March 28, 2000
Securities and Exchange Commission
Branch of Edgar Operations-Filers Support
6432 General Green Way
Alexandria, VA 22312
Re: U.S. Gold Corporation Form 10-KSB
File No. 0-9137
Gentlemen and Ladies:
U.S. Gold Corporation (the Company) hereby files its Form 10-KSB
for the year ended December 31, 1999, by Edgar submission.
The financial statements contained in the Form 10-KSB do not
include any change from the preceding year in any accounting
principles or practices or in the methods of application of those
principles or practices.
/s/ William F. Pass
Vice President and Chief Financial Officer
enclosures
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 for the fiscal year ended December 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ________ to __________
Commission file number 0-9137
U.S. GOLD CORPORATION
(Name of small business issuer in its charter)
Colorado 84-0796160
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2201 Kipling Street, Suite 100, Lakewood, Colorado 80215
(Address of principal executive office) (Zip Code)
Issuer's telephone number (303) 238-1438
Securities to be registered pursuant to Section 12(b) of the Act:
Title of class Name of exchange on which registered
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.10 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Securities 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 in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB [ ].
State issuer's revenues for its most recent fiscal year. $627,548 in revenues
for year ended December 31, 1999.
The aggregate market value (at the last trade price of $0.25 per share) of the
Common Stock of U.S. Gold Corporation held by nonaffiliates as of March 24,
2000 was approximately $3,463,000. As of March 24, 2000, there were 13,974,040
shares of Common Stock, par value $0.10, outstanding.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format (check one): yes no x
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS
IN THIS REPORT WHICH RELATE TO THE COMPANY'S PLANS, OBJECTIVES OR FUTURE
PERFORMANCE MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS ARE BASED ON CURRENT EXPECTATIONS OF MANAGEMENT. ACTUAL
STRATEGIES AND RESULTS MAY DIFFER MATERIALLY FROM THOSE CURRENTLY
EXPECTED BECAUSE OF FACTORS INCLUDING GOLD PRICE, MINERALIZED MATERIAL
GRADES, METALLURGICAL RECOVERY, OPERATING COSTS, MARKET VALUATION, AND
PROJECT OPERATOR'S DECISIONS AND PERFORMANCE UNDER THE TONKIN SPRINGS
LIMITED LIABILITY COMPANY, AS WELL AS OTHER RISKS AND UNCERTAINTIES.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development
U.S. Gold Corporation, also referred to as 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, by 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.
Our principal mining property is the Tonkin Springs property which is located
in Eureka County Nevada. Our ownership interest in this property is held by
Tonkin Springs Venture Limited Partnership, also referred to as "TSVLP", which
is a Nevada limited partnership. TSVLP, in turn, is owned 100% by two of our
wholly-owned subsidiaries.
On December 31, 1993, TSVLP sold a 60 percent undivided interest in Tonkin
Springs to Gold Capital Corporation, a Colorado corporation. TSVLP retained a
40 percent undivided interest in Tonkin Springs. Then, effective February 26,
1999, TSVLP and Gold Capital terminated the Tonkin Springs Project Mining
Venture Agreement dated December 31, 1993 as amended, also referred to as the
"1993 Agreement". Gold Capital then immediately sold it's 60% undivided
interest in Tonkin Springs to Tonkin Springs Holdings Inc., a Colorado
corporation, also referred to as "TSHI", which is owned by subsidiaries of
Sudbury Contact Mines Limited, an Ontario, Canada corporation, also referred to
as "Sudbury," whose shares are traded on the Toronto stock exchange under the
symbol SUD. Sudbury is itself a subsidiary of Agnico-Eagle Mines Limited, an
Ontario, Canada corporation, also referred to as "Agnico-Eagle," whose shares
are traded on the New York Stock Exhange under the symbol AME. TSHI then
immediately contributed its 60% undivided interest in Tonkin Springs into a new
limited liability company, Tonkin Springs LLC, also referred to as "TSLLC," in
exchange for 60% of the equity membership interest of TSLLC, and TSVLP
contributed its 40% undivided interest in Tonkin Springs into TSLLC in
exchange for 40% of the equity membership interest of TSLLC.
Business
General
We are primarily engaged in the precious metal mining business in the
continental United States, however, we may also evaluate and develop properties
outside the United States. We own, through our wholly-owned subsidiaries, an
interest in the Tonkin Springs gold mine located in Eureka County, Nevada.
As a gold mining company, our 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. We may also 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.
We may also enter into joint undertakings with other companies to accomplish
the same purposes.
Contribution of 40% Interest in Tonkin Springs into Tonkin Springs Limited
Liability Company
Effective February 26, 1999, also referred to as the "Effective Date," TSVLP
and Gold Capital terminated the 1993 Agreement and each retained their
respective 40% and 60% undivided interests in the Tonkin Springs properties.
Gold Capital then immediately sold it's 60% interest in Tonkin Springs to
TSHI, and then TSHI and TSVLP each immediately contributed their respective
undivided interests in Tonkin Springs into a new Delaware limited liability
company, the Tonkin Springs LLC or TSLLC. In this transaction and in
exchange for contributing their respective undivided interests in the
Properties, TSVLP received 40% of the equity membership interest of TSLLC,
and TSHI received 60% of the equity membership interest of TSLLC. The deemed
amount of the Initial Contribution of TSVLP to the TSLLC was $2 million and
the deemed amount of TSHI Initial Contribution to TSLLC was $3 million. The
objective of TSLLC is the exploration, evaluation and, if justified, the
development and mining of mineralization at Tonkin Springs.
Under the Members' Agreement and the Operating Agreement of the TSLLC, TSHI
is required to fund all costs related to the Properties, including all holding,
administrative, operational and exploration costs, until TSHI has first
expended $4 million on exploration of the Properties, also referred to as the
"Cut-Off Date". Through December 31, 1999, TSHI has reported that it has
expended approximatley $703,473 on exploration at Tonkin Springs. All
expenditures funded by TSHI prior to the Cut-Off Date shall be added to
TSHI's Recoupable Amount which has as its opening balance the sum of $5,625,000,
which represents approximately one-half of the recoupment account balance of
Gold Capital under the 1993 Agreement as of the Effective Date. If TSHI should
withdraw from the TSLLC prior to Cut-Off, TSHI shall have no further right,
title or interest in Tonkin Springs or TSLLC and its ownership interest shall
be deemed transferred to TSVLP. In addition, TSHI shall remain obligated to
TSVLP: (i) to fund the remaining balance of the adopted Program and Budget in
effect upon termination, (ii) to complete its Minimum Work Commitment
for exploration of the Properties in the amount of $2 million, or pay to TSVLP
the deficiency, (iii) to pay any unpaid Monthly Minimum Payments to TSVLP (as
described further below) that are due and payable, and (iv) to fund and satisfy
all unfunded liabilities to third parties arising out of operations conducted
subsequent to the Effective Date but prior to the date of TSHI's withdrawal or
deemed withdrawal. TSVLP and TSHI, also referred to as the "Members," have
designated Tonkin Springs Management Co., a Colorado corporation, referred to
as "TSMC", and an affiliate of TSHI, as the initial Manager of the Properties
with overall management responsibilities for operations.
At the Effective Date, TSHI paid to TSVLP $190,000, and agreed to make
additional payments to TSVLP in the amount of $45,000 per month commencing March
1, 1999 and continuing for an additional 34 months, referred to as the "Minimum
Payments to TSVLP". The aggregate of Minimum Payments to TSVLP, $1,720,000,
represent consideration for the terms and conditions of the TSLLC, and one half
of such payments will be added to TSHI's Recoupable Amount as discussed further
below. Through December 31, 1999, TSHI has made $685,000 in Minimum Payments
to TSVLP. As of December 31, 1999, the Company has a $1,035,000 receivable due
from the TSLLC reflecting the Minimum Payments to TSVLP of which $495,000 was
classified in our financial statements as a current asset offset by a
$1,080,000 deferred credit, with the effect that the entire receivable is
offset by a deferred credit.
The Operating Agreement of the TSLLC defines Commencement of Commercial
Production as the last day of a consecutive two-month period during which
payable or accountable gold production from the Properties totals at least 3,000
ounces of gold per month, provided that such production is part of an approved
Program of at least one year in duration which contemplates an estimated
budgeted production rate of at least 36,000 ounces of gold per annum. After
Commencement of Commercial Production 60% of positive cash flow from the
operations at Tonkin Springs, if any, shall be distributed to TSHI until TSHI
has recovered its Recoupment Amount, and the remaining 40% of Cash
Flow shall be distributed to the Members based upon their respective ownership
interest on a calendar quarter basis. If TSVLP's ownership interest has been
reduced, then the preferential percentage applied to TSHI's Recoupment Amount
shall be TSHI's adjusted interest with the remaining amount distributed to the
Members based upon their respective ownership interest. After TSHI has
recovered the Recoupment Amount, 100% of Cash Flow shall be distributed to the
Members in proportion to the Member's ownership interest. Therefore, initially
during the period in which TSHI is thus receiving preferential payments,
TSVLP shall receive 16% of Cash Flow from operations. Cash Flow otherwise due
TSVLP shall first be applied to reduce any Elected Loans outstanding from TSHI,
as discussed further below. Through December 31, 1999, TSHI has reported that
the Recoupable Amount balance is approximately $7,338,022.
On the last day in the calendar month in which Commencement of Commercial
Production is achieved, TSHI shall pay TSVLP an additional amount to be
calculated by multiplying $15,000 times the number of months from the Effective
Date through the month in which Commencement of Commercial Production is
achieved, also referred to as the "Lump-Sum Payment".
After the Cut-Off Date, TSHI is required to exercise reasonable efforts to
attempt to obtain third party project financing for any development of the
Properties requiring funding of more than $20 million.
After the Cut-Off Date, TSVLP is required to fund its 40% share of all costs of
the Properties or be subject to dilution under a formula. Either party may
elect to contribute a lesser amount or none towards its share of an adopted
program and budget. However, as long as TSHI owns at least 50% interest in
TSLLC, TSHI is obligated to loan TSVLP its share of funding of an adopted
program and budget after the Cut-Off Date under one-year term loans, also
referred to as the "Elected Loan," with an interest rate of LIBOR plus 2%.
If, however, TSVLP does not repay an Elected Loan when due, TSHI shall have no
further obligation to make additional Elected Loans to TSVLP and the amounts of
defaulted Elected Loans and accrued interest thereon, also referred to as the
"Default Amount," shall be incorporated into the computation of dilution of
TSVLP's working interest under a formula. Under the formula for dilution of
either Member's interest in the TSLLC, the diluting party's Initial
Contribution plus any contributions to approved programs and budgets after Cut-
Off is the numerator; divided by a denominator which is the Initial Contribution
of both parties, the contribution of either party to approved program and
budgets after Cut-Off, plus any Default Amount; and the new ownership interest
of the diluting party is determined by multiplying the result by one hundred.
If, however, the ownership interest of any Member falls to 10 percent or less
as a result of the forgoing calculation, then such Member shall be deemed to
have withdrawn from the TSLLC and to have automatically relinquished and
transferred its interest to the other Member and upon such relinquishment
the withdrawing Member shall be granted an overriding 2% net smelter royalty,
referred to as the "NSR," on products subsequently extracted, removed and sold
from the Properties.
The Company has guaranteed TSVLP's obligations under the TSLLC and TSVLP has
given a security interest (consisting of its ownership interest arising under
the TSLLC) in favor of TSHI to secure its performance under the TSLLC. Sudbury
has guaranteed certain obligations of TSHI.
The Company recognized neither a gain nor a loss on the termination of the 1993
Agreement or with the contribution of its 40% undivided interest in the
Properties to the TSLLC.
Sale of 60% Interest in Tonkin Springs Properties to Gold Capital
On December 31, 1993, referred to as the "1993 Closing", TSVLP sold a 60 percent
undivided interest in the Tonkin Springs properties and obligations to Gold
Capital. TSVLP retained a 40 percent undivided interest in Tonkin Springs.
TSVLP and Gold Capital then made their respective interest in Tonkin Springs
subject to the Tonkin Springs Project Joint Venture, referred to as the
"Project Joint Venture," with Gold Capital designated manager. Gold Capital
was responsible for funding of all costs related to Tonkin Springs
through the transaction with TSHI effective February 26, 1999, described above.
Gold Capital purchased its 60 percent undivided interest in Tonkin Springs 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 7.5 percent
mortgage note in the amount of $3.8 million, referred to as the "Promissory
Note"; 300,000 shares of Gold Capital's Series A Convertible Preferred Stock,
referred to as the "Preferred Stock," having an assigned value of $3 million
and subsequently converted into 1,750,000 shares of common stock of Gold
Capital, and the assumption of 60 percent of a reclamation obligation recorded
at $960,000. Effective August 29, 1997, the remaining balance of the Promissory
Note was paid.
Effective August 29, 1997, Gold Capital became a wholly-owned subsidiary of
Globex Mining Enterprises, Inc., referred to as "Globex", a Canadian corporation
with shares traded on the Toronto stock exchange under the symbol GMX, pursuant
to the merger of Gold Capital with a subsidiary of Globex, referred to as the
"Gold Capital Merger". With the Gold Capital Merger the Company and TSVLP
received an aggregate of 631,905 shares of Globex common stock in exchange for
shares of Gold Capital received upon conversion of its Preferred Stock and
other shares of Gold Capital received for interest on the Preferred Stock and
other liabilities of Gold Capital to the Company. Globex raised approximately
$12 million in equity related to the Gold Capital Merger, a significant portion
of which was invested in the Project Joint Venture. The Company agreed to amend
the Project Joint Venture Agreement effective upon the Gold Capital Merger.
Included in the terms of the amendment, Gold Capital i) paid off the balance of
the Promissory Note to TSVLP in the amount of $1,206,449 including $66,804 of
accrued interest, ii) agreed to finance any capital requirements of TSVLP after
Commencement of Commercial Production, and iii) agreed to pay TSVLP $60,000 per
month in minimum cash distributions during a 36 month period commencing
September 1, 1998. Gold Capital paid $120,000 of the required minimum cash
distributions to TSVLP through the date of the transaction with TSHI
effective February 26, 1999, described above. The amendment also increased the
maximum recoupment amount from $6 million to $11.25 million which amount was to
be reimbursed to Gold Capital from a preferential portion (84%) of cash flows
from the operations of the Properties, if any.
The Company recognized the gain from the sale of the 60% interest in the Tonkin
Springs Properties to Gold Capital using the installment method of accounting.
At August 29, 1997, there was $1,789,100 in deferred gain remaining which was
associated with the Gold Capital common stock received in exchange for Gold
Capital Preferred Stock. With the Gold Capital Merger this deferred gain was
eliminated as non-realizable as provided under the installment method of
accounting. The shares of Globex were sold during 1999 for net proceeds of
approximatley $57,453 which represented a loss of $5,105.
Loan Settlement Agreement with FABC
Effective February 21, 1992, the Company entered into a Loan Settlement
Agreement with its former senior secured lender, French American Banking
Corporation, referred to as "FABC". As partial consideration to FABC under that
agreement the Company entered into an agreement between Tonkin Springs Gold
Mining Company, referred to as "TSGMC" and 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.
Competitive Business Conditions
The exploration for, and the acquisition and development 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. Our present limited cash flow means that our ability to
compete for properties to be explored and developed is more limited than in the
past. We believe that competition for acquiring mineral prospects will
continue to be intense in the future. Therefore, we may have to undertake
greater risks than more established companies in order to compete. The market
price for gold depends on numerous factors beyond our 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. We believe that the loss of
these customers would not affect our business.
Patents, Trademarks, Licenses, Franchises, Concessions
We own three United States patents (expiring in 2008) and two Republic of South
Africa patents covering various aspects of our bio-oxidation technology. If
feasible, we intend to exploit our bio-oxidation expertise, technology and
patents to help create business opportunities in the gold mining business.
We also own two Chilean patents related to its bio-oxidation technology. No
research and development expenditures have been incurred during the last two
years.
We do not own any trademarks, licenses, franchises or concessions, except mining
interests granted by governmental authorities and private landowners. No
portion of our business is subject to renegotiation of profits or termination
of contracts or subcontracts at the election of the government.
Government Regulations
In connection with mining, milling and exploration activities, we are 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.
There currently are pending in the U.S. Congress five bills that would revise in
various respects the provisions of the Mining Law of 1872, but it is unlikely
that any of this legislation will be enacted in this Congress before its
adjournment. However, if 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.
Our 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 our mining, milling and exploration activities, we are
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 is not
aware of any material violations of environmental permits, licenses or
approvals issued with respect to our operations.
The Company through TSVLP, owns a 40% interest in the Tonkin Springs Limited
Liability Company whose primary asset is the Tonkin Springs properties, and is
jointly responsible for the reclamation obligations related to disturbances at
Tonkin Springs. In 1997 Gold Capital posted a reclamation cash bond in the
preliminary amount of $1.3 million with the appropriate governmental agencies
for the Tonkin Springs Properties. An updated reclamation plan and projected
cost estimate for the Properties is anticipated to be prepared and submitted
by TSHI during year 2000 which will include updated reclamation costs
associated with current disturbances at the Properties. The plan will be filed
with appropriate governmental agencies (the Nevada Department of Environmental
Protection and the Federal Bureau of Land Management) for review and approval.
This process could result in an increase or decrease to the reclaimation bond
requirements. Any increase prior to the Cut-Off date would be the funding
responsibility of TSHI under the Operating Agreement.
The Company has transferred its interest in several mining properties over the
past years. We could remain potentially liable for environmental enforcement
actions related to our prior ownership interest of such properties. However, we
have no reasonable belief that any violation of relevant environmental laws or
regulations has occurred regarding these transferred properties. We are 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 our operations. The Secretary of the Interior has announced his
intent to undertake rule making procedures to impose more comprehensive
surface management regulations on mineral operations of Federal lands. We
cannot now accurately predict or estimate the impact of any such future laws or
regulations on our operations.
Employees
At December 31, 1999, we Company had 3 employees, each of whom were employed on
a full-time basis.
ITEM 2. DESCRIPTION OF PROPERTIES.
Tonkin Springs Properties
General
Through February 26, 1999, the Company through TSVLP held a 40% undivided
ownership interest in the Tonkin Springs properties located in Eureka County,
Nevada, subject to the Project Joint Venture under the 1993 Agreement. Until
that date Gold Capital owned the remaining 60% undivided interest in Tonkin
Springs, and was project manager. Effective February 26, 1999, TSVLP and Gold
Capital terminated the 1993 Agreement and each retained their respective 40% and
60% undivided interests in Tonkin Springs. Gold Capital then immediately sold
it's 60% interest in Tonkin Springs to TSHI, and then TSHI and TSVLP each
immediately contributed their respective undivided interests in Tonkin Springs
into the TSLLC in exchange for 40% and 60%, respectively, of the equity stock of
TSLLC. The Tonkin Springs properties are located on the Battle Mountain-Cortez
Trend, approximately 45 miles northwest of Eureka, Nevada.
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 23,295 acres of Federal land located along the Battle Mountain
- - Cortez Trend approximately 45 miles northwest of the town of Eureka in Eureka
County, Nevada. Part of the mineralized material at the Project is contained in
sulfides and will require pre-treatment prior to the conventional mill or heap
recovery processing. An important part of the mineralized material at the
Project is in oxide form, located at the Tonkin North deposit, and is amenable
to conventional heap leach extraction methods.
Recent Activities at Tonkin Springs
During 1999, TSHI, as project manager, has focused on the exploration potential
of the Tonkin Springs Properties as well as the regulatory permitting and
environmental processes, claim management and care and maintenance of the
properties. The manager has assembly an experienced exploration team of
employees and contract personnel at Tonkin Springs and has organized and
compiled existing and historic exploration data in a more useful computerized
data base. In addition, geologic mapping and surface rock chip sampling were
conducted where needed to fill in open areas and geophysical studies were
obtained over certain areas of the properties. From these activities the
exploration team has identified various locations considered high priority
exploration areas. These areas of exploration priority are generally outside
of the "mine corridor" where we had previously concentrated our exploration
efforts and where the existing ore grade mineralization is presently located.
Current exploration drilling at the project commenced during late fourth
quarter of 1999 continuing in year 2000 and is anticipated to test three of the
high priority exploration areas. Other areas of exploration interest also
remain to be evaluated on the extensive 36 square mile property package. The
preliminary budget for Tonkin Springs for year 2000 includes funding for an
estimated 35,000 feet of reverse circulation drilling, related road construction
and permitting costs for testing new target areas as well as exploring
open-ended high-grade mineralization in the existing pit areas. Also,
additional geophysical studies, detailed mapping and sampling is anticipated
to evaluate new targets as they are generated.
In addition to the new high priority exploration targets discussed above, within
the mine corridor target area additional drilling is planned to explore for
mineralization in the deeper and peripheral zones of the known mineralization
and to search for and delineate additional gold mineralization outside of these
areas.
During the fourth quarter of 1998, we submitted samples of Tonkin Springs
sulfide ore to Newmont Mining Corporation for the purposes of having Newmont
test the ore with their proprietary and commercially proven N2TEC flotation
technology. The test work involved grinding the ore followed by flotation
using the N2TEC process to concentrate the gold bearing sulfides. While the
test work was limited in sample size and scope, the tests did indicate that the
sulfide ores from Tonkin Springs are amenable to N2TEC flotation with the gold
in the ore recovered either in a concentrate form or through cyanidation
resulting in a combined recovery of up to 91 percent. This test work indicates
that an additional, commercially proven technology is available to process the
Tonkin Springs ores and could be used with minimal addition to the existing
2,000 ton per day mill facility located at the Project. TSLLC is continuing
additional test work and discussions with Newmont related to the N2TEC
technology.
TSLLC is also progressing with its Mine Plan for the Tonkin Springs Project
which is anticipated to be submitted to the appropriate government regulatory
authorities in the near future. Other environmental activities include
hydrological studies and evaluation which would be required to be completed
prior to commencing any operations at the Project, and the care and maintenance
of areas of prior disturbances.
At the Tonkin Springs properties, access 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 1,225 claims. Of that amount,
an aggregate of 279 of the unpatented mining claims covered by the Project are
leased from unaffiliated third parties pursuant to two mining leases. One lease
at Tonkin North, which covers 269 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, had an initial term which expired August 9, 1996, and has been
extended on a year to year basis 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 Tonkin North 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. TSLLC is required to
perform an annual work commitment and the lease includes a defined area of
interest extending from the boundaries of certain claims. Certain of the
claims which are included in the Tonkin North 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 913 of the unpatented mining claims covered by the Project, as
well as 33 millsites claims, are owned by TSLLC. 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 its
royalty in the form of gold and silver upon proper notice to TSLLC. The
remaining claims and the millsites are not subject to any royalties.
In March, 1994, 215 claims covering approximately 4,400 acres in the vicinity of
the Tonkin Springs project were acquired from an unaffiliated third party. 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.
History of Property
In late 1989, U.S. Gold 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 mineralized
material 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. We 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 we put the operation on stand-by status beginning in June, 1990, while
we concluded a transaction with a wholly-owned subsidiary of Homestake Mining
Company of California, hereafter called "Denay". In the February 13, 1991
Denay transaction, we sold a 51 percent undivided interest in the Tonkin Springs
properties to Denay and the parties contributed their respective interests in
the properties into the TSVLP. Ownership in the TSVLP was initially: Tonkin
Springs Gold Mining Company, also referred to as "TSGMC", a wholly-owned
subsidiary of the Company- 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. Effective October 9, 1992, Denay withdrew
from TSVLP as was provided for and governed by the Limited Partnership Agreement
and the partnership interest of the withdrawing parties reverted to TSGMC and
U.S. Environmental Corporation, also referred to as "USEC" and a wholly-owned
subsidiary of the Company. Upon the withdrawal by Denay from the TSVLP, the
Company aquired 100% ownership of the partnership with our interest held 99.5%
by TSGMC and 0.5% by USEC. Effective December 31, 1993, TSVLP sold a 60%
interest in Tonkin Springs to Gold Capital Corporation. As noted above, TSVLP
now holds a 40% interest in the Tonkin Springs LLC which owns the Tonkin Springs
properties.
ITEM 3. LEGAL PROCEEDINGS.
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock currently trades on the OTC Bulletin Board under the symbol
"USGL." Until September 25, 1998, our common stock was traded on The Nasdaq
SmallCap Market. The tables below set forth the high and low sales prices
for our common stock as quoted by The Nasdaq SmallCap Market through September
25, 1998 and, thereafter, as reflected on the OTC Bulletin Board, for the fiscal
years ended December 31, 1999 and 1998. 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, 1999 High Low
First Quarter $ 0.188 $ 0.125
Second Quarter $ 0.280 $ 0.125
Third Quarter $ 0.310 $ 0.125
Fourth Quarter $ 0.290 $ 0.150
Fiscal Year Ended
December 31, 1998 High Low
First Quarter $ 0.938 $ 0.375
Second Quarter $ 0.750 $ 0.438
Third Quarter $ 0.688 $ 0.313
Fourth Quarter $ 0.500 $ 0.140
As of March 1, 2000, there were approximately 7,500 record holders for our
common stock.
No dividends have ever been paid with respect to our common stock and we do not
anticipate the payment of dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The principal property of U.S. Gold Corporation (the "Company") is it's 40
percent interest in Tonkin Springs (the "Properties"). The Company holds it's
interest in the Properties through Tonkin Springs Venture Limited Partnership
("TSVLP"), a partnership owned by subsidiaries of the Company.
Until February 26, 1999, the Properties were subject to the Tonkin Springs
Project Joint Venture as amended (the "1993 Agreement") with Gold Capital
Corporation ("Gold Capital") owner of 60 percent, project manager and
responsible for all funding. Effective February 26, 1999 (the "Effective Date")
TSVLP and Gold Capital terminated the 1993 Agreement and each retained their
respective 40% and 60% undivided interests in the Properties.
Gold Capital then immediately sold it's 60% undivided interest in the Properties
to Tonkin Springs Holdings Inc., a Colorado corporation ("TSHI") which is owned
by subsidiaries of Sudbury Contact Mines Limited, an Ontario, Canada corporation
("Sudbury")(SUD:TSE), which is itself a subsidiary of Agnico-Eagle Mines
Limited, an Ontario, Canada corporation ("Agnico-Eagle") (NYSE:AME).
TSVLP and TSHI (the "Members") then immediately contributed their respecitive
undivided interests in the Properties into a new limited liability company,
Tonkin Springs LLC ("TSLLC") in exchange for 40% and 60%, respectively, of the
equity membership interest of TSLLC. TSHI is manager of TSLLC.
Activities at Tonkin Springs Properties
During 1999, TSLLC was primarily involved with the assembly of an experienced
exploration team of employees and contract personnel at the Tonkin Springs
Project, the organization and compilation of existing and historic exploration
data in a more useful computerized data base, and in the addition of geologic
mapping and surface rock chip sampling where appropriate. From these activities
the exploration team has initially identified various locations considered high
priority exploration areas. These areas are generally outside of the "mine
corridor" where the Company had previously concentrated its exploration efforts
and where the existing ore grade mineralization is presently located. Current
exploration drilling at the project commenced during the late forth quarter of
1999 continuing into year 2000 and is anticipated to test three of the high
priority exploration areas. Other areas of exploration interest also remain
to be evaluated on the extensive 36 square mile property package.
The preliminary budget for Tonkin Springs for year 2000 includes funding for an
estimated 35,000 feet of reverse circulation drilling, related road construction
and permitting costs for testing new target areas as well as exploring open-
ended high-grade mineralization in the existing pit areas. In addition,
additional geophysical studies, detailed mapping and sampling is anticipated
to evaluate new targets as they are generated.
In addition to the new high priority exploration targets discussed above, within
the mine corridor target area additional drilling is planned to explore for
mineralization in the deeper and peripheral zones of the known resources and
to search for and delineate additional gold resources outside of these areas.
During the fourth quarter of 1998, the Company submitted samples of Tonkin
Springs sulfide ore to Newmont Mining Corporation for the purposes of having
Newmont test the ore with their proprietary and commercially proven N2TEC
flotation technology. The test work involved grinding the ore followed by
flotation using the N2TEC process to concentrate the gold bearing sulfides.
While the test work was limited in sample size and scope, the tests did
indicate that the sulfide ores from Tonkin Springs are amenable to N2TEC
flotation with the gold in the ore recovered either in a concentrate form or
through cyanidation resulting in a combined recovery of up to 91 percent. This
test work indicates that an additional, commercially proven technology may be
available to process the Tonkin Springs ores and could be used with minimal
addition to the existing 2,000 ton per day mill facility located at the Project.
The Company understands that TSLLC is continuing discussions amd additional test
work with Newmont related to the N2TEC technology.
Tonkin Springs LLC is also progressing with its Mine Plan for the Tonkin Springs
Project which his been submitted to the appropriate government regulatory
authorities. Other environmental activities include hydrological studies and
evaluation which would be required to be completed prior to commencing any
operations at the Project, and the care and maintenance of areas of prior
disturbances.
Changes in Financial Condition
As noted above, effective February 26, 1999, and in exchange for contributing
it's respective 40% undivided interests in the Properties, TSVLP received 40%
of the equity membership interest of TSLLC. The deemed amount of the Initial
Contribution of TSVLP to TSLLC is $2 million and the deemed amount of TSHI's
Initial Contribution to TSLLC is $3 million. The objective of TSLLC is the
exploration, evaluation and, if justified, the development and mining of mineral
resources in the Properties.
At the Effective Date, TSHI paid to TSVLP $190,000, and agreed to make
additional payments to TSVLP in the amount of $45,000 per month commencing
March 1, 1999 and continuing for an additional 33 months (collectively the
"Minimum Payments to TSVLP"). The aggregate of Minimum Payments to TSVLP,
$1,720,000, represent consideration for the terms and conditions of the TSLLC,
and one half of such payments will be added to TSHI's Recoupable Amount as
discussed further below. Through December 31, 1999, the Company has recieved
$685,000 in Minimum Payments and as of that date the Company has recorded a
$1,035,000 receivable due from the TSLLC reflecting the remaining Minimum
Payments to TSVLP of which $495,000 was classified as a current asset. The
Company also has recorded a $1,035,000 deferred credit with the effect that
the entire TSHI receivable is offset by a deferred credit.
Under the Members' Agreement and the Operating Agreement of TSLLC, TSHI is
required to fund all costs related to the Properties, including all holding,
administrative, operational and exploration costs, until TSHI has first
expended $4 million on Exploration of the Properties (the "Cut-Off Date"). All
expenditures funded by TSHI prior to the Cut-Off Date shall be added to TSHI's
Recoupable Amount which has as its opening balance the sum of $5,625,000, which
was intended to represent approximately one-half of the recoupment account
balance of Gold Capital under the 1993 Agreement as of the Effective Date. As
of December 31, 1999, TSHI has reported that it has spent $703,473 in
Exploration and that the Recoupmemt Balance as of that date was $7,338,022.
The Operating Agreement of the TSLLC defines Commencement of Commercial
Production ("CCP"). After CCP, 60% of positive cash flow from operations of the
Properties ("Cash Flow"), if any, shall be distributed to TSHI until TSHI has
recovered its Recoupment Amount, and the remaining 40% of Cash Flow shall be
distributed to the Members based upon their respective ownership interest on
a calendar quarter basis. Therefore, initially during the period in which
TSHI is thus receiving preferential payments, TSVLP shall receive 16% of Cash
Flow from operations. Cash Flow otherwise due TSVLP shall first be applied to
reduce any Elected Loans outstanding from TSHI, as discussed further below.
On the last day in the calendar month in which CCP is achieved, TSHI shall pay
TSVLP an additional amount to be calculated by multiplying $15,000 times the
number of months from the Effective Date through the month in which CCP is
achieved (the "Lump-Sum Payment").
After the Cut-Off Date, TSHI is required to exercise reasonable efforts to
attempt to obtain third party project financing for any development of the
Properties requiring funding in excess of $20 million. After the Cut-Off Date,
TSVLP is required to fund its 40% share of all costs of the Properties or be
subject to dilution under a formula. However, as long as TSHI owns at least
50% interest in TSLLC, TSHI is obligated to loan TSVLP its share of funding of
an adopted program and budget after the Cut-Off Date under one-year term
loans (the "Elected Loan") with an interest rate of LIBOR plus 2%. If,
however, TSVLP does not repay an Elected Loan when due, TSHI shall have no
further obligation to make additional Elected Loans to TSVLP and the amounts
of defaulted Elected Loans and accrued interest thereon (the "Default Amount")
shall be incorporated into the computation of dilution of TSVLP's working
interest under a formula. If the ownership interest of any Member falls to
10 percent or less as a result of dilution, then such Member shall be
deemed to have withdrawn from the TSLLC and to have automatically relinquished
and transferred its interest to the other Member and upon such relinquishment
the withdrawing Member shall be granted an overriding 2% net smelter royalty
(the "NSR") on products subsequently extracted, removed and sold from the
Properties.
The Company recognized neither a gain nor a loss on the termination of the 1993
Agreement or with the contribution of its 40% undivided interest in the
Properties to the TSLLC.
Under the old 1993 Agreement which was terminated February 26, 1999, Gold
Capital was required to pay TSVLP $60,000 per month in minimum cash
distributions during a 36 month period commencing September 1, 1998. Gold
Capital made the required payments for September and October of 1998 but did
not make any further payments. With the termination of the 1993 Agreement,
the obligations by Gold Capital were also terminated. Gold Capital funded all
costs related to Tonkin Springs through the transaction with TSHI effective
February 26, 1999, described above.
Liquidity and Capital Resources
As of December 31, 1999, the Company had working capital of $360,820 made up of
current assets of $543,480 and current liabilities of $182,338. During year
2000, the Company anticipates receipt of $495,000 in Minimum Payments to TSVLP
from TSHI. The Company may also issue equity in public or private transactions
to raise additional working capital. These items are the primary source of
working capital presently anticipated during 2000. Net cash used in operations
decreased from $728,626 for 1998 to $686,086 for 1999, reflecting decreases
during 1999 in cash paid to suppliers and employees. Cash flow from investing
activities increased to $742,010 in 1999 from $116,581 in 1998, primarily
reflecting receipt of $685,000 in Minimum Payments from TSHI and proceeds from
the sale of all Globex common stock. Cash flows from financing activities
decreased from $(2,000) for 1998 to $(9,398) in 1999 reflecting higher payments
on installment purchase contracts.
Results of Operations - 1999 Compared to 1998
For 1999 the Company recorded a net loss of $59,762 or $.00 per share, compared
to a loss for 1998 of $2,790,159 or $.20 per share. The 1998 results included
a write down of Globex securities held for sale of $1,927,871 and a write off
of deferred tax asset of $41,203.
Through December 31, 1999, the Company has recieved $685,000 in Minimum Payments
from TSHI of which $640,000 have been recorded as income for 1999. Also during
1999 the Company sold its shares of stock in Globex which generated proceeds of
$57,453 and recorded a related loss of $5,105. The 1998 results include
$120,000 in payments from Gold Capital under the 1993 Agreement.
General and administrative expense decreased approximately $208,256 in 1999 to
$654,164 primarily reflecting lower rent and salaries expense as well as reduced
investor relations and financial consulting costs.
As of December 31, 1999, the Company has approximately $11,200 in alternative
minimum tax credits which can be carried forward and utilized against future tax
income as well as capital loss carryforward of approximatley $1,900,000 which
are available for capital gains with $2,000,000 expiring in 2002 and $700,000
expiring in 2004.
Other
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS
IN THIS REPORT WHICH RELATE TO THE COMPANY'S PLANS, OBJECTIVES OR FUTURE
PERFORMANCE MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS ARE BASED ON CURRENT EXPECTATIONS OF MANAGEMENT. ACTUAL
STRATEGIES AND RESULTS MAY DIFFER MATERIALLY FROM THOSE CURRENTLY
EXPECTED BECAUSE OF FACTORS INCLUDING GOLD PRICE, MINERALIZED MATERIAL
GRADES, METALLURGICAL RECOVERY, OPERATING COSTS, MARKET VALUATION, AND
PROJECT OPERATOR'S DECISIONS AND PERFORMANCE UNDER THE TONKIN SPRINGS
LIMITED LIABILITY COMPANY, AS WELL AS OTHER RISKS AND UNCERTAINTIES.
ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements
Report of Independent Certified Public Accountants
Consolidated Statements of Operations for the years
ended December 31, 1999 and 1998
Consolidated Balance Sheet at December 31, 1999
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1999 and 1998
Consolidated Statements of Cash Flows for the
years ended December 31, 1999 and 1998
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
U.S. Gold Corporation
Lakewood, Colorado
We have audited the accompanying consolidated balance sheet of U.S. Gold
Corporation as of December 31, 1999 and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the two years ended December 31, 1999 and 1998. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the U.S. Gold
Corporation as of December 31, 1999, and the results of its operations and its
cash flows for each of the two years ended December 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
Stark Tinter & Associates, LLC
Certified Public Accountants
March 17, 2000
Denver, Colorado
U.S. GOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1999 1998
Project payments $640,000 $120,000
Interest income 118 8,934
Gain (loss) on sale of assets (12,566) 2,010
627,552 130,944
Costs and expenses:
General and administrative 654,560 862,420
Consulting fees, related Parties (Note 12) 10,000 61,480
Loss on securities held for sale - 1,927,871
Interest 6,916 2,630
Depreciation 16,230 25,499
687,706 2,879,900
Loss before income taxes (60,154) (2,748,956)
Provision for income taxes (Note 6) - -
Write off of deferred tax asset, net (Note 6) - 41,203
Net loss $(60,154) $(2,790,159)
Basic and diluted per share data:
Basic $(0.00) $(0.20)
Diluted $(0.00) $(0.20)
The accompanying notes are an integral part of these consolidated financial
statements.
U.S. GOLD CORPORATION
CONSOLIDATED BALANCE SHEET
December 31, 1999
ASSETS
Current assets:
Cash and cash equivalents $48,480
Project payments receivable (Note 2) 495,000
Total current assets 543,480
Project payments receivable (Note 2) 540,000
Investment in Tonkin Springs LLC (Note 2 and 3) 2,262,578
Other assets (Note 5) 62,574
$3,408,632
LIABILITIES, DEFERRED CREDIT & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $16,987
Installment purchase contracts (Note 10) 10,681
Related party payables (Note 11) 155,388
183,056
Installment purchase contracts, long-term (Note 10) 33,004
Deferred credit, project payments (Note 2) 1,080,000
Reserve for reclamation (Note 3) 640,000
Total liabilities and deferred credit 1,936,060
Commitments and contingencies (Note 4, 9 and 10) -
Shareholders' equity (Note 7):
Common stock, $.10 par value, 18,000,000
shares authorized; 13,964,665 shares issued
and outstanding 1,396,466
Additional paid-in capital 31,971,695
Accumulated deficit (31,895,589)
Total shareholders' equity 1,472,572
$3,408,632
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, 1999 AND 1998
Common Stock Additional
Par Paid-in
Shares Value Capital
Balance, January 1, 1998 13,927,469 $1,392,747 $31,969,459
Changes in unrealized loss
on securities available for sale - - -
Net Loss - - -
Balance, December 31, 1998 13,927,469 1,392,747 31,969,459
Exercise of stock options
(Note 7) 37,500 3,750 2,250
Treasury shares canceled (255) (26) (19)
Rounding of fractional
share holdings (49) (5) 5
Net loss - - -
Balance, December 31, 1999 13,964,665 $1,396,466 $31,971,695
U.S.GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, Continued
Unrealized
Loss on
Securities
Accumulated Available
Deficit for Sale
Balance, January 1, 1998 $(29,045,276) $(884,595)
Changes in unrealized loss
on securities available for sale - 884,595
Net Loss (2,790,159) -
Balance, December 31, 1998 (31,835,435) -
Exercise of stock options
(Note 7) - -
Treasury shares canceled - -
Rounding of fractional
share holdings - -
Net loss (60,154) -
Balance, December 31, 1999 $(31,895,589) $-
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,
1999 1998
Cash flows from operating activities:
Cash paid to suppliers and employees $(679,288) $(734,930)
Interest received 118 8,934
Interest paid (6,916) (2,630)
Cash used in operating activities (686,086) (728,626)
Cash flows from investing activities:
Cash received from project distributions 685,000 120,000
Capital expenditures (1,193) (5,431)
Sale of assets 58,203 2,012
Cash provided by investing activities 742,010 116,581
Cash flows from financing activities:
Payments on installment purchase contracts (9,398) (2,000)
Cash used in financing activities (9,398) (2,000)
Increase (decrease) in cash and cash equivalents 46,526 (614,045)
Cash and cash equivalents, beginning of year 1,954 615,999
Cash and cash equivalents, end of year $48,480 $1,954
Reconciliation of net loss to cash used in operating activities:
Net loss $(60,154) $(2,790,159)
Items not requiring (providing) cash:
Loss on securities held for sale - 1,927,871
Depreciation, depletion and amortization 16,230 25,499
Write-off of deferred tax asset, net - 41,203
Decrease in other assets related
to operations (649,280) -
Increase (decrease) in liabilities
related to operations 7,118 66,960
Cash used in operating activities $(686,086) $(728,626)
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 24, 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 subsidiaries, as well as the
accounts of the wholly-owned 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.
Equity Method Investment: Investment in Tonkin Springs 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 the lesser of cost or its estimated realizable
value.
Property and equipment: Property 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. Permanent impairments are evaluated periodically based
upon expected future cash flows in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets."
This statement did not have an effect on the financial statements for the year
ended December 31, 1999 or 1998.
Depreciation: Depreciation of property 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 and equipment are being depreciated
using the straight-line method over the estimated economic lives ranging from
3 to 5 years.
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
environmental and reclamation expenditures are expensed as incurred.
Stock Option Plans: The Company applies APB Opinion 25, "Accounting for Stock
Issued to Employees", and related Interpretations in accounting for all stock
option plans. Under APB Opinion 25, no compensation cost has been recognized
for stock options issued to employees as the exercise price of the Company's
stock options granted equals or exceeds the market price of the underlying
common stock on the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation", requires the Company
to provide pro forma information regarding net income as if compensation costs
for the Company's stock option plans had been determined in accordance with the
fair value based method prescribed in SFAS No. 123. To provide the required pro
forma information, the Company estimates the fair value of each stock option at
the grant date by using the Black-Scholes option-pricing model.
Revenue Recognition: The Company recognizes revenues when earned.
Per share amounts: Statement of Financial Accounting Standards No. 128 provides
for the calculation of "Basic" and "Diluted" earnings per share. Basic earnings
per share includes no dilution and is computed by dividing income available to
common shareholders by the weighted-average number of shares outstanding during
the period (13,936,313 for 1999 and 13,927,469 for 1998). Diluted earnings per
share reflect the potential dilution of securities that could share in the
earnings of the Company, similar to fully diluted earnings per share. As of
December 31, 1999 and 1998, options are not considered in the computation of
diluted earnings per share as their inclusion would be antidilutive. The
implementation of this standard did not have a material effect on the
consolidated financial statements.
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 investment in the Tonkin Springs Project
is exposed to concentration of risk primarily because this investment is managed
by and funded by the other participant in the Tonkin Springs Limited Liability
Company ("TSLLC"), Tonkin Springs Holding, Inc. and this investment is dependent
upon the successful operations of TSLLC.
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.
Fair Value of Financial Instruments: Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments.
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 1999.
The respective carrying value of certain on-balance-sheet financial instruments
approximate their fair values. These financial instruments include cash and
cash equivalents, receivables and accounts payable. Fair values were assumed
to approximate carrying values for these financial instruments since they are
short term in nature and their carrying amounts approximate fair value or they
are receivable or payable on demand.
Recent Pronouncements: The FASB recently issued Statement No. 137, "Accounting
for Derivative Instruments and Hedging Activities-Deferral of Effective Date of
FASB Statement No. 133." The Statement defers for one year the effective date
of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The rule now will apply to all fiscal quarters of all fiscal years
beginning after June 15, 2000. In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging ACtivities," which is
required to be adopted in years beginning after June 15, 1999. The Statement
permits early adoption as of the beginning of any fiscal quarter after its
issuance. The Statement will require the Company to recognize all derivatives
on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives will either
be offset against the change in fair value of the hedged assets, liabilities,
or firm commitments through earnings or recognized in other comprehensive income
until the hedge item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
The Company has not yet determined if it will early adopt and what the effect
of SFAS No. 133 will be on the earnings and financial position of the Company.
2. Tonkin Springs Project
From December 31, 1993 until February 26, 1999, TSVLP, a partnership owned by
subsidiaries of the Company, held a 40 percent undivided interest in the Tonkin
Springs Properties (the "Properties") subject to a mining joint venture, the
Tonkin Springs Project Joint Venture as amended (the "1993 Agreement"), with
Gold Capital Corporation ("Gold Capital") being the holder of 60 percent
undivided interest and project manager. In August 1997, Gold Capital became a
wholly-owned subsidiary of Globex Mining Enterprises, Inc. ("Globex"), a
Canadian corporation with shares traded on the Toronto stock exchange
(symbol: "GMX") pursuant to the merger of Gold Capital with a subsidiary of
Globex (the "Gold Capital Merger"). With the Gold Capital Merger the Company
and TSVLP received an aggregate of 631,905 shares of Globex common stock in
exchange for shares of Gold Capital. During 1999, the Company sold its shares
of Globex for aggregate proceeds of $57,453 recognizing a loss of $5,105.
Effective February 26, 1999 (the "Effective Date") TSVLP and Gold Capital
terminated the 1993 Agreement and each retained their respective 40 percent and
60 percent undivided interests in the Properties. Gold Capital then immediately
sold its 60 percent undivided interest in the Properties to Tonkin Springs
Holdings Inc., a Colorado corporation ("TSHI") which is owned by subsidiaries
of Sudbury Contact Mines Limited, an Ontario, Canada corporation ("Sudbury")
(SUD:TSE), which is itself a subsidiary of Agnico-Eagle Mines Limited, an
Ontario, Canada corporation ("Agnico-Eagle") (AME:NYSE). TSHI then immediately
contributed its 60 percent undivided interest in the Properties into a new
limited liability company, Tonkin Springs LLC ("TSLLC") in exchange for 60
percent of the equity membership interest of TSLLC, and TSVLP contributed its
40 percent undivided interest in the Properties into TSLLC in exchange for 40
percent of the equity membership interest of TSLLC. The deemed amount of the
Initial Contribution of TSVLP to TSLLC is $2 million and for TSHI the Initial
Contribution to TSLLC is $3 million. The objective of TSLLC is the exploration,
evaluation and, if justified, the development and mining of mineralization in
the Properties.
Under the 1993 Agreement Gold Capital was obligated to pay TSVLP $60,000 per
month in minimum cash distributions during a 36 month period commencing
September 1, 1998. Gold Capital made the required payments for September and
October, 1998, but did not make any subsequent payments through the date of
termination of the 1993 Agreement.
Under the Members' Agreement and the Operating Agreement of the TSLLC, TSHI is
required to fund all costs related to the Properties, including all holding,
administrative, operational and exploration costs, until TSHI has first
expended $4 million on Exploration (exploration related costs only) of the
Properties (the "Cut-Off Date"). All expenditures funded by TSHI prior to the
Cut-Off Date, including Exploration, holding, administrative or other
operational costs of the Properties, shall be added to TSHI's Recoupable Amount
which has as its opening balance the sum of $5,625,000, which was intended to
represent approximately one-half of the recoupment account balance of Gold
Capital under the 1993 Agreement as of the Effective Date. TSHI has reported
that through December 31, 1999 the balance of Exploration expenditures on the
Properties is approximately $703,473 and that the balance of the Recoupable
Amount as of that date is approximatley $7,338,022. If TSHI should withdraw
from the TSLLC prior to Cut-Off, TSHI shall have no further right, title or
interest in the Properties of TSLLC and its ownership interest shall be deemed
transferred to TSVLP. In addition, TSHI shall remain obligated to TSVLP: (i) to
fund the remaining balance of the adopted Program and Budget in effect upon
termination, (ii) to complete its Minimum Work Commitment for Exploration
of the Properties in the amount of $2 million, or pay to TSVLP the deficiency,
(iii) to pay any unpaid Monthly Minimum Payments to TSVLP (as described further
below) that are due and payable, and (iv) to fund and satisfy all unfunded
liabilities to third parties arising out of operations conducted subsequent to
the Effective Date but prior to the date of TSHI's withdrawal or deemed
withdrawal. TSVLP and TSHI (the "Members") have designated Tonkin Springs
Management Co., a Colorado corporation ("TSMC", and an affiliate of TSHI) as the
initial Manager of the Properties with overall management responsibilities for
operations.
At the Effective Date, TSHI paid to TSVLP $190,000, and commencing March 1, 1999
TSHI began making additional payments to TSVLP in the amount of $45,000 per
month through December 1, 2001 (collectively "Minimum Payments to TSVLP").
During 1999, the Company received $685,000 in Minimum Payments to TSVLP of which
$640,000 are reflected in revenue in the Statements of Operations and $45,000
will be recognized as revenue in January, 2000. One half of Minimum Payments
to TSVLP are added to TSHI's Recoupable Amount as discussed further below (and
included in the December 31, 1999 balance as reported above). As of December
31, 1999, there remains recorded a $1,035,000 receivable due from the TSLLC
reflecting remaining Minimum Payments to TSVLP, of which $495,000 is classified
as a current asset, offset by a $1,080,000 deferred credit, with the effect that
the entire receivable is offset by a deferred credit.
The Operating Agreement of the TSLLC defines Commencement of Commercial
Production ("CCP"). After CCP 60 percent of positive cash flow from the
operations of the Properties ("Cash Flow"), if any, shall be distributed to TSHI
until TSHI has recovered its Recoupment Amount, and the remaining 40 percent of
Cash Flow shall be distributed to the Members based upon their respective
ownership interest on a calendar quarter basis. After TSHI has recovered the
Recoupment Amount, 100 percent of Cash Flow shall be distributed to the
Members in proportion to the Member's ownership interest. Therefore, initially
during the period in which TSHI is thus receiving preferential payments, TSVLP
shall receive 16 percent of Cash Flow, if any, from operations. Cash Flow other
wise due TSVLP shall first be applied to reduce any Elected Loans outstanding
from TSHI, as discussed further below.
On the last day in the calendar month in which CCP is achieved, TSHI shall pay
TSVLP an additional amount to be calculated by multiplying $15,000 times the
number of months from the Effective Date through the month in which CCP is
achieved (the "Lump-Sum Payment").
After the Cut-Off Date, TSHI is required to exercise reasonable efforts to
attempt to obtain third party project financing for any development of the
Properties requiring funding of more than $20 million. After the Cut-Off Date,
TSVLP is required to fund its 40 percent share of all costs of the Properties or
be subject to dilution under a formula. Either party may elect to contribute a
lesser amount or none towards its share of an adopted program and budget.
However, as long as TSHI owns at least 50 percent interest in TSLLC, TSHI is
obligated to loan TSVLP its share of funding of an adopted program and budget
after the Cut-Off Date under one-year term loans (the "Elected Loan") with an
interest rate of LIBOR plus 2 percent. If, however, TSVLP does not repay an
Elected Loan when due, TSHI shall have no further obligation to make additional
Elected Loans to TSVLP and the amounts of defaulted Elected Loans and accrued
interest thereon shall be incorporated into the computation of dilution of
TSVLP's working interest under a formula. If the ownership interest of any
Member falls to 10 percent or less as a result of the dilution formula, then
such Member shall be deemed to have withdrawn from the TSLLC and to have
automatically relinquished and transferred its interest to the other Member and
upon such relinquishment the withdrawing Member shall be granted an overriding 2
percent net smelter royalty (the "NSR") on products subsequently extracted,
removed and sold from the Properties.
The Company has guaranteed TSVLP's obligations under the TSLLC and TSVLP has
given a security interest (consisting of its ownership interest arising under
the TSLLC) in favor of TSHI to secure its performance under the TSLLC. Sudbury
has guaranteed certain obligations of TSHI. The Company recognized neither a
gain nor a loss on the termination of the 1993 Agreement or with the
contribution of its 40 percent undivided interest in the Properties to the
TSLLC.
3. Condensed Financial Information of Tonkin Springs LLC, unaudited
As noted in Footnote 2 above, effective February 26, 1999, the Company's
interest in the Tonkin Springs Properties were contributed into the Tonkin
Springs LLC with TSMC as manager. The following is the condensed balance sheet
of Tonkin Springs LLC as of December 31, 1999, and a condensed statement of
operations for the approximate 10 months then ended. All costs associated with
the Properties have been funded by TSHI.
STATEMENT OF OPERATIONS Period Ended
December 31, 1999
Interest income $45,625
Exploration expense 703,473
Property holding costs 735,174
Depreciation expense 46,345
1,484,992
Net loss (1,439,367)
BALANCE SHEET December 31, 1999
Assets:
Cash $82,790
Prepaid claim fees 115,607
198,397
Property, plant, equipment 5,092,693
Restricted time deposit for reclamation bond 1,347,224
Total assets $6,638,314
Liabilities, Reserves and Members' Equity:
Current liabilities $150,870
Reserve for reclamation 1,469,000
1,619,870
Members' Equity-
TSHI 3,018,444
TSVLP 2,000,000
Total members' equity 5,018,444
Total liabilities, reserves and members' equity $6,638,314
Note A. TSVLP and TSHI are jointly responsible for reclamation of disturbances
of the Properties. The current estimate of reclamation costs, on a 100 percent
basis, totals approximately $1.47 million of which TSVLP and the Company
reflects $640,000 on its balance sheet related to its 40 percent 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, tentatively set at $1.3 million, is the
responsibility of TSHI under the terms of the Tonkin Springs LLC prior to Cut-
Off. Tonkin Springs LLC has a cash bond posted in the initial amount of $1.3
million with the required governmental agencies secured by a restricted cash
time deposit for a total balance of reclamation deposits of $1,347,224.
4. Loan Settlement Agreement with FABC
On February 21, 1992, the Company, among other related things, entered into a
Loan Settlement Agreement with its senior secured lender, The French American
Banking Corporation ("FABC"). The Company discharged its debt to FABC and
terminated all prior security interests related thereto. As part of the
consideration to FABC under the Loan Settlement Agreement, the Company entered
into an agreement between Tonkin Springs Gold Mining Company, a wholly-owned
subsidiary of the Company ("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. 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 percent 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.
5. Other Assets
At December 31, 1999, property and equipment consisted of the following:
Office furniture and equipment $72,833
Trucks and autos 78,137
Equipment 13,513
164,483
Less: accumulated depreciation (112,953)
$51,530
The remainder of Other Assets consists of deposits, employee advances and
miscellaneous receivables.
6. Income Taxes
In various transactions entered into February 21, 1992, 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 are 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 1999, the Company estimates that tax loss carry
forwards totals approximately $4,828,000 expiring in year 2014. The Company has
an additional capital loss carryforward of approximately $1,900,000 which are
only available against capital gains from investment securities expiring in
years 2002 and 2004.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1999 are
presented below:
Deferred tax assets:
Alternative minimum tax credit carryfoward $11,200
Reclamation obligation 140,800
Net operating loss carryforward 1,062,200
Capital loss carryforward 268,400
Total gross deferred tax assets 1,482,600
Less valuation allowance (1,179,400)
Net deferred tax assets 303,200
Deferred tax liabilities:
Basis in TSVLP (303,200)
Total gross deferred tax liabilities (303,200)
Total net deferred tax asset $-
The Company believes that it is more likely than not that the net deferred tax
asset will not be realized. Therefore, the full valuation allowance has been
provided for net deferred tax assets.
A reconciliation of the tax provision for 1999 and 1998 at statutory rates is
comprised of the following components:
1999 1998
Statutory rate tax provision on book loss $(20,000) $(949,000)
Book to tax adjustments:
Gain (loss) from joint venture 12,000 (3,200)
Valuation allowance 8,000 952,200
Tax provision $0 $0
7. Shareholders' Equity
On July 21, 1998, the shareholders of the Company approved an amendment to the
Articles of Incorporation to increase the authorized shares of the Company from
15 million shares to 18 million shares. Stock options have been granted to key
employees, directors and others under the Non-Qualified Amended and Restated
Stock Option and Stock Grant Plan (the "Plan"). Options to purchase shares
under the Plan were granted at market value as of the date of the grant. The
number of shares reserved under the Plan is 2,500,000. On May 22, 1998, an
option of a member of the Board of Directors to purchase a total of 100,000
shares at an exercise price of $.97 per share was terminated without
consideration. Option to purchase a total of 100,000 shares at an exercise
price of $.53 per share were granted to a member of the Board of Directors on
May 22, 1998. There were no exercise of stock options during 1998. During
1999, options to purchase 2,148,295 at exercise prices of $.28 to $.53 per
share were terminated without consideration. On January 20, 1999, options to
purchase an aggregate of 2,148,295 shares at exercise price of $.16 per share
were granted to officers and members of the Board of Directors which options
expire five years after the grant date. Options for 37,500 shares at an
exercise price of $0.16 were exercised during 1999 in exchange for directors
fees payable. Options to purchase a total of 2,110,795 shares at an exercise
price of $.16 per share remain outstanding and unexercised as of December 31,
1999.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires the Company to
provide pro forma information regarding net income as if compensation cost for
the Company's stock option plans had been determined in accordance with the fair
value based method prescribed in SFAS No. 123. The Company estimates the fair
value of each stock option at the grant date by using the Black-Scholes option-
pricing model with the following weighted-average assumptions used: (1) for the
1999 grant: dividend yield of 0 percent; expected volatility of 4.6 percent;
risk free interest rate of 5.4 percent; and expected life of 4.1 years; and (2)
for the 1998 grant: dividend yield of 0 percent; expected volatility of 19.97
percent; risk free interest rate of 5.03 percent; and expected life of 10 years.
Under the accounting provisions of SFAS No. 123, the Company's net income (loss)
and net income (loss) per share would have been adjusted to the following pro
forma amounts:
1999 1998
Net loss
As reported $(60,154) $(2,790,159)
Pro forma $(141,529) $(2,811,557)
Basic net loss per share
As reported $(0.00) $(0.20)
Pro forma $(0.01) $(0.20)
1999 1998
Weighted Weighted
Average Average
Range of Exercise Range of Exercise
Shares Prices Shares Prices
Outstanding,
beginning of year 2,148,295 $.39 2,198,295 $.39
Granted 2,148,295 $.16 100,000 $.53
Exercised (37,500) $.16 - -
Canceled (2,148,295) $.39 (100,000) $.97
Expired - - (50,000) $.47
Outstanding,
end of year 2,110,795 $.16 2,148,295 $.39
Options exercisable,
end of year 2,110,795 $.16 2,148,295 $.39
Weighted average fair
value of option
granted during year $.04 $.21
The following table summarizes information about stock options outstanding at
December 31, 1999:
Options Outstanding Weighted Average Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/31/99 life Price at 12/31/99 Price
$.16 2,110,795 4.1 yrs. $.16 2,110,795 $.16
8. 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, 1999 and no contribution was made for the year ended
December 31, 1998. 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 $30,000 or 15 percent of that
employee's total compensation.
9. Lease Commitments and Contingencies
The Company has leased office space and equipment under noncancelable operating
leases which expire through December 2001. Future minimum lease payments as of
December 31, 1999 are as follows:
2000 $11,769
2001 $5,505
Rent expense during the years ended December 31, 1999 and 1998 on all operating
leases was approximately $22,011 and $75,600, respectively.
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.
10. Installment Purchase Contracts
The Company has installment purchase contracts collateralized by three vehicles
bearing an average interest of 9.3 percent per annum. Future maturities under
these contracts as of December 31, 1999 are as follows:
2000 $10,681
2001 $11,775
2002 $12,933
2003 $ 8,296
11. Statements of Cash Flows
The Company's statement of cash flows for the two year periods ended December
31, 1999 excludes the following non-cash investing and financing activities:
1999 1998
Acquisition of vehicles through
installment purchase contracts $24,845 $30,239
Stock options exercised in
exchange for directors fees payable $6,000 -
12. Related Party Transactions
On October 16, 1997, Mr. Douglas J. Newby, the managing partner of Moyes Newby,
became a director of the Company. Effective November 15, 1997 through February,
1999, the Company and Moyes & Newby entered into a month-to-month arrangement
whereby Moyes Newby provided the Company general corporate and financial
advisory services for a retainer of $5,000/month plus reimbursement of
reasonable out of pocket expenses. A total of $10,588 and $61,480 for the years
ended December 31, 1999 and 1998, respectively, was paid or accrued under this
arrangement.
During 1998 and 1999, the three executive officers of the Company made personal
cash loans to the Company to allow the Company to make critical payments to
third parties, in the aggregate amount of $28,576 through February 1999, which
loans were repaid to the three executives during 1999.
During 1998 and 1999, the executive officers of the Company voluntarily deferred
a portion of their base salary in order to conserve working capital of the
Company. As of December 31, 1999, the total amount of such voluntary deferral
was $144,888. Directors fees in the amount of $10,500 remain unpaid as of
December 31, 1999. All of these amounts are reflected as liabilities of the
Company as of December 31, 1999.
As of December 31, 1998, normal salaries (at the voluntarily reduced rates) for
the three executive officers of the Company were unpaid and accrued in the
aggregate of $59,625, which amounts were paid during 1999.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS on ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth certain information as to each officer and
director of the Company:
Board
Positions With Position
Name Age the Company Held Since Term Expires
William W. Reid 51 President, Chief 1979 Upon Successor's
Executive Officer Election
and Director
John W. Goth 72 Director 1987 Upon Successor's
Election
David C. Reid 49 Vice President 1993 Upon Successor's
and Director Election
Douglas J. Newby 42 Director 1997 Upon Successor's
Election
William F. Pass 53 Vice President, n/a n/a
Chief Financial Officer,
Secretary
WILLIAM W. REID-PRESIDENT, CHIEF EXECUTIVE OFFICER 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.
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 Royal Gold, Inc., a publicly traded company. For the
past ten years, Mr. Goth has been a self-employed mining consultant.
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. 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.
DOUGLAS J. NEWBY-DIRECTOR
Mr. Newby has been a director of the Company since October 16, 1997. From 1991
to 1999 Mr. Newby was managing partner of Moyes Newby & Co., Inc. a firm that
provided strategic corporate finance advice to the international natural
resource industry. He is currently managing director of Proteus Consultants,
a firm which is active in mining and other industries internationally.
WILLIAM F. PASS-VICE PRESIDENT, CHIEF FINANCIAL OFFICER, 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.
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.
Section 16(a) Beneficial Ownership Reporting Complaince
Based solely upon review of Forms 3 and 4 and amendments thereto furnished to
the Company during 1999 and Forms 5 and amendments thereto furnished to the
Company with respect to 1999, the Company is aware that Douglas J. Newby, a
director of the Company, filed a Form 4 report late reporting one transaction,
but from such review the Company is not aware that any other person, who at any
time during the fiscal year was a director, officer, beneficial owner of more
than ten percent of the stock of the Company, failed to file on a timely basis,
as disclosed in the above Forms, reports required by Section 16(a) during the
most recent fiscal year or prior years.
ITEM 10. EXECUTIVE COMPENSATION
Compensation of Officers
The following table summarizes the total compensation of the Executive Officers
of the Company for the Company's last three fiscal years. Except as set forth
below under "Stock Option Plan" and "Pension Plan," there were no compensation
plans for which cash or non-cash distributions, other than salaries, were made
during the last fiscal year:
Summary Compensation Table
Long Term
Annual Compensation Compensation
Awards-
Name and Securities All
Principal Underlying Other
Position Year Salary Bonus Options Compensation
William W. Reid, 1999 $240,444(1) $- 888,295(7) $-
President and 1998 $235,204(4) $- - $-
CEO 1997 $243,719 $150,000 - $22,500(8)
William F. Pass, 1999 $109,215(2) $- 295,000(7) $-
Vice President, 1998 $107,275(5) $- - $-
Chief Financial 1997 $111,054 $ 67,500 - $19,495(8)
Officer and
Secretary
David C. Reid, 1999 $120,430(3) $- 665,000(7) $-
Vice President 1998 $117,869(6) $- - $-
1997 $122,531 $ 75,000 - $21,530(8)
(1) The 1999 period amount includes $189,075 related to 1999 which was paid
in 1999 and $51,369 which was not paid and is owed the employee as of December
31, 1999. In addition, there still remains at December 31, 1999 $22,933 owed
the employee ralated to 1998.
(2) The 1999 period amount includes $86,099 related to 1999 which was paid in
1999 and $23,116 which was not paid and is owed the employee as of December 31,
1999. In addition, there still remains at December 31, 1999 $10,320 owed the
employee ralated to 1998.
(3) The 1999 period amount includes $94,746 related to 1999 which was paid in
1999 and $25,685 which was not paid and is owed the employee as of December 31,
1999. In addition, there still remains at December 31, 1999 $11,466 owed the
employee ralated to 1998.
(4) Of this amount, only $181,695 was paid and $53,509 was owed to the
employee as of December 31, 1998.
(5) Of this amount, only $83,196 was paid and $24,079 was owned to the
employee as of December 31, 1998.
(6) Of this amount, only $91,114 was paid and $26,755 was owned to the
employee as of December 31, 1998.
(7) During 1999, stock options to purchase 1,848,295 shares to Executive
Officers were voluntarily terminated without consideration. On January 20,
1999, options to purchase an aggregate of 1,848,295 shares at exercise price
$.16 per share were granted to Executive Officers.
(8) 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 performance of the Company. The Company
has not yet determined any contributions to the SEP for the year ended December
31, 1999. No contribution was made for the calendar year 1998 or 1987. The
Company made a contribution of 15% during year 1997 for calender year 1996.
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 $30,000 for calendar year 1999 or 15% of
that employee's total compensation.
Option Grants in Last Fiscal Year
During 1999 the following grants of stock options were made pursuant to the Non-
Qualified Stock Option and Stock Grant Plan to Executive Officers:
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted (#) in Fiscal Year Price ($/Sh) Date
William W. Reid 888,295 48% $0.16 January 20, 2004
William F. Pass 295,000 16% $0.16 January 20, 2004
David C. Reid 665,000 36% $0.16 January 20, 2004
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Table
Value Shown below is information at December 31, 1999 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 Unexercised
Underlying Unexercised In-the-Money Options
Options Held at at
Name December 31, 1999 (1) December 31, 1999 (2)
William W. Reid 888,295 $26,649
William F. Pass 295,000 $ 8,850
David C. Reid 665,000 $19,950
(1) These options were exercisable at December 31, 1999.
(2) Based upon the close price as reported by OTC Bulletin Board as of
December 31, 1999 ($0.19 per share).
(3) No options were exercised by Executive Officers during year ended
December 31, 1999.
Compensation of Directors
The Company reimburses its outside directors for reasonable expenses incurred by
them in attending meetings of the Board of Directors or of Committees of the
Board. During 1998 $4,922 in such expenses were incurred or paid while none
was incurred or paid during 1999. Additionally, effective January 1, 1999,
outside directors were paid $1,500 per quarter for services with an equal
amount deferred. During 1999, Mr. Goth received total compensation of $6,000
for his service as outside director for 1999 with the remaining $6,000 unpaid,
deferred and owed to him as of December 31, 1999 plus an additional $4,000
owned to Mr. Goth for deferred 1998 directors pay. During the same period Mr.
Newby received total compensation of $12,000 for his service as outside director
for 1999, including $6,000 of deferred compensation which was utilized to pay
for exercise of stock options during 1999, with $500 remaining unpaid and owed
to him as of December 31, 1999.
During 1999, stock options to purchase an aggregate 300,000 shares held by
diretors were voluntarily terminated without consideration. On January 20,
1999, options to purchase an aggregate of 300,000 shares at exercise price
$.16 per share were granted to such directors.
Employment Contracts
The Company entered into Employment Agreements effective January 1, 1994, as
amended June 1, 1995 and July 21, 1998 with William W. Reid, William F. Pass,
and David C. Reid (the "Employment Contracts") each of which was initially 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. During 1998 the Company gave written notice under each Employment
Contract that it was not automatically extending the term by an additional year
which resulted in such contracts having a term of four years subject to the
automatic extensions each year as discussed above. 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. During 1998
and 1999, the executives voluntarily deferred a portion of their base salary
in order to conserve working capital. As of December 31, 1999, the Company owed
salary to William Reid in the amount of $74,302, William F. Pass in the amount
of $33,436 and David C. Reid in the amount of $37,151.
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 (provided that the employee is not provided continued employment
for a minimum of three years with compensation and other business terms equal
to or more favorable to the employee than under the Employment Agreement)
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) 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.
During 1999, stock options to purchase an aggregate 1,848,295 shares to
Executive Officers were voluntarily terminated without consideration. Mr.
William W. Reid terminated options to purhcase 388,295 shares at an exercise
price of $.28 per share and options to purchase 500,000 shares at $.50 per
share. Mr. Pass terminated options to purhcase 195,000 shares at an exercise
price of $.28 per share and options to purchase 100,000 shares at $.50 per
share. Mr. David C. Reid voluntarily terminated options to purhcase 365,000
shares at an exercise price of $.28 per share and options to purchase 300,000
shares at $.50 per share. Effective January 20, 1999, options to purchase an
aggregate of 1,848,295 shares at exercise price $.16 per share (the market price
of the shares as of the date of the grants) were granted to Executive Officers
with an expiration date of January 21, 2004. Mr. William W. Reid recieved
options for 888,295, Mr. Pass recieved options for 295,000 shares and Mr.
David C. Reid revieved options to purchase 665,000 shares. The Compensation
Committee of the Company determined that each of the options should be granted
to each Executive Officer as additional incentive to the executive officer and
in recognition of the dedication of the executive officer to the successful
conduct of the business of the Company as well as in recognition of the
willingness of the executive officer to defer a portion of compensation under
his respective employment contract in order to conserve, in the near-term, the
working capital of the Company as noted above, and the making of loans to the
Company by the executive officer which funds were used to pay critical financial
obligaitons of the Company during 1998 and 1999, as more fully discussed in Item
12 below.
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 December 31, 1999, 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.
Percentage of
Name and Address of Number Class
Beneficial Owner Type of Ownership of Shares Beneficially Owned
William W. Reid Record and Beneficial 985,295(1) 6.6%
1620 Platte St,
Appt. 547
Denver, CO 80202
David C. Reid Record and Beneficial 684,970(2) 4.7%
2201 Quitmann St
Denver, CO 80212
William F. Pass Record and Beneficial 300,000(3) 2.1%
14820 W. 58th Pl
Golden, CO 80403
John W. Goth Record and Beneficial 200,000(4) 1.4%
15140 Foothill Road
Golden, CO 80401
Douglas J. Newby Record and Beneficial 62,500(5) 0.0%
5 White Street
Sag Harbour, New York 11963
Placer Dome U.S. Record and Beneficial 975,000 7.0%
Inc.
Suite 600-1055 Dunsmuir St.
Vancouver, British Columbia,
Canada V7X 1L3 (6)
Citigroup Inc. Record and Beneficial 3,162,373 22.7%
425 Park Avenue
New York, NY 10043 (7)
French American Record and Beneficial 2,142,171 15.3%
Banking Corporation
499 Park Avenue
New York, NY 10022
All officers and 2,232,765 13.9%
directors as a group
(5 persons)
(1) This number includes an option to purchase 888,295 shares at $.16 per
share.
(2) This number includes an option to purchase 665,000 shares at $.16 per
share.
(3) This number includes an option to purchase 295,000 shares at $.16 per
share.
(4) This number consists of an option to purchase 200,000 shares at $.16 per
share.
(5) This number includes an option to purchase 62,500 shares at $.16 per share.
(6) Placer Dome U.S. Inc. is a wholly owned subsidiary of Placer Dome Inc., a
Canadian public company.
(7) The securities are owned by The Travelers Indemnity Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Executive Officers
Commencing July 1, 1998, the three executive officers of the Company voluntarily
deferred a portion of their individual salaries in order to conserve working
capital of the Company. As of December 31, 1999, the total amount of such
voluntary deferral was $144,888 with William W. Reid owed $74,302, William F.
Pass owed $33,435 and David C. Reid owned $37,151.
During 1998 and 1999, the three executive officers of the Company made personal
interest-free cash loans to the Company to allow the Company to make critical
payments to third parties, in the aggregate amount of $28,579 through February
1999, which loans were repaid to the three executives during 1999. Of this
total, William W. Reid loaned the Company $9,663, William F. Pass loaned the
Company $10,812 and David C. Reid loaned the Company $8,104. As of December
31, 1998, salaries (at the voluntarily reduced rates) for the three executive
officers of the Company were unpaid and accrued in the aggregate of $59,625,
which amounts were paid during 1999, including $30,577 to William W. Reid,
$13,760 to William F. Pass, and $15,288 to David C. Reid.
Relationship with Moyes Newby & Co., Inc.
During a portion of 1998 and 1999 the Company and Moyes Newby & Co., Inc.
entered into a month to month arrangement whereby Moyes Newby provided the
Company general corporate and financial advisory services for a retainer of
$5,000/month plus reimbursement of reasonable out of pocket expenses, which
arrangement was terminated in February 1999, for a total paid or accrued of
$10,588 for 1999 and $61,480 for 1998. Douglas J. Newby is managing partner
of Moyes Newby & Co., Inc. and since October 16, 1997 has been a director of
the Company.
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 (incorporated by reference from the
Report on Form 10-KSB dated December 31, 1995, Exhibit 3.0).
3.1 Company's Bylaws, as Amended June 22, 1988 (incorporated by
reference from the Report on Form 10-KSB dated December 31, 1995,
Exhibit 3.1).
10.1 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).
10.2 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).
10.3 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).
10.4 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).
10.5 Amendment to Mining Venture Agreement dated effective August 29,
1997, by and between Tonkin Springs Venture Limited Partnership and
Gold Capital Corporation (incorporated by reference to the Report on
Form 10-QSB dated September 30, 1997, Exhibit 6.a).
10.6 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).
10.7 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).
10.8 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).
10.9 Members' Agreement of the Members of Tonkin Springs LLC by and
between Tonkin Springs Venture Limited Partnership and Tonkin
Springs Holdings Inc. dated February 26, 1999 (Incorporated by
reference from the Report on Form 10-KSB for the year ended December
31, 1998, Exhibit 10.9).
10.10 Operating Agreement of the Members of Tonkin Springs LLC by and
between Tonkin Springs Venture Limited Partnership and Tonkin
Springs Holdings Inc. dated February 26, 1999 (Incorporated by
reference from the Report on Form 10-KSB for the year ended December
31, 1998, Exhibit 10.10).
10.11 Amendment to Employment Agreement with William W. Reid dated July
21, 1998 (Incorporated by reference from the Report on Form 10-KSB
for the year ended December 31, 1998, Exhibit 10.11).
10.12 Amendment to Employment Agreement with William F. Pass dated July
21, 1998 (Incorporated by reference from the Report on Form 10-KSB
for the year ended December 31, 1998, Exhibit 10.12).
10.13 Amendment to Employment Agreement with David C. Reid dated July 21,
1998 (Incorporated by reference from the Report on Form 10-KSB for
the year ended December 31, 1998, Exhibit 10.13).
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 Stark Tinter & Associates LLC, to the incorporation by
reference of their audit report dated March 17, 2000, in the
Company's Form S-8.
*27 Financial Data Schedule
*Filed herewith.
(b) Reports on Form 8-K during the 4th quarter of 1998.
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 27, 2000 By /s/ William W. Reid
William W. Reid, President and
Chief Executive Officer
March 27, 2000 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 27, 2000 By /s/ William W. Reid
William W. Reid, Chairman of the Board
of Directors
March 27, 2000 By /s/ David C. Reid
David C. Reid, Exploration Vice President
and Director
March 27, 2000 By /s/ John W. Goth
John W. Goth, Director
March 27, 2000 By /s/ Douglas J. Newby
Douglas J. Newby, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the 1999 Form 10-KSB
and is qualified in its entirety by reference to such Form 10-KSB.
</LEGEND>
<CIK> 0000314203
<NAME> U.S. GOLD CORPORATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 48,480
<SECURITIES> 0
<RECEIVABLES> 495,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 543,480
<PP&E> 164,483
<DEPRECIATION> (112,953)
<TOTAL-ASSETS> 3,408,632
<CURRENT-LIABILITIES> 183,056
<BONDS> 0
0
0
<COMMON> 1,396,466
<OTHER-SE> 76,106
<TOTAL-LIABILITY-AND-EQUITY> 3,408,632
<SALES> 0
<TOTAL-REVENUES> 627,552
<CGS> 0
<TOTAL-COSTS> 664,560
<OTHER-EXPENSES> 16,230
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,916
<INCOME-PRETAX> (60,154)
<INCOME-TAX> 0
<INCOME-CONTINUING> (60,154)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (60,154)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby 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 reports dated March 17, 2000 and March 19, 1999, on our audits of the
consolidated statements of operations, change in shareholders equity and cash
flows for U.S. Gold Corporation as of and for the years ended December 31, 1999
and 1998, which reports are included in the 1999 and 1998 Annual Reports on
Form 10-KSB.
Stark Tinter & Associates, LLC
Certified Public Accountants
March 17, 2000
Denver, Colorado
