of the outstanding common stock of Gold Capital.
However, TSVLP has assigned its voting rights to shares of Gold
Capital common stock to Mr. John Young as provided in the
Shareholders Agreement dated June 22, 1995, explained further
above. Pursuant to the Registration Rights Agreement dated March
27, 1995, Gold Capital has agreed to use its best efforts to
register all common stock received by TSVLP. William W. Reid,
president of the Company, was made a member of the board of
directors of Gold Capital as provided by the Gold Capital Preferred
Stock agreement upon Closing.
Effective June 1, 1995, the Company granted to its officers and
outside director options to purchase an aggregate of 450,000 shares
of common stock of Gold Capital Corporation from the Company at an
exercise price of $1.25 per share (the market price of the shares
as of the date of the grant). These option agreements expire June
1, 2000, and cannot be exercised prior to April 1, 1996. Exercise
of these options anticipates the prior conversion by the Company of
the Preferred Stock.
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 December 31, 1995, Gold Capital has reported that
it has incurred approximately $2,173,000 in net Reimbursable Costs.
The consolidated financial statements of the Company have been
prepared assuming the Company will continue as a going concern. As
indicated above, the sufficiency of the Company's working capital
is dependent upon Gold Capital's continuing performance under the
terms of various agreements which raises substantial doubt about
the ability to continue as a going concern. Management plans to
monitor Gold Capital's performance under the various terms of the
agreements and, if required, to exercise its rights as provided in
a security agreement dated December 31, 1993, under which the
Company holds a security interest in Gold Capital's 60% interest in
the Properties and Project Joint Venture. The consolidated
financial statements do not include any adjustments for the
uncertainty that Gold Capital may not continue to perform as
required under various agreements.
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 1995 and 1994, 14.8%
($702,828) and 7.2% ($339,702), respectively, of the gain was
recognized. As of December 31, 1995, $2,954,518 of the gain (62%)
is deferred and is anticipated to be recognized as income as
provided under the installment method of accounting.
3. Tonkin Springs Venture Limited Partnership
On February 13, 1991, the Company sold a 51% undivided interest in
its Tonkin Springs project to Denay Creek Gold Mining Company and
Homestake Nevada Corporation (collectively Denay), and the parties
immediately contributed their respective interests in such assets
into a newly formed partnership, TSVLP. Denay was the initial
manager of TSVLP. Effective October 9, 1992, Denay withdrew from
TSVLP and as provided in the partnership agreement, Denay's
interest reverted to the Company through its wholly-owned
subsidiaries, Tonkin Springs Gold Mining Company (TSGMC) (99.5%
general partner) and U.S. Environmental Corporation (0.5% limited
partner). The Company, through its subsidiaries, became owner of
100% of the interest in the Partnership and assumed
responsibilities for funding and managing the project. In
connection with Denay's withdrawal, a dispute brought by the
Company against Denay was resolved by arbitration proceedings
concluded April 12, 1994 under which Denay paid to TSVLP
approximately $50,562 as reimbursement for the cost of preparing a
reclamation plan cost estimation for the Properties. As noted
above, effective December 31, 1993, TSVLP sold a 60% interest in
the Tonkin Springs Properties to Gold Capital and formed the Tonkin
Springs Project Joint Venture with Gold Capital.
The following is the condensed statement of operations and
condensed balance sheet for TSVLP as of and for the year ended
December 31, 1995.
STATEMENT OF OPERATIONS
Year Ended
December 31, 1995
Revenues:
Installment gain on sale of
Tonkin Springs interest $435,610
Interest income 201,637
Dividend income 247,500
Gain on sale of assets 199,335
1,084,082
Costs and expenses:
General, administrative and other 300,637
Related party interest expense (to TSGMC) 54,370
355,007
Net income $729,075
BALANCE SHEET
December 31, 1995
Assets:
Current assets
Cash $234,133
Interest receivable 195,573
Dividend receivable 247,500
Note receivable, current portion 650,000
1,327,206
Investment in Project Joint Venture 3,283,875
Note receivable, non-current portion 1,301,920
Investment in Gold Capital Common Stock 270,000
Investment in Gold Capital Preferred Stock 3,000,000
Intercompany account 141,821
Other assets 2,301
Total Assets $9,327,123
Liabilities and Partners' Interest:
Current liabilities $27,992
Reserve for reclamation 640,000
Deferred gain on sale of
Tonkin Springs interest 1,831,243
2,499,235
Partners' interest
Subsidiaries of U.S. Gold-
Initial interest 3,309,902
Allocation of withdrawn interests 3,515,384
Accumulated income 2,602
Partners' Interest 6,827,888
Total Liabilities and Partners' Interest $ 9,327,123
Note A. The partnership agreement was amended in 1991 to, among
other things, eliminate the requirement that the general partner
fund TSVLP activities by contributions and provides at the option
of the general partner, the ability to make secured loans to TSVLP
to fund activities.
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 TSVLP and 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.
Note C. During 1995, TSVLP contributed into the Project Joint
Venture 247 mineral claims located in Eureka County, Nevada. TSVLP
and the Company believes that the carrying value of the forgoing
mineral claims to be diminutive.
Note D. During 1995, the Tonkin Springs Project made payments to
the participants of $640,000 representing the net proceeds from the
sale of a surplus sag mill at the Project with TSVLP receiving
$256,000. A gain of $196,375 was recognized by TSVLP related to
this sale.
Note E. As more fully discussed in Footnote 2, effective December
31, 1993 TSVLP sold a 60 percent undivided interest in the
Properties to Gold Capital. TSVLP will recognize the gain from this
sale using the installment method of accounting. In 1995, 14.8%
($435,610) of the gain was recognized while in 1994, 7.2%
($210,550) was recognized.
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 December 31, 1995, and statement of operations for
the year then ended. All costs associated with the Properties
have been funded by Gold Capital and development and exploration
costs capitalized:
STATEMENT OF OPERATIONS
Year Ended
December 31, 1995
Revenues $ 0
Property maintenance costs 609,424
Net loss $(609,424)
BALANCE SHEET December 31, 1995
Assets:
Property, plant, equipment &
development costs $12,012,946
Prepaid royalties 350,760
Deposits and other assets 10,261
Total assets $12,373,967
Liabilities, Reserves and Project
Joint Venturers' Interest:
Current liabilities $ 292,916
Intercompany account-Gold Capital 2,173,339
Reserve for reclamation 1,469,900
3,936,155
Venturers' Interest-
Gold Capital's interest 6,001,469
TSVLP's interest 2,436,343
Total venturers' interest 8,437,812
Total reserves and venturers' interest $12,373,967
5. Royalty Restructuring with NERCO, Loan Settlement Agreement
with FABC
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 final payment
received in February, 1994, 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. Property and Equipment
At December 31, 1995 property and equipment, net of accumulated
depreciation totalled $52,400, and represented office leasehold
improvements, office furniture and equipment, vehicles and
trailers.
The Company has transferred its interest in several mining
properties over the past years. The Company could remain
potentially liable for environmental enforcement actions related to
its prior ownership interest of such properties. However, the
Company has no reasonable belief that any violation of relevant
environmental laws or regulations has occurred regarding these
transferred properties.
7. 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 along with accrued interest of $30,016. PDUS is
beneficial owner of approximately 7% of the outstanding shares of
common stock of U.S. Gold.
8. Income Taxes
In the various transactions entered into February 21, 1992 (see
footnote 5), the Company had an ownership change, as that term is
defined under Section 382 (g), IRC. As a result, the tax net
operating loss carry forwards and the investment tax credit carry
forwards will be subject to annual limitations under Section 382
IRC, following the date of such ownership change. Except as noted
below, the Company will receive no future benefits from net
operating loss carryforwards or investment tax credit carryforwards
existing as of the date of the ownership change. At December 31
1995, the Company estimates that tax loss carry forwards related to
operations subsequent to 1992 and therefore not subject to any
limitations, totals approximately $1,665,000, expiring in year
2010.
The Company adopted Statement 109 as of January 1, 1993. Prior
years' financial statements were not restated. The tax effects of
temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December 31,
1995 are presented below:
Deferred tax assets:
Alternative minimum tax credit carryfoward $ 223,622
Deferred gain on sale of TSVLP interest 497,200
Reclamation obligation 140,800
Net operating loss carryforward 366,000
Total gross deferred tax assets 1,227,622
Less valuation allowance (613,700)
Net deferred tax assets 613,922
Deferred tax liabilities:
Investment in common stock 113,900
Basis in TSVLP 276,400
Total gross deferred tax liabilities 390,300
Total net deferred tax asset $ 223,622
The Company believes that it is more likely than not that the net
deferred tax asset will be realized. Therefore, no valuation
allowance has been provided for the $223,622 net deferred tax
asset.
A reconciliation of the tax provision for 1995 and 1994 at
statutory rates is comprised of the following components:
1995 1994
Statutory rate tax provision on book income $ 194,400 $ 69,500
Book to tax adjustments:
Installment gain on sale of Tonkin
Springs not taxable (110,900) (61,200)
Preferred Stock Dividend (78,600) -
Other, net (4,900) (8,300)
Tax provision $ 0 $ 0
9. Shareholders' Equity
Stock options were granted to key employees, directors and others
under the Non-Qualified Amended and Restated Stock Option and Stock
Plan (the Plan) during 1993 and 1992. Options to purchase shares
and stock grants under the Plan were granted at market value as of
the date of the grant. Options to purchase a total of 1,250,000
at an exercise price of $.28125 per share were issued to officers,
directors and others on February 3, 1992 of which 1,212,295 remain
outstanding and unexercised as of December 31, 1995. Effective
December 8, 1993, the Board of Directors amended the Plan and
increased the number of shares thereunder from 1,250,000 to
2,300,000. At that date, options to purchase a total of 1,000,000
shares at an exercise price of $.50 per share, were granted to
executives and directors of the Company. Options cannot be
exercised until sufficient reserved shares of common stock are
available and reserved for option exercise by the Board of
Directors. During 1995, options to purchase an aggregate of 37,705
shares of stock at exercise price of $.28125 were exercised by
officers of the Company.
In conjunction with the Loan Settlement Agreement with FABC and the
conversion of the 10.93% convertible subordinated debentures, both
effective February 21, 1992, the Company agreed to use its best
efforts to register an aggregate 5,304,545 shares of common stock
with the Securities and Exchange Commission and to maintain the
effectiveness of such registration for a period of two years.
There can be no assurance, however, that the Company will be
successful in its efforts to have the shares so registered.
10. Employee Benefit Plans
On December 10, 1985, the Company's Board of Directors adopted a
Simplified Employee Pension Plan (SEP). The Company intends to
make a determination of contributions under the SEP on an annual
basis, based upon review by the Board of Directors of the Company's
financial statements as of its fiscal year end. The Company has
not yet determined any contributions to the SEP for the year ended
December 31, 1995. The Company made a contribution of 15% during
1995 for calendar year 1994 in the aggregate amount of $53,807. No
contribution was made in 1994 for calendar year 1993. Under the
SEP, the Company has the option of contributing a certain amount
directly to its employees' Individual Retirement Accounts. The
Plan covers all employees of the Company with certain participation
requirements, however the Company is not required to make any
contributions in a given year. If contributions are made, they
must be made to all eligible employees. Contributions made under
the SEP in any one calendar year for any one employee may not be
more than the smaller of $22,500 or 15% of that employee's total
compensation.
11. Lease Commitments
The Company has leased office space and vehicles under
noncancelable operating leases which expire through October 2000.
Future minimum lease payments as of December 31, 1995 are as
follows:
1996 $ 64,200
1997 64,200
1998 60,000
1999 56,700
2000 47,300
$292,400
Rent expense during the years ended December 31, 1995 and 1994 on
all operating leases was approximately $31,089 and $16,092,
respectively.
12. Statement of Cash Flows
The Company's statement of cash flows for the two year periods
ended December 31, 1995 excludes the following non-cash investing
and financing activities:
1995 1994
Sale of assets for receivable $ 0 $23,500
Satisfaction of dividend receivable
by investment in Gold Capital
common stock. $270,000 $ 0
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS on
ACCOUNTING AND FINANCIAL DISCLOSURE.
On January 1, 1996, Mitchell Finley and Company, the Company's
principal accountants, combined their practice into BDO Seidman,
LLP. On February 13, 1996, BDO Seidman, LLP replaced Mitchell
Finley and Company, P.C., as the Company's principal accountants.
A Form 8-K was filed in February, 1996 reporting this event.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS OF THE ISSUER
The following table sets forth certain information as to each
officer and director of the Company:
Positions With
Name Age the Company Term Expires
William W. Reid 47 President and Director Upon
Successor's
Election
William F. Pass 49 Vice President Administration Upon
and Secretary Successor's
Election
David C. Reid 46 Vice President Exploration and Upon
Director Successor's
Election
John W. Goth 68 Director Upon Successor's
Election
WILLIAM W. REID-PRESIDENT AND DIRECTOR
Mr. Reid, a founder of the Company, has served as a Director and
the President of the Company since its inception in 1979. Mr. Reid
devotes substantially all of his time to the business and affairs
of the Company. Effective January 1, 1994, Mr. Reid and the
Company entered into an employment contract as discussed below.
Mr. Reid also serves on the board of directors of Gold Capital
Corporation, a publicly traded company, as provided under the Gold
Capital Series A Preferred Stock Agreement between TSVLP and Gold
Capital.
WILLIAM F. PASS-VICE PRESIDENT ADMINISTRATION, SECRETARY
Mr. Pass joined the Company in June, 1988 and was appointed
Corporate Secretary on September 1, 1991 and effective January 1,
1994, was made Vice President Administration. Effective February
1, 1996, Mr. Pass was appointed Vice President, Chief Financial
Officer and Corporate Secretary. Mr. Pass devotes substantially
all of his time to the business and affairs of the Company.
Effective January 1, 1994, Mr. Pass and the Company entered into an
employment contract as discussed below.
DAVID C. REID-VICE PRESIDENT EXPLORATION AND DIRECTOR
Effective October 19, 1993, Mr. David Reid was appointed a member
of the Board of Directors of the Company. On January 1, 1994, Mr.
Reid became an employee and officer of the Company with the title
Vice President Exploration and entered into an employment contract
with the Company as discussed below. Mr. David Reid devotes
substantially all of his time to the business and affairs of the
Company. From January 1, 1993 through December 31, 1993, Mr. Reid
was an employee of TSVLP and sole director and president of U.S.
Environmental Corporation, a wholly-owned subsidiary of the Company
and 0.5 percent owner and limited partner in TSVLP. From September
1, 1991 through December 31, 1992, Mr. Reid was a consultant to the
Company. Prior to September, 1991, Mr. Reid was an employee and
officer (secretary) of the Company and served as a director.
JOHN W. GOTH-DIRECTOR
Mr. Goth has been a director of the Company since 1987. Mr. Goth
also serves on the board of directors of Magma Copper Co., and
Royal Gold, Inc., both publicly traded companies. For the past
nine years, Mr. Goth has been a self-employed mining consultant.
There are no family relationships between officers and directors of
the Company except that David C. Reid, an officer and director of
the Company, is brother to William W. Reid, president of the
Company and director.
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the
Executive Officers of the Company for the Company's last three
fiscal years:
Summary Compensation Table
Annual Compensation
Name and Principal Other Annual
Position Year Salary Bonus Compensation
William W. Reid, 1995 $200,000 $53,750 $ -
President and CEO 1994 $157,500 $16,250 $22,500(1)
1993 $155,150 $30,000 $ 0
William F. Pass, 1995 $ 90,000 $23,000 $ -
Vice President and 1994 $ 75,000 $12,000 $13,307(1)
Secretary 1993 $ 73,500 - $ 0
David C. Reid, 1995 $100,000 $23,000 $ -
Vice President 1994 $ 75,000 $12,000 $13,050(1)
1993 $ 69,948 - $ 0
All executive officers 1995 $390,000 $99,750 $ -
as a group 1994 $307,500 $40,250 $48,857(1)
(3 individuals) 1993 $298,589 $30,000 $ 0
Long Term Compensation
Awards All
Securities Underlying Other
Options Compensation
William W. Reid, 1995 - (2)
President and CEO 1994 500,000 -
1993 - -
William F. Pass, 1995 - (2)
Vice President and 1994 100,000 -
Secretary 1993 - -
David C. Reid, 1995 - (2)
Vice President 1994 300,000 -
1993 - -
All executive officers 1995 - (2)
as a group 1994 900,000 -
(3 individuals) 1993 - -
(1) On December 10, 1985, the Company's Board of Directors adopted
a Simplified Employee Pension Plan ("SEP"). The Company intends to
make a determination of contributions under the SEP on an annual
basis, based upon review by the Board of Directors of the Company's
financial statements as of its fiscal year end. The Company has
not yet determined any contributions to the SEP for the year ended
December 31, 1995. The Company made a contribution of 15% during
1995 for calendar year 1994. No contribution was made for calendar
year 1993. Under the SEP, the Company has the option of
contributing a certain amount directly to its employees' Individual
Retirement Accounts. The Plan covers all employees of the Company
with certain participation requirements, however the Company is not
required to make any contributions in a given year. If
contributions are made, they must be made to all eligible
employees. Contributions made under the SEP in any one calendar
year for any one employee may not be more than the smaller of
$22,500 or 15% of that employee's total compensation.
(2) Effective June 1, 1995, the Company granted to its executive
officers and outside director options to purchase shares of common
stock of Gold Capital Corporation from TSVLP or the Company at an
exercise price of $1.25 per share (the market price of the shares
as of the date of the grant). Mr. William Reid received options to
purchase 200,000 shares of Gold Capital common stock, and Mr. Pass
and Mr. David Reid each received options to purchase 100,000
shares. These option agreements expire June 1, 2000, and cannot be
exercised prior to April 1, 1996. Exercise of these options
anticipates and is dependent upon the prior conversion by TSVLP of
its 300,000 shares of Gold Capital Series A Preferred Stock into
1,500,000 common shares of Gold Capital Corporation as provided by
the Commitment and Agreement to Convert dated June 22, 1995. The
options were not in the money at December 31, 1995 based upon the
average of the reported bid and ask price of Gold Capital's common
stock of $1.19 per share and therefor had no reportable value.
Option Grants in Last Fiscal Year
There were no grants of stock options made pursuant to the Non-
Qualified Stock Option and Stock Grant Plan during 1995 to
Executive Officers.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Table Value
Shown below is information at December 31, 1995 with respect to the
exercised and unexercised options to purchase the Company's common
stock to Executive Officers under the Non-Qualified Stock Option
and Stock Grant Plan.
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options Held at Options at
on Value December 31, December 31,
Name Exercise Realized 1995 1995 (3)
William W. Reid 22,750 $14,839 452,292 (1) $409,890
500,000 (2) $ 0
William F. Pass 5,000 $ 2,344 195,000 (1) $176,719
100,000 (2) $ 0
David C. Reid 10,000 $ 4,688 365,000 (1) $330,781
300,000 (2) $ 0
(1) These options were exercisable at December 31, 1995.
(2) These options are currently unexercisable but will become
exercisable at such time as additional authorized and unissued
shares of the Company's common stock become available and are
reserved for option exercise by the Board of Directors. If they
had been exercisable, their value would be $343,750 for William W.
Reid, $68,750 for William F. Pass, and $206,250 for David C. Reid,
based upon the price as noted in (3) below.
(3) Based upon the mean of the high and low price as reported by
Nasdaq on that date ($1.1875).
Compensation of Directors
The Company reimburses its outside director for reasonable expenses
incurred by him in attending meetings of the Board of Directors or
of Committees of the Board. No such expenses were incurred nor
paid for 1995. Additionally, the outside director is paid $3,000
per quarter for his services. During 1995, Mr. Goth received total
compensation of $12,000 for his service as outside director plus
$10,000 in additional compensation as a bonus. Directors who are
also officers or employees of the Company or its affiliates do not
receive compensation for their director responsibilities over their
normal compensation as employees.
Employment Contracts
The Company entered into Employment Agreements effective January 1,
1994, as amended June 1, 1995 with William W. Reid, William F.
Pass, and David C. Reid (the "Employment Contracts") each of which
is for a five year term commencing January 1, 1994. The Employment
Contracts shall be extended automatically by one year upon each
anniversary date unless either the Company or employee provides the
other party written notice prior to 120 days before such
anniversary, that the Employment Contract will not be so extended.
William W. Reid's Employment Contract provides for a base salary of
$157,500 per year for the first year, $200,000 per year for the
second year, and annual upward adjustments thereafter based upon
increases in the Consumer Price Index (All Items-Urban) (the "CPI-
U"). William F. Pass' Employment Contract provides for a base
salary of $75,000 per year for the first year, $90,000 per year for
the second year, and annual upward adjustments thereafter based
upon increases in the CPI-U. David C. Reid's Employment Contract
provides for a base salary of $75,000 per year for the first year,
$100,000 per year for the second year, and annual upward
adjustments thereafter based upon increases in the CPI-U.
Each of the Employment Agreements provides that the employee would
be entitled to receive a termination payment from the Company in a
lump sum equal to 2.9 times the employee's average annual
compensation for the five taxable years immediately preceding the
date of termination by the employee under certain circumstances,
summarized as follows: i) the sale by the Company of substantially
all of its assets to a single purchaser or to a group of affiliated
purchasers; ii) the sale, exchange or other disposition, in one
transaction or a series of related transactions, of at least 30
percent of the outstanding voting shares of the Company; iii) a
decision by the Company to terminate its business and liquidate its
assets; iv) the merger or consolidation of the Company with
another entity or an agreement to such a merger or consolidation or
any other type of reorganization; v) the Company makes a general
assignment for the benefit of its creditors, files a voluntary
bankruptcy, or certain similar events or circumstances, vi) there
is a material change in employee's authority, duties or
responsibilities; or, vi) the Company acquires any stock or other
investment in any business enterprise which acquisition or
investment exceeds 40 percent of the net book value of the Company.
Upon the death of an employee, the Company shall pay the employee's
estate an amount equal to one year's salary; and upon termination
by the Company following permanent disability of the employee, the
Company shall pay the employee an amount equal to two years salary.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the number of shares of the
Company's common stock owned beneficially as of March 25, 1996, by
each person known by the Company to have owned beneficially more
than five percent of such shares then outstanding, by each person
serving as a director of the Company, the Executive Officers, and
all of the Company's officers and directors as a group.
Name and Percentage
Address of of Class
Beneficial Type of Number Beneficially
Owner Ownership of Shares Owned
William W. Reid Record and Beneficial 468,292(1) 3.3%
338 Clayton #1
Denver, CO 80206
David C. Reid Record and Beneficial 384,970(2) 2.7%
9070 E. Jewell Circle
Denver, CO 80231
William F. Pass Record and Beneficial 200,000(3) 1.4%
14820 W. 58th Pl
Golden, CO 80403
John W. Goth Record and Beneficial 100,000(4) 0.7%
15140 Foothill Road
Golden, CO 80401
Placer Dome U.S. Inc. Record and Beneficial 975,000 7.1%
One California Street
Suite 2500
San Francisco, CA 94111-5472
(5)
The Travelers Record 3,162,374 23.0%
Corporation
One Tower Square
Hartford, CT 06183
(6)
French American Record 2,142,171 15.5%
Banking Corporation
499 Park Avenue
New York, NY 10022
Denay Creek Gold Record and Beneficial 936,988 6.8%
Mining Company
650 California St.
San Francisco, CA 94108
(7)
All officers and 1,153,262 7.7%
directors as a group
(4 persons)
(1) This number includes an option to purchase 452,292 shares at
$.28125 per share.
(2) This number includes an option to purchase 365,000 shares at
$.28125 per share.
(3) This number includes an option to purchase 195,000 shares at
$.28125 per share.
(4) This number consists of an option to purchase 100,000 shares
at $.28125 per share.
(5) Placer Dome U.S. Inc. is a wholly owned subsidiary of
Placer Dome Inc., a Canadian public company.
(6) The securities are owned by The Travelers Corporation and
its subsidiaries, The Travelers Insurance Co., and The
Prospect Company.
(7) Denay is a wholly-owned subsidiary of Homestake Mining
Company of California.
ITEM 12. Certain Relationships and Related Transactions
Transaction with Placer Dome U.S. Inc.
Effective August 23, 1993, the Company entered into a Loan
Agreement and Promissory Note with Placer Dome U.S. Inc. ("PDUS")
whereby PDUS loaned $300,000 to the Company. The loan was
unsecured, accrued interest at 5% per annum, and was repaid in full
in June, 1995. PDUS is beneficial owner of approximately 7% of the
outstanding shares of common stock of the Company. In a separate
but related transaction dated August 23, 1993, TSVLP entered into
a Grant, Bargain and Sale Deed agreement whereby TSVLP sold its
rights under 87 mineral claims located in Eureka County, Nevada, to
PDUS. In June, 1995, PDUS quit-claimed these and other mineral
claims to TSVLP who, in turn, assigned them to the Tonkin Springs
Project Joint Venture. The Company believes that the value of the
forgoing mineral claims to be immaterial.
Transaction with Gold Capital
On December 31, 1993, TSVLP sold a 60 percent undivided interest in
the Tonkin Springs properties and obligations to Gold Capital, a
publicly traded corporation, and the parties immediately made their
respective interests therein subject to the Project Joint Venture,
with Gold Capital as manager. Ownership in the Project Joint
Venture is: TSVLP- 40 percent, Gold Capital- 60 percent. As
partial consideration for the purchase by Gold Capital, TSVLP took
a $3.8 million secured promissory note, recourse only to the
properties and joint venture of which principal payments of
$1,848,080 have been received as of December 31, 1995. As further
partial consideration TSVLP received 300,000 shares of convertible
Preferred Stock of Gold Capital with a deemed aggregate value of $3
million. Under the Commitment and Agreement to Convert dated June
22, 1995, TSVLP agreed to convert its 300,000 shares of Gold
Capital Preferred Stock into 1,500,000 shares of Gold Capital
common stock, but not before November 30, 1995. The Gold Capital
Preferred Stock, as amended June 22, 1995, required Gold Capital to
pay a mandatory annual 9% dividend through November 30, 1995 (based
on the $10 per share stated value, or $3 million aggregate
valuation). Such dividends were payable at the option of Gold
Capital in cash or its unregistered common stock. The 1994
dividend ($270,000) was satisfied with the issuance of 127,702
shares of common shares of Gold Capital and the 1995 dividend
($247,500 through November 30, 1995) was satisfied by the issuance
of 147,816 shares issued to the Company in February, 1996. If
conversion of the Preferred Stock into common equity of Gold
Capital by TSVLP had taken place effective December 31, 1995, and
considering the 1994 and 1995 dividend paid in common stock, TSVLP
would have then owned approximately 27% of the outstanding common
stock of Gold Capital. However, TSVLP has assigned its voting
rights to shares of Gold Capital common stock to Mr. John Young,
president of both Gold Capital and Royalstar, as provided in the
Shareholders Agreement dated June 22, 1995, explained further
below. Pursuant to the Registration Rights Agreement dated March
27, 1995, Gold Capital has agreed to use its best efforts to
register all common stock received by TSVLP. William W. Reid,
president of the Company, was made a member of the board of
directors of Gold Capital as provided by the Gold Capital Preferred
Stock agreement upon Closing.
Subsequent to the December 31, 1993 transaction with Gold Capital,
certain executives of the Company and certain of their immediate
family members, made personal investments in securities of Gold
Capital under the same terms and conditions as those offered by
Gold Capital to other investors in a private placement offering
completed February 28, 1994. Under the terms of the investments,
investors purchased units for $2.00 per unit. Each unit consisted
of 2 shares of common stock in Gold Capital plus the right, through
a warrant, to purchase one additional share of common stock for an
additional $1.00, which rights were all exercised during 1994. Mr.
William W. Reid, president of the Company, and members of his
immediate family purchased 40,500 shares of Gold Capital common
stock at a cost of $40,500. The investments by Mr. William Reid
and his immediate family constituted approximately 2% of the then
issued and outstanding common shares of Gold Capital. Mr. William
F. Pass, vice president and secretary of the Company along with his
immediate family, purchased 15,900 shares at cost a of $15,900.
The investments by Mr. Pass and his immediate family constituted
approximately 1% of the then issued and outstanding common shares
of Gold Capital. Mr. David C. Reid, vice president exploration of
the Company, purchased 35,100 shares at a cost of $35,100, which
constituted approximately 2% of the then issued and outstanding
common shares of Gold Capital.
Effective June 22, 1995, Gold Capital completed the sale of
2,200,000 shares of its common stock in a private placement to
Royalstar Resources Ltd.("Royalstar"), a company organized and
existing under the laws of Canada with shares traded on the
Vancouver Stock Exchange. TSVLP and the Company, in order to
facilitate the Royalstar private placement investment into Gold
Capital i) amended the Secured Promissory Note, ii) entered into
the Commitment and Agreement to Convert, and iii) entered into the
Shareholders' Agreement by and between TSVLP, the Company, Gold
Capital, Royalstar and certain directors of Gold Capital, as
further discussed below. From a portion of the proceeds from the
sale of stock by Gold Capital to Royalstar, Gold Capital paid
approximately $1 million to TSVLP as principal payments under the
Promissory Note and accounts payable to TSVLP.
The Promissory Note was amended June 22, 1995 to reduce the monthly
installment from $75,000 to $50,000 per month until such time as
Gold Capital has raised an additional $4 million in additional
financing, at which time the monthly payments will be increased to
$75,000, and to reschedule as normal monthly payments a $400,000
payment previously due December 1, 1995.
Under the Commitment and Agreement to Convert, TSVLP agreed to
convert its 300,000 shares of Gold Capital Preferred Stock into
1,500,000 shares of Gold Capital common stock, but not before
November 30, 1995. In addition, the mandatory 9% annualized stock
dividend requirement under the Gold Capital Preferred Stock
terminated November 30, 1995, regardless of the date at which TSVLP
converted.
Under the Shareholders' Agreement dated June 22, 1995:
Royalstar, as majority owner of Gold Capital, agreed for a period
of five years to support the nomination and election of certain
individuals to Gold Capital's board of directors, including a
member recommended by TSVLP.
TSVLP granted a proxy to John Young, the President and Chief
Executive Officer of both Royalstar and Gold Capital, which
continues until June, 2000 and provides that Mr. Young can vote all
common shares of Gold Capital standing in the name of TSVLP or the
Company in all matters submitted to shareholders of Gold Capital.
This proxy terminates as to any shares sold or transferred to third
parties and in addition, terminates if Mr. Young is no longer
president of Gold Capital or Royalstar, and
TSVLP and the Company gave to Royalstar a first right of refusal as
relates to sales by TSVLP or the Company of shares of Gold Capital
common stock to third parties.
The Company has a month-to-month office support agreement with Gold
Capital, whereby it provides Gold Capital office space in Denver,
Colorado, along with secretarial and administrative assistance,
reception services, and conference facilities, for $1,850 per month
totalling $22,200 during 1995 and $12,950 during 1994. Gold
Capital also contracts for consulting services from certain
employees of the Company on an as-needed basis. The Company has
received or accrued an aggregate of $107,426 and $53,770 pursuant
to this arrangement in years 1995 and 1994, respectively. At
December 31, 1995, the Company had accounts receivable from Gold
Capital under these arrangements of $59,166.
ITEM 13.EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
*3.0 Company's Articles of Incorporation, as Amended June 22,
1988, July 5, 1988, and December 20, 1991.
*3.1 Company's Bylaws, as Amended June 22, 1988.
10.1 Royalty Purchase and Restructuring Agreement dated
February 21, 1992, by and between U.S. Gold Corporation
and NERCO Minerals Company (incorporated by reference from
the Report on Form 8-K dated February 21, 1992,
Exhibit 1).
10.2 Agreement To Pay Distributions dated February 21, 1992, by
and between Tonkin Springs Gold Mining Company and French
American Banking Corporation (incorporated by reference
from the Report on Form 8-K dated February 21, 1992,
Exhibit 4).
10.3 Promissory Note dated December 31, 1993, by and between
Tonkin Springs Venture Limited Partnership and Gold
Capital Corporation (incorporated by reference from the
Report on Form 8-K dated December 31, 1993, Exhibit 10.3).
10.4 Security Agreement dated December 31, 1993, by and between
Tonkin Springs Venture Limited Partnership and Gold
Capital Corporation (incorporated by reference from the
Report on Form 8-K dated December 31, 1993, Exhibit 10.4).
*10.5 Form of Amended Promissory Note from Gold Capital
Corporation (debtor) to Tonkin Springs Venture Limited
Partnership dated June 22, 1995.
10.6 Loan Agreement dated August 18, 1993, by and between U.S.
Gold Corporation and Placer Dome U.S. Inc. (incorporated
by reference from the Report on Form 8-K dated August 23,
1993, Exhibit 10.1).
10.7 Promissory Note dated effective August 23, 1993, by and
between U.S. Gold Corporation and Placer Dome U.S. Inc.
(incorporated by reference from the Report on Form 8-K
dated August 23, 1993, Exhibit 10.2).
10.8 Grant, Bargain and Sale Deed dated effective August 23,
1993, by and between U.S. Gold Corporation and Placer Dome
U.S. Inc. (incorporated by reference from the Report on
Form 8-K dated August 23, 1993, Exhibit 10.3).
10.9 Amended and Restated Non-Qualified Stock Option and Stock
Grant Plan, as amended effective December 8, 1993
(incorporated by reference from the Report on Form 10-KSB
for the year ended December 31, 1993, Exhibit 10.14).
10.10 Purchase and Sales Agreement dated December 31, 1993, by
and between Tonkin Springs Venture Limited Partnership and
Gold Capital Corporation (incorporated by reference from
the Report on Form 8-K dated December 31, 1993, Exhibit
10.1).
10.11 Certificate of Designations, Preferences and Rights of the
Series A Convertible Preferred Stock of Gold Capital
Corporation dated December 31, 1993 (incorporated by
reference from the Report on Form 8-K dated December 31,
1993, Exhibit 10.2).
10.12 Mining Venture Agreement dated December 31, 1993, by and
between Tonkin Springs Venture Limited Partnership and
Gold Capital Corporation (incorporated by reference from
the Report on Form 8-K dated December 31, 1993, Exhibit
10.5).
10.13 Amended Employment Agreement with William W. Reid dated
June 1, 1995 (Incorporated by reference from the Report on
Form 10-QSB for the period ended September 30, 1995,
Exhibit 10.1).
10.14 Amended Employment Agreement with William F. Pass dated
June 1, 1995 (Incorporated by reference from the Report on
Form 10-QSB for the period ended September 30, 1995,
Exhibit 10.2).
10.15 Amended Employment Agreement with David C. Reid dated June
1, 1995 (Incorporated by reference from the Report on Form
10-QSB for the period ended September 30, 1995, Exhibit
10.3).
10.16 Stock Option Agreement dated June 1, 1995 with William W.
Reid related to option to purchase shares of common stock
of Gold Capital Corporation from the Company
(Incorporated by reference from the Report on Form 10-QSB
for the period ended September 30, 1995, Exhibit 10.4).
10.17 Stock Option Agreement dated June 1, 1995 with William F.
Pass related to option to purchase shares of common stock
of Gold Capital Corporation from the Company (Incorporated
by reference from the Report on Form 10-QSB for the period
ended September 30, 1995, Exhibit 10.5).
10.18 Stock Option Agreement dated June 1, 1995 with David C.
Reid related to option to purchase shares of common stock
of Gold Capital Corporation from the Company (Incorporated
by reference from the Report on Form 10-QSB for the period
ended September 30, 1995, Exhibit 10.6).
10.19 Stock Option Agreement dated June 1, 1995 with John W.
Goth related to option to purchase shares of common stock
of Gold Capital Corporation from the Company (Incorporated
by reference from the Report on Form 10-QSB for the period
ended September 30, 1995, Exhibit 10.7).
*10.20 Registration Rights Agreement dated March 27, 1995, by and
between Tonkin Springs Venture Limited Partnership and
Gold Capital Corporation.
*10.21 Shareholders Agreement dated June 22, 1995, by and between
U.S. Gold Corporation, Tonkin Springs Venture Limited
Partnership, Tonkin Springs Gold Mining Company, Royalstar
Resources Ltd. and John M. Young, and Gold Capital
Corporation.
*10.22 Commitment and Agreement to Convert dated June 22, 1995,
by and between Tonkin Springs Venture Limited Partnership
and Royalstar Resources Ltd.
*11. Statement regarding computation of per share earnings.
21. Subsidiaries of the Company (incorporated by reference
from the Report on Form 10-KSB for the year ended December
31, 1993, Exhibit 21).
*23.1 Consent of BDO Siedman, LLP, to the incorporation by
reference of their audit report dated March 8, 1996, in
the Company's Form S-8.
*23.2 Consent of Mitchell Finley and Company, PC., to the
incorporation by reference of their audit report dated
April 14, 1995, in the Company's Form S-8.
*27 Financial Data Schedule
*Filed herewith.
(b) Reports on Form 8-K during the 4th quarter of 1995.
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of
1934, the Company caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
U.S. GOLD CORPORATION
March 22, 1996
By /s/ William W. Reid
William W. Reid, President and Chief Executive Officer
March 22, 1996
By /s/ William F. Pass
William F. Pass, Vice President, Chief Financial Officer and
Secretary
In accordance with the Exchange Act, this Report has been
signed below by the following persons on behalf of the Company and
in the capacities and on the dates indicated.
March 22, 1996
By /s/ William W. Reid
William W. Reid, Chairman of the Board of Directors
March 22, 1996
By /s/ David C. Reid
David C. Reid, Exploration Vice President and Director
March 22, 1996
By /s/ John W. Goth
John W. Goth, Director
Exhibit 3.0
ARTICLES OF INCORPORATION OF U. S. GOLD CORPORATION
KNOW ALL MEN BY THESE PRESENTS: That the undersigned
incorporator being a natural person of the age of eighteen years or
more and desiring to form a body corporate under the laws of the
State of Colorado does hereby sign, verify and deliver in duplicate
to the Secretary of State of the State of Colorado these Articles
of Incorporation:
ARTICLE I
Name
The name of the corporation shall be: U. S. Gold Corporation.
ARTICLE II
Period of Duration
This corporation shall exist in perpetuity, from and after the
date of filing these Articles of Incorporation with the Secretary
of State of the State of Colorado unless dissolved according to
law.
ARTICLE III
Objects and Purposes
The objects and purposes for which the said corporation is
organized and the nature of the business to be carried on by it are
as follows:
1. In general to carry on any lawful business or activity and
to have and exercise all of the powers and rights conferred by the
laws of the State of Colorado upon corporations formed under such
laws.
ARTICLE IV
Capital
The aggregate number of shares which this corporation shall
have authority to issue is seventy-five million (75,000,000) shares
of a par value of One Cent ($0.01) each, which shares shall be
designated "Common Stock".
1. Dividends. Dividends in cash, property or shares of the
corporation may be paid upon the Common Stock, as and when declared
by the board of directors, out of funds of the corporation to the
extent and in the manner permitted by law.
2. Distribution in Liquidation. Upon any liquidation,
dissolution or winding up of the corporation, and after paying or
adequately providing for the payment of all its obligations, the
remainder of the assets of the corporation shall be distributed
either in cash or in kind, pro rata to the holders of the Common
Stock. The board of directors may, from time to time, distribute
to the shareholders in partial liquidation, out of stated capital
or capital surplus of the corporation, a portion of its assets, in
cash or property, in the manner permitted and upon compliance with
limitations imposed by law.
3. Voting Rights; Cumulative Voting. Each outstanding share
of Common Stock shall be entitled to one vote and each fractional
share of Common Stock shall be entitled to a corresponding
fractional vote on each matter submitted to a vote of shareholders.
Cumulative voting shall not be allowed in the election of directors
of the corporation.
4. Denial of Preemptive Rights. No holder of any shares of
the corporation, whether now or hereafter authorized, shall have
any preemptive or preferential right to acquire any shares or
securities of the corporation, including shares or securities held
in the treasury of the corporation.
ARTICLE V
Right of Directors to Contract with Corporation
No contract or other transaction between the corporation and
one or more of its directors or any other corporation, firm,
association, or entity in which one or more of its directors are
directors or officers or are financially interested shall be either
void or voidable solely because of such relationship or interest or
solely because such directors are present at the meeting of the
board of directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction or solely
because their votes are counted for such purpose if:
(a) The fact of such relationship or interest is disclosed or
known to the board of directors or committee which authorizes,
approves, or ratifies the contract or transaction by a vote or
consent sufficient for the purpose without counting the votes or
consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or
known to the shareholders entitled to vote and they authorize,
approve, or ratify such contract or transaction by vote or written
consent; or (c) The contract or transaction is fair and reasonable
to the corporation.
Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the board of directors or
a committee thereof which authorizes, approves, or ratifies such
contract or transaction.
ARTICLE VI
Corporate Opportunity
The officers, directors and other members of management of this
corporation shall be subject to the doctrine of "corporate
opportunities" only insofar as it applies to business opportunities
in which this corporation has expressed an interest as determined
from time to time by this corporation's board of directors as
evidenced by resolutions appearing in the corporation's minutes.
Once such areas of interest are delineated, all such business
opportunities within such area of interest which come to the
attention of the officers, directors, and other members of
management of this corporation shall be disclosed promptly to this
corporation and made available to it. The board of directors may
reject any business opportunity presented to it and thereafter any
officer, director or other member of management may avail himself
of such opportunity. Until such time as this corporation, through
its board of directors, has designated an area of interest, the
officers, directors and other member of management of this
corporation shall be free to engage in such areas of interest on
their own and this doctrine shall not limit the rights of any
officer, director or other member of management of this
corporationto continue a business existing prior to the time that
such area of interest is designated by the corporation. This
provision shall not be construed to release any employee of this
corporation (other than an officer, director or member of
management) from any duties which he may have to this corporation.
ARTICLE VII
Indemnification of Officers Directors and Others
The corporation may indemnify each director, officer, and any
employee or agent of the corporation, his heirs, executors and
administrators, against expenses reasonably incurred or any amounts
paid by him in connection with any action, suit or proceeding to
which he may be made a party by reason of this being or having been
a director, officer, employee or agent of the corporation to the
full extent permitted by the laws of the State of Colorado now
existing or as such laws may hereafter be amended.
ARTICLE VIII
Shareholder voting
One-third of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of
shareholders.
ARTICLE IX
Registered Office and Registered Agent
The address of the initial registared office of the corporation
is 2600 Energy Center One, 717 Seventeenth Street, Denver, Colorado
80202, and the name of the initial registered agent at such address
is John B. Wills. Either the registered office or the registered
agent may be changed in the manner permitted by law.
ARTICLE X
Initial Board of Directors
The number of directors of the corporation shall be fixed by
the bylaws of the corporation, except the initial board of
directors of the corporation shall consist of three directors. The
names and addresses of the persons who shall serve as directors
until the first annual meeting of shareholders or until their
successors are elected and shall qualify are as follows:
NAME, ADDRESS
John B. Wills, 2600 Energy Center One, 717 Seventeenth Street
Denver, Colorado 80202
Stanley F. Freedman, 2600 Energy Center One, 717 Seventeenth
Street, Denver, Colorado 80202
Daniel B. Matter, 2600 Energy Center One, 717 Seventeenth Street,
Denver, Colorado 80202
ARTICLE XI
Incorporator
The name and address of the incorporator is as follows:
NAME, ADDRESS
Daniel B. Matter, 2600 Energy Center One, 717 Seventeenth Street,
Denver, Colorado 80202
IN WITNESS WHEREOF, the above-named incorporator has signed
these Articles of Incorporation this 23rd day of July, 1979.
/s/ Daniel B. Matter
Daniel B. Matter
ARTICLE XII
To the fullest extent permitted by the Colorado Corporation
Code, as the same exists or may hereafter be amended, a director of
this Corporation shall not be liable to the Corporation or its
shareholders for monetary damages for breach of fiduciary duty as
a director.
Exhibit 3.1
BYLAWS OF U. S. GOLD CORPORATION
ARTICLE I
Principal Office and Corporate Seal
Section 1. The principal office and place of business of the
Corporation in the State of Colorado shall be at Alma, Colorado.
Other offices and places of business may be established from time
to time by resolution of the board of directors or as the business
of the Corporation may require.
Section 2. The seal of the Corporation shall have inscribed
thereon the name of the Corporation and shall be in such form as
may be approved by the board of directors, which shall have power
to alter the same at pleasure. The Corporation may use the seal by
causing it, or a facsimile thereof, to be impressed or affixed or
in any other manner reproduced.
ARTICLE II
Share and Transfer Thereof
Section l. The shares of this Corporation shall be represented by
certificates signed by the president or a vice president and the
secretary or an assistant secretary of the Corporation, and may be
sealed with the seal of the Corporation or a facsimile thereof.
The signatures of the president or vice president and the secretary
or assistant secretary upon a certificate may be facsimiles if the
certificate is countersigned by a transfer agent, or registered by
a registrar, other than the Corporation itself or an employee of
the Corporation. In case any officer who has signed a certificate
shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as
if he were such officer at the date of its issue.
Section 2. No new certificates evidencing shares shall be issued
unless and until the old certificate or certificates, in lieu of
which the new certificate is issued, shall be surrendered for
cancellation, except as provided in Section 3 of this Article II.
Section 3. In case of loss or destruction of any certificate of
shares, another certificate may be issued in its place upon
satisfactory proof of such loss or destruction and, at the
discretion of the Corporation, upon giving to the Corporation a
satisfactory bond of indemnity issued by a corporate surety in an
amount and for a period satisfactory of the board of directors.
Section 4. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders, or any
adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for
any other proper purpose, the board of directors may provide that
the stock transfer books shall be closed for a stated period, but
not to exceed in any case fifty days. If the stock transfer books
shall be closed for the purpose of determining shareholders
entitled to notice of, or to vote at a meeting of shareholders,
such books shall be closed for at least ten days immediately
preceding such meeting. In lieu of closing the stock transfer
books, the board of directors may fix in advance a date as the
record date for any such determination of shareholders, such date
in any case to be not more that fifty days and, in case of a
meeting of shareholders, not less than ten days prior to the date
on which the particular action requiring such determination of
shareholders is to be taken. If the board of directors does not
order the stock transfer books closed, or fix in advance a record
date, as above provided, then the record date for the determination
of shareholders entitled to notice of, or to vote at any meeting of
shareholders, or any adjournment thereof, or entitled to receive
payment of any dividend, or for the determination of shareholders
for any proper purpose shall be thirty days prior to the date on
which the particular action requiring such determination of
shareholders is to be taken.
ARTICLE III
Shareholders and Meetings Thereof
Section 1. Only shareholders of record on the books of the
Corporation shall be entitled to be treated by the Corporation as
holders in fact of the shares standing in their respective names,
and the Corporation shall not be bound to recognize any equitable
or other claim to, or interest in, any shares on the part of any
other person, firm or corporation, whether or not it shall have
express or other notice thereof, except as expressly provided by
the laws of Colorado.
Section 2. Meetings of shareholders shall be held at the principal
office of the Corporation.
Section 3. In the absence of a resolution of the board of
directors providing otherwise, the annual meeting of shareholders
of the Corporation for the election of directors, and for the
transaction of such other business as may properly come before the
meeting, shall be held within the first six months of each fiscal
year. On such date as may be determined from time to time by the
Board of Directors; and that if not otherwise provided for, said
annual meeting shall be held on the 30th day of June at 9:00 A.M.
at the Company's offices in Victor, Colorado.
Section 4. Special meetings of shareholders may be called by the
president, the board of directors or the holders of not less that
one-tenth of all the shares entitled to vote at the meeting.
Section 5. Written notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than
ten days nor more than fifty days before the date of the meeting,
either personally or by mail, by or at the direction of the
president, the secretary, or the officer or person calling the
meeting to each shareholder of record entitled to vote at such
meeting; except that, if the authorized shares are to be increased,
at least thirty days' notice shall be given.
Notice to shareholders of record, if mailed, shall be deemed given
as to any shareholder of record, when deposited in the United
States mail, addressed to the shareholder at his address as it
appears on the stock transfer books of the Corporation, with
postage thereon prepaid, but if three successive letters mailed to
the last-known address of any shareholder of record are returned as
undeliverable, no further notices to such shareholder shall be
necessary, until another address for such shareholder is made known
to the Corporation.
Section 6. The officer or agent having charge of the stock
transfer books for shares of this Corporation shall make, at least
ten days before each meeting of shareholders, a complete record of
the shareholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which record, for
a period of ten days before such meeting, shall be kept on file at
the principal office of the Corporation, whether within or outside
Colorado, and shall be subject to inspection by any shareholder for
any purpose germane to the meeting at any time during usual
business hours. Such record shall also be produced and kept open
at the time and place of the meeting and shall be subject to the
inspection of any shareholder for any purpose germane to the
meeting during the whole time of the meeting. The original stock
transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such record or transfer books or
to vote at any meeting of shareholders.
Section 7. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his duly authorized
attorney in fact. No proxy shall be valid after eleven months from
the date of its execution, unless otherwise provided in the proxy.
ARTICLE IV
Directors, Powers and Meetings
Section 1. The business and affairs of the Corporation shall be
managed by a board of seven directors who need not be shareholders
of the Corporation or rsidentds of the State of Colorado and who
shall be elected at the annual meeting of shareholders or some
adjournment thereof. Directors shall hold office until the next
succeeding annual meeting of shareholders or until their successors
shall have been elected and shall qualify. The board of directors
may increase or decrease, to not less than three, the number of
directors by resolution to the board.
Section 2. The annual meeting of the board of directors shall be
held at the same place as, and immediately after, the annual
meeting of shareholders, and no notice shall be required in
connection therewith. The annual meeting of the board of directors
shall be for the purpose of electing officers and the transaction
of such other business as may come before the meeting. Regular
meetings of the board of directors may be held without notice as
determined by resolution adopted by the board.
Section 3. Special meetings of the board of directors or any
committee designated by said board may be called at any time by the
president or by any director, and may be held within or outside the
State of Colorado at such time and place as the notice or waiver
thereof may specify. Notice of such meetings shall be mailed or
telegraphed to the last known address of each director at least
five days, or shall be given to a director in person or by
telephone at least forty-eight hours, prior to the date or time
fixed for the meeting. Special meetings of the board of directors
may be held at any time that all directors are present in person,
and presence of any director at a meeting shall constitute waiver
of notice of such meeting except as otherwise provided by law.
Unless specifically required by law, the articles of incorporation
or these bylaws, neither the business to be transacted at, nor the
purpose of, any meeting of the board of directors or any committee
designated by said board need be specified in the notice or waiver
of notice of such meeting.
Section 4. Except as may be otherwise provided by the Articles of
Incorporation or Bylaws, members of the board of directors or any
committee designated by such board may participate in a meeting of
the board or committee by means of conference telephone or similar
communications equipment by which all persons participating in the
meeting can hear each other at the same time. Such participation
shall constitute presence in person at the meeting.
Section 5. A quorum at all meetings of the board of directors
shall consist of a majority of the number of directors then holding
office, but a smaller number may adjourn from time to time without
further notice, until a quorum be secured. The act of the majority
of the directors present at a meeting at which a quorum is present
shall be the act of the board of directors, unless the act of a
greater number is required by the laws of the State of Colorado or
by the articles of incorporation or these bylaws.
Section 6. Any vacancy occurring in the board of directors may be
filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the board of directors. A
director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, and shall hold such
office until his successor is duly elected and shall qualify. Any
directorship to be filled by reason of an increase in the number of
directors shall be filled by the affirmative vote of a majority of
the directors then in office or by an election at an annual
meeting, or at a special meeting of shareholders called for that
purpose. A director chosen to fill a position resulting from an
increase in the number of directors shall hold office until the
next annual meeting of shareholders and until his successor shall
have been elected and shall qualify.
Section 7. Directors may receive such compensation as may be
established by appropriate resolution of the board of directors and
in addition thereto, shall receive reasonable traveling expense, if
any is required, for attendance at such meetings.
Section 8. The board of directors, by resolution adopted by a
majority of the number of directors may designate from among its
members an executive committee, and one of more other committees
each of which, to the extent provided in the resolution shall have
all of the authority of the board of directors; but no such
committee shall have the authority of the board of directors in
reference to amending the articles of incorporation, adopting a
plan of merger or consolidation, recommending to the shareholders
the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business,
recommending to the shareholders a voluntary dissolution of the
Corporation or a revocation thereof, or amending the bylaws of the
Corporation. The designation of such committees and the delegation
thereto of authority shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed by
law.
Section 9. The shareholders may, at a meeting called for the
express purpose of removing directors, by a majority vote of the
shares entitled to vote at an election of directors, remove the
entire board of directors or any lesser number, with or without
cause.
ARTICLE V
Officers
Section 1. The elective officers of the Corporation shall consist
of at least a president, a secretary and a treasurer each of whom
shall be eighteen years or older and whom shall be elected by the
board of directors at its first meeting after the annual meeting of
shareholders. Unless removed in accordance with procedures
established by law and these bylaws, the said officers shall serve
until the next succeeding annual meeting of the board of directors
and until their respective successors are elected and shall
qualify. Any two offices, but not more than two, may be held by
the same person at the same time, except that one person may not
simultaneously hold the offices of president and secretary.
Section 2. The board may elect or appoint such other officers and
agents as it may deem advisable, who shall hold office during the
pleasure of the board, and shall be paid such compensation as may
be directed by the board.
Section 3. The officers of the Corporation shall exercise and
perform the respective powers, duties and functions as are stated
below, and as may be assigned to them by the board of directors.
(a) The president shall be the chief executive of the Corporation
and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and
officers of the Corporation. He shall preside at all meetings of
the shareholders and of the board of directors. The president or
a vice president, unless some other person is specifically
authorized by the board of directors, shall sign all stock
certificates, bonds, deeds, mortgages, leases and contracts of the
Corporation. The president shall perform all the duties commonly
incident to this office and such other duties as the board of
directors shall designate.
(b) In the absence or disability of the president, the vice
president or vice presidents, if any, in order of their rank as
fixed by the board of directors, and if not ranked, the vice
presidents in the order designated by the board of directors, shall
perform all the duties of the president, and when so acting shall
have all the powers of, and be subject to all the restrictions on
the president. Each vice president shall have such other powers
and perform such other duties as may from time to time be assigned
to him by the president.
(c) The secretary shall keep accurate minutes of all meetings of
the shareholders and the board of directors. He shall keep, or
cause to be kept a record of the shareholders of the Corporation
and shall be responsible for the giving of notice of meetings of
the shareholder of the board of directors. The secretary shall be
custodian of the records and of the seal of the Corporation and
shall and shall attest the affixing of the seal of the Corporation
when so authorized. The secretary shall perform all duties
commonly incident to his office and such other duties as may from
time to time be assigned to him by the president.
(d) An assistant secretary may, at the request of the secretary,
or in the absence or disability of the secretary, perform all of
the duties of the secretary. He shall perform such other duties as
may be assigned to him by the president or by the secretary.
(e) The treasurer, subject to the order of the board of directors,
shall have the care and custody of the money, funds, valuable
papers and documents of the Corporation. He shall keep accurate
books of accounts of the Corporation's transactions, which shall be
the property of the Corporation, and shall render financial reports
and statements of condition of the Corporation when so requested by
the board of directors or president. The treasurer shall perform
all duties commonly incident to his office and such other duties as
may from time to time be assigned to him by the president. In the
absence or disability of the president and vice president or vice
presidents, the treasurer shall perform the duties of the
president.
(f) An assistant treasurer may, at the request of the treasurer,
or in the absence or disability of the treasurer, perform all of
the duties of the treasurer. He shall perform such other duties as
may be assigned to him by the president or by the treasurer.
Section 4. All officers of the Corporation may receive salaries or
other compensation if so ordered and fixed by the board of
directors. The board shall have authority to fix salaries in
advance for stated periods or render the same retroactive as the
board may deem advisable.
Section 5. In the event of absence or inability of any officer to
act, the board of directors may delegate the powers or duties of
such officer to any other officer, director or person whom it may
select.
Section 6. Any officer or agent may be removed by the board of
directors or by the executive committee, if any, whenever in its
judgment the best interest of the corporation will be served
thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not, of itself, create
contract rights.
ARTICLE VI
Finance
Section 1. The board of directors, in its uncontrolled discretion,
may set aside from time to time, out of the net profits or earned
surplus of the Corporation, such sum or sums as it deems expedient
as a reserve fund to meet contingencies, for equalizing dividends,
for maintaining any property of the Corporation, and for any other
purpose.
Section 2. The moneys of the Corporation shall be deposited in the
name of the Corporation in such bank or banks or trust company or
trust companies, as the board of directors shall designate, and may
be drawn out only on checks signed in the name of the Corporation
by such person or persons as the board of directors by appropriate
resolution may direct. Notes and commercial paper, when authorized
by the board, shall be signed in the name of the Corporation by
such officer or officers or agent or agents as shall thereunto be
authorized from time to time.
Section 3. The fiscal year of the Corporation shall be determined
by resolution of the board of directors.
ARTICLE VII
Waiver of Notice
With any notices required by law or under these bylaws to be given
to any shareholder or director of the corporation, a waiver thereof
in writing signed by the person entitled to such notice, whether
before, at, or after the time stated therein shall be the
equivalent to the giving of such notice.
ARTICLE VIII
Action Without a Meeting
Section 1. Any action required to be taken at a meeting of the
directors, executive committee, or other committee of the
directors, or shareholders of this Corporation, or any action which
may be taken at a meeting of directors, executive committee, or
other committee of the directors, or shareholders, may be taken
without a meeting if a consent in writing, setting forth the action
so taken shall be signed by all of the directors, executive or
other committee members or shareholders entitled to vote with
respect to the subject matter thereof.
Section 2. Such consent shall have the same force and effect as a
unanimous vote of the directors, executive committee or other
committee members or shareholders, as the case may be and may be
stated as such in any articles or document filed with the Secretary
of State of Colorado.
ARTICLE IX
Indemnification of Directors, Officers and Others
Section 1. The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by
or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best
interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, or conviction, or upon
a plea of nolo contendere or its equivalent, shall not of itself
create a presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in the best
interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership. joint venture, trust, or other enterprise
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in
a manner he reasonably believed to be in the best interest of the
Corporation; but no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the
extent that the court in which such action or suit was brought
determines upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person
is fairly and reasonably entitled to indemnification for such
expenses which such court shall deem proper.
Section 3. To the extent that a director, officer, employee or
agent of the Corporation has been successful on the merits in
defense of any action, suit or proceeding referred to in Sections
1 and 2 of this Article IX, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 of this
Article IX (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a
determination that indemnification of the officer, director and
employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in Section 1 and 2 of
this Article IX. Such determination shall be made by the board of
directors by a majority vote of a quorum consisting of directors
who where not parties to such action, suit or proceeding, or if
such a quorum is not obtainable, or, even if obtainable, if a
quorum of disinterested directors so directs, by independent legal
counsel in a written opinion.
Section 5. Expenses incurred (including attorneys' fees) in
defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the board of directors
as provided in Section 4 of this Article IX upon receipt of an
undertaking by or on behalf of the director, officer, employee or
agent to repay such amount unless it is ultimately determined that
he is entitled to be indemnified by the Corporation as authorized
in this Article IX.
Section 6. The board of directors may exercise the Corporation's
power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such
liability hereunder or otherwise.
Section 7. The indemnification provided by this Article IX shall
not be deemed exclusive of any other rights to which those
indemnified may be entitled under the articles of incorporation,
these bylaws, agreement, vote of shareholders or disinterested
directors, the Colorado Corporation Code, or otherwise, and any
procedure provided for by any of the foregoing both as to action in
his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure
to the benefit of the heirs and personal representatives of such a
person.
ARTICLE X
Amendments
Subject to repeal or change by action of the shareholders, these
bylaws may be altered, amended or repealed at the annual meeting of
the board of directors or at any special meeting of the board
called for that purpose.
ARTICLE XI
Gender
Whenever in these Bylaws the masculine gender is used, it shall be
deemed to include the feminine gender.
The above bylaws approved and adopted by the Board of Directors on
July 31, 1979.
/s/ Daniel B. Matter
4
Exhibit 10.5
AMENDED AND RESTATED SECURED PROMISSORY NOTE
THIS AMENDED AND RESTATED PROMISSORY NOTE dated June 21,
1995, is executed by and between Gold Capital Corporation
("Debtor") whose address is 55 Madison Street, Suite 745,
Denver, Colorado 80206 and Tonkin Springs Venture Limited
Partnership ("TSVLP"), and amends and restates that Secured
Promissory Note between the parties, dated December 31,
1993, as previously amended, in its entirety.
R E C I T A L S
WHEREAS, for value received, the Debtor and TSVLP previously
negotiated a Secured Promissory Note dated December 31, 1993
(the "Note") in the principal amount of $3,800,000, a copy
of which is attached hereto as Exhibit "A" and incorporated
by reference; and
WHEREAS, the parties executed an Amendment to Secured
Promissory Note (the "First Amendment") on July 13, 1994, a
copy of which is attached hereto as Exhibit "C" and
incorporated by reference; and
WHEREAS, the parties executed a Second Amended and Restated
Secured Promissory Note (the "Second Amendment") on October
18, 1994, a copy of which is attached hereto as Exhibit "D"
and incorporated by reference; and
WHEREAS, the parties executed an Amended and Restated
Secured Promissory Note (the "Third Amendment") on March 27,
1995, a copy of which is attached hereto as Exhibit "E" and
incorporated by reference; and
WHEREAS, the remaining unpaid principal balance due under
the Note as of the date of this Amended and Restated
Secured Promissory Note is $3,108,619.91; and
WHEREAS, Debtor and Royalstar Resources Ltd. ("Royalstar")
entered into a Private Placement agreement dated April 13,
1995, which included an option whereby Royalstar could
purchase an additional 2,200,000 shares of the common stock
of Debtor for U.S.$2.2 million, a copy of which is attached
hereto as Exhibit "F" and incorporated by reference. The
closing of the exercise of the purchase of the additional
2,200,000 shares by Royalstar is referred to hereinafter as
the "Second Closing". This Amended and Restated Secured
Promissory Note is a requirement of and conditioned upon the
successful completion of the Second Closing under the terms
and conditions set forth in the Private Placement agreement
dated April 13, 1995; and
WHEREAS, the parties wish to further amend the terms and
conditions of the Note and provide a schedule of payments
which shall reflect the remaining terms of the Note, as
herein agreed.
NOW THEREFORE, the remaining terms and conditions of the
Note executed on December 31, 1993 between the above
mentioned parties, as previously amended, is hereby amended
and restated in its entirety as follows:
This Amended and Restated Secured Promissory Note is made
pursuant to that certain Purchase and Sale Agreement dated
as of December 31, 1993 (the "Purchase Agreement") between
Debtor and TSVLP. Capitalized terms not defined herein
shall have the meaning assigned to them in the Purchase
Agreement or the Security Agreement attached hereto as
Exhibit B (the "Security Agreement").
This Amended and Restated Secured Promissory Note is without
recourse to the Debtor and in the event of default, TSVLP
may only rely upon the collateral for payment of the Amended
and Restated Secured Promissory Note and by the Security
Agreement, and may not proceed against the Debtor.
The Debtor shall make remaining principal payments to TSVLP
under this Amended and Restated Secured Promissory Note as
follows:
1. Immediately after the Second Closing with Royalstar,
Debtor shall make a payment of $1,000,000 to TSVLP, which
payment shall be applied to obligations of Debtor as
follows: first to any then outstanding accounts payable
balance by Debtor to TSVLP; and Secondly, applied to reduce
the principal balance owed under the Note.
2. Commencing effective June 1, 1995, and continuing until
Debtor has raised funding subsequent to the Second Closing
with Royalstar in the cumulative minimum aggregate amount of
US$4,000,000 from debt, equity or other forms of financing
and funding, the Debtor shall make monthly principal
payments in the amount of $50,000 which payments shall be
payable on the first day of each month during that time.
Said June 1, 1995 payment shall be due and payable on the
date of the Second Closing.
3. Commencing on the first day of the next month following
Debtor raising funding subsequent to the Second Closing with
Royalstar in the cumulative minimum aggregate amount of
US$4,000,000 from debt, equity or other forms of financing
and funding, the Debtor shall then make monthly principal
payments in the amount of $75,000 which payments shall be
payable on the first day of each month and shall continue
until the Note is paid in full.
4. In any event, the entire unpaid principal balance hereof
and all accrued interest hereunder shall be due and payable
on or before April 1, 1999.
5. In no event shall Debtor be liable for principal
payments in excess of the $3,800,000 described in the Note,
less principal amounts previously paid, together with any
additional interest described herein, or additional costs or
expenses of collection contained in this Amended and
Restated Secured Promissory Note.
Debtor shall have the right of prepayment of the outstanding
principal under this Amended and Restated Secured Promissory
Note at any time.
Interest on the unpaid balance of the Amended and Restated
Secured Promissory Note, and any accrued interest not
otherwise paid as required, shall equal 7.5% per annum.
Interest shall be due and payable annually on each
anniversary date of the Note (December 31) computed as the
sum of the daily interest rate applied against the
outstanding principal, until all principal and interest has
been paid in full.
Payments of both principal and interest are to be made at
the offices of TSVLP, 55 Madison, Suite 745, Denver,
Colorado 80206, in lawful money of the United States of
America.
In the event of default, TSVLP will give written notice to
Debtor with reasonable explanation of the default ("Notice
of Default"), and Debtor will then have a period of 10 days
from receipt of the Notice of Default to cure such events of
default.
Debtor shall pay to TSVLP, on demand, all costs and expenses
incurred to collect any indebtedness evidenced hereby
including, without limitation, reasonable attorneys' fees,
whether or not suit is actually commenced.
Except as otherwise provided in this Amended and Restated
Secured Promissory Note, Debtor waives presentation for
payment, protest, notice of protest and of dishonor and
hereby assents to any indulgence and any extension of time
for payment of any indebtedness evidenced hereby that has
been granted or permitted by TSVLP. Any failure to exercise
or any delay in exercising any right hereunder shall not be
construed as a waiver of such right or any right.
At the option of TSVLP, an action may be brought to enforce
this Amended and Restated Secured Promissory Note in the
District Court in and for the County of Washoe, State of
Nevada, in the United States District Court for the District
of Nevada, or in any court in which venue and jurisdiction
are proper. The undersigned consents to venue and
jurisdiction in the District Court in and for the County of
Washoe, State of Nevada, and to service of process under the
Nevada Revised Statutes in any action commenced to enforce
this Amended and Restated Secured Promissory Note.
This Amended and Restated Secured Promissory Note is secured
by the Security Agreement executed December 31, 1993, and
attached hereto as Exhibit B. Reference is made to the
Security Agreement for certain rights and remedies of the
parties hereto and the terms and conditions on which this
Amended and Restated Secured Promissory Note is secured
thereby.
GOLD CAPITAL CORPORATION
By: /s/ Charles E. Stott, Jr.
Charles E. Stott, Jr., President
TONKIN SPRINGS VENTURE LIMITED PARTNERSHIP
By:/s/ William W.
Reid William W. Reid, President
Tonkin Springs Gold Mining Company,
General Partner and Manager - TSVLP
Exhibit 10.20
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT dated March 27, 1995, is
executed by and between Gold Capital Corporation (the
Company) whose address is 55 Madison Street, Suite 745,
Denver, Colorado 80206 and Tonkin Springs Venture Limited
Partnership (TSVLP).
RECITALS
WHEREAS, effective March 27, 1995, the parties have agreed
to the Amended and Restated Secured Promissory Note which
further amended the previously negotiated Secured Promissory
Note dated December 31, 1993, as amended (the Note), all
conditioned upon execution by the parties of this
Registration Rights Agreement.
NOW THEREFORE, in consideration for TSVLP agreeing to the
Amended and Restated Secured Promissory Note dated March 27,
1995, Gold Capital commits to the following rights for
demand registration of Common Shares of Gold Capital held by
or issuable to TSVLP now or in the future by virtue of
dividends and/or conversion rights pursuant to the Preferred
Convertible Stock Agreement between the parties dated
December 31, 1993:
1. Certain Definitions:
Commission shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the
Securities Act.
Conversion Stock means the Common Stock issued or issuable
pursuant to conversion rights under the Series A Preferred
Stock Agreement.
Dividend Stock means the Common Stock issued or issuable
pursuant to the annual mandatory dividend requirements as
provided under the Series A Preferred Stock Agreement.
Exchange Act shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statue and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Holder shall mean TSVLP holding Registrable Securities and
any person holding Registrable Securities to whom the rights
hereunder have been transferred in accordance with Section
12.
Registrable Securities means any Common Stock of the Company
issued or issuable in respect to the Conversion Stock and
Dividend Stock, or other securities issued or issuable
pursuant to the issuance of the Common Stock upon any stock
split, stock dividend, recapitalization, or similar event,
or any Common Stock otherwise issuable with respect to the
Common Stock; provided, however, that shares of Common Stock
or other securities shall only be treated as Registrable
Securities if and so long as they have not been (a) sold to
or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (b) sold
or are available for sale in the opinion of counsel to the
Company in a single transaction exempt from the registration
and prospectus delivery requirements of the Securities Act
so that all transfer restrictions and restrictive legends
with respect thereto are or may be removed upon the
consummation of such sale.
The terms register, registered and registration refer to a
registration effected by preparing and filing with the
Commission a registration statement in compliance with the
Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
Registration Expenses shall mean all expenses, except
Selling Expenses as defined below, incurred by the Company
in complying with Section 4, 5 and 6 thereof, including,
without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and
disbursements of counsel; for the Company, blue sky fees and
expenses, the expense of any special audits incident to or
required by any such registration (but excluding the
compensation of regular employees of the Company which shall
be paid in any event by the Company).
Restricted Securities shall mean the securities of the
Company required to bear the legend set forth in Section 3
hereof.
Securities Act shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Selling Expenses shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to
the securities registered by the Holder and all reasonable
fees and disbursements of counsel for Holder.
2. Restrictions on Transferability. The Conversion Stock
and Dividend Stock shall not be sold, assigned, transferred
or pledged except upon satisfaction of the conditions
specified herein, which conditions are intended to ensure
compliance with the provisions of the Securities Act. The
Holder will cause any proposed purchaser, assignee,
transferee or pledge of the Conversion Stock or Dividend
Stock held by the Holder to agree to take and hold such
securities subject to the provisions and conditions of this
Agreement.
3. Restrictive Legend. Each certificate representing (i)
the Conversion Stock,(ii) the Dividend Stock, and (iii) any
other securities issued in respect of the Conversion Stock
and Dividend Stock upon any stock split stock dividend,
recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of
Section 4 below) be stamped or otherwise imprinted with a
legend in the following form (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT.
The Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the
Conversion Stock and the Dividend Stock in order to
implement the restrictions on transfer established herein.
4. Requested Registration.
(a) Request for Registration. The Company hereby agrees
upon receipt of written request of Holder that the Company
effect a registration under the Securities Act with respect
to Registrable Securities, the Company will:
(I) as soon as practicable, use its best efforts to effect
such registration (including, without limitation,
appropriate qualification under applicable blue sky or other
state securities laws for the State of Colorado and
appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are
specified in such request, together with all or such portion
of the Registrable Securities of the Holder.
Provided, however, that the Company shall not be obligated
to take any action to effect any such registration,
qualification or compliance pursuant to this Section 4 more
that once or prior to September 30, 1995.
Subject to the foregoing clause, the Company shall file a
registration statement covering the Registrable Securities
so requested to be registered as soon as practicable after
receipt of the request of the Holder, but in any event
within 45 days of receipt of such written request of Holder.
(b) Underwriting. In the event that a registration
pursuant to this Section 4 is for a registered public
offering involving an underwriting, the Company shall, along
with the Holder, enter into an underwriting agreement in
customary form with the managing underwriter(s) selected for
such underwriting, but subject to the Company's reasonable
approval.
5. Company Registration.
(a) Notice of Registration. If at any time or from time to
time the Company shall determine to register any of its
securities, either for its own account or the account of a
security holder or holders, other than (i) a registration
relating solely to employee benefit plans or (ii) a
registration relating solely to a Commission Rule 145
transaction, the Company will:
(I) Promptly give Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and
in any underwriting involved therein, all the Registrable
Securities specified in a written request, made within 20
days after receipt of such written notice from the Company
to the Holder.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving
an underwriting, the Company shall so advise the Holder as
part of the written notice given pursuant to section
5(a)(i). In such event the right of Holder to registration
pursuant to Section 5 shall be conditioned upon Holder's
participation in such underwriting and the inclusion of
Holder's Registrable Securities in the underwriting to the
extent provided herein. Holder participating in the
proposed distribution of Holder's securities through such
underwriting shall (together with the Company and any other
shareholders distributing their securities through such
underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for
such underwriting by the Company. Notwithstanding any other
provision of this Section 5, if the managing underwriter
determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities to be
included in such registration. The Company shall so advise
the Holder and the number of shares of Registrable
Securities that may be included in the registration and
underwriting of the Holder shall be adjusted at the time of
filing the registration statement. Any securities excluded
from such underwriting shall be withdrawn from such
registration, and shall not be transferred in a public
distribution prior to 90 days after the effective date of
the registration statement relating thereto, or such other
shorter period of time as the underwriters may require. The
Company may include shares of Common Stock held by
shareholders other than Holder in a registration statement
pursuant to Sections 4 or 5 if, and to the extent that, the
amount of Registrable Securities otherwise included in such
registration statement would not thereby be diminished.
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration
initiated by it under this Section 5 prior to the
effectiveness of such registration whether or not Holder has
elected to include securities in such registration.
6. Registration on Form S-3.
(a) If Holder requests that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3)
for a public offering of the Registrable Securities the
reasonably anticipated aggregate price to the public of
which, net of underwriting discount and commission, would
exceed $100,000, the Company shall use its best efforts to
cause such Registrable Securities to be registered for the
offering on such form and to cause such Registrable
Securities to be qualified in Colorado; provided, however,
that the Company shall not be required to effect more than
one registration pursuant to previous Section 5 in any six
month period or in excess of one registration under this
Section 6. The substantive provisions of Section 4(b) shall
be applicable to each registration initiated under this
Section 6. Provided, however, that the Company shall not be
obligated to take any action to effect any such
registration, qualification or compliance pursuant to this
Section 6 prior to September 30, 1995.
7. Limitations on Subsequent Registration Rights. From
and after September 30, 1995, the Company shall not enter
into any agreement granting any holder or prospective holder
of any securities of the Company registration rights with
respect to such securities unless (i) such new registration
rights, including standoff obligations, are on a pari passu
basis with those rights of the Holder hereunder; or (ii)
such new registration rights, including standoff obligations
are subordinated to the registration rights granted Holder
hereunder.
8. Expenses of Registration.
(a) All Registration Expenses incurred pursuant to Sections
4 and 5 will be borne by the Company. Unless otherwise
stated, all Selling Expenses relating to securities
registered on behalf of the Holder shall be borne by the
Holder of such securities pro rata on the basis of the
number of shares so registered.
9. Registration Procedures. In the case of each
registration, qualification or compliance effected by the
Company pursuant hereto, the Company will keep Holder
advised in writing as to the initiation of each
registration, qualification and compliance and as to the
completion thereof. The Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best
efforts to cause such registration statement to become and
remain effective for at least 12 months, and prepare and
file with the Commission such amendments to such
registration statement and supplements to the prospectus
contained therein as may be necessary to keep such
registration statement effective for at least 12 months;
(b) Enter into a written underwriting agreement in
customary form and substance reasonably satisfactory to the
Company, and the managing underwriter or underwriters of the
public offering of such securities, if the offering is to be
underwritten in whole or in part;
(c) Furnish to the Holder participating in such
registration and to the underwriters of the securities being
registered such reasonable number of copies of the
registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public
offering of such securities;
(d) Use its best efforts to register or qualify the
securities covered by such registration statement under such
state securities or blue sky laws of Colorado.
(e) Notify the Holder (or if Holder has appointed an
attorney-in-fact, such attorney-in-fact) participating in
such registration, promptly after it shall receive notice
thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a
part of such registration statement has been filed;
(f) Notify Holder or their attorney-in-fact promptly of any
request by the Commission for the amending or supplementing
of such registration statement or prospectus or for
additional information;
(g) Prepare and file with the Commission promptly upon the
request of Holder, any amendments or supplements to such
registration statement or prospectus which, in the
reasonable opinion of counsel for Holder, is required under
the Securities Act or the rules and regulations thereunder
in connection with the distribution of the Registrable
Securities by Holder within the time frame in Subsection (a)
above;
(h) Prepare and promptly file with the Commission, and
promptly notify Holder or their attorney-in-fact of the
filing of, such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered
under the Securities Act, any event has occurred as the
result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary
to make the statements therein not misleading in light of
the circumstances in which they were made;
(I) Advise Holder or their attorney-in-fact, promptly after
it shall receive notice knowledge thereof, of the issuance
of any stop order by the Commission suspending the
effectiveness of such registration statement or the
initiation or threatening of any proceeding for the purpose
and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop
order should be issued; and
(j) At the request of Holder, furnish on the effective date
of the registration statement and, if such registration
includes an underwritten public offering, at the closing
provided for in the underwriting agreement, (i) to the
extent the counsel for the Company is willing to render an
opinion, dated each such date, of the counsel representing
the Company for the purposes of such registration, addressed
to the underwriters, if any, and to the Holder, covering
such matters with respect to the registration statement, the
prospectus and each amendment or supplement thereto,
proceedings under state and federal securities laws, other
matters relating to the Company, the securities being
registered and the offer and sale of such securities as are
customarily the subject of opinions of issuer's counsel
provided to underwriters in underwritten public offerings,
and (ii) to the extent the Company's accounting firm is
willing to do so, a letter dated each such date, from the
independent certified public accountants of the Company,
addressed to the underwriters, if any, and to the Holder,
stating that they are independent certified public
accountants within the meaning of the Securities Act and
that in the opinion of such accountants the financial
statements and other financial data of the Company included
in the registration statement or the prospectus or any
amendment or supplement thereto comply in all material
respects either the applicable accounting requirements of
the Securities Act, and additional covering such other
financial matters, including information as to the period
ending not more than five business days prior to the date to
such letter with respect to the registration statement and
prospectus, as the underwriters or such requesting Holder
any reasonably request.
10. Information by Holder. The Holder of Registrable
Securities included in any registration shall furnish the
Company such information regarding such Holder, the
Registrable Securities held by them and the distribution
proposed by Holder as the Company may request in writing and
as shall be required in connection with any registration,
qualification or compliance referred to herein.
11. Indemnification.
(a) The Company will indemnify Holder, each of its
officers, directors, partners, employees, agents and each
person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to which registration
qualification or compliance has been effected pursuant
hereto, and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses,
damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement,
prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the
Company of the Securities Act or any rule or regulation
promulgated under the Securities Act applicable to the
Company in connection with any such registration,
qualification or compliance, and the Company will reimburse
each such Holder, each of its officers, directors, partners,
employees, agents and each person controlling such Holder,
each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with
written information furnished to the Company by an
instrument duly executed by such Holder, controlling person
or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such
registration, qualification or compliance is being effected,
indemnify the Company, each of its directors and officers
employees and agents, each underwriter, if any, of the
Company's securities covered by such a registration
statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its
officers, directors, partners, employees, agents and each
person controlling such Holder within the meaning of Section
15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
and will reimburse the Company, such Holder, such directors,
officers, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim,
loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement,
prospectus, offering circular or other document in reliance
upon and in conformity with written information furnished to
the Company by an instrument duly executed by such Holder
and stated to be specifically for use therein.
(c) Each party entitled to indemnification under this
Section 11 (the Indemnified Party) shall give notice to the
party required to provide indemnification (the Indemnifying
Party) promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's
expense, and provided further that the failure of any
Indemnified Party to give notice as provided hereinshall not
relieve the Indemnifying Party of its obligations herein
unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend
such action and provided further, that the Indemnifying
Party shall not assume the defense for matters as to which
there is a conflict of interest or separate and different
defenses. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
12. Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of Colorado.
13. Survival. The representations, warranties, convenants
and agreements made herein shall survive the transactions
contemplated hereby.
14. Successors and Assigns. The provisions hereof shall be
binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
15. Amendment. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of
any amendment, waiver, discharge or termination is sought.
The Foregoing Agreement is hereby executed as of the date
first above written.
COMPANY
GOLD CAPITAL CORPORATION
By:/s/ Charles E. Stott, President
Charles E. Stott, President
HOLDER
TONKIN SPRINGS VENTURE LIMITED PARTNERSHIP
By:/s/ William W. Reid, President
William W. Reid, President, Tonkin Springs Gold
Mining Company, General Partner and Manager
Exhbit 10.21
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this Agreement) is made as of June
22, 1995, among the undersigned shareholders, John M. Young
(Young) and Gold Capital Corporation, a Colorado corporation (the
Corporation). The shareholders are more particularly described
in Schedule A attached hereto and are hereinafter each sometimes
referred to individually as a Shareholder, and collectively as
Shareholders.
A. The authorized capital of the Corporation is 5,000,000 shares
of preferred stock, par value $0.01 per share, of which 300,000
Series A convertible Preferred shares are issued and outstanding,
and 25,000,000 shares of common stock, $0.0001 par value per
share, of which there are 2,619,698 shares issued and
outstanding;
B. The Shareholders are the registered and beneficial owners of
the number of shares of common stock set opposite their
respective names as more particularly set forth on Schedule A;
C. The parties are entering into this Agreement in connection
with the purchase by Royalstar Resources Ltd. (Royalstar) of
2,200,000 shares of Common Stock (the Investment) pursuant to a
Private Placement Subscription Agreement dated June 22, 1995. At
the request of U.S. Gold Corporation (U.S. Gold) and in
consideration of Young agreeing to act as a director and chief
executive officer of the Corporation, the Corporation and the
shareholders other than Royalstar (the Other Shareholders) wish
to provide the President of Royalstar, Young, with certain rights
and privileges in addition to those otherwise attaching to the
shares of Common Stock.
NOW, THEREFORE, in consideration of the above facts and their
mutual promises herein, the parties hereto agree as follows:
1. Definitions.
1.1 Unless otherwise specified, the term Stock shall include (i)
all of the issued shares of capital stock of the Corporation
including, without limitation, shares that may be issued by
reason of stock splits, reverse stock splits, stock dividends or
other recapitalization of the Corporation, (ii) all rights,
options or warrants to purchase capital stock of the Corporation,
and (iii) all securities convertible into or exchangeable for any
of the securities described in clause (i) or clause (ii), now
owned or hereafter acquired by any person or entity.
1.2 The term Transfer or derivatives thereof shall mean any
voluntary or involuntary disposition of any interest in Stock
including, without limitation, sale, exchange, transfer,
assignment, hypothecation, pledge or gift or by operation of law,
resulting from death or otherwise. Such term shall also include
the establishment of ownership in joint tenancies of any description.
The term Transfer shall not include the transfer of stock for no
consideration to a trust established solely for the benefit of
the transferring shareholder or the spouse or any direct lineal
descendant of the transferor, or to a corporation owned eighty
percent (80%) or more by the transferor or his or her spouse or
lineal descendants; provided that such trust or corporation
agrees in writing to be bound by the terms of this Agreement and
to sell its Stock at the same times and on the same terms and
conditions as if the transferring Shareholder continued to own
such Stock.
1.3 The terms Shareholder and Shareholders shall include the
undersigned shareholders and any person who has acquired Stock in
the Corporation and has agreed in writing to be bound by the
terms of this Agreement.
2. Terms of Agreement.
2.1 This Agreement shall be effective as of the date hereof and
shall remain in force until June 21, 2000 or shall sooner
terminate upon (a) the written agreement of all of the
Shareholders (b) a sale or Transfer by a Shareholder of Stock
subject to this Agreement pursuant to the Right of First Refusal
Agreement provided that this Agreement shall remain in full force
and effect and bind such Shareholders with respect to any
remaining Stock held by such Shareholder or (c) Young is no
longer either the Chief Executive Officer of Royalstar or the
Chairman, chief executive officer and president of the
Corporation.
2.2 The parties hereto acknowledge their intention to
periodically review the terms of this Agreement to consider the
usefulness and fairness of the Agreement in accomplishing the
intents and purposes of the Corporation and the Shareholders.
Failure to periodically review the terms of this Agreement
pursuant to this Section 2.2 shall not affect the validity or
enforceability of any term or conditions contained herein, nor
shall any damages, judgment, or order of specific performance be
available to any person to compel or compensate for any failure
to periodically review the terms of this Agreement.
3. Grant of Proxies; Voting Agreement.
3.1 Simultaneously with the execution and delivery of this
Agreement, each of the Other Shareholders shall deliver to Young
a duly executed irrevocable proxy (each, a Proxy) in the form
attached hereto as Schedule B, with respect to all of the voting
stock of the Corporation owned or controlled by the Shareholder.
Each of the Other Shareholders hereby acknowledges and agrees
that he or it is giving his or its Proxy at the request of U.S.
Gold and that this Agreement embodies a voting agreement between
him or it an John Young within the meaning of C.R.S. 7-107-203.
Except as provided in Section 2.1 hereof, each of the Other
Shareholders further acknowledges and agrees that his or its
Proxy is coupled with an interest and rendered irrevocable in
accordance with C.R.S. 7-107-203(5)(e).
3.2 Each of the Other Shareholders hereby agrees that, in the
event that the Proxy given by such Other Shareholder shall be
determined to be defective or invalid by any governmental
authority having proper jurisdiction, such Other Shareholders
shall, until June 21, 2000 or the earlier termination of this
Agreement, participate in all votes of the shareholders of the
Corporation and shall cast all of such Other Shareholder's votes
as a shareholder as directed by Young. Each of the Other
Shareholders further agrees that, in such event, such Other
Shareholder shall, until the termination of this Agreement,
participate in all votes of the shareholders on, and shall cast
all of such Other Shareholder's votes as a shareholder as
directed by Young on, any of the following actions by the
Corporation:
(a) Amendment or repeal or alteration in any way of any
provision in the articles of incorporation or bylaws of the
Corporation;
(b) Merger, consolidation or exchange of Stock of the
Corporation with another corporation;
(c) Transfer of all or substantially all of the assets of the
Corporation; or
(d) Termination, dissolution or wrapping up of the affairs of
the Corporation.
At the request of Young, any Other Shareholder whose Proxy shall
have been determined to be defective shall promptly execute and
deliver to Young a new, non-defective irrevocable proxy in
substance identical to such Other Shareholder's original Proxy.
4. Remedies.
4.1 The parties agree that they will not have an adequate remedy
at law for the breach of this Agreement. The parties shall have
available for any breach of this Agreement the remedies of
specific performance and injunctive relief, together with all
other remedies at law and in equity. No waiver of or forbearance
to enforce any right or provision hereto shall be binding unless
in writing and signed by the party to be bound, and no such
waiver or forbearance in any instance shall apply to any other
instance or any other right or provision.
5. Modification or Termination.
5.1 This Agreement may not be modified or terminated orally, and no
modification, termination, amendment, or attempted waiver shall shall
be valid unless in writing signed by the party against whom
the agreement its sought to be enforced.
6. Endorsement on Stock Certificates.
6.1 Upon signing this Agreement, the Other Shareholders shall
temporarily surrender their Stock certificates(s) to the
Corporation and the Corporation shall cause the following
endorsement to be placed thereupon before returning such
certificates:
THE RIGHT OF SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE, PLEDGE, OR
ANY OTHER DISPOSITION OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY, AND SUBJECT TO, THE TERMS AND
PROVISIONS OF AN AGREEMENT DATED JUNE 22, 1995.
A COPY OF THIS AGREEMENT IS ON FILE WITH THE SECRETARY OF THE
CORPORATION AND AVAILABLE FOR INSPECTION ON REQUEST.
THE VOTING OF THE SHARES REPRESENTED HEREBY IS SUBJECT TO THE
TERMS OF THE SAME AGREEMENT.
THE VOTING POWER OF THE SHARES EVIDENCED HEREBY HAS BEEN
PREVIOUSLY GRANTED TO JOHN M. YOUNG PURSUANT TO A WRITTEN PROXY
EFFECTIVE JUNE 22, 1995, WHICH PROXY IS IRREVOCABLE.
All certificates representing shares of Stock issued to or
acquired by any Other Shareholder subsequent to the date hereof
shall, if the recipient thereof is or shall be bound by the terms
of this Agreement as a Shareholder, bear the above legends, as
appropriate. The legend shall be removed forthwith upon the
valid sale or Transfer of the Stock.
7. Other Covenants
7.1 Each of the Other Shareholders hereby agrees to enter into
and execute the following documents:
1. The Right of First Refusal Agreement, a copy of which is
attached hereto as Schedule C;
2. The Agreement to recommend and support and nomination and
election of directors of Gold Capital Corporation, a copy of
which is attached hereto as Schedule D;
3. The Voting Agreement, a copy of which is attached hereto as
Schedule E; and
4. The Consent and Acknowledgment, a copy of which is attached
hereto as Schedule F.
8. Notices.
8.1 All notices, offers, acceptances, requests, or other communications
hereunder to the Shareholders, Young or the Corporation shall be in
writing and shall be deemed to have been duly given if delivered in
person or mailed certified or registered to the parties at the addresses
designated in the stock records of the Corporation, or to such other
addresses as any party hereto shall designate to the Corporation in writing.
Any such communication to the Corporation shall be delivered or
mailed as described above to it at the address on the signature
page, or to such other address as shall be designated by the
Board of Directors and notice of which is personally delivered or
sent by certified or registered mail to the Shareholders or
Young. Notices and other communications shall be deemed received
and effective upon the earlier of (i) hand delivery to the
recipient, or (ii) five (5) days after being mailed by certified
or registered mail, postage prepaid, return receipt requested.
9. Successors and Assigns.
9.1 The rights of Young under Section 3 hereof are personal to
Young and may not be assigned or transferred by Young to any
other person or entity, whether voluntarily, involuntarily, by
operation of law, by inheritance or will, or otherwise. Subject
to the limitation of the preceding sentence, the terms and
conditions of this Agreement shall inure to the benefit of and
shall be binding upon the heirs, personal representatives,
successors, and assigns of the parties hereto and no signature or
other indication of assent by any such person shall be required
as a prerequisite to enforceability.
10. Implementation of Agreement.
10.1 Each Shareholder agrees at all times to vote such
Shareholder's Stock (or, if applicable, to direct the trustee of
such Shareholder's respective grantor trust to vote its Stock)
and to otherwise exercise any authority or control now or
hereafter enjoyed as an officer, director, or participant in the
Corporation so as to ensure the complete performance and
execution of each and every provision of this Agreement according
to its terms.
11. Costs and Expenses of Enforcement.
11.1 If suit is brought to interpret or enforce any term or
provision of this Agreement, of if any dispute among the parties
is settled by agreement of the parties, the prevailing party or
parties in either case shall, in addition to any other relief to
which such party or parties may be entitled, be awarded against
the other party or parties such prevailing party or parties'
attorneys fees and costs reasonably and actually incurred.
12. Governing Law.
12.1 This Agreement shall be governed for all purposes by the laws
of Colorado. Venue for any action shall lie in the Courts of Colorado.
13. Severability.
13.1 Each term and provision of this Agreement is intended to be
enforced to the maximum extent permitted by applicable law. If
any term or provision of this Agreement, or the applicability
thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and shall continue in full force
and effect.
14. Entire Agreement.
14.1 This Agreement and the schedules attached hereto
constitutes the entire agreement among the parities with respect
to the disposition of shares of Stock of the Corporation and
supersedes all prior or contemporaneous written or oral
agreements with respect thereto.
15. Headings and Gender.
15.1. The headings of the Sections of this Agreement have been
included for convenience of reference purposes only and shall in
no way be interpreted to restrict or modify the terms hereof.
The use of pronouns of any gender herein shall include pronouns
of all other genders, as applicable.
16. Counterparts.
16.1 This Agreement may be executed by original or facsimile
signature in one or more counterparts, each of which may be
termed an original, but all of which together shall constitute
one Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the day and year first above written.
GOLD CAPITAL CORPORATION,
a Colorado corporation
Per: /s/ William W. Reid
William W. Reid, Director
/s/ John M. Young
JOHN M. YOUNG
U.S. GOLD CORPORATION
Per: /s/ William W. Reid
TONKIN SPRINGS VENTURE LIMITED PARTNERSHIP
TONKIN SPRINGS GOLD MINING COMPANY
Per: /s/ William W. Reid
ROYALSTAR RESOURCES LTD.
Per: /s/ John M. Young
SCHEDULE A TO THE SHAREHOLDERS' AGREEMENT
Name and Address Number of Shares
of Beneficial Owner (including Option Shares)
U.S. Gold Corporation 0
55 Madison Street, Suite 745
Denver, Colorado 80206
Tonkin Springs Venture
Limited Partnership 127,702
55 Madison Street, Suite 745
Denver, Colorado 80206
Tonkin Springs Gold Mining Company 0
55 Madison Street, Suite 745
Denver, Colorado 80206
Royalstar Resources Ltd. 2,500,000
900 - 999 West Hastings Street
Vancouver, BC, Canada V6C 2W2
SCHEDULE B TO THE SHAREHOLDERS' AGREEMENT
IRREVOCABLE PROXY COUPLED WITH AN INTEREST
Pursuant to Colorado Revised Statues 7-107-203(5)
1. The undersigned shareholder (the Shareholder), holder of the
number of shares of common stock, par value $.0001 per share
(Common Stock), of Gold Capital Corporation, a corporation
organized and existing under the laws of Colorado (the
Corporation), set forth opposite the Shareholder's signature (the
Shares), hereby irrevocably appoints and constitutes John M.
Young (Young) as his or its attorney and proxy to attend
meetings, vote, give consents and in all other ways to act in the
Shareholder's place and stead as to all of the Shares as long as
this Irrevocable Proxy is in effect. Death or incapacity of the
Shareholder shall not cause a revocation of his or its
Irrevocable Proxy. Young shall have full power of substitution
and revocation and any proxies heretofore given are hereby
revoked.
2. In compliance with C.R.S. 7-107-203(5), this Irrevocable
Proxy is made irrevocable and executed (a) in consideration of
Young, at the request of U.S. Gold Corporation, agreeing to act
as a director and chief executive officer of the Corporation (b)
in connection with Young being a party to a voting agreement with the
Shareholder embodied in that certain Shareholders' Agreement,
dated as of June 22, 1995 (the Shareholders' Agreement), among
the Corporation, Young, the Shareholder and certain other
shareholders of the Corporation.
3. Young shall have complete discretion to vote the shares under
this Irrevocable Proxy as to any matter requiring a vote of
shareholders of the Corporation until June 21, 2000. Without
limiting the generality of the foregoing, Young shall have
complete discretion to vote the shares under this Irrevocable
Proxy on any of the following actions by the Corporation:
(a) Amendment or repeal or alteration in any way of any
provision in the articles of incorporation or bylaws of the
Corporation;
(b) Merger, consolidation or exchange of stock of the
Corporation with another corporation;
(c) Transfer of all or substantially all of the assets of the
Corporation; or;
(d) Termination, dissolution or wrapping up of the affairs of
the Corporation.
4. Any additional shares of voting capital stock issued to the
Shareholder shall be subject to this Irrevocable Proxy. A
certificate or certificates evidencing the Shares and any
additional shares issued to the Shareholder shall be affixed with
a legend indicating that the shares evidenced thereby are subject
to this Irrevocable Proxy as follows:
THE VOTING POWER OF THE SHARES EVIDENCED HEREBY HAS BEEN
PREVIOUSLY GRANTED TO YOUNG PURSUANT TO A WRITTEN PROXY EFFECTIVE
JUNE 22, 1995, WHICH PROXY IS IRREVOCABLE.
5. This proxy shall terminate upon the termination of the
Shareholders' Agreement, unless earlier terminated by Young.
6. In the event of a dispute or controversy arising out of or
relating to this Irrevocable Proxy, or performance hereof, Young
shall be entitled to vote the shares pursuant to this Irrevocable
Proxy during the pendency of such dispute. The Shareholder
acknowledges that the only basis to contest in any way this
Irrevocable Proxy, or the voting of shares hereunder, is for
gross abuse by Young of the voting rights herein transferred.
The prevailing party in any litigation or proceeding pertaining
to this Irrevocable Proxy shall be entitled to reasonable
attorney's fees actually incurred, together with costs of the
litigation, including expert witness fees, if any.
Dated: June 22, 1995
127,702
Stock Owned and Subject to this
Irrevocable Proxy
ACCEPTED AND AGREED TO
/s/ John M. Young
JOHN M. YOUNG
SCHEDULE C TO THE SHAREHOLDERS' AGREEMENT
FIRST RIGHT OF REFUSAL AGREEMENT
FOR COMMON SHARES OF
GOLD CAPITAL CORPORATION
This agreement is entered into by U.S. Gold Corporation, a
Colorado corporation, Tonkin Springs Venture Limited Partnership
(TSVLP), a Nevada limited partnership owned by subsidiaries of
U.S. Gold Corporation, and Tonkin Springs Gold Mining Company,
the general partner of TSVLP (collectively hereinafter called
U.S. Gold), and Royalstar Resources Ltd., a Canadian
corporation (Royalstar).
WHEREAS, Royalstar and Gold Capital Corporation, a Colorado
corporation (Gold Capital) have entered into a Private
Placement Subscription Agreement dated June 22, 1995 (Private
Placement Agreement), under which Royalstar has agreed to
purchase 2,200,000 shares of Common Stock of Gold Capital, the
purchase of the shares hereinafter described as the Second
Closing; and
WHEREAS, U.S. Gold: (i) currently owns 127,702 shares of Gold
Capital's Common, (ii) has committed to convert 300,000 shares of
Gold Capital's $0.01 par value Series A Preferred Convertible
Stock (the Preferred Stock) into 1,500,000 shares of Gold
Capital Common Stock, as provided in Commitment and Agreement to
Convert dated June 22, 1995, a copy of which is attached hereto
as Schedule A and incorporated herein by reference, and (iii) at
the discretion of Royalstar, additional Common Stock may be
issued to U.S. Gold by Gold Capital in satisfaction of the pro-
rata 1995 dividends on the Preferred Stock as set out in the
Commitment and Agreement to Convert; and
WHEREAS, as a precondition to the Second Closing, Royalstar
requires the Shareholders to enter into this First Right of
Refusal Agreement, and
WHEREAS, the Shareholders are willing to enter into this
Agreement in order to facilitate the Second Closing.
NOW THEREFORE, the parties agree as follows:
1. The Shareholders hereby grant to Royalstar a first right of
refusal as related to sales of Common Shares of Gold Capital by
the Shareholders to third-party non-affiliates, for a period of
five (5) years from the date of the Second Closing, as provided
herein (First Right of Refusal).
(a) A Shareholder will give Royalstar written notice of such
Shareholder's intention to sell any shares of Common Stock of
Gold Capital beneficially owned directly or indirectly by such
Shareholder to any person, except for an Affiliate, as
hereinafter defined, such written notice to provide in reasonable
detail, the terms, conditions and timing of such intended sale
provided that a written notice from a Shareholder to the effect
that a prescribed number of shares will be sold at the prevailing
market price shall constitute a valid Sales Notice (Sales
Notice). Affiliates of U.S. Gold is defined as any entity in
which U.S. Gold Corporation directly or indirectly owns a greater
than 50% interest.
(b) Royalstar will have 10 business days from receipt of the
Sales Notice to give such Shareholder written notice of
Royalstar's irrevocable election to exercise its rights to
purchase the shares covered by the Sales Notice under terms and
conditions no less favorable to such Shareholder than those
included in the Sales Notice.
(c) If Royalstar has not given notice to such Shareholder of its
irrevocable intent to exercise its rights as provided in (b) and
within the required time frame specified above, Royalstar shall
relinquish any First Right of Refusal related specifically to
those shares included in the Sales Notice, unless such sale(s)
are not consummated by such Shareholder within 30 days of the
date of the Sales Notice.
(d) Any election by Royalstar not to exercise its First Right of
Refusal as related to any Sales Notice shall not change or
diminish Royalstar's rights under this agreement as related to
subsequent Sales Notices.
(e) This First Right of Refusal shall specifically not apply to:
(i) transfers of Common Stock among and between Affiliates of
U.S. Gold, and (ii) dispositions of Common Stock by U.S. Gold
through the sale, grant or exercise of stock option agreements
with officers and directors of U.S. Gold.
(f) All rights and obligations of the parties to this agreement
shall terminate absolutely upon the earlier of the fifth
anniversary of the date of the Second Closing and the date all of
the shares subject to this agreement are sold.
2. A Shareholder may sell or transfer any shares of Common Stock
of Gold Capital beneficially owned directly or indirectly by such
Shareholder to an Affiliate provided that such Affiliate agrees
in writing to be bound by the terms of this Agreement.
3. Written Notice shall be valid by either confirmed facsimile
transmission to the numbers provided below, or by messenger
delivery to the appropriate addresses provided below:
Attention: William W. Reid, President
55 Madison, Suite 745
Denver, Colorado 80206
Telephone (303) 322-8002
Fax (303) 322-7866
(b) Royalstar Resources Ltd.
Attention: John M. Young, President
900 - 999 West Hastings Street, Vancouver
British Columbia, Canada V6C 2W2
Telephone (604) 683-3613
Fax (604) 683-6699
4. Miscellaneous:
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
(b) This Agreement shall bind and inure to the benefit of the
successors and assigns of the respective parties.
5. Counterparts:
This Agreement may be executed by original or facsimile signature
in one or more counterparts, each of which may be termed an
original, but all of which together shall constitute one
Agreement.
IN WITNESS WHEREOF, the parties have executed this agreement on
this 22nd day of June, 1995.
ROYALSTAR RESOURCES LTD.
Per: /s/ John M. Young
John M. Young, President and CEO
900 - 999 West Hastings Street
Vancouver, British Columbia
U.S. GOLD CORPORATION
Per: /s/ William W. Reid
William W. Reid, President
55 Madison, Suite 745
Denver, Colorado 80206
TONKIN SPRINGS VENTURE LIMITED PARTNERSHIP
Per: /s/ William W. Reid
William W. Reid, President
Tonkin Springs Gold Mining Company,
General Partner and Manager - Tonkin Springs Venture L.P.
55 Madison, Suite 745
Denver, Colorado 80206
TONKIN SPRINGS GOLD MINING COMPANY
Per: /s/ William W. Reid General Partner and Manager
Tonkin Springs Venture L.P
55 Madison, Suite 745
Denver, Colorado 80206
SCHEDULE D TO THE SHAREHOLDERS' AGREEMENT
AGREEMENT TO RECOMMEND AND SUPPORT
NOMINATION AND ELECTION OF DIRECTORS
OF GOLD CAPITAL CORPORATION
This agreement is entered into by Royalstar Resources Ltd., a
Canadian corporation (Royalstar), John M. Young, an individual,
Gold Capital Corporation, a Colorado corporation (Gold
Capital), and Bill M. Conrad, Raymond E. McElhaney and William
W. Reid (the undersigned board members) effective June 22,
1995.
WHEREAS, Royalstar and Gold Capital have entered in a Private
Placement Subscription Agreement dated June 22, 1995 (the
Private Placement Agreement), under which Royalstar has agreed
to purchase an additional 2,200,000 shares of common stock of
Gold Capital and closing of the purchase is hereinafter described
as the Second Closing; and
WHEREAS, as a precondition to the Second Closing, Royalstar and
Tonkin Springs Venture Limited Partnership, a Nevada limited
partnership (TSVLP) have agreed to enter into a Voting
Agreement effective upon the Second Closing, whereby TSVLP would
assign its voting rights under shares of common stock of Gold
Capital owned from time to time by TSVLP, TSVLP's parent
corporations, or U.S. Gold Corporation, to John M. Young, for a
period of five years from the date of the Second Closing; and
WHEREAS, John M. Young may now, or from time to time in the
future, directly own or indirectly control certain voting rights
represented by shares of common stock of Gold Capital; and
WHEREAS, as inducement to Gold Capital to complete the Second
Closing, and as provided in the Private Placement Agreement,
Royalstar and John M. Young have agreed, individually, to support
the nomination and election of three (3) non-Royalstar nominated
individuals to serve as directors of Gold Capital,
NOW THEREFORE, the parties agree as follows:
1. Royalstar agrees with the undersigned board members of Gold
Capital and commits, during the term of the Voting Agreement to
support the nomination of and vote any common shares of Gold
Capital held by it directly or indirectly, in favor of the three
non-Royalstar individuals to serve as members of the Board of
Directors of Gold Capital, as directed collectively in writing by
Gold Capital board of director members Bill M. Conrad, Raymond E.
McElhaney and William W. Reid, or by their successors as members
of the Board of Directors of Gold Capital.
2. John M. Young agrees with the undersigned board members of
Gold Capital and commits during the term of the Voting Agreement,
to support the nomination of and vote any common shares of Gold
Capital held by him, directly or indirectly, in favor of the
three non-Royalstar individuals to serve as members of the Board
of Directors of Gold Capital, as directed collectively in writing
by Gold Capital board of director members Bill M. Conrad, Raymond
E. McElhaney and William W. Reid, or by their successors as
members of the Board of Directors of Gold Capital.
3. Miscellaneous:
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
(b) This Agreement shall bind and inure to the benefit of the
successors and assigns of the respective parties.
4. This Agreement may be executed by original or facsimile
signature in one or more counterparts, each of which may be
termed an original, but all of which together shall constitute
one Agreement.
IN WITNESS WHEREOF, the parties have executed this agreement on
this 22 day of June, 1995.
ROYALSTAR RESOURCES LTD.
Per: /s/ John M. Young /s/ Bill M. Conrad
John M. Young, President and CEO BILL M. CONRAD
900 - 999 West Hastings Street
Vancouver, British Columbia
Canada V6C 2W2
/s/ Raymond E. McElhaney
RAYMOND E. McELHANEY
Per: /s/ John M. Young
John M. Young, an individual /s/ William W. Reid
900 - 999 West Hastings Street WILLIAM W. REID
Vancouver, British Columbia
Canada V6C 2W2
GOLD CAPITAL CORPORATION
Per: William W. Reid, Director
55 Madison, Suite 745
Denver Colorado 80206
SCHEDULE E TO THE SHAREHOLDERS' AGREEMENT
VOTING AGREEMENT
THIS VOTING AGREEMENT (the Agreement) is made as of June 22,
1995, between Tonkin Springs Venture limited Partnership, a
Nevada Limited Partnership, Tonkin Springs Gold Mining Company, a
Colorado corporation, U.S. Gold Corporation, a Colorado
corporation, John M. Young with respect to certain securities of
Gold Capital Corporation, a Colorado corporation, John M. Young,
as an individual and Royalstar Resources Ltd., a Canadian
corporation.
NOW, THEREFORE, in consideration of the above facts and their
mutual promises herein, the parties hereto agree as follows:
1. The parties hereto acknowledge that all the rights and
obligations in respect to the Voting Agreement are hereby
incorporated in the terms of the Shareholders' Agreement and that
other than as is set forth in the Shareholders' Agreement there
are no voting rights granted by U.S. Gold Corporation, Tonkin
Springs Ventures Limited Partnership or Tonkin Springs Mining
Company in respect of the securities of Gold Capital Corporation.
2. This Agreement may be executed by original or facsimile
signature in one or more counterparts, each of which may be
termed an original, but all of which together shall constitute
one Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Voting
Agreement as of the 22nd day of June, 1995.
TONKIN SPRINGS VENTURES LIMITED PARTNERSHIP
Per: /s/ William W. Reid
William W. Reid, President
55 Madison, Suite 745
Denver Colorado 80206
TONKIN SPRINGS GOLD MINING COMPANY
Per: /s/ William W. Reid
William W. Reid, General Partner and Manager -
Tonkin Springs Venture L.P.
55 Madison, Suite 745
Denver Colorado 80206
U.S. GOLD CORPORATION
Per: /s/ William W. Reid
William W. Reid, President and Manager -
Tonkin Springs Venture L.P.
55 Madison, Suite 745
Denver Colorado 80206
/s/ John M. Young
John M. Young
900 - 999 West Hastings Street
Vancouver, B.C., Canada V6C 2W2
ROYALSTAR RESOURCES LTD.
John M. Young, President
900 - 999 West Hastings Street
Vancouver, B.C., Canada V6C 2W2
GOLD CAPITAL CORPORATION
Per: /s/ William W. Reid
William W. Reid, President
55 Madison, Suite 745
Denver Colorado 80206
SCHEDULE F TO THE SHAREHOLDERS' AGREEMENT
CONSENT AND ACKNOWLEDGMENT
This Agreement is entered into by U.S. Gold Corporation, a
Colorado corporation, Tonkin Springs Gold Mining Company, and
Tonkin Springs Venture Limited Partnership, a Nevada limited
partnership owned by subsidiaries of U.S. Gold Corporation
(TSVLP).
WHEREAS, Royalstar Resources Ltd., a Canadian corporation
(Royalstar) and Gold Capital Corporation, a Colorado
corporation (Gold Capital) have entered into a Private
Placement Subscription Agreement dated for reference June 22,
1995 (Private Placement Agreement), under which Royalstar has
agreed to purchase 2,200,000 shares of Common Stock of Gold
Capital (Private Placement).
WHEREAS, the Shareholders are shareholders of Gold Capital.
WHEREAS, it is a condition of the Private Placement that
Royalstar acquire control of Gold Capital through:
(a) the acquisition of approximately 52% of the issued and
outstanding Common Stock of Gold Capital on a non-diluted basis;
(b) the control of the Board of Directors of Gold Capital by
virtue of appointing four of the seven nominees to the Board of
Directors of Gold Capital;
(c) the Shareholders' Agreement made as of June 22, 1995 among
the Shareholders and Gold Capital, under which the Shareholders
have provided John M. Young with certain rights and privileges in
addition to those otherwise attaching to the shares of Common
Stock.
NOW THEREFORE, the parties agree as follows:
1. In view of and in consideration of the foregoing, each of the
Shareholders hereby acknowledges that if there is anything
inconsistent in the Articles of Incorporation and Bylaws of Gold
Capital and all amendments thereto, resolutions of the directors
or shareholders of Gold Capital or the provisions of any indenture,
instrument, agreement or undertaking to which Capital is a party or
by which Gold Capital or the properties or assets of Gold Capital
are bound which would be inconsistent with or which would constitute
a default thereunder as a result of the foregoing transactions, each
of the Shareholders hereby agrees to do, execute and deliver or
cause to be done executed and delivered all such further acts, documents
and things, vote their shares in favor of, and sign any amendments
which may be required to give effect to the full intent of the foregoing
transactions provided it is understood that the Shareholders shall only be
obliged to observe the covenant contained in this clause one to
the extent that it is within their corporate power and authority
to do so.
2. None of the Shareholders is aware of anything in the affairs
of Gold Capital which is presently inconsistent with the
foregoing intent and purpose.
Dated as of this 22nd day of June, 1995.
U.S. GOLD CORPORATION
Per: /s/ William W. Reid
TONKIN SPRINGS VENTURE LIMITED PARTNERSHIP
Per:/s/ William W. Reid
TONKIN SPRINGS GOLD MINING COMPANY
Per: /s/ William W. Reid
EXHIBIT 11
U.S. GOLD CORPORATION
EXHIBIT TO FORM 10-KSB
Computation of Weighted Average Shares Outstanding
Used in Earnings Per Share Calculations
for the two years ended December 31, 1995
1995 1994
Shares issued, beginning of period 13,768,800 13,768,800
Weighted average shares issued-
Exercise of stock options 25,454 -
Weighted average of common
stock equivalents-
Unexercised stock options 1,193,495 1,250,000
Less: Buy back of common
shares under treasury stock
method using average price (1) (395,779) (549,574)
Total weighted average shares
and share equivalent outstanding 14,591,970 14,469,226
(1) Fully diluted computations are not made as total shares and
share equivalent outstanding would be effected by less than 3%.
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the
Registration Statement of U.S. Gold Corporation on Form S-8,
File No. 33-47460 of our report dated March 8, 1996, on our
audit of the consolidated financial statements of U.S. Gold
Corporation as of December 31, 1995 and for the year then
ended, which report is included in the Annual Report on Form
10-KSB.
BDO Seidman, LLP
Certified Public Accountants
March 22, 1996
Denver, Colorado
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the
Registration Statement of U.S. Gold Corporation on Form S-8,
File No. 33-47460 of our report dated April 14, 1995, on our
audit of the consolidated financial statements of U.S. Gold
Corporation for the year ended December 31, 1994 which
report is included in the Annual Report on Form 10-KSB.
Mitchell Finley and Company, P.C.
Certified Public Accountants
March 22, 1996
Exhibit 10.22
COMMITMENT AND AGREEMENT TO CONVERT
THIS COMMITMENT AND AGREEMENT TO CONVERT dated June 22, 1995, is
executed by and between Gold Capital Corporation (Gold Capital)
whose address is 55 Madison Street, Suite 745, Denver, Colorado
80206, Tonkin Springs Venture Limited Partnership (TSVLP) and
Royalstar Resources Ltd. (Royalstar).
RECITALS
WHEREAS, TSVLP holds 300,000 shares of Series A Preferred
Convertible Stock, par value of $.01 per share and issue price of
$10.00 per share (Preferred Stock), of Gold Capital, which shares
were issued as partial consideration for the purchase by Gold
Capital of an interest in the Tonkin Springs Project under that
certain Purchase and Sale Agreement dated December 31, 1993; and
WHEREAS, the general and limited partners of TSVLP are each
wholly-owned subsidiaries of U.S. Gold Corporation, a Colorado
corporation (collectively U.S. Gold); and
WHEREAS, the parties have entered into a Registration Rights
Agreement dated March 27, 1995, covering Registrable Securities
including the common shares of Gold Capital into which the
Preferred Stock may be converted, a copy of which is attached
hereto as Exhibit A; and
WHEREAS, Gold Capital has previously issued to TSVLP an aggregate
of 127,702 common shares, $.0001 par value, in fulfillment of
Gold Capital's obligations for the 1994 mandatory dividend as
provided under the Preferred Stock agreement (the 1994 Dividend
Shares).
WHEREAS, Gold Capital and Royalstar have entered into a Private
Placement Subscription Agreement dated June 22, 1995, under which
Royalstar has agreed to purchase an additional 2,200,000 shares
of the common stock of Gold Capital for aggregate of US$2.2
million. The closing of the exercise of the purchase of the
additional 2,200,000 shares by Royalstar is referred to
hereinafter as the Second Closing. This Commitment and Agreement
to Convert is a requirement of and is conditioned upon the
successful completion of the Second Closing under the terms and
conditions set forth in the Private Placement Subscription
Agreement dated June 22, 1995; and
WHEREAS, TSVLP is willing to commit to the conversion of its
Preferred Stock into common shares, as provided herein; and
WHEREAS, Gold Capital is willing to commit to undertake and use
its best efforts to include all common shares of Gold Capital
owned by or issuable to TSVLP, for registration on a registration
statement on an appropriate form to be filed with the
Securit1ies and Exchange Commission and the securities commission
of any appropriate states, at the same time Gold Capital files a
registration statement to register the shares of Gold Capital
owned by Royalstar.
WHEREAS, Gold Capital is willing to commit to the terms and
conditions of this Commitment and Agreement to Convert, as
provided herein.
NOW THEREFORE, the parties hereby agree to the following:
1. Notwithstanding the provisions of the Certificate of
designations, Preferences and Rights of the Series A Convertible
Preferred Stock dated December 30, 1993 (the Certificate), TSVLP
agrees as follows:
(a) on receipt by TSVLP of the written direction of Royalstar,
delivered at any time after the Second Closing, TSVLP will
convert its 300,000 shares of Series A Preferred Stock (the
Series A Shares) into 1,500,000 shares of common stock of Gold
Capital, par value $.0001 (the Conversion Shares);
(b) except in accordance with clause 1(a) hereof or with the
prior written consent of Royalstar, TSVLP will not convert the
Series A Shares at any time earlier than November 30, 1995;
(c) the mandatory dividend to be paid by Gold Capital to TSVLP
under the terms of Certificate is eliminated effective on
November 30, 1995;
(d) the pro-rata mandatory dividend owing by Gold Capital to
TSVLP for the period from January 1, 1995 to the date of the
Second Closing (the 1995 Dividend) will be satisfied in full by
the issuance to TSVLP of 70,000 shares of common stock (the 1995
Dividend Shares) of Gold Capital or by payment to TSVLP of the
cash equivalent thereof determined in accordance with the terms
of paragraph 2 of the Certificate, at the option of Royalstar.
The pro-rata mandatory dividend which may accrue and be owing by
Gold Capital for the period from the date of the Second Closing
will be satisfied in full by the payment in cash as determined in
accordance with the terms of paragraph 2 of the Certificate or by
the issuance of such number of common shares of Gold Capital as
is determined by and in accordance with the terms of paragraph 2
of the Certificate except that the deemed issuance price of such
shares shall be determined by reference to the prevailing market
price of such shares for the period from the date of the Second
Closing until November 30, 1995 or until the date of conversion
of the Series A Shares if such conversion occurs prior to
November 30, 1995. Payment of the 1995 Dividend will be made by
Gold Capital to TSVLP on the conversion date;
2. Notwithstanding the terms of the Registration Rights
Agreement, Gold Capital agrees to use its best efforts to effect
registration of the Conversion shares, the 1994 Dividend Shares and the
1995 Dividend Shares, if any, in conjunction with any
registration of the shares acquired by Royalstar but in any event
no later than 90 days from the date of the Second Closing.
3. Miscellaneous.
(a) this Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado;
(b) this Agreement shall bind and inure to the benefit of the
successors and assigns of the respective parties; and
(c) this Agreement constitutes the entire agreement between the
parties regarding the subject matter hereof, and there are no
prior or additional agreements, understandings, representations
or warranties between the parties other than set forth herein.
IN WITNESS WHEREOF, the parties have executed this Commitment and
Agreement to Convert on this 22 day of June, 1995.
GOLD CAPITAL CORPORATION
By: /s/ William W. Reid
William W. Reid, Director
TONKIN SPRINGS VENTURE LIMITED PARTNERSHIP
By: /s/ William W. Reid
William W. Reid, President, Tonkin Springs
Gold Mining Company, General Partner and
Manager, TSVLP
U.S. GOLD CORPORATION
By: /s/ William W. Reid
William W. Reid, President and Chief Executive Officer
ROYALSTAR RESOURCES LTD.
By: /s/ John M. Young
John M. Young, President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRATED FROM THE 1995 FORM
10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB.
</LEGEND>
<CIK> 0000314203
<NAME> U.S. GOLD CORPORATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JAN-01-1995
<CASH> 234,326
<SECURITIES> 0
<RECEIVABLES> 443,072
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,508,837
<PP&E> 162,655
<DEPRECIATION> (100,768)
<TOTAL-ASSETS> 8,628,884
<CURRENT-LIABILITIES> 46,171
<BONDS> 0
0
0
<COMMON> 33,362,816
<OTHER-SE> (28,374,621)
<TOTAL-LIABILITY-AND-EQUITY> 8,628,884
<SALES> 918,334
<TOTAL-REVENUES> 1,367,557
<CGS> 0
<TOTAL-COSTS> 762,829
<OTHER-EXPENSES> 5,725
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,369
<INCOME-PRETAX> 571,634
<INCOME-TAX> 0
<INCOME-CONTINUING> 571,634
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 571,634
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
