SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended October 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number: 0-12825
GAENSEL GOLD MINES, INC.
(Exact name of small business issuer in its charter)
Nevada 84-0916272
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
45110 Club Drive, Suite B
Indian Wells, California 92210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 360-1042
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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-K
or any amendment to this Form 10-K. [ ]
State issuer's revenues for its most recent fiscal year: None
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of February 28, 1997 was not determinable since the Common
Stock was not traded.
The number of shares outstanding of the issuer's classes of Common
Stock as of February 28, 1997:
Common Stock, $.0001 Par Value 218,379 Shares
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
Item 1. DESCRIPTION OF BUSINESS
Background
Gaensel Gold Mines, Inc., formerly named World Technologies & Trading company,
was incorporated under the name Chatham Energy Corporation on September 13,
1981, under the laws of the state of Nevada. From inception until June of 1984,
the company engaged in the business of acquiring and developing oil and gas
properties. In June of 1983 the company executed a letter of intent to merge
with Gaensel Gold Mines Cia, Ltd., a Bolivian real estate company, but the
merger failed to occur. The Company no longer engages in any business related to
oil and gas exploration or the extraction of natural resources.
Plan of Operation - General
Management anticipates that it will only participate in one potential business
venture. This lack of diversification should be considered a substantial risk in
investing in the Company because it will not permit the Company to offset
potential losses from one venture against gains from another.
The Company may seek a business opportunity with a firm which only recently
commenced operations, or a developing company in need of additional funds for
expansion into new products or markets, or seeking to develop a new product or
service, or an established business which may be experiencing financial or
operating difficulties and is in the need for additional capital which is
perceived to be easier to raise by a public company. In some instances, a
business opportunity may involve the acquisition or merger with a corporation
which does not need substantial additional cash but which desires to establish a
public trading market for its common stock. The Company may purchase assets and
establish wholly owned subsidiaries in various business or purchase existing
businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in which
to participate will be complex and extremely risky. Because of general economic
conditions, rapid technological advances being made in some industries, and
shortages of available capital, management believes that there are numerous
firms seeking the benefits of a publicly traded corporation. Such perceived
benefits of a publicly traded corporation may include facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for the principals of a business, creating a means for providing
incentive stock options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statutes) for all shareholders,
and other factors. Potentially available business opportunities may occur in
many different industries and at various stages of development, all of which
will make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex.
As is customary in the industry, the Company may pay a finder's fee for
locating an acquisition prospect. If any such fee is paid, it will be approved
by the Company's Board of Directors and will be in accordance with the industry
standards.
As part of any transaction, the acquired company may require that Management or
other stockholders of the Company sell all or a portion of their shares to the
acquired company, or to the principals of the acquired company. It is
anticipated that the sales price of such shares will be lower than the current
market price or anticipated market price of the Company's Common Stock. The
Company's funds are not expected to be used for purposes of any stock purchase
from insiders. The Company shareholders will not be provided the opportunity to
approve or consent to such sale. The opportunity to sell all or a portion of
their shares in connection with an acquisition may influence management's
decision to enter into a specific transaction. However, management believes that
since the anticipated sales price will be less than market value, that the
potential of a stock sale by management will be a material factor on their
decision to enter a specific transaction.
The above description of potential sales of management stock is not based upon
any corporate bylaw, shareholder or board resolution, or contract or agreement.
No other payments of cash or property are expected to be received by Management
in connection with any acquisition.
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The Company has not formulated any policy regarding the use of consultants or
outside advisors, but does not anticipate that it will use the services of such
persons.
The Company has, and will continue to have, insufficient capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes the Company will offer owners of business
opportunities the opportunity to acquire a controlling ownership interest in a
public company at substantially less cost than is required to conduct an initial
public offering. The owners of the business opportunities will, however, incur
significant post-merger or acquisition registration costs in the event they wish
to register a portion of their shares for subsequent sale. The Company will also
incur significant legal and accounting costs in connection with the acquisition
of a business opportunity including the costs of preparing post-effective
amendments, Forms 8-K, agreements and related reports and documents
nevertheless, the officers and directors of the Company have not conducted
market research and are not aware of statistical data which would support the
perceived benefits of a merger or acquisition transaction for the owners of a
business opportunity.
The Company does not intend to make any loans to any prospective merger or
acquisition candidates or to unaffiliated third parties.
Sources of Opportunities
The Company anticipates that business opportunities for possible acquisition
will be referred by various sources, including its officers and directors,
professional advisers, securities broker-dealers, venture capitalists, members
of the financial community, and others who may present unsolicited proposals.
The Company will seek a potential business opportunity from all known sources,
but will rely principally on personal contacts of its officers and directors as
well as indirect associations between them and other business and professional
people. It is not presently anticipated that the Company will engage
professional firms specializing in business acquisitions or reorganizations.
The officers and directors of the Company are currently employed in other
positions and will devote only a portion of their time (not more than one hour
per week) to the business affairs of the Company, until such time as an
acquisition has been determined to be highly favorable, at which time they
expect to spend full time in investigating and closing any acquisition for a
period of two weeks. In addition, in the face of competing demands for their
time, the officers and directors may grant priority to their full-time positions
rather than to the Company.
Evaluation of Opportunities
The analysis of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company. Management intends to
concentrate on identifying prospective business opportunities which may be
brought to its attention through present associations with management. In
analyzing prospective business opportunities, management will consider such
matters as the available technical, financial and managerial resources; working
capital and other financial requirements; history of operation, if any;
prospects for the future; present and expected competition; the quality and
experience of management services which may be available and the depth of that
management; the potential for further research, development or exploration;
specific risk factors not now foreseeable but which then may be anticipated to
impact the proposed activities of the Company; the potential for growth or
expansion; the potential for profit; the perceived public recognition or
acceptance of products, services or trades; name identification; and other
relevant factors. Officers and directors of each Company will meet personally
with management and key personnel of the firm sponsoring the business
opportunity as part of their investigation. To the extent possible, the Company
intends to utilize written reports and personal investigation to evaluate the
above factors. The Company will not acquire or merge with any company for which
audited financial statements cannot be obtained.
It may be anticipated that any opportunity in which the Company participates
will present certain risks. Many of these risks cannot be adequately identified
prior to selection of the specific opportunity, and the Company's shareholders
must, therefore, depend on the ability of management to identify and evaluate
such risk. In the case
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of some of the opportunities available to the Company, it may be anticipated
that the promoters thereof have been unable to develop a going concern or that
such business is in its development stage in that it has not generated
significant revenues from its principal business activities prior to the
Company's participation. There is a risk, even after the Company's participation
in the activity and the related expenditure of the Company's funds, that the
combined enterprises will still be unable to become a going concern or advance
beyond the development stage. Many of the opportunities may involve new and
untested products, processes, or market strategies which may not succeed. Such
risks will be assumed by the Company and, therefore, its shareholders.
The Company will not restrict its search for any specific kind of business, but
may acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially any stage of its corporate life. It is
currently impossible to predict the status of any business in which the Company
may become engaged, in that such business may need additional capital, may
merely desire to have its shares publicly traded, or may seek other perceived
advantages which the Company may offer.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, reorganization, joint venture,
franchise or licensing agreement with another corporation or entity. It may also
purchase stock or assets of an existing business. On the consummation of a
transaction, it is possible that the present management and shareholders of the
Company will not be in control of the Company. In addition, a majority or all of
the Company's officers and directors may, as part of the terms of the
acquisition transaction, resign and be replaced by new officers and directors
without a vote of the Company's shareholders.
It is anticipated that any securities issued in any such reorganization would
be issued in reliance on exemptions from registration under applicable Federal
and state securities laws. In some circumstances, however, as a negotiated
element of this transaction, the Company may agree to register such securities
either at the time the transaction is consummated, under certain conditions, or
at specified time thereafter. The issuance of substantial additional securities
and their potential sale into any trading market which may develop in the
Company's Common Stock may have a depressive effect on such market. While the
actual terms of a transaction to which the Company may be a party cannot be
predicted, it may be expected that the parties to the business transaction will
find it desirable to avoid the creation of a taxable event and thereby structure
the acquisition in a so called "tax free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code of 1986, as amended (the "Code").
In order to obtain tax free treatment under the Code, it may be necessary for
the owners of the acquired business to own 80% or more of the voting stock of
the surviving entity. In such event, the shareholders of the Company, including
investors in this offering, would retain less than 20% of the issued and
outstanding shares of the surviving entity, which could result in significant
dilution in the equity of such shareholders.
As part of the Company's investigation, officers and directors of the Company
will meet personally with management and key personnel, may visit and inspect
material facilities, obtain independent analysis or verification of certain
information provided, check reference of management and key personnel, and take
other reasonable investigative measures, to the extent of the Company's limited
financial resources and management expertise.
The manner in which each Company participates in an opportunity will depend on
the nature of the opportunity, the respective needs and desires of the Company
and other parties, the management of the opportunity, and the relative
negotiating strength of the Company and such other management.
With respect to any mergers or acquisitions, negotiations with target company
management will be expected to focus on the percentage of the Company which
target company shareholders would acquire in exchange for their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
lesser percentage ownership interest in the Company following any merger or
acquisition. The percentage ownership may be subject to significant reduction in
the event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the Company can be expected to have a
significant dilative effect on the percentage of shares held by the Company's
then shareholders, including purchasers in this offering.
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The Company will not have sufficient funds (unless it is able to raise funds in
a private placement) to undertake any significant development, marketing and
manufacturing of any products which may be acquired. Accordingly, following the
acquisition of any such product, the Company will, in all likelihood, be
required to either seek debt or equity financing or obtain funding from third
parties, in exchange for which the Company would probably be required to give up
a substantial portion of its interest in any acquired product. There is no
assurance that the Company will be able either to obtain additional financing or
interest third parties in providing funding for the further development,
marketing and manufacturing of any products acquired.
It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity the costs
therefore incurred in the related investigation would not be recoverable.
Furthermore, even if an agreement is reached for the participation in a specific
business opportunity, the failure to consummate that transaction may result in
the loss of the Company of the related costs incurred.
Management believes that the Company may be able to benefit from the use of
"leverage" in the acquisition of a business opportunity. Leveraging a
transaction involves the acquisition of a business through incurring significant
indebtedness for a large percentage of the purchase price for that business.
Through a leveraged transaction, the Company would be required to use less of
its available funds for acquiring the business opportunity and, therefore, could
commit those funds to the operations of the business opportunity, to acquisition
of other business opportunities or to other activities. The borrowing involved
in a leveraged transaction will ordinarily be secured by the assets of the
business opportunity to be acquired. If the business opportunity acquired is not
able to generate sufficient revenues to make payments on the debt incurred by
the Company to acquire that business opportunity, the lender would be able to
exercise the remedies provided by law or by contract. These leveraging
techniques, while reducing the amount of funds that the Company must commit to
acquiring a business opportunity, may correspondingly increase the risk of loss
to the Company. No assurance can be given as to the terms or the availability of
financing for any acquisition by the Company. No assurance can be given as to
the terms or the availability of financing for any acquisition by the Company.
During periods when interest rates are relatively high, the benefits of
leveraging are not as great as during periods of lower interest rates because
the investment in the business opportunity held on a leveraged basis will only
be profitable if it generates sufficient revenues to cover the related debt and
other costs of the financing. Lenders from which the Company may obtain funds
for purposes of a leveraged buy-out may impose restrictions on the future
borrowing, distribution, and operating policies of the Company. It is not
possible at this time to predict the restrictions, if any, which lenders may
impose or the impact thereof on the Company.
Competition
The Company is an insignificant participant among firms which engage in
business combinations with, or financing of, development stage enterprises.
There are many established management and financial consulting companies and
venture capital firms which have significantly greater financial and personnel
resources, technical expertise and experience than the Company. In view of the
Company's limited financial resources and management availability, the Company
will continue to be a significant competitive disadvantage vis-a-vis the
Company's competitors.
Regulation and Taxation
The Investment Company Act of 1940 defines an "investment company" as an issuer
which is or holds itself out as being engaged primarily in the business of
investing, reinvesting or trading of securities. While the Company does not
intend to engage in such activities, the Company could become subject to
regulation under the Investment Company Act of 1940 in the event the Company
obtains or continues to hold a minority interest in a number of development
stage enterprises. The Company could be expected to incur significant
registration and compliance costs if required to register under the Investment
Company Act of 1940. Accordingly, management will continue to review the
Company's activities from time to time with a view toward reducing the
likelihood the Company could be classified as an "investment company."
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The Company intends to structure a merger or acquisition in such manner as to
minimize Federal and state tax consequences to the Company and to any target
company.
Employees
The Company's only employees at the present time are its officers and
directors, who will devote as much time as the Board of Directors determine is
necessary to carry out the affairs of the Company. (See "Management").
Item 2. DESCRIPTION OF PROPERTY
The Company shares space with its officers. The Company pays its own charges
for long distance telephone calls and other miscellaneous secretarial,
photocopying and similar expenses.
Item 3. LEGAL PROCEEDINGS
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended October 31, 1996.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock has not traded since 1984. As of October 31,
1996, there were approximately 510 stockholders of record.
The Company does not expect to pay a cash dividend upon its capital
stock in the foreseeable future. Payment of dividends in the future will depend
on the Company's earnings (if any) and its cash requirements at that time.
Item 6. PLAN OF OPERATIONS
Background. The Company's principal business operations, through
October 31, 1984, consisted of acquiring interests in oil and gas properties and
drilling wells on the properties or farming out the properties and retaining an
overriding royalty interest in production. All such properties and interests
were forfeited, and all the Company's assets abandoned or repossessed, and
therefore were written off for the fiscal year ended October 31, 1984. The
Company realized only nominal revenues through such date and none since.
Accordingly, the Company has always been and remains in the development stage.
During the fiscal year ended October 31, 1991 the Company
determined that the statute of limitations had lapsed as to all accounts payable
owed and has since written all payables off. As of October 31, 1995, the Company
had no long-term liabilities and no current liabilities except sums owed to
legal counsel and its transfer agent. The Company has paid its expenses advanced
by a control affiliate by the issuance of shares. See Item 12 -
"Certain Relationships and Related Transactions".
Liquidity. As of October 31, 1996, the Company had accumulated a
deficit (net loss) of $3,479,018, mostly the result of writing off oil and gas
properties which were forfeited or which the Company abandoned by October 31,
1984. In fiscal 1996 the Company had a loss of $97,368. Most of the expenses in
fiscal 1996 related to the issuance of shares for investment banking fees.
Non-operating income of $5,895 in 1996 was derived from debt forgiveness. The
Company has no assets and is completely illiquid. Management is actively seeking
to make one or more acquisitions of privately held companies, properties or
interests as described above, but has not yet entered into any understanding,
agreement or arrangement with any person respecting such an acquisition. Whether
the Company ultimately becomes a going concern depends upon its success in
finding and acquiring a suitable private business and the success of that
acquired business. As of October 31, 1995, the Company had no assets except
approximately $76 in cash. The Company has no long-term liabilities and only
modest short-term liabilities for accounts payable. Assets and cash available to
the Company from its Management and shareholders may not be sufficient for the
Company to carry out its business plan. Problems relating to capital resources
are more fully discussed in the paragraph below.
Capital Resources. The Company has no commitment for any capital
expenditure and forsees none. However, the Company will incur routine fees and
expenses incident to its reporting duties as a public company, and it will incur
fees and expenses in the event it make or attempts to make an acquisition. As a
practical matter, the Company expects no significant operating costs other than
professional fees payable to attorneys, accountants and its transfer agent. In
regard to a proposed acquisition, the Company intends to require the target
company to deposit with the Company a retainer which the Company can use to
defray such professional fees and costs. In this way, the Company could avoid
the need to raise funds for such expenses or becoming indebted to such
professionals. Moreover, investigation of business ventures for potential
acquisition will involve some costs, including travel, lodging, postage and
long-distance telephone charges. Management hopes, once a candidate business
venture is deemed to be appealing, to likewise secure a deposit from the
business venture to defray expenses of further investigation, such as air travel
and lodging expenses. An otherwise desirable business venture may, however,
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decline to post such a deposit. In this event, such expenses can only be covered
if affiliates of the Company loan or contribute the necessary capital to the
Company (which is not assured) or if the Company is otherwise able to raise
funds from third parties. The officers and directors of the Company intend to
fund such expenses until such time as a suitable acquisition is located.
The Company has no current intention of making a public offering of
its securities but will investigate the feasibility of raising capital in one or
more private transactions, if needed. The Company cannot assess the likelihood
of raising any such capital or of obtaining loans. No source of funding or
capital has been identified, and the Company has no credit or means to obtain a
loan.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company required to be
included in Item 7 are set forth in the Financial Statements Index.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
The members of the Board of Directors of the Company serve until the
next annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the Board of Directors.
Information as to the directors and executive officers of the Company is as
follows.
Name Age Position
Dempsey K. Mork 55 President, Chief Financial Officer and
Director
Randall Baker 53 Vice President, Secretary and Director
Robert Filiatreaux 66 Director
Dempsey K. Mork, age 55, has been president and a director since
February 1996. He has been
Secretary/Treasurer of Development Bancorp, Ltd. since December 1992 and
President and Director of AG Holdings,
Inc. since September 1993. He is president of Magellan Capital Corporation, a
merger and acquisition firm.
Randall A. Baker. Mr. Baker is 53 years old. He attended the
University of Minnesota. After a tour in the
United States Navy and a navigation teaching stint in San Francisco, he began
his investment career with the Pacific
Coast Stock Exchange followed by employment with a number of major brokerage
houses. He then was employed
for twenty years as Executive Vice President with Wm. Mason & Company, an
Investment Counseling firm in Los
Angeles. Mr. Baker designed and implemented all data systems, was responsible
for trading, personnel and was the
client/broker liaison. Mr. Baker is currently employed as the Vice President
for Magellan Capital Corporation, a
merger and acquisition firm.
Robert Filiatreaux. Mr. Filiatreaux is 66 years of age and has been
engaged in international business for the
past 27 years. He attended school in Wisconsin where he received his degree
from the University of Wisconsin.
During the Korean Conflict Mr. Filiatreaux served a three year tour of duty in
the US Air Force. The majority of
international business experience came from the airline industry where Mr.
Filiatreaux worked for many years in
various executive capacities in sales and marketing. Mr. Filiatreuax has worked
and traveled to over 55 countries
and is currently an associate in the merger and acquisition firm of Magellan
Capital Corporation of Indian Wells,
California.
Dempsey Mork did not file a Form 4 with respect to the months of
February and October 1996.
Item 10. EXECUTIVE COMPENSATION
No compensation was paid in fiscal 1996.
On acquisition of a business opportunity, current management may
resign and be replaced by persons associated with the business opportunity
acquired, particularly if the Company participates in a business opportunity by
effecting a reorganization, merger or consolidation. If any member of current
management remains after effecting a business opportunity acquisition, that
member's time commitment will likely be adjusted based on the nature and method
of the acquisition and location of the business which cannot be predicted.
Compensation of management will be determined by the new board of directors, and
shareholders of the Company will not have the opportunity to vote on or approve
such compensation.
Directors currently receive no compensation for their duties as
directors.
In August of 1993, the Company's Board of Directors adopted the 1993
Employee Stock Compensation
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Plan, the 1993 Incentive Stock Option Plan and the 1993 Non-Statutory Stock
Option Plan, all described below. Otherwise, the Company does not have in force
any pension, profit-sharing, stock appreciation or bonus or other benefit plans,
although such plans may be adopted in the future.
1993 Employee Stock Compensation Plan. The Company has adopted an
Employee Stock Compensation Plan for employees, officers, directors of the
Company and advisors to the Company (the "ESC Plan"). The Company has reserved a
maximum of 1,000,000 Common Shares to be issued upon the grant of awards under
the ESC Plan. Employees will recognize taxable income upon the grant of Common
Stock equal to the fair market value of the Common Stock on the date of the
grant and the Company will recognize a compensating deduction at such time. The
ESC Plan will be administrated by the Board of Directors. 100,000 shares of
common stock were issued under the ESC Plan to Company counsel.
1993 Incentive Stock Option Plan. The Company has adopted an
Incentive Stock Option Plan for key employees (the "ISO Plan"). The Company has
reserved a maximum of 500,000 Common Shares to be issued upon the exercise of
options granted under the ISO Plan. The ISO Plan is intended to qualify as an
"incentive stock option" plan under Section 422 of the Internal Revenue Code of
1986, as amended. Accordingly, options will be granted under the ISO Plan at
exercise prices at least equal to the fair market value per share of the Common
stock on the respective dates of grant and will be subject to the limitations
provided by the Code. However, options may be granted to employees who own more
than 10% of the outstanding shares of the Company of all classes or any parent
or subsidiary thereof (a "Significant Shareholder") only at an option price
which on the date granted is at least 110% of the fair market value of the
Common Stock. With respect to options granted pursuant to Section 422, employees
will not recognize taxable income upon either the grant or exercise of such
options. The Company will not be entitled to any compensating deduction with
respect to such options unless disqualifying dispositions, as defined by such
law, are made. The ISO Plan will be administered by the Board of Directors or a
committee of directors. No options have been granted under the ISO Plan, and
none may be granted unless and until it has been approved by the shareholders.
1993 Non-Statutory Stock Option Plan. The Company had adopted a
Non-Statutory Stock Option Plan for officers, key employees, potential key
employees, non-employee directors and advisors (the "NSO Plan"). The Company has
reserved a maximum of 5,000,000 Common Shares to be issued upon the exercise of
options granted under the NSP Plan. The NSO Plan will not qualify as an
"incentive stock option" plan under Section 422 A of the internal Revenue Code
of 1986, as amended. Options will be granted under the NSP Plan at exercise
prices to be determined by the Board of Directors or other NSO Plan
administrator. With respect to options granted pursuant to the NSO Plan,
optionees will not recognize taxable income upon the grant of options, but will
realize income (or capital loss) at the time the options are exercised to
purchase Common stock. The amount of income will be equal to the difference
between the exercise price and the fair market value of the Common Stock on the
date of exercise. The Company will be entitled to a compensating deduction in an
amount equal to the taxable income realized by an optionee as a result of
exercising the option. The NSO Plan will be administered by the Board of
Directors or a committee of directors. No options have been granted under the
NSO Plan.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information relating to the beneficial
ownership of Company common stock by those persons beneficially holding more
than 5% of the Company capital stock, by the Company's directors and executive
officers, and by all of the Company's directors and executive officers as a
group, as of February 28, 1997.
Percentage
Name of Number of of Outstanding
Stockholder Shares Owned Common Stock
Dempsey K. Mork(1)(2) 210,167 96.2%
Randy Baker(1) -- --
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Robert Filiatreaux(1) -- --
All officers and directors
as a group (3 persons) 210,167 96.2%
(1) The address of this person is c/o of the Company.
(2) Includes 10,167 shares owed by Magellan Capital Corporation, a
corporation controlled by Mr. Mork.
Item 12. Certain Relationships and Related Transactions.
In February 1996 the Company issued 200,000 shares to and affiliated
party, Dempsey K. Mork for investment banking services rendered in connection
with a proposed acquisition. In addition on October 31, 1996, the Company issued
10,167 shares for payment of expenses to Magellan Capital Corporation with which
Mr. Mork is affiliated and issued 1,000 shares to Eric J. Sunsvold, a former
officer and director, for cash of $500.
Effective as of October 31, 1995, the Company issued an additional 55
common shares to Eric J. Sunsvold in consideration of an additional $1,863 of
Company expenses which he paid, bringing his holdings in the Company to 530
shares. On October 21, 1994, the Board of Directors of the Company resolved to
purchase 450 of its common shares owned by Thomas J. Loguin (a former officer
and director of the Company), in a private transaction for the cash sum of
$1,000. These shares subsequently were purchased and cancelled by the Company.
On March 13, 1986, the Company consented to the entry of a permanent
injunction against it by the United States District Court for the District of
Denver in an action brought by the Securities and Exchange Commission against
the Company, Thomas J. Olguin (currently a significant shareholder and a former
officer and director of the Company) and Helmut Gaensel. This order permanently
enjoins the Company from violating certain provisions of the Securities Exchange
Act of 1934, as amended, and certain rules promulgated thereunder, and from
making any untrue or misleading statements of fact in connection with the sale
of securities of the Company or any other issuer. In consenting to entry of the
injunctive order, the Company neither admitted nor denied any of the factual
allegations of the Securities and Exchange Commission's complaint.
Unless otherwise noted, all share information in Parts I, II and III
has been adjusted for a stock split effected in March 1997.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits, if any, marked with an asterisk
(*) are filed with this report. Other exhibits have previously been filed with
the Securities and Exchange Commission and are incorporated by reference to
another report, registration statement or form. As to any shareholder of record
requesting a copy of this report, the Company will furnish any exhibit indicated
in the list below as filed with report upon payment to the Company of its
expenses in furnishing the information. References to the "Company" mean Gaensel
Gold Mines, Inc.
3. Articles and Bylaws
3.1 Articles of Incorporation of Chatham Energy
Corporation, incorporated by reference to
registration statement on Form S-18 of Chatham Energ
Corporation, file no. 2-75288-
NY.
3.2 Articles of Amendment of Chatham Energy Corporation
(changing name to World Technologies and Trading
Company), incorporated by reference to Exhibit 3.2 to
Form 10-KSB for fiscal year ended October 31, 1991.
3.3 Articles of Amendment of World Technologies and
Trading Company (changing name
to Gaensel Gold Mines, Inc.) to be provided by
amendment.
3.4 Bylaws of the Company adopted August 31, 1993,
incorporated by reference to Exhibit
11
<PAGE>
3.4 to Form 10-KSB for fiscal year ended October 31,
1991.
4. Instruments Establishing Rights of Security Holders
4.1 Specimen common stock certificate of the Company,
incorporated by reference to Exhibit 4.1 to Form
10-KSB for fiscal year ended October 31, 1991.
10. Material Contracts
10.1 1993 Employee Stock Compensation Plan of the Company,
incorporated by reference to Exhibit 10.1 to Form
10-KSB for fiscal year ended October 31, 1991.
10.2 1993 Incentive Stock Option Plan of the Company,
incorporated by reference to Exhibit 10.2 to Form
10-KSB for fiscal year ended October 31, 1991.
10.3 1993 Non-Statutory Stock Option Plan of the Company,
incorporated by reference to Exhibit 10.3 to Form
10-KSB for fiscal year ended October 31, 1991.
(b) Reports on Form 8-K. None were filed by the Company during
the fourth fiscal quarter ended
October 31, 1996.
(c) Financial Statements and supplementary data. See page F-1 fo
financial statements index.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized March 24, 1997.
GAENSEL GOLD MINES, INC.
By: /s/ Dempsey K. Mork
Dempsey K. Mork
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities on March ___, 1997.
By: /s/ Dempsey K. Mork President, Chief Financial Officer and Director
Dempsey K. Mork (chief executive, financial and accounting
officer)
By: /s/ Randall Baker Secretary and Director
Randall Baker
By: /s/ Robert Filiatreaux Director
Robert Filiatreaux
13
<PAGE>
GAENSEL GOLD MINES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Independent auditors' reports............................................................................. F-2
Consolidated balance sheet, as of October 31, 1996........................................................ F-3
Consolidated statements of operations, for the years ended October 31, 1996 and
1995 and from September 13, 1981 (inception)
through October 31, 1996 (unaudited)...................................................................... F-4
Consolidated statements of cash flows, for the years ended October 31, 1996 and
1995 and from September 13, 1981 (inception)
through October 31, 1996 (unaudited)...................................................................... F-5
Consolidated statements of shareholders' deficit,
September 13, 1981 (inception) through
October 31, 1996 (unaudited).............................................................................. F-6
Summary of significant accounting policies................................................................ F-10
Notes to financial statements............................................................................. F-11
</TABLE>
<PAGE>
Board of Directors
Gaensel Gold Mines, Inc. and subsidiary
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Gaensel Gold Mines, Inc. and
subsidiary (a development stage company) as of October 31, 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended October 31, 1996 and 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our 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 Gaensel Gold Mines,
Inc. and subsidiary as of October 31, 1996, and the results of its consolidated
operations and its cash flows for the years ended October 31, 1996 and 1995, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note G to the
consolidated financial statements, the Company has suffered recurring losses
from development stage activities and has a net capital deficiency which raises
substantial doubt about its ability to continue as a going concern. Management's
plans regarding these matters are also described in Note G. The consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
Cordovano and Company, P.C.
Denver, Colorado
January 11, 1997
<PAGE>
<TABLE>
<CAPTION>
GAENSEL GOLD MINES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
October 31, 1996
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 576
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable, trade $ 7,635
TOTAL CURRENT LIABILITIES $ 7,635
CONTINGENCY (Note F) $ --
SHAREHOLDERS' DEFICIT (Note D)
Common stock, 50,000,000 shares authorized,
$0.0001 par value; 2,183,790 shares
issued and outstanding $ 218
Additional paid in capital 3,471,741
Deficit accumulated during development stage (3,479,018)
TOTAL SHAREHOLDERS' DEFICIT $ (7,059)
$ 576
See accompanying summary of significant
accounting policies and notes to
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GAENSEL GOLD MINES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
September 13,
1981
(Inception)
Years Ended Through
October 31, October 31,
1996 1995 1996
<S> <C> <C> <C>
NET SALES (Note C) $ -- $ -- $ 43,145
COSTS AND EXPENSES
Oil and gas operations -- -- 3,366,630
General and administrative 103,263 7,836 144,765
LOSS FROM OPERATIONS (103,263) (7,836) (3,468,250)
NONOPERATING INCOME (Note C) 5,895 -- 174,198
INTEREST EXPENSE (Note C) -- -- (25,204)
NONOPERATING EXPENSE (Note C) -- -- (159,695)
NET LOSS $ (97,368) $ (7,836) $ (3,478,951)
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,164,020 46,282 179,876
NET LOSS PER SHARE $ (.08) $ (.17) $ (19.34)
</TABLE>
See accompanying summary of significant accounting policies and
notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
GAENSEL GOLD MINES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
September 13,
1981
(Inception)
Years Ended Through
October 31, October 31,
1996 1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (97,368) $ (7,836) $ (3,478,951)
Adjustments to reconcile net income (loss) to
net cash used in continuing operations:
Issuance of common stock to related party for
payment of expenses and for services 105,083 -- 109,683
Issuance of common stock for services -- 210 1,647
Issuance of common stock for property -- -- 3,039,129
Issuance of common stock to related party for debt -- -- 30,000
Issuance of common stock for debt -- -- 90,333
Increase (decrease) in accounts payable (7,715) 4,832 7,636
NET CASH USED IN
OPERATING ACTIVITIES -- (2,794) (200,523)
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of land including subsequent
gain on sale -- -- (75,000)
Sale of land to related parties (Note B) -- -- 75,000
Acquisition and retirement of treasury sales -- -- (1,068)
Issuance of common stock for cash and
contributed capital 500 1,863 202,167
NET CASH PROVIDED BY
FINANCING ACTIVITIES 500 1,863 201,099
Net increase (decrease) in cash and cash equivalents 500 (931) 576
Cash and cash equivalents at beginning of period 76 1,007 --
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 576 $ 76 $ 576
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ -- $ -- $ 25,204
Income taxes $ -- $ -- $ --
</TABLE>
See accompanying summary of significant
accounting policies and notes to
financial statements.
<PAGE>
<TABLE>
<CAPTION>
GAENSEL GOLD MINES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' DEFICIT
September 13, 1981 Through October 31, 1996
(Unaudited)
Deficit
Accumulated
Additional During
Common Stock Paid-in Development
Shares Par Value Capital Stage Total
<S> <C> <C> <C> <C> <C>
Shares issued for cash, September 17, 1981 1,250 $ -- $ 25,000 $ -- $ 25,000
Shares issued for cash, September 17, 1981 50 -- 1,000 -- 1,000
Shares issued for cash, September 17, 1981 50 -- 1,000 -- 1,000
Shares issued for cash, September 17, 1981 50 -- 1,000 -- 1,000
Balance, October 31, 1981 1,400 -- 28,000 -- 28,000
Shares issued for cash, May 15, 1982 5,363 1 96,499 -- 96,500
Net loss -- -- -- (1,589) (1,589)
Balance, October 31, 1982 6,763 1 124,499 (1,589) 122,911
Shares issued for cash January 2, 1983 400 -- 38,750 -- 38,750
Shares issued for oil and gas leases,
at cost, May 12, 1983 12,072 1 3,016,128 -- 3,016,129
Shares issued in exchange for debt, July 28, 1983 3,333 -- 90,333 -- 90,333
Shares issued in exchange for aircraft, at cost,
July 28, 1983 157 -- 23,000 -- 23,000
Net loss -- -- -- (3,227,400) (3,227,400)
Balance, October 31, 1983 22,725 2 3,292,710 (3,228,989) 63,723
Shares issued to related party for debt,
July 31, 1984 (Note B) (unaudited) 500 -- 30,000 -- 30,000
Shares issued for services, at cost,
July 31, 1984 (unaudited) 30 -- 937 -- 937
Shares issued to related party for services
at cost, July 31, 1984 (Note B) (unaudited) 7,000 1 699 -- 700
Capital contribution, October 21, 1984 (unaudited) -- -- 13,800 -- 13,800
Net loss (unaudited) -- -- -- (254,379) (254,379)
Balance, October 31, 1984 (unaudited) 30,235 3 3,338,146 (3,483,368) (145,219)
See accompanying summary of significant accounting policies and
notes to financial statements.
<PAGE>
GAENSEL GOLD MINES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' DEFICIT, CONTINUED
September 13, 1981 Through October 31, 1996
(Unaudited)
Deficit
Accumulated
Additional During
Common Stock Paid-in Development
Shares Par Value Capital Stage Total
Acquisition and cancellation of shares,
December 11, 1984 (unaudited) (6,809) (1) -- 1 --
Shares issued to related party for services, at cost,
November 1, 1984 (Note B) (unaudited) 14,000 1 1,399 -- 1,400
Shares issued to related party for services, at cost,
November 1, 1984 (Note B) (unaudited) 100 -- 100 -- 100
Shares issued for services, at cost,
November 1, 1984 (unaudited) 100 -- 100 -- 100
Shares issued for services, at cost,
November 1, 1984 (unaudited) 100 -- 100 -- 100
Shares issued for services, at cost,
November 1, 1984 (unaudited) 100 -- 100 -- 100
Shares issued for services, at cost,
November 1, 1984 (unaudited) 200 -- 200 -- 200
Net income (unaudited) -- -- -- 143,219 143,219
Balance, October 31, 1985 (unaudited) 38,046 3 3,340,145 (3,340,148) --
Net income (loss) (unaudited) -- -- -- -- --
Balance, October 31, 1986 (unaudited) 38,046 3 3,340,145 (3,340,048) --
Shares issued to related party for services, at cost,
July 31, 1987 (Note B) (unaudited) 7,000 1 699 -- 700
Net income (loss) (unaudited) -- -- -- (700) (700)
Balance, October 31, 1987 (unaudited) 45,046 4 3,340,844 (3,340,848) --
Net income (loss) (unaudited) -- -- -- -- --
Balance, October 31, 1988 (unaudited) 45,046 4 3,340,844 (3,340,848) --
Shares issued to related party for services, at cost,
July 31, 1989 (Note B) (unaudited) 7,000 1 699 -- 700
Net loss (unaudited) -- -- -- (700) (700)
Balance, October 31, 1989 (unaudited) 52,046 5 3,341,543 (3,341,548) --
See accompanying summary of significant accounting policies and
notes to financial statements.
<PAGE>
GAENSEL GOLD MINES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' DEFICIT, CONCLUDED
September 13, 1981 Through October 31, 1996
(Unaudited)
Deficit
Accumulated
Additional During
Common Stock Paid-in Development
Shares Par Value Capital Stage Total
Net income (loss) -- -- -- -- --
Balance, October 31, 1990 52,046 5 3,341,543 (3,341,548) --
Shares issued for cash, January 15, 1991 10,000 1 9,999 -- 10,000
Net income (loss) -- -- -- -- --
Balance, October 31, 1991 62,046 6 3,351,542 (3,341,548) 10,000
Shares issued to related party for services, at cost,
January 15, 1992 (Note B) 10,000 1 999 -- 1,000
Net loss -- -- -- (8,000) (8,000)
Balance, October 31, 1992 72,046 7 3,352,541 (3,349,548) 3,000
Shares issued for cash, October 19, 1993 (Note B) 20,000 2 6,873 -- 6,875
Net loss -- -- -- (17,482) (17,482)
Balance, October 31, 1993 92,046 9 3,359,414 (3,367,030) (7,607)
Acquisition and cancellation of shares,
October 31, 1994 (Note B) (45,000) (4) (996) -- (1,000)
Shares issued for cash, October 31, 1994 (Note B) 17,500 2 5,877 -- 5,879
Net loss -- -- -- (6,784) (6,784)
Balance, October 31, 1994 64,546 7 3,364,295 (3,373,814) (9,512)
Shares issued for cash, October 31, 1994 (Note B) 5,479 -- 1,863 -- 1,863
Shares issued for services, December 1, 1994 300 -- 30 -- 30
Shares issued for services, February 22, 1995 1,000 -- 100 -- 100
Shares issued for services, March 3, 1995 800 -- 80 -- 80
Net loss -- -- -- (7,836) (7,836)
Balance, October 31, 1995 72,125 7 3,366,368 (3,381,650) (15,275)
Shares issued for services, November 1, 1995 (Note B)2,000,000 200 99,800 -- 100,000
Shares issued for cash, February 2, 1996 10,000 1 499 -- 500
Shares issued for payment of expenses,
October 31, 1996 (Note B) 58,065 6 2,898 -- 2,904
Shares issued for payment of expenses,
October 31, 1996 (Note B) 43,600 4 2,176 -- 2,180
Net loss -- -- -- (97,368) (97,368)
2,183,790 218 3,471,741 (3,479,018) (7,059)
</TABLE>
*Restated for 1 to ten reverse split on July 31, 1984 and 1 to 100 reverse split
on February 26, 1996 (Note D)
See accompanying summary of significant accounting policies and
notes to financial statements.
<PAGE>
GAENSEL GOLD MINES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
October 31, 1996
Basis of presentation
The accompanying consolidated financial statements include the transactions of
Gaensel Gold Mines, Inc. and Aliqout Energy, Inc., a wholly owned subsidiary of
Gaensel Gold Mines, Inc. All material intercompany transactions have been
eliminated in the accompanying consolidated financial statements.
Development stage company
Gaensel Gold Mines, Inc. is in the development stage in accordance with SFAS No
7. Its business plan is to
search for, evaluate and consummate a merger with or acquisition of, a private
company.
Cash equivalents
For financial accounting purposes and the statement of cash flows, cash
equivalents include time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months or less.
Net income (loss) per share
Net loss per share is based on the weighted average number of common shares
outstanding for the periods presented according to the rules of the Securities
and Exchange Commission. Such rules require that any shares sold at a nominal
value prior to a public offering, should be considered outstanding for all
periods presented.
Note A: Nature of organization
Gaensel Gold Mines, Inc. and subsidiary (the Company) (Formerly
World Technologies & Trading Company and prior the Chatham Energy
Corporation) was incorporated in Nevada on September 13, 1981, for
the purposes of providing consultation to companies and individuals
engaged in the extractive industries. Planned principal operations
commenced on 1982 with the development of oil and gas wells in
Texas, as Chatham Energy Corporation and through its wholly owned
subsidiary, Aliqout Energy, Inc. and during 1983, in Kentucky, as
World Technologies & Trading Company. However, there has been no
significant revenues therefrom. During 1983, the Board of directors
decided to discontinue oil and gas development operation and after
restructuring, prepared plans to enter the gold mining industry.
These plans were never carried out. During 1985, the Securities and
Exchange commission initiated an investigation into certain
financial statements filed during 1984 which contained questionable
gold mine assets. In 1986, without admitting or denying guilt, both
the Company and its president consented to the entry of a permanent
injunction against the Company by the United States District Court
for the District of Denver in an action brought by the SEC against
the Company. The Company has been an "inactive shell" since the SEC
investigation. During 1992, the Company commenced another
restructuring and is searching for a merger with or acquisition of,
a privately owned company. The Company is in the development stage
in accordance with SFAS No. 7 and is in effect, a blind pool
company.
<PAGE>
Note B: Related party transactions
The Company is utilizing office space on a rent-free basis from the
president. The Company does not anticipate changing this
arrangement until the Company's operations have commenced.
During the year ended October 31, 1996, the Company issued to an
affiliate 2,000,000 shares of the Company's $.0001 par value common
stock in exchange for investment banking services, related to a
failed acquisition. In addition, the Company issued 111,665 shares
of the Company's $.0001 par value common stock to certain
shareholders and affiliates in exchange for the payment of expenses
on behalf of the Company.
Effective on October 31, 1995, the Company issued to a shareholder
547,941 shares of the Company's $.0001 par value common stock in
exchange for the payment of expenses totalling $1,863.
On December 1, 1994, the Company issued to a shareholder 30,000
shares of the Company's $.0001 par value common stock in exchange
for services performed.
Those shares were valued at the estimated cost of the services
performed in the accompanying consolidated financial statements.
Effective on October 31, 1994, the Company issued to a shareholder
1,750,000 shares of the Company's $.0001 par value common stock in
exchange for the payment of expenses totalling $5,879.
On October 21, 1994, the Company resolved to buy back and
subsequently cancel the 4,500,000 shares of the Company's $.0001
par value common stock held by the Company's ex-president for
$1,000.
On October 19, 1993, the Company issued to a shareholder 2,000,000
shares of the Company's $.0001 par value common stock in exchange
for the payment of expenses totalling $6,975.
On January 15, 1992, the Company issued to the president (and
controlling shareholders) 1,000,000 shares of the Company's $.0001
par value common stock in exchange for services performed. Those
shares were valued at the estimated cost of the services performed
in the accompanying consolidated financial statements.
On July 31, 1989, the Company issued to the president (and
controlling shareholder) 700,000 shares of the Company's $.0001 par
value common stock in exchange for services performed. Those shares
were valued at the estimated cost of the services performed in the
accompanying consolidated financial statements.
Note B: Related party transactions, continued
On July 31, 1987, the Company issued to the president (and
controlling shareholder) 700,000 shares of the Company's $.0001 par
value common stock in exchange for services performed. Those shares
were valued at the estimated cost of the services performed in the
accompanying consolidated
<PAGE>
financial statements.
On November 1, 1984, the Company issued to the president (and
controlling shareholder) 1,400,000 shares of the Company's $.0001
par value common stock in exchange for services performed. Those
shares were valued at the estimated cost of the services performed
in the accompanying consolidated financial statements.
On July 31, 1984, the Company issued to the president (and
controlling shareholder) 700,000 shares of the Company's $.0001 par
value common stock in exchange for services performed. Those shares
were valued at the estimated cost of the services performed in the
accompanying consolidated financial statements.
On April 12, 1984, the Company sold to the President of the Company
and to the Chairman of the Board of Directors land, costing
$57,000, for $75,000.
During 1984, a shareholder advanced the Company $30,000 for working
capital and on July 31, 1984, this debt was repaid with 50,000
shares of the Company's $.0001 par value common stock.
During 1983, a shareholder advanced the Company $2,000 which was
repaid during November 1983.
Note C: Withdrawal from oil and gas businesses
Effective October 31, 1984, the Company ceased development activity
and effectively withdrew from the oil and gas businesses. The
following condensed, consolidated results of operations of are
included in loss from operations:
<TABLE>
<CAPTION>
1982 1983 1984 Combined
<S> <C> <C> <C> <C>
Net sales and gross revenues $ -- $ 35,436 $ 7,709 $ 43,145
Cost and expense
Selling, general and administrative (797) (3,261,125) (104,708) (3,366,630)
Nonoperating income 6,576 5,442 156,285 168,303
Interest expense (7,368) (4,253) (13,583) (25,204)
Nonoperating expense -- (2,900) (156,795) (159,695)
Net loss $ (1,589) $(3,227,400) $ (111,092) $(3,340,081)
</TABLE>
The above condensed, consolidated results of operations include
nonoperating income resulting from the effect of the statute of
limitations on certain trade and notes payable totalling $145,219
and does not include accrued interest on this indebtedness for the
periods presented.
NOTE D: Shareholders' deficit
Public offering
On February 15, 1982, the Company, through a prospectus, offered
10,000,000 of its $.0001 par value shares of common stock to the
public at $.01 per share. The offering closed on May 15, 1982. The
Company issued 536,253 (restated for the effects of a 1 for ten
stock split) shares and realized $96,500 after deducting
commissions and other costs of the offering from the proceeds.
NOTE D: Shareholders' deficit, continued
Reverse stock split, July 1984
Effective July 31, 1984, the Board of Directors declared a 1 for
ten reverse stock split. All common
<PAGE>
shares reflected in the accompanying consolidated financial
statements have been restated.
Reverse stock split, April 1996
Effective April 1996, the Board of Directors declared a 1 for ten
reverse stock split. All common shares reflected in the
accompanying consolidated financial statements have been restated.
Capital shares reserved
As of October 31, 1996, 4,500,000 shares of common stock were
reserved for issuance under option and award plans. There are one
million shares of common stock authorized to be awarded to
employees through August 1998. In addition, three million shares of
common stock were reserved for issuance to employees, directors,
consultants and affiliates under a non-statutory stock option plan
and 500,000 shares of common stock were reserved for issuance to
officers and key employees under an incentive stock option plan.
Under the terms of the plans, options are granted at the fair
market value of the stock at the grant date and the options expire
in ten years from the date of the grant. As of October 31, 1996, 2
million shares had been awarded or granted to consultants.
Accumulated deficit during development stage
Following is a summary of accumulated deficit during the
development stage as of October 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Deficit accumulated during development of oil and gas operations
(September 13, 1981, inception, through October 31, 1984) $ 3,340,081
Deficit accumulated during restructuring
(November 1, 1984 through October 31, 1996) 138,870
$ 3,478,951
</TABLE>
Note E: Income taxes
At October 31, 1996 and 1995, deferred taxes consisted of:
<TABLE>
<CAPTION>
October 31,
1996 1995
<S> <C> <C>
Deferred tax assets, net operating loss carryforward $ 36,216 $ 36,041
Deferred tax liabilities -- --
Valuation allowance (36,216) (36,041)
Net deferred taxes $ -- $ --
</TABLE>
The valuation allowance offsets the net deferred tax asset for
which there is no assurance of recovery. The Company has available,
as of October 31, 1996, unused Federal and State operating loss
carryforwards of approximately $141,061 and $141,061, respectively,
which expire through the years 2010 and 2010, respectively. The
loss carryforwards may not be available to the Company should its
line of business (extractive) or its ownership change
substantially.
<PAGE>
Note F; Contingencies
The statute of limitations has expired on the Company's trade
payables and notes payable totalling $107,336 and $37,883
respectively, as of December 31, 1984. The statute bars the remedy
but not the right of creditors to use the courts in debt recovery
matters and effectively prevents the creditors from pursuing
collection activities. Accordingly, the consolidated financial
statements include the nonoperating income resulting from the
effect of the statute. The accompanying consolidated financial
statements do not include accrued interest on any indebtedness for
the periods presented.
Note G; Going concern
As of October 31, 1996, the Company had no operations. Management
is evaluating a plan to raise working capital and search for and
consummate a merger with or acquisition of, a private company.
There is no assurance that a suitable candidate will be found.
Various shareholders inject cash into the Company as needed to pay
for operating expenses. Management plans to continue this
arrangement until such time as a merger or acquisition, if ever, is
consummated.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL
STATEMENTS FOR THE TWELVE MONTHS ENDED OCTOBER 31, 1996
AND AS OF
OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000357049
<NAME> GAENSEL GOLD MINES, INC.
<MULTIPLIER> 1
<CURRENCY> US dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Oct-31-1997
<PERIOD-START> Nov-01-1995
<PERIOD-END> Oct-31-1996
<EXCHANGE-RATE> 1
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0
0
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