SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-KSB
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(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31st, 1999
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( ) TRANSITION REPORT PERSUANT 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: 1-1767
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THE GOLD CHAIN MINING COMPANY
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(Exact name of Registrant as specified in charter)
UTAH 87-0267213
(State or other jurisdiction of incorporation) (I.R.S. EMPLOYER ID NO.)
44 West Broadway, Suite 704-S, Salt Lake City, UT 84101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(801) 355-6044
(REGISTRANT'S TELEPHONE NUMBER)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT: 2,000,776
Title of each class Name of exchange on which registered
None None
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To be so registered
Common stock:2,002,975 $.01 par value
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Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
(1) Yes [x] No [ ] (2) Yes [x] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of the 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: $0.00
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State the aggregate market value of the voting stock held by non-affiliates
of the registrant. the aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked process of
such stock, as of the specified date within the past 60 days.
At December 31, 1999, the aggregate market value of the voting stock held
by non-affiliates is undeterminable and is considered to be zero.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Not applicable
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of December 31, 1999, the registrant had 2,000,776 shares issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the part
of the Form 10-KSB (eg., part I, part II, etc.) into which the document is
incorporated; (1) Any annual report to security holders; (2) any proxy or other
information statement; and (3) Any prospectus filed persuant to rule 424 (b) 0r
(c) under the Securities Act of 1933:
None
Page 1 of 40 Consecutively Numbered Pages.
ITEM NUMBER AND CAPTION TABLE OF CONTENTS PAGE NO.
PART I
Item 1. Description of Business . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis
or Plan of Operation . . . . . . . . . . . . . . . . . . . 13
Item 3. Description of Property . . . . . . . . . . . . . . . . . . . . . 14
Item 4. Security Ownership of Certain Beneficial Owners And Management . . 17
Item 5. Directors, Executive Officers, Promoters and Control Persons . . . 19
Item 6. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 21
Item 7. Certain Relationships and Related Transactions . . . . . . . . . . 23
Item 8. Description of Securities . . . . . . . . . . . . . . . . . . . . 24
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Stockholder Matters . . . . . . . . 24
Item 2. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 3. Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure . . . . . . . . . . 25
Item 4. Recent Sales of Unregistered Securities . . . . . . . . . . . . . 26
Item 5. Indemnification of Directors and Officers . . . . . . . . . . . . 26
PART F/S
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . 27
PART III
Item 1. Index to Exhibits, Financial Schedules
and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 27
Item 2. Description of Exhibits . . . . . . . . . . . . . . . . . . . . . 27
POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
FINANCIAL STATEMENTS, Audited and Unaudited, beginning on page . . . . 29
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REPORTS TO SECURITY HOLDERS
You may read and copy any materials that the The Gold Chain Mining Company,
Inc. (The "Company"; "Gold Chain") files with the SEC at the SEC's Public
Reference Room at 450 Fifth Street NW, Washington, DC 20549. You may obtain
information about the operation of the Public Reference Room by calling the SEC
at 1-800-SEC-0330.
Inasmuch as the Company is an electronic filer, and the SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, you may
access that site's web address at http://www.sec.gov.
As of the date of this filing, Gold Chain has not yet established a web
address.
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NOTICE AND DISCLAIMER REGARDING
FORWARD-LOOKING STATEMENTS
Certain matters discussed herein may be forward-looking statements that
involve risks and uncertainties. These could include, for example, any of the
following: the timely development of existing or future properties, reserves and
projects; the impact of metals prices and metal production volatility; changing
market conditions; changes in the regulatory environment; and other material
risks that are or will be described from time to time in the Registrant's
filings with the Securities and Exchange Commission ("SEC").
However, actual results may differ materially from those projected or
implied. As a result, forward-looking statements expressed herein are deemed to
represent Gold Chain's judgment as of the date of this filing. Gold Chain does
NOT express any intent or obligation to update any forward-looking statement
because it is unable to give any assurances regarding the likelihood that, or
extent to which, any event discussed in any such forward-looking statement
contained herein may or may not occur, or any effect from or outcome of any such
forward-looking event may or may not bear materially upon its future business,
development of plans, or financial condition and results of operations.
The reader is strongly cautioned to review the comprehensive disclosure of
"Risk Factors" presented in detail in this report.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND. THE GOLD CHAIN MINING COMPANY ("Gold Chain," the "Company" or
"Registrant"), organized on August 19, 1907, is a U.S. mineral resource company
registered, from inception, as a Utah corporation.
Located within the historic Tintic Mining District (organized on December
13, 1869) in Juab County, Gold Chain was part of a once-thriving mining district
with worldwide acclaim. The Tintic Mining District was listed in the National
Register of Historic Places in 1979.
Gold Chain, a subsidiary of Mammoth Mining Company ("Mammoth"), a Nevada
corporation, is authorized to conduct business in Utah.
Mammoth currently owns, at the time of this filing, approximately 37
percent (37%) of the total amount of issued and outstanding shares of Gold Chain
common stock ("Gold Chain Common Shares"). Neither Gold Chain nor Mammoth is, or
has been, involved in any bankruptcy, receivership or similar proceeding; and,
other than in the ordinary course of business, there has been no material
reclassification, consolidation, merger, or purchase or sale of a significant
amount of assets, of either company.
EXECUTIVE OFFICES. Gold Chain's Executive Offices, together with its
Corporate Research Facility and Geological Library, are located in Mammoth Town,
Utah.
SUBSIDIARIES AND RELATED COMPANIES. Gold Chain does NOT have any
subsidiaries. Related parties are described in Part I, Item 8, entitled "Certain
Relationships and Related Transactions."
TRADING AND REPORTING HISTORY. Gold Chain's common stock was listed on the
Intermountain Stock Exchange from 1908 and filed annual reports with that
exchange until it closed in 1985. Following passage of the Securities Act of
1933, as amended (the "1933 Act"), and the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Company also reported to the SEC. Gold Chain
ceased filing periodic reports with the SEC in 1985, but has continued filing
annual reports with the Utah Department of Commerce, Corporation Division.
JOINT VENTURES. The Company has neither entered into, nor participates in,
any joint venture arrangements.
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RECENT CHANGES IN OWNERSHIP. In February, 1994, the Jefferson-Pacific
Corp., a closely-held Washington corporation ("Jefferson-Pacific"), purchased a
little over Eighty percent (80%) of Mammoth's then issued and outstanding shares
of common stock from the Samuel McIntyre Investment Company and several persons
with large shareholdings in Mammoth. Jefferson-Pacific also purchased
approximately Two percent (2%) of the then-issued and outstanding Gold Chain
Common Shares. At the time of that purchase Mammoth owned approximately Sixty
One percent(61%) of the Gold Chain Common Shares. Thus, by purchasing Eighty
percent (80%) of Mammoth's common stock, Jefferson-Pacific also gained majority
control of Gold Chain Common Shares.
In September, 1994, the Jefferson-Pacific shareholders completed a plan of
reorganization and share exchange with Centurion Mines Corporation, a Utah
corporation ("Centurion"), that was reorganized in February 1998 as Grand
Central Silver Mines, Inc. ("Grand Central", Nasdaq SmallCap: "GSLM"). The share
exchange resulted in Centurion/Grand Central owning the Eighty percent (80%)
control block of Mammoth common shares and majority control of Gold Chain Common
Shares, including ownership of the Two percent (2%) of Gold Chain Common Shares.
Mammoth and Gold Chain became subsidiaries of Centurion/Grand Central, and
their financial data was fully consolidated into the financial statements of
Centurion/Grand Central.
In April, 1998, Grand Central filed a lawsuit against Mr. Spenst Hansen
("Hansen"), Keystone Surveys, Inc., a closely-held Utah corporation controlled
by Hansen ("Keystone"), and three other closely-held Utah corporations
controlled by Hansen (Hansen, Keystone and the three corporations are referred
to, collectively, as the "Hansen Parties"). Hansen had been a director and
executive officer of Centurion from its incorporation in June 1984 until his
retirement in February 1998, and has been a Director of Gold Chain and Mammoth
since April 1995, and their President and Board Chairman since June 1997. Grand
Central's causes of action alleged breach of contract, breach of fiduciary
duties and securities violations, which the Hansen Parties denied.
In July 1998, Grand Central settled the lawsuit, which occurred before the
Hansen Parties had filed their answer and counterclaim. The Hansen Parties would
have alleged serious fiduciary and contractual breaches and numerous violations
of federal and state corporate and securities laws against Grand Central and
certain members of its newly reorganized management.
The settlement resulted in the dismissal, with prejudice, of all of Grand
Central's causes of action against the Hansen Parties, without any admission or
finding of wrongdoing by any of the parties. In settling the lawsuit, Grand
Central, as successor to Centurion, subsequently transferred to Hansen its
Eighty percent (80%) control block of Mammoth common shares and a majority of
the Gold Chain Common Shares it then owned or had acquired, and also transferred
all of the patented mining claims it owned in the Tintic Mining district (Juab
County, Utah) to Keystone.
In exchange, the Hansen Parties gave cash and transferred shares of Grand
Central common stock owned by the Hansen Parties to Grand Central. As a result
of this settlement, Hansen gained control of Mammoth's ownership of a majority
control block of the Gold Chain Common Shares.
RECENT PROPERTY PURCHASE. On June 21, 1999, the Company's Board of
Directors authorized the purchase, from Keystone, of nine (9) additional
patented adjacent mining claims located in the Tintic Mining district. In
exchange for the nine (9) patented mining claims, the Board approved the
issuance of 600,000 shares of the Company's Common Shares. This transaction, not
negotiated with care to avoid being over-reached or imposed upon
(arms-length),reduced Mammoth's ownership of Gold Chain stock to Thirty Seven
percent (37%) and gave Keystone control of almost Thirty Four percent (34%) of
Gold Chain's Common Shares.
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Mammoth and Keystone, which are both controlled by Hansen, together own
almost Seventy One percent (71%) of the Gold Chain Common Shares.
Hansen continues to serve as Gold Chain's President and Chairman of its
Board of Directors.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES. Gold Chain does NOT own any
patents, trademarks, licenses, franchises, or concessions, except for patented
mining claims which consist of 15 acres of real estate AND underlying mineral
rights.
LONG-TERM GOAL AND OBJECTIVES. Gold Chain's long-term business goal is
focused on advancing the exploration, development and mining potential of the
mining properties it owns. The Company's intermediate objectives for funding and
advancing this goal are two-fold:
First, it seeks to re-establish itself as an active business operation in
the mining industry.
Second, it will seek to obtain capital funds, preferably from equity
investment sources, but also by participation in joint business arrangements.
At present, the Company is focused on accomplishing the first of these
intermediate objectives. When that objective nears completion, Management will
then be able to more specifically determine the necessary short-term plans and
strategies best suited to accomplishing the second of its intermediate
objectives. In this method, the Company expects, ultimately, to achieve its
long-term goal of creating an on-going source of positive cash-flow from mineral
development, exploration and mining.
BUSINESS PLAN. Management is developing its business plan, if justified, to
resume mineral exploration and development of the Company's mineral properties.
To finance these activities, the Company may seek to receive income through
property sales, or through a joint venture, or other form of business
arrangement with a larger and better capitalized mining company.
As the Company is organized for the purpose of " . . . transacting any
lawful act or activity for which corporations may be organized under the Utah
Revised Business Corporation Act (Restated Articles of Incorporation, ARTICLE II
- PURPOSE)", the Company may or may not entertain potential merger candidates
who are NOT engaged in the business of mineral exploration and / or mining.
While the Company should be considered a viable Development Stage Company,
in the event the Company does successfully acquire or merge with an operating
business opportunity, it is likely that the Company's present shareholders will
experience substantial dilution and there is the further possibility of a change
in control of the Company.
Any target acquisition or merger candidate of the Company will become
subject to the same reporting requirements as the Company upon consummation of
any such business combination. Thus, in the event that the Company successfully
completes an acquisition or merger with another operating business, the
resulting combined business must provide audited financial statements for at
least the two most recent fiscal years or, in the event that the combined
operating business has been in business less than two years, audited financial
statements will be required from the period of inception of the target
acquisition or merger candidate.
If warranted by future events, Gold Chain may or may not explore and
develop its properties on its own account. However, the Company does not
contemplate expanding its mining operations outside the United States of
America.
CURRENT DEVELOPMENTS. Gold Chain is a viable development stage company.
While it is an active Utah corporation in good standing with the State of Utah,
the Company is NOT currently entertaining a potential merger or acquisition
transaction under discussion with any other entity. Nonetheless, the Board of
Directors has determined that the best interests of the Company and its
shareholders will be served by filing this registration statement with the SEC
on a voluntary basis, and subsequently filing periodic reports and other forms
with the SEC.
As a result of filing this and other registration statements, the Company
obligates itself to continue to file with the Commission certain interim and
periodic reports, including an annual report containing audited financial
statements.
The Company intends to continue to voluntarily file these periodic reports
under the Exchange Act even if its obligation to file such reports is suspended
under applicable provisions of the Exchange Act.
SEASONABILITY. Gold Chain's business is generally not seasonal in nature
except to the extent that weather conditions at certain times of the year may
affect access to some of its properties at higher elevations.
NUMBER OF EMPLOYEES. At present, Gold Chain does NOT have any paid
employees. Should it succeed in obtaining working capital, the Company intends
to contract for the services of 1 or 2 part-time employees, and may also enter
into contractual arrangements with 1 or more consultants. Gold Chain may or may
not contract with additional employees or consultants from time to time,
depending upon the circumstances of its operations. Any consultants retained by
the Company are considered independent contractors.
SECURITIES ISSUANCES. The Company's Articles of Incorporation
authorize it to issue up to ten million (10,000,000) shares. To date, there
are 2,000,776 shares issued and outstanding. The Company did not issue any
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shares of its common stock during fiscal years <1996, 1997, or 1998.
During fiscal 1999, the Company issued a total of 775,000 shares. While the
Company has not issued any stock options, warrants, other security derivatives,
or stock appreciation rights since its inception, the Directors have approved
the establishment of a plan for awarding shares of common stock, stock options
and stock appreciation rights, pending the affirmative authorization of its
shareholders as to the amount of shares to be administered under the plan.
GOVERNMENT REGULATION OF ENVIRONMENTAL CONCERNS. Gold Chain remains
committed to complying with various federal, state and local provisions that
regulate the discharge of materials into the environment and govern the conduct
of mining activities for the protection of the environment. To its knowledge,
the Company was in full compliance with these environmental regulations during
fiscal 1998 and 1999 and intends to continue to fully comply in fiscal 2000.
To fulfill its environmental compliance obligations, Gold Chain must attend
to the complex requirements of laws encompassing jurisdictional authority over
matters affecting land, mineral rights and/or the surface under which mining
activities are proposed. Such compliance may materially affect Gold Chain's
capital expenditures, earnings and competitive position in the following general
areas:
1) surface impact, 2) water acquisition, 3) site access, 4) reclamation, 5)
wildlife preservation, and 6) permit and license qualification. To date,
compliance has not had a material financial effect on Gold Chain because its
activities have not had a material and significant impact on the environment.
As the Company becomes more active on its properties, however, it is
reasonable to expect that compliance with environmental regulations could
substantially increase in cost. Such future compliance could include performing
feasibility studies on the surface impact of the Company's proposed operations;
minimizing surface impact, water treatment and protection; reclamation
activities including rehabilitation of various sites; and on-going efforts at
alleviating the mining impact on wildlife. Moreover, governmental agencies may
require permits or bonds from year to year to ensure the Company's compliance
with applicable regulations.
During fiscal 1999, Gold Chain did not engage in any activity that would
have required, and no governmental agency required, it to obtain any permits or
bonds, or otherwise cause the Company to expend any funds to comply with any
material environmental regulation. Moreover, the Company does not anticipate
that any reclamation bonding will be required during fiscal 2000, or in the
reasonably foreseeable future.
Gold Chain does NOT anticipate any material capital expenditures for
environmental control facilities during fiscal 2000. The cost of future
compliance affecting the Company's mineral properties may depend upon the extent
and type of exploration and testing required.
There can be no assurance, however, that Gold Chain will be able to comply
with all requirements imposed on any such future development, or that it will be
able to economically operate or pursue exploration and development activities
under future regulatory provisions.
RISK FACTORS
Investment in Gold Chain's securities should be considered highly
speculative. The Company has no recent operating history and is subject to all
of the risks inherent in developing a business enterprise.
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The Company needs additional capital and has NO revenues. There exist, or
may exist, non-arms length transactions with related parties that at times may
or may not involve conflicts of interest. Furthermore, it should be carefully
noted that Gold Chain does NOT anticipate paying any dividends on its common
stock.
In brief, the Company's securities involve a high degree of risk. The
reader is cautioned, therefore, to carefully read this registration statement in
its entirety and to seriously consider all of the factors and financial data
that are disclosed here, in particular, the specific risk factors described
below.
1. RECENT STATUS AS A NON-REPORTING, NON-TRADED PUBLIC COMPANY. Gold Chain
obligated itself as a fully reporting company with its submission of FORM
10SB12G on Aug 9, 1999, Commission File Number: 1-1767.
The Company's securities have NOT traded publicly in any market since 1985.
The uncertain likelihood that its business and a market for its securities will
be successful must be considered in light of the potential difficulties,
complications, problems, expenses and / or delays frequently encountered in
connection with a new business in general.
These same factors may be compounded by even greater risks, particularly
those characteristic of a speculative industry like mining exploration and
development, and may be adversely affected by the competition in the industry
and the strict regulatory environment in which Gold Chain will operate.
2. EXPLORATION (DEVELOPMENT STAGE) COMPANY. Mineral exploration
(particularly gold and silver), is highly speculative in nature, is frequently
nonproductive, and involves many risks, often greater than those involved in the
actual mining of mineralization.
Such risks may be considerable and may add unexpected expenditures or
delays in the Company's plans. There can be no assurance that Gold Chain's
mineral exploration activities will be successful or profitable. Even if
mineralization is discovered, it may take a number of years from the initial
phase of drilling until production is possible, during which time the economic
feasibility of production may change.
Furthermore, there can be no assurance that a determination of economic
feasibility will apply over time because it is based partly on assumptions and
factors that are subject to fluctuation and uncertainty, such as, for example,
metal prices, production costs, and the actual quantity and grade of ore
recoverable.
3. AUDITORS' GOING CONCERN OPINION. Gold Chain's management has reactivated
the Company and is voluntarily registering its common stock with the SEC to make
Gold Chain more attractive to potential investors. Management believes that
being a reporting company under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), could provide a prospective merger or acquisition
candidate with additional information concerning the Company. In addition,
Management believes that this might make the company more attractive to an
operating business opportunity as a potential business combination candidate.
However, the Company cannot provide any assurances that it will obtain
future capital, or if so, that the amount raised will be sufficient to establish
the Company as a going concern.
4. ACCUMULATED NET LOSS; NOMINAL WORKING CAPITAL. Gold Chain has NOT
commenced significant business operations as of the date of this filing. The
Company remains in the development stage. At December 31, 1998, Gold Chain had
negative working capital of $8,500 and an accumulated deficit of $291,405. At
September 30, 1999, the Company had negative working capital of $74 and an
accumulated deficit of $360,479. Accumulated deficits and the potential for
future deficits in working capital are losses that are expected to continue in
to the foreseeable future because the Company's operations are
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subject to numerous risks that are associated with a development stage company
in the mining industry.
5. LACK OF REVENUE. Gold Chain needs additional capital but currently has
no revenues. Substantial expenditures are required to establish ore reserves
through drilling, to determine metallurgical processes to extract the
mineralization from the ore and, in the case of new properties, to construct
mining and processing facilities.
The Company lacks a constant and continual flow of revenue. Currently, Gold
Chain does NOT have royalty interests in any mining production or properties.
There is no assurance that the Company will obtain any such royalty interests,
or that if so, it will receive any royalty payments, or that it will otherwise
receive adequate funding to be able to finance its exploration and development
activities.
Further, Gold Chain intends to seek revenue sources on an on-going basis,
but there can be no assurance that such sources can be found, or that if
available, the terms of such financing will be commercially acceptable. This
lack of consistent revenue detrimentally affects the Company's progress because
it needs additional capital to fund business development and exploration and
development operations, and to acquire additional mineral properties, if
warranted.
6. REGULATORY CONCERNS. Environmental and other government regulations at
the federal, state and local level pertaining to the Company's business and
properties may include: (a) surface impact; (b) water acquisition; (c) site
access; (d) reclamation; (e) wildlife preservation; (f) licenses and permits;
and, (e) maintaining the fees for unpatented mining claims. See "Government
Regulation of Environmental Concerns," above at page 6.
7. RETENTION AND ATTRACTION OF KEY PERSONNEL. Gold Chain's success will
depend, in large part, on its ability to retain and attract highly qualified
personnel, and to provide them with competitive compensation arrangements,
equity participation and other benefits. There is no assurance that the Company
will be successful in retaining or attracting highly qualified individuals in
key management positions.
8. RELIANCE UPON DIRECTORS AND OFFICERS. At present, Gold Chain is wholly
dependent upon the personal efforts and abilities of its officers and directors,
who exercise control over its day-to-day affairs. There can be no assurance as
to the volume of business, if any, that the Company may succeed in obtaining,
nor that its proposed operations will prove to be profitable.
9. OFFICERS AND DIRECTORS INDEMNIFICATION FOR SECURITIES LIABILITIES. Gold
Chain's Articles of Incorporation and Bylaws provide that it may indemnify any
Director, Officer, agent and/or employee against certain liabilities as
specified in the Revised Utah Business Corporation Act. Also, the Company may
purchase and maintain insurance on behalf of any such person whether or not it
would have the power to indemnify that person against the liability insured
against. The foregoing indemnification could result in substantial expenditures
by the Company and prevent any monetary recovery from such Officers, Directors,
agents and employees for losses incurred by the Company as a result of their
actions. It is the Company's understanding that, in the opinion of the SEC,
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable with respect to any claim, issue, question, or matter
of liability touched upon by the federal securities laws and regulations.
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10. NO DIVIDENDS. Holders of the Company's common stock are entitled to
receive dividends when, as and if declared by the Board of Directors out of
funds legally available for that purpose. To date, Gold Chain has NOT paid any
cash dividends. The Board does NOT intend to declare any dividends in the
foreseeable future, but instead intends to retain all earnings, if any, for use
in the Company's business operations. Even if the Board desired to declare any
dividends, the Company's ability to do so would very likely be restricted
because the Company is seeking outside financing and most financing covenants
prohibit such declarations.
11. PREEMPTIVE RIGHTS, CUMULATIVE VOTING AND CONTROL. In accordance with the
Company's Articles of Incorporation and Bylaws and the laws of Utah, there are
no preemptive rights in connection with Gold Chain's Common Stock. There can be
no assurance that Gold Chain shareholders might not be further diluted in their
percentage ownership of the Company's stock in the event additional shares were
to be issued by Gold Chain in the future. Moreover, cumulative voting in
electing Directors is NOT provided for. Accordingly, the holder(s) of a majority
of the Company's outstanding shares, present in person or by proxy, will be able
to elect all of its Directors. See the section entitled "Description of
Securities," at page 24.
12. VOTING CONTROL OWNED BY ENTITIES THAT ARE CONTROLLED BY ONE PERSON. As
of the date of this filing, Mammoth Mining Company owns approximately 37 percent
(37%) of the Company's outstanding common stock, and Keystone Surveys, Inc.,
owns approximately 34 percent (34%).
Mr. Spenst Hansen, an executive officer and director of the Company, owns
the closely-held Keystone, and holds greater than 80 percent (80%) of Mammoth's
outstanding common stock. This control gives Mr. Hansen the ability to elect all
of Gold Chain's directors, who in turn elect all executive officers, potentially
without regard to the votes of all other stockholders.
13. NO MARKET FOR COMMON STOCK; NO MARKET FOR SHARES. Although the Company
intends to submit its common stock for listing on the OTC Bulletin Board or the
"pink sheets", administered by the National Association of Securities Dealers,
Inc. ("NASD"), there currently is no market for its shares. There can be no
assurance, as of the date of this filing, that any such market will ever develop
or be maintained.
Even if the Company succeeds in establishing a market for its shares, the
market and price for shares of the Company's common stock is likely to be
extremely volatile. Numerous other factors beyond the Company's control may have
significant impact, from time to time, on its common stock, with adverse
consequences. For example, stock markets generally experience extreme price and
volume fluctuations that can, and do, greatly affect the stock trading of "small
capital" companies such as Gold Chain. These fluctuations often are unrelated to
the operating performance of those companies. Further, in conjunction with
changes in other economic and political conditions, all such factors and
uncertainties may adversely affect the market for and price of the Company's
common stock.
14. RISKS OF PENNY STOCK. The Company's common stock is considered to be a
"penny stock" because it meets one or more of the definitions in SEC Rule
3a51-1: (i) it has a price less than five dollars per share; (ii) it is NOT
traded on a recognized" national exchange; (iii) it is NOT quoted on the NASD's
automated quotation system (NASDAQ), or even if so, has a price less
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than five dollars per share; OR (iv) is issued by a company with net tangible
assets less than $2,000,000, if in business more than three years continuous-
ly, or $5,000,000, if in business less than continuous three years, or with
average revenues of less than $6,000,000 for the past three years.
For more than 15 years there has been no established published market for
Gold Chain's common stock. The Company is in the process of qualifying for
trading in the over-the-counter market in the "pink sheets" or the OTC Bulletin
Board of the NASD. At such time as the Company meets the relevant requirements,
it may attempt to qualify for listing on either NASDAQ or a national securities
exchange, but there can be no assurance of this.
15. BROKER-DEALER REQUIREMENTS MAY AFFECT TRADING. Section 15(g) of the
Securities Exchange Act of 1934, as amended, and Rule 15g-2 of the Securities
and Exchange Commission require broker-dealers dealing in penny stocks to
provide potential investors with a document disclosing the risks of penny stocks
and to obtain a manually signed and dated written receipt of the document before
effecting any transaction in a penny stock for the investor's account.
Potential investors in the Company's common stock are urged to obtain and
read such disclosure carefully before purchasing any shares that are deemed to
be "penny stock." Moreover, Rule 15g-9 of the Securities and Exchange Commission
requires broker-dealers in penny stocks to approve the account of any investor
for transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
the Company's common stock to resell their shares to third parties or to
otherwise dispose of them.
16. PUBLIC, NON-AFFILIATE SHAREHOLDERS WILL SUFFER THE GREATEST LOSSES IF
THE COMPANY IS UNSUCCESSFUL. If Gold Chain's future operations are successful,
the present shareholders who are not affiliates of the Company could realize
benefits from Gold Chain's growth.
However, if the Company's future operations are unsuccessful, persons who
purchase its securities by means of a subsequent registration to sell
securities, or other type of public or private offering, likely will sustain the
principal loss of their cash investment.
17. POTENTIAL FUTURE SALES PURSUANT TO RULE 144. At October 7, 1999, there
were issued and outstanding approximately 2,000,776 shares of the Company's
common stock, of which about Seventy Five point 3 percent (75.3%)are "restricted
securities," as that term is defined in Rule 144 promulgated under the 1933 Act.
In general under Rule 144 a person (or persons whose shares are aggregated)
who has satisfied a one (1) year holding period, may sell within any three month
period, an amount of shares which does not exceed the greater of One percent
(1%) of the then outstanding shares of common stock, or the average weekly
trading volume during the four calendar weeks prior to such sale. Rule 144 also
permits the sale of shares, under certain circumstances, without any
10 of 40
quantity limitation, by persons who are not affiliates of Registrant and who
have beneficially owned the shares for a minimum period of two (2) years. Hence,
the possible sale of those restricted shares may, in the future, dilute the
percentage of free-trading shares held by a shareholder or subsequent purchaser
of these securities, and may have a depressive effect on the price of the
Registrant's securities. Further, such sales, if substantial, might also
adversely effect Registrant's ability to raise additional equity capital.
RISK FACTORS RELATED TO COMPANY'S PROPERTY
18. REALIZATION OF INVESTMENTS IN MINERAL PROPERTIES AND ADDITIONAL CAPITAL
NEEDS. The ultimate realization of Gold Chain's investment in mineral properties
is dependent upon, among other factors, the success of future property sales,
the existence of economically recoverable reserves, the ability of the Company
to obtain financing or make other arrangements for development, and upon the
profitability of prospective production. There presently exists uncertainty and
no assurances regarding the Company's expectation of acquiring sufficient funds
to finance its operations for fiscal 1999 and beyond. Gold Chain does NOT have
sufficient capital of its own to implement a full-fledged business development
plan or finance its intended operations, let alone to explore and develop its
mineral properties. There can be no assurance that the Company will be
successful in obtaining the required funds to finance its long-term capital
needs.
19. ABSENCE OF RECENT MINING ACTIVITY. There has been no significant mining
activities on these properties recently, except for limited exploration and
development work. After Centurion, no other mining company or entity has made
any offer to purchase, lease, or engage in any other transaction, such as a
joint venture, with respect to Gold Chain's property. Although the Company
incurs only nominal expense to preserve its ownership and maintain its property,
it receives from them no revenue or other income for that purpose.
20. UNCERTAINTY OF DEMAND FOR TINTIC-TYPE, OXIDIZED ORE. Due to the
development of modern hydrometallurgical processes, the absence of suitable
smelters, and the availability of more cost-effective techniques, it is
uncertain what the future level of demand will be for the type of oxidized
mineralization present on the Company's properties. Also, the amount it could
cost to reopen and finance a mining operation is likely to be dependent upon
several factors. These include: acceptable price levels of the relevant metals;
milling and smelting availability; fluctuations in market demand over time;
extent of competition with other companies; availability of acceptable
construction costs; availability of acceptable labor costs; feasibility of
obtaining economical housing facilities; manageable equipment costs; realistic
capital costs; and the acceptability of other price and cost variables.
21. RELIANCE UPON ESTIMATES AND ASSUMPTIONS. Exploration stage mining
companies use the evaluation work of professional geologists, geophysicists, and
engineers to make estimates in determining whether to acquire an interest in
property, or to commence exploration and development work. These estimates
generally rely on scientific and economic assumptions, and in some instances may
not be correct. The economic viability of a property cannot be determined until
extensive exploration and development work has been conducted and a
comprehensive feasibility study performed. That could result in the expenditure
of substantial amounts of money on a property before it even can
11 of 40
be determined whether or not the property contains economically recoverable
mineralization. No feasibility studies have been performed on Gold Chain's
properties because they yet require considerable exploration and development
work. Moreover, market prices of minerals produced are subject to fluctuation,
which may adversely affect the economic viability of properties on which
expenditures have been made. The Company is not able to presently determine
whether or not, or the extent to which, such risks may adversely affect its
strategy and business plan.
22. UNCERTAINTY OF TOPOGRAPHICAL EFFECT ON EXPLORATION. The Company's
properties are located in mountainous terrain. Because the surface of the land
has a topographic relief of over 800 feet, any ruggedness in the overlying area
could affect the location of drilling sites and shafts, as well as the
construction of industrial facilities. It also could require that additional
development or drilling on the property be accessed below ground. These outcomes
are uncertain at present, and the Company cannot provide assurances that they
will not have a materially adverse effect on the ability of the Company or a
business partner to conduct mining activities. There may be areas that
eventually could pose environmental or safety concerns.
23. UNCERTAIN CONDITION OF MINE WORKINGS. There are no surface mine shafts
or usable headframes on the Company's property. Moreover, the underground
workings have been inactive for many years due to the absence of significant
exploration, development and production activities on Gold Chain's properties
since the 1930's. There are tunnels with portals, however, that could be
reconditioned for later use to gain underground access to the workings for
renewed development and exploration on the Company's property. Considerable cost
would be incurred to recondition shafts, drifts, tunnels, winzes and other
workings, as well as to re-equip hoisting bases and framework. It is uncertain
whether and to what extent the workings themselves, as well as any
rehabilitation of them, could expose the Company to environmental and safety
concerns. If so, remediating these concerns could require expending an uncertain
amount of funds to render the workings safe, acceptable, and environmentally
sound.
OTHER BUSINESS RISK FACTORS
12 of 40
24. COMPETITIVE CONDITIONS IN THE INDUSTRY. Mining companies compete to
obtain favorable mining properties and to evaluate exploration prospects for
drilling, exploration, development, and mining. Gold Chain faces competition
from certain other similarly situated junior mining companies in connection with
the acquisition of properties capable of profitably producing gold, silver,
copper and other mineralization.
However, the Company is unable to ascertain the exact number of competitor
companies, or whether or when such competitors competitive positions could
improve. Thus, Gold Chain may be unable to acquire or develop attractive mining
properties on terms acceptable to Management. Accordingly, there can be no
assurance that such competition, although customary in the mining industry, will
not result in delays, increased costs, or other types of adverse consequences
affecting Gold Chain, nor that Gold Chain programs will yield commercially
mineable reserves.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The reader is strongly cautioned to review this discussion of the Company's
plan of operation together with the audited financial statements that accompany
this registration statement.
Management is providing the following plan of operation, in accordance with
SEC regulations for small business registrants, because Gold Chain did not have
revenues from operations in either 1998 or 1999, the last two fiscal years
audited in the financial statements.
Management discusses here its present business plans and then projects
those plans into 2000.
The Company's present plan of operation is based on certain reasonable
expectations concerning the mining industry, the demand for metals, and the
sources and potentials for obtaining financial capital. The Company does not
intend to forecast what may occur in the future, nor will the Company predict
that any particular event may occur.
However, the Company voluntarily discusses future events and plans
involving risks and uncertainties that could result in outcomes that are
materially different from those projected by these plans. Management emphasizes
that it can neither control nor predict many of these risks and uncertainties.
Management has attempted to encompass these risks and uncertainties within
its plan of operation. The reader is cautioned, however, to not overly rely on
any of the positive forward-looking statements made in this plan of operation,
or found elsewhere in this registration statement.
Parenthetical explanations have been included throughout to assist any
reader not familiar with certain mining terminology.
PLAN OF OPERATION
PURPOSE. The Company's purpose is to generate recurring cash flow by
establishing long-term business opportunities. The uncertainty of future events,
however, presently limits Gold Chain's ability to provide any assurances
regarding its ability to implement such a plan, raise financial resources, or
undertake such business activities. The reader is strongly cautioned to review
the comprehensive disclosure of "Risk Factors" presented above.
STRATEGY. The Company's business plan will be directed primarily toward the
exploration and development of its Twenty Eight (28) privately owned mining
claims. The mineral interests and rights with respect to these claims represent
durable value for exploration, development and mining as Gold Chain owns the
real property in fee simple.
13 of 40
It is possible, although not presently contemplated by Management, that
Gold Chain may purchase additional patented mining claims before the end of
fiscal 2000. In any event, management has decided that it will NOT purchase any
UNPATENTED mining claims because the real property underlying them is not owned
outright and the uncertain possession and value of their mineral rights is too
dependent upon compliance with costly and time-consuming federal regulations
that are subject to unpredictable changes.
Management does not expect to make any significant changes in the number of
its employees, other personnel, or consultants.
Management believes that further exploration and development on the
Company's patented mining claims may be warranted, even though they cover a
relatively small number of acres for the following reasons:
First, there exists a verifiable, quantifiable history of profitable
production from proven ore on the property.
Second, there has been almost no comprehensive exploration, to date, of the
property's mineralization beyond a depth of 300 to 400 ft.
Third, worldwide and in the U.S., major ore bodies have been found on
property encompassing fewer acres than that which Gold Chain encompasses.
Consider, for purposes of comparison only, the ore deposits in El Indio, Peru
and the Orphan Mine in Arizona, each approximately 20 acres. It is not the
number of acres, therefore, but what occurs on and beneath those acres that is
economically important.
FUNDING. Management believes the Company can satisfy its minimal cash
requirements from accounts receivable to continue nominal business operations as
at present. However, the Company does NOT have sufficient other funds of its own
to finance exploration and development costs, or to make capital improvements to
its properties and operating facilities.
Should the Company be unable to raise a significant amount of additional
working capital in the next twelve to eighteen months, it might not have
sufficient funds for further exploration or development work. As a result, Gold
Chain's plan of operation depends largely on its ability to cultivate financial
resources and business arrangements with investors and larger and better
capitalized companies.
The primary contribution to the Company's planned exploration and
development efforts, in Management's opinion, is Gold Chain's extensive library
of technical information concerning its properties. This technical library
contains geological reports, historical data, maps and other pertinent
geological information specific to the area, specifically a complete set of mine
maps and production records relataing to all previous mining operations on the
Gold Chain properties. These reference materials, in managements opinion,
represent an invaluable asset that management believes will be essential to
feasibly develop and explore the Company's properties with a high degree of
confidence.
The value of this tangible asset is greatly enhanced by the intangible
value of current management's knowledge of modern geologic science and
technology and its years of experience exploring and developing mining
properties in the Tintic Mining district.
ITEM 3. DESCRIPTION OF PROPERTY
For many years, Gold Chain's property consisted of nineteen patented mining
claims that it owned in the Tintic Mining district, Juab County, Utah, about
1-1/2 miles south of the small town of Eureka, Utah.
On June 21, 1999, the Company purchased nine additional patented mining
claims adjacent to the original nineteen. The twenty-eight patented mining
claims Gold Chain currently owns comprise a total of 151.462 acres. Table 3.1,
below, gives information about these patented mining claims:
14 of 40
<TABLE>
<CAPTION>
TABLE 3.1 -- DESCRIPTION OF PATENTED MINING CLAIMS
U.S. LOT NO. OR
NAME OF PATENTED CLAIM MINERAL SURVEY NO. ACRES
---------------------- ------------------ ------
<S> <C> <C>
Desert View________________ 6135 __________________ 1.675
Oneida_____________________ 2950 (Oneida group)____ 10.532 <F1>
Sideview___________________ 2946 (Oneida group)____ ** <F1>
Fairview___________________ 2951 (Oneida group)____ ** <F1>
Copperopolis No. 2_________ 160 __________________ 10.170
Belcher____________________ 3750 __________________ 5.653
California_________________ 114 __________________ 6.880
Fraction Lode______________ 3233 __________________ 1.675
Gold Chain Fraction________ 6191 __________________ 1.846
Golden Chain_______________ 339 __________________ 11.100
Champlain No. 2____________ 174 __________________ 2.916
Mammoth Mine_______________ 37 __________________ 4.590
West Mammoth Lode__________ 173 __________________ 1.536
American Eagle Lode________ 4679 __________________ 0.915
Mammoth 2 & 3 North________ 65 __________________ 1.830
Napoleon___________________ 3442 __________________ 5.220
Dom Pedro 2nd (1/2)________ 172 __________________ 7.815
Hungarian (North 1/2)______ 164 __________________ 3.270
Silver Chain (3/4)_________ 5880 __________________ 6.515
Leo________________________ 290 __________________ 8.990
Lisbon_____________________ 290 __________________ 3.920
Silver Star________________ 290 __________________ 5.160
Silver Spar________________ 290 __________________ 4.710
Argenta____________________ 290 __________________ 16.860
West Star__________________ 82 __________________ 5.729
North Star_________________ 62 __________________ 5.509
Ardath_____________________ 3332 __________________ 2.648
Elgin Amended______________ 4019 __________________ 13.798
=======
TOTAL ACRES = 151.462
<FN>
1. Oneida, Sideview, and Fairview, the three patented mining claims in the
Oneida Group, together constitute an undivided 10.532 acres.
</FN>
</TABLE>
FORM OF OWNERSHIP. Gold Chain does not hold "unpatented" mining claims. (An
unpatented mining claim is a parcel of property located on federal lands that
the U.S. government continues to own, though it has granted the private party
claimholder the right to explore and mine the claim.)
The Company owns patented mining claims. (A "patented" mining claim is land
originally held as unpatented, to which the private-party claimholder has been
conveyed fee simple title by the U.S. government, after meeting the federal
patenting requirements.) The important difference in the type of mineral
interest it represents is that the patent gives the claimholder full and
complete ownership, outright, of the land on which the claim is located.
15 of 40
THE EFFECT OF REGULATORY CHANGES ON HOLDING UNPATENTED MINING CLAIMS. The
U.S. Bureau of Land Management (BLM) promulgated new regulations in 1997
regarding hardrock unpatented mining claims (see 43 CFR 3809). Compliance with
the 1997 regulations is both time-consuming and costly. Therefore, Gold Chain
does NOT intend to purchase or locate any unpatented claims, but instead, to
concentrate its exploration and development activities primarily on its own
privately-held land and perhaps on land that, at some point in the future, it
may decide to acquire a leasehold under, through Utah State Mineral Leases.
Management believes that these BLM regulations will have little or no effect on
the Company's activities.
In fact, these regulations give Gold Chain an advantage over competing
companies since they will be required to comply with these regulations which is
at once time-comsuming and costly.
TYPE OF PROPERTY. The Company's twenty-eight privately owned mining claims
are lode claims. ( Lode claims contain deposits of minerals, in this case, gold,
silver, copper and lead, in solid rock.)
Located on the slopes of nearby Mammoth Mountain, the surface has a
topographic relief of over 800 feet.
To date, these efforts have not been sufficiently developed to achieve a
promising discovery of a new ore body. The intrinsic economic worth of these
properties, therefore, lies in continuing this exploration and development work
to achieve the recognizable potential of these properties in containing
discoverable, profitable ore.
MINING AND PRODUCTION HISTORY. Ore was discovered in 1870 on the Gold Chain
mineral properties and production began the following year. The Gold Chain
properties included the Gold Chain and Ajax Mines, two of the first mines in
production in the Tintic Mining district.
The Company's original nineteen patented claims yielded a total output of
193,000 tons of ore. Table 3.2, below, comprises data compiled by the U.S.
Bureau of Mines. It shows the total amounts and average grades of the principal
metals recovered by metallurgical treatment. Note that these figures may be
considerably less than the gross amounts and average grades of the total metal
actually contained in the ore, due to the inefficient smelter and recovery
processes of the pre-1930's.
<TABLE>
<CAPTION>
TABLE 3.2 -- AMOUNTS AND GRADES OF METALS RECOVERED
FROM GOLD CHAIN MINING CLAIMS
METAL TOTAL AMOUNT RECOVERED AVERAGE GRADE
------ ----------------------- --------------
<S> <C> <C>
Gold 89,800 ounces .47 OPT <F1>
Silver 1,600,000 ounces 8.29 OPT
Copper 17,300,000 pounds 4.48 % <F2>
Lead 1,500,000 pounds .39 %
</TABLE>
[FN]
1. "OPT" signifies the average number of "Ounces" of metal recovered
"Per" each "Ton" of ore mined.
2. "%" is derived from the ratio of total metal recovered to total
ore mined.
</FN>
16 of 40
For comparative purposes only, and using average metal prices on June 30th,
2000 (gold, $289 per oz; silver, $5.02 per oz, copper, $.82 per lb, and lead
$.20 per lb), the metal recovered from the mine on Gold Chain's patented claims
would have had a total present value of approximately $48,376.200.00.
EXPLORATION, DEVELOPMENT AND REHABILITATION WORK. There has been no mining
or other production activity on Gold Chain's properties since the 1930's, except
briefly during World War II which consisted of production of small tonnages of
high grade copper ore. Only a limited amount of exploration or development work
has been conducted on the Company's properties since the 1930's. ("Exploration"
is the work involved in searching for ore. "Development" is the construction
work carried out for the purpose of extracting ore from the deposit or mine.)
In 1976, Kennecott Copper Corporation negotiated a ten-year lease to
operate all of the properties that were owned by Mammoth Mining Company and its
subsidiary companies, which included Gold Chain's nineteen patented mining
claims. These properties were "unitized", in that Gold Chain was to receive
royalties based on metals production from any of the leased properties.
Kennecott carried out limited mineral exploration and development work on
the Gold Chain properties, but terminated this lease in 1982, after six years.
No ore production came from the Company's properties. Gold Chain's properties
were inactive from 1982 until 1994, when Centurion carried out limited
exploration consisting mainly of geologic mapping and sampling. Centurion also
performed some much-needed maintenance and rehabilitation work on the Gold Chain
underground workings. Centurion continued its activities until 1996.
NO additional work has been done on the properties since that time.
FUTURE PLANS FOR EXPLORATION AND DEVELOPMENT WORK. To date, Gold Chain
management has NOT applied for exploration permits for work on any of its
patented mining claims. However, during 2000 the Company expects to conduct
geological mapping, geochemical sampling, and geophysical surveys, and to file
applications for permits that would permit exploratory drilling to be carried
out during 2000. Gold Chain's management has not yet determined whether the
company will actually carry out drilling operations. This will depend on the
availability of funds.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 2000, the beneficial
ownership of the Company's common stock by the following 4 groups:
(1) all persons known to the Company to be the beneficial owners of more
than five percent of the outstanding shares of its common stock (the "Principal
Shareholders");
(2) each Gold Chain director;
(3) each "Named Executive Officer" who is listed in the "Summary
Compensation Table" on page 22 (the term "Named Executive Officer" is defined
below in the section entitled "Compensation of Executive Officers," Part I, Item
6, page 22); and
(4) All directors and executive officers as a group.
17 of 40
<TABLE>
<CAPTION>
TABLE 4.1 -- COMMON STOCK BENEFICIALLY OWNED <F1>
NAME AND ADDRESS NO. SHARES HOW HELD PERCENT OF CLASS
----------------------------- ---------- ---------- ----------------
<S> <C> <C> <C>
1. PRINCIPAL SHAREHOLDER(S)
Mammoth Mining Company 735,534 DIRECTLY 36.76%
Mammoth, Utah
Keystone Surveys, Inc. 680,000 DIRECTLY 33.99% <F2>
Salt Lake City, Utah
Spenst Hansen [1,415,534] [indirectly] [70.75%] <F3>
Mammoth, Utah 35,000 DIRECTLY 1.75% <F4>
2. DIRECTORS
Spenst Hansen 1,450,534 BOTH 72.50% <F5>
Mammoth, Utah
Blane van Pletzen 35,000 DIRECTLY 1.75% <F6>
Salt Lake City, Utah
Carlos M. Chavez 35,000 DIRECTLY 1.75% <F7>
Murray, Utah
3. "NAMED EXECUTIVE OFFICERS"
(NOT DIRECTORS) None n/a n/a n/a
4. ALL DIRECTORS & OFFICERS
AS A GROUP 4 Persons 1,520,534 Both 76.00% <F8>
<FN>
1. For purposes of this table only, in determining beneficial ownership the
amount reported for each individual, entity, or group listed above includes all
shares that such person or group has the right to acquire within 60 days after
December 31, 2000, including all share awards that will vest, and all shares
from options, warrants, or rights exercisable during that 60-day period. All
shares are owned directly, beneficially and of record, unless otherwise noted.
2. As of the date of this filing, Keystone is the owner of record of
670,000 shares, actually issued. However, for purposes of this table only,
Keystone is deemed to be the beneficial owner of 680,000 shares because during
the next 60 days, Keystone will be entitled to receive 10,000 shares in lieu of
cash as payment from the Company for the use in October and November 1999 of
office space owned and managed by Keystone.
3. Mr. Hansen does NOT directly own the 1,415,534 shares. Instead, they are
owned of record by Mammoth and Keystone in the amounts listed separately in the
table. However, Mr. Hansen has majority ownership and control of both Mammoth
and Keystone. Thus for purposes of this table only, Mr. Hansen is deemed to be
the beneficial owner, albeit indirectly, of the 1,415,534 shares.
4. As of the date of this filing, Mr. Hansen has received 35,000 shares for
his service as director. That is the total number of shares Mr. Hansen owns
directly and of record. Mr. Hansen is not entitled to receive any additional
shares during the next 60 days.
18 of 40
5. For purposes of this table only, Mr. Hansen is deemed to be the
beneficial owner of all shares that he owns or controls, both directly and
indirectly. Mr. Hansen directly owns 35,000 shares. He is deemed to be the
beneficial owner of the 1,415,534 shares owned by Mammoth and Keystone because
he holds indirect control over those shares. Thus, Mr. Hansen is deemed to be
the beneficial owner of their sum, or 1,450,534 shares.
6. As of the date of this filing, Mr. van Pletzen is the beneficial owner,
directly and indirectly, of 35,000 shares. He is not entitled to receive any
additional shares during the next 60 days.
7. As of the date of this filing, Mr. Chavez is the beneficial owner,
directly and indirectly, of 35,000 shares. He is not entitled to receive any
additional shares during the next 60 days.
8. As of the date of this filing, Mr. Chavez and Mr. van Pletzen,
collectively, are the beneficial owners of 70,000 shares. Mr. Hansen is deemed
to be the beneficial owner of 1,450,534 shares (see footnote 5). Thus the sum
total of their beneficial ownership, for purposes of this table only, is deemed
to be 1,520,534 shares.
</FN>
</TABLE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS. Under Gold Chain's Bylaws, the Company must have not fewer than
one nor more than twelve directors, notwithstanding resignations, vacancies or
terminations from office.
The directors are elected to serve until the next annual shareholders'
meeting or until their respective successors are elected and qualify. Interim
replacements for vacancies on the Board of Directors are appointed by the
remaining incumbent directors. The Gold Chain Board of Directors is currently
composed of three members. No director that was appointed or elected during any
of the past five fiscal years has declined to serve, and none has been found
unable or unfit to serve.
EXECUTIVE OFFICERS. The Company's officers hold office until the meeting of
the Board of Directors immediately following the next annual shareholders'
meeting or until removal by the Board of Directors. Gold Chain's Bylaws specify
that its officers shall be a president, one or more vice presidents, a secretary
and a treasurer. Interim replacements for officers that have resigned or been
terminated are appointed by the Board of Directors. The following sets forth
pertinent information about each of Gold Chain's directors and executive
officers:
SPENST HANSEN, Ph.D. has been a Director since 1995, and has served as
President and Chairman of the Company's Board of Directors since 1997. From 1979
until 1998, he was a director, executive officer and employee of Centurion and
its predecessor companies.
Mr. Hansen has worked on several mining projects worldwide for more than 30
years, and has been directly involved in all phases of mining exploration,
development and production on various mining properties in the State of Utah
during that period.
Mr. Hansen holds a doctoral degree in geology from the University of
Missouri, Columbia, Missouri, a Masters degree in mining engineering from the
Missouri School of Mines, Rolla, Missouri, and a Bachelor of Science degree in
geological engineering from the University of Utah, Salt Lake City, Utah.
He is a registered professional geologist in California (#2067) and Idaho
(#38).
Mr. Hansen presently serves as a director and executive officer of Mammoth
Mining Company.
19 of 40
BLANE VAN PLETZEN, M.A. recently joined the Company as a Director and Vice
President of the Company. He has been principally employed as a Paralegal from
1995 until the present. Mr. van Pletzen has represented a diverse group of
clients, specifically mining exploration and development companies, who have
retained his services as a Filing Agent and Outside Consultant.
Mr. van Pletzen received a Master's degree in English Literature and
Technical Writing in 1985 from the Utah State University, Logan, Utah and a
Bachelors degree in English in 1982 from Weber State University (then College),
Ogden, Utah.
Formerly on the faculty of Brigham Young University - Hawai'i, Mr. van
Pletzen served as Director of the Reading / Writing Center, and lectured various
undergraduate courses in English literature and Composition and Rhetoric.
Mr. van Pletzen is currently an Adjunct professor of English with Salt Lake
Community College in the department of Humanities and Sciences.
Mr. van Pletzen presently serves as a director and executive officer of
Viable Resources, Inc.
ELIZABETH KNOWLTON has been a Director and Vice President of the Company
since 1997. She has been principally employed as a licensed attorney in the
private practice of law from 1986 until the present.
Ms. Knowlton has represented a diverse group of clients before numerous
state, federal and tribal courts on a variety of civil, criminal, tribal and
other legal matters. Ms. Knowlton received a B.S. degree in 1980 from the
University of Utah, Salt Lake City, Utah and a J.D. degree in 1984 from Western
State University, San Diego, California.
She was employed by the San Diego Attorney General's Office in 1982 and was
licensed by the California Bar and the U.S. District Court for the Southern
District of California in 1986; by the Utah Bar and the U.S. District Court for
the District of Utah in 1991; and by the U.S. District Court for the District of
Arizona in 1997.
Ms. Knowlton presently serves as a director and executive officer of
Mammoth Mining Company.
No arrangement or understanding exists between or among any of the
directors or executive officers and any other person pursuant to which any
director was elected, or any executive officer was appointed. None of the
Company's directors are currently directors of other companies registered under
the Securities Exchange Act of 1934.
Each director and executive officer intends to devote such amount of time
as that person's responsibilities require, but none of them work full time for
the Company. Also, no family relationship exists among any of the named
directors and executive officers.
As of the date of this registration statement, none of the Company's
directors or nominees, executive officers, or principal shareholders has been
involved in any legal proceeding during the past five years arising from any of
the following events that would be material in evaluating the ability or
integrity of any such person: (1) any bankruptcy petition filed by or against
any business of which such person was a general partner or executive officer
20 of 40
either at the time of the bankruptcy or within two years prior to that time; (2)
any conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses); (3) being
subject to any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting that person's involvement
in any type of business, securities or banking activities; and (4) being found
by a court of competent jurisdiction (in a civil action), the SEC, or the
Commodity Futures Trading Commission to have violated a federal or state
securities, or commodities law and the judgment has not been reversed,
suspended, or vacated.
BOARD MEETINGS. Pursuant to Utah law, the Board of Directors conducted all
of its business and approved all corporate action during fiscal 1999 by the
unanimous consent of all its members, in the absence of formal Board meetings.
STANDING AUDIT AND COMPENSATION COMMITTEES; NO OTHER COMMITTEES. At the
beginning of fiscal 1999, the Board of Directors established Compensation and
Audit Committees. At present, the Board does not have a nominating committee, or
any other Board committees.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities and Exchange Act of 1934 requires officers,
directors, and persons who own more than ten percent of Registrant's Common
Stock to file initial reports of beneficial ownership and to report changes in
such ownership with the Commission and the National Association of Securities
Dealers. These persons are also required to furnish the Company with copies of
all Section 16(a) forms they file. These requirements will commence upon the
effective date of this registration statement. Therefore, as of the date of this
filing, these persons have not been subject to the requirements of Section
16(a). Nevertheless, Gold Chain has informed these persons of their imminent
obligations under Section 16(a). Further, the Company has set up a procedure
whereby periodically it will (i) notify these persons of their Section 16(a)
obligations; (ii) review the copies of Forms 3, 4, and 5 that these persons
furnish to the Company; (iii) request written representations from them that no
other transactions were required; and (iv) make a determination that the
pertinent officers, directors and principal shareholders have complied with all
applicable Section 16(a) requirements during fiscal year 1999.
DIRECTOR LIABILITY LIMITATION. In fiscal 1995, shareholders approved by
written consent an amendment to the Registrant's Articles of Incorporation
limiting the personal liability of directors to the Registrant and its
shareholders to the extent allowed by Utah law. In effect, the shareholders
approved the adoption of statutory provisions which permit a Utah corporation to
eliminate the personal liability of directors for monetary damages for breach of
fiduciary duty.
ITEM 6. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS. The Company does NOT have any contractual
arrangements for compensation with any of the Directors, and does not pay any
monetary fees or other form of cash compensation for their services. Instead,
Directors are authorized to receive a grant of 5,000 shares of restricted
21 of 40
common stock for each quarter of completed service. This authorization covers
the five-year period from January 1, 1998, to December 31, 2002. At September
30, 1999, the Directors had earned and received a total of 105,000 shares for
their service during the seven consecutive quarters between January 1, 1998, and
September 30, 1999. At present, Directors do NOT receive any award of options,
warrants, or stock appreciation rights for their service.
COMMON STOCK AND OPTION AWARD PLAN. At the Annual Board of Directors
Meeting held June 17, 1995, the Company's Directors approved a plan for the
granting of stock, stock options and stock appreciation rights pursuant to
registration on Form S-8 with the SEC. The plan was approved to enable the
Company to attract and retain experienced and able directors, officers,
employees and similar individuals who provide significant service to the Company
and who are eligible under the plan to receive qualified plan awards. As of the
date of this filing, the shareholders have not authorized a specific amount of
shares of common stock to be administered under this plan and to date the
Company has not issued any non-restricted stock, options, or stock appreciation
rights awardable under the plan.
COMPENSATION OF EXECUTIVE OFFICERS. The following table sets forth the
compensation paid by Gold Chain during each of the last three fiscal years to
its chief executive officer and to the other four most highly compensated
officers and executive officers, whose individual total annual salary and bonus
exceeded $100,000 for Fiscal 1999 (the "Named Executive Officers"). This
information includes the dollar value of base salaries and bonus awards, the
number of stock options granted, and certain other compensation, if any.
<TABLE>
<CAPTION>
TABLE 6.1 -- SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- -------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
------- ---- ------- ----- ------- -------- ---------- ------- -------
Name Securities
and Other Re- Underlying All
Princi- Annual stricted Options/ LTIP Other
pal Po- Compen- Stock SAR's Pay- Compen-
sition Year Salary Bonus sation Award(s) (#) outs($) sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------- ---- ------- ----- ------- -------- ---------- ------- -------
PRES.
Spenst 1998 $0 $0 $0 $0 0 $0 $0
Hansen 1997 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0
</TABLE>
There are no retirement, pension, or profit sharing plans for the benefit
of officers, directors or key employees as of the date of this filing.
OPTION/SAR GRANTS TABLE. This table has been omitted because there has been
no compensation in the form of options or SARs awarded to, earned by, or paid to
the Company's chief executive officer or any of its Named Executive Officers
during any pertinent fiscal year covered by this table.
22 of 40
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE.
This table has been omitted because there has been no compensation in the form
of options or SARs awarded or paid to, or earned, exercised, or retained by, the
Company's chief executive officer or any of its Named Executive Officers during
any pertinent fiscal year covered by this table.
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE. This table has been omitted
because there has been no compensation in the form of long-term incentive awards
that have been granted or paid to, or earned, exercised, or retained by, the
Company's chief executive officer or any of its Named Executive Officers during
any pertinent fiscal year covered by this table.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the officers and directors of the Company are engaged in other
businesses, either individually or through business entities in which they may
have an interest, hold an office or serve on the boards of directors. Some of
the directors of the Company also have other business interests to which they
devote a major or significant portion of their time. Certain conflicts of
interest, therefore, may arise between the Company and its directors. Company
management believes, however, that these conflicts can be resolved through the
exercise by these individuals of reasonable judgment consistent with their
respective fiduciary duties to the Company. The officers and directors of the
Company intend to resolve such conflicts in the best interests of the Company.
Moreover, the officers and directors will devote their time to the affairs of
the Company as they deem necessary.
Other than as described below, the Company has not been a party to any
transaction, or proposed transaction, during the last two years in which any
director, executive officer, or principal shareholder had or will have a direct
or indirect material interest, where: (1) the amount involved in the transaction
or series of similar transactions exceeds $60,000; or (2) the person's interest
arises solely from the ownership of the Company's securities, and the person
receives no extra or special benefit not shared equally (pro rata) by all
holders of the same class of securities.
In the past, the Company had made non-interest bearing advances to certain
shareholders and companies whose shareholders and officers also are shareholders
and officers of the Company. However, all such advances were paid. Therefore, at
December 31, 1997, and 1998, and September 30, 1999, no money was due the
Company as a result of any advance to a related party.
A majority of the Gold Chain common stock is owned by its parent company,
Mammoth Mining Company and by Keystone Surveys, Inc., a company that is owned
and operated by Spenst Hansen. Both Mammoth and Keystone are controlled by Mr.
Hansen, an officer and director of the Company who is also an officer, director
and majority shareholder of Mammoth and Keystone. The Company leases certain
office space located at the Main Tintic project mine in buildings and offices
owned and operated by Keystone. Gold Chain leases the office space from Keystone
for $500 per month on a month-to-month basis. The lease was not negotiated at
arms-length, but management believes that this arrangement is on terms as fair
as those that would have been obtainable from independent third parties.
Subsequent to the end of fiscal 1999, the Company entered a business
transaction to purchase additional mineral properties. On June 21, 1999, the
23 of 40
Company's Board of Directors authorized the purchase of nine patented mining
claims in the Tintic Mining district, Juab County, Utah, from Keystone, a
company that is a principal shareholder of the Company, and that is controlled
and operated by Mr. Hansen. The Board approved the issuance of 600,000 shares of
Gold Chain's common stock in exchange for the nine patented mining claims. The
purchase transaction was not negotiated at arms-length, but management believes
that this purchase is on terms and for consideration that is as fair as what
would have been obtainable from independent third parties.
The Board of Directors of the Company has not adopted or approved any
policy regarding future transactions with related third parties.
ITEM 8. DESCRIPTION OF SECURITIES.
COMMON STOCK AND DIVIDENDS. The authorized capital stock of the Company
consists of 10,000,000 shares of common stock, $.01 par value, of which
2,000,776 have been issued and are outstanding as of the date of this filing.
The holders of common stock are entitled to receive such lawful dividends as may
be declared by the Board of Directors. There are no redemption or sinking fund
provisions applicable to any shares of common stock. All outstanding shares of
common stock are fully paid and non-assessable.
VOTING RIGHTS. Stockholders are entitled to one vote, on all matters to be
voted upon, for each share of common stock held. The shares do not have the
right to cumulative voting for directors, meaning that holders of more than 50
percent of the shares voting for the election of directors can elect all of the
directors if they choose to do so.
LIQUIDATION RIGHTS. In the event of liquidation, dissolution or winding up
of the Company, holders of common stock shall be entitled to receive pro rata
all of the remaining assets of the Company that are available and distributable
to the shareholders.
PREEMPTIVE RIGHTS. Stockholders do NOT have a preemptive right, by statute
or under the Company's Articles of Incorporation or Bylaws, to acquire the
Company's unissued shares of common stock.
TRANSFER AGENT. OTC Stock Transfer, Inc., is transfer agent for the
Company's common stock. Its address is P.O. Box 15600, 231 East 2100 South, Salt
Lake City, Utah 84115, and its telephone number is (801) 485-5555.
PART II
Item 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
Gold Chain's common shares have NOT traded on a public stock exchange for
approximately 14 years. The Company is registering its common stock for
reporting purposes by way of this filing in order to place its common shares for
trading on the OTC Bulletin Board or the "pink sheets", which are over-the-
counter markets administered by the National Association of Securities Dealers.
The initial trading price of the Registrant's common shares will be determined
by market forces and other trading variables at the time of first trading, and
will be set by its market makers. After that time, quoted trading
24 of 40
prices will reflect inter-dealer prices, without retail markup, markdown, or
commission. It is likely that such quotations will not necessarily represent
actual transactions.
If, on the date of this registration statement, Gold Chain's shares were
listed for public trading, then approximately 490,240 shares or 24.5 percent of
the issued and outstanding common stock could be sold pursuant to Rule 144 under
the 1933 Act. However, the Company has NOT agreed to register any securities
under the 1933 Act for sale by stockholders. Further, the Company is NOT making
or proposing to make any public or private offering (unless pursuant to an
employee benefit plan) that could have a material effect on the market price of
its common stock. Finally no shares of the Company's common stock are subject to
outstanding options or warrants to purchase, or securities convertible into, its
common stock.
As of December 31, 1999, there were approximately 450 shareholders of
record of Gold Chain's common shares. The Registrant has not paid any dividends
on its common shares since its inception and does not anticipate that dividends
will be paid at any time in the immediate future.
ITEM 2. LEGAL PROCEEDINGS
To the best of its knowledge, Gold Chain is not aware of any pending legal
proceeding contemplated by a governmental authority, or concerning the Company's
business or properties, that involves primarily a claim for damages in excess of
ten percent of current assets excluding interest and costs. As of the date of
this filing, Gold Chain is NOT a party to any legal proceeding, either as
plaintiff or defendant, other than routine litigation incidental to its
business. Thus, the financial statements have not been adjusted to reflect any
material uncertainty regarding exposure to liability in legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS. The Company retains the
services of Robison, Hill and Company, 1366 East Murray-Holliay Road, Salt Lake
City, Utah 84117-5050.
NO CHANGES OR DISAGREEMENTS. Robison, Hill and Company continues as
Gold Chain's independent public accountants to the present date, without
25 of 40
any changes in or disagreements with that engagement or their audits. In
particular, the Company has made no changes, nor has it had any disagreements
with Robison, Hill and Company, that have affected its independent, professional
relation- ship with Robison, Hill and Company in any way during Gold Chain's two
most recent fiscal years, 1997 and 1998, or any subsequent interim period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company has not sold any shares of unregistered common stock in any
private placement offerings, or issued any unregistered stock in exchange for
Company debts in the past five years, and it is not aware of any recent sales or
issuances of restricted shares of common stock, other than the following:
(1) On June 21, 1999, the Company authorized the issuance of 600,000 shares
of unregistered stock, with a basis of $0.10 per share, to Keystone Surveys,
Inc., for the purchase of nine patented mining claims.
(2) On June 28 and September 30, 1999, the Company authorized the issuance
of 60,000 and 10,000 shares of unregistered stock, respectively, with a $0.10
per share basis, to Keystone Surveys, Inc., for the payment of rental costs of
$500/month, incurred from August 1, 1998 to June 30, 1999, and from July 1 to
September 30, 1999, respectively.
(3) On July 1 and September 30, 1999, the Company authorized the issuance
of 30,000 and 5,000 shares of unregistered stock, respectively, with a $0.10 per
share basis, to each of its three directors as compensation for their service at
the rate of 5,000 shares per quarter from January 1, 1998 to June 30, 1999, and
from July 1 to September 30, 1999, respectively.
All of the share issuances described above are restricted because they were
made in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. After the shares have been held for one year, the recipient may
sell, within any three month period, an amount of shares no greater than 1% of
the number of then-outstanding shares of the Company, in compliance with the
provisions of Rule 144. A restrictive legend is imprinted on the stock
certificates and "stop transfer" instructions against their sale or transfer are
in place.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Gold Chain's Bylaws authorize it to indemnify, at its election, any
director, officer, agent and/or employee as to those liabilities and on those
terms and conditions as are specified in the Revised Utah Business Corporation
Act. Further, the Company may purchase and maintain insurance on behalf of any
such persons whether or not it would have the power to indemnify such person
against the liability insured against. Indemnifying and/or insuring its officers
and directors from the increasing liabilities and risks their corporate acts and
omissions expose them to, could result in substantial expenditures by the
Registrant, while preventing any recovery from them for losses incurred by the
Registrant as a result of their actions. For that reason, the Securities and
Exchange Commission has issued an advisory opinion concluding that
indemnification of this type is against public policy as expressed in the 1933
Act, as amended, and, therefore, is unenforceable with respect to any claim,
issue, question, or matter of liability touched
26 of 40
upon by anything within the purview of the federal securities laws and
regulations.
PART F/S
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements (audited and unaudited) and Report of
Independent Public Accountants are filed as with this Registration Statement:
ITEM PAGE NO.
-------------------------------------------------------- ---------
Independent Auditors' Report. . . . . . . . . . . . . . . . . . F-3 (30)
Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . F-4 (31)
Statements of Operations. . . . . . . . . . . . . . . . . . . . F-5 (32)
Statements of Stockholders' Equity. . . . . . . . . . . . . . . F-6 (33)
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . F-7 (34)
Notes to Financial Statements . . . . . . . . . . . . . . . . . F-8 (35)
PART III
ITEM 1. INDEX TO EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K
and
ITEM 2. DESCRIPTION OF EXHIBITS
A. Index to and Description of Supplemental Schedules: NONE.
B. Reports on Form 8-K: NONE.
C. Index to and Description of Exhibits: The following documents are on
file under SEC File No. 1-1767 and are incorporated here by reference.
EXHIBIT NO. SEC. NO. DOCUMENT
----------- -------- -------------------------------------------
3.1 3 Articles of Incorporation
3.2 3(i) Articles of Amendment
3.3 3(i) Articles of Amendment
3.4 3(ii) Bylaws
10.1 10 Material agreements
The following documents were appended as exhibits to the originally filed Form
10-SB, submitted to the SEC on about August 9, 1999.
EXHIBIT NO. SEC. NO. DOCUMENT
----------- -------- -------------------------------------------
3.5 3(i) Articles of Restatement of the
Articles of Incorporation
3.6 3(i) Articles of Incorporation, restated
3.7 3(ii) Bylaws, amended and restated
10.2 10 Deed - properties, Juan County, Utah
27.1 27 Financial Data Schedule to Form 10-SB
The following document is appended as an exhibit to this Amendment No. 1 to Form
10-SB, being submitted to the SEC on or about October 7, 1999.
27 of 40
EXHIBIT NO. SEC. NO. DOCUMENT PAGE NO.
----------- -------- ------------------------------------------- --------
27.2 27 Financial Data Schedule to Form 10-SB/A __
POWER OF ATTORNEY
The Registrant and each person whose signature appears below has designated
and appointed Carlos M. Chavez as its/his true attorney-in-fact
("Attorney-in-Fact") with full power to act alone and authority to execute in
the name of each of them, and to file with the SEC, together with any exhibits
thereto and other documents therewith, any and all amendments to this Form
10-KSB that may be necessary or advisable to enable Registrant to comply with
the 1934 Act, and all rules, regulations and requirements pertaining thereto,
and fully empowering the aforesaid Attorney-in-Fact to make all amendments and
such other changes in the Form 10-KSB as he deems appropriate, with authority
thereby to ratify and execute the same.
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of
1934, the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE GOLD CHAIN MINING COMPANY, Registrant
/s/ Spenst Hansen
---------------------------------
By: Spenst Hansen, President
Its: CHIEF EXECUTIVE OFFICER
Dated: July 21, 2000
28 of 40
THE GOLD CHAIN MINING COMPANY
(A Development Stage Company)
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
AND THE TWO YEARS ENDED DECEMBER 1, 1999
AND THE PERIOD FROM INCEPTION ON AUGUST 19, 1907 THROUGH DECEMBER 31, 1999.
29 of 40
(F-2)
30 of 40
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Gold Chain Mining Company
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheets of The Gold Chain Mining
Company (a development stage company) as of December 31, 1999 and 1998 and the
related statements of operations and cash flows for the two years ended December
31, 1999 and the statement of stockholders' equity from inception on August 19,
1907 through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 audits 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 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 financial statements referred to above present fairly,
in all material respects, the financial position of The Gold Chain Mining
Company (a development stage company) as of December 31,1999 and 1998 and the
results of its operations and cash flows for the two years ended December 31,
1999, in conformity with generally accepted accounting principles.
Respectfully submitted
/s/ ROBISON, HILL & CO.
___________________________
Certified Public Accountants
Salt Lake City, Utah
July 21, 2000
31 of 40
THE GOLD CHAIN MINING COMPANY
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31,
______________________________
1999 1998
_____________ _____________
<S> <C> <C>
Assets:
Cash and Cash Equivalents $ 96 $ -
============= =============
Liabilities:
Accounts Payable $ 965 $ 100
Related Party Payables 11,504 9,159
_____________ ______________
Total Liabilities 12,469 9,259
_____________ ______________
Stockholders' Equity:
Common Stock, Par value $.01
Authorized 10,000,000 shares,
Issued 2,002,975 and 1,227,975 shares at
December 31, 1999 and 1998, respectively 20,030 12,280
Paid in Capital 340,275 270,525
Deficit Accumulated During the Development Stage (372,678) (292,064)
_____________ ______________
Total Stockholders' Equity (12,373) (9,259)
_____________ ______________
Total Liabilities and Stockholders' Equity $ 96 $ -
============= ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
32 of 40
THE GOLD CHAIN MINING COMPANY
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the year ended Cumulative
December 31, Since inception
of
---------------------- Development
1999 1998 Stage
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
EXPENSES
General and administrative 20,614 9,259 271,257
---------- ---------- ----------
Net Loss from Operations (20,614) (9,259) (271,257)
---------- ---------- ----------
OTHER INCOME (EXPENSES)
Loss on valuation of assets (60,000) - (101,421)
---------- ---------- ----------
Net Loss $ (80,614) (9,259) (372,678)
---------- ---------- ----------
Basic & Diluted loss
per share $ (0.05) $ (0.01)
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
(F-5)
33 of 40
THE GOLD CHAIN MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock During the
----------------------- Paid in Development
Shares Amount Capital Stage
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Balance at inception
on August 19, 1907 - $ - $ - $ -
Issuance of Common stock
at approximately
$0.23 per share 1,227,975 12,280 270,319 -
Net loss from
inception through
December 31, 1995 - - - (233,865)
----------- ---------- ---------- -----------
Balance at
December 31, 1995 1,227,975 12,280 270,319 (233,865)
Net Loss (48,834)
----------- ---------- ---------- -----------
Balance at
December 31, 1996 1,227,975 12,280 270,425 (282,805)
Capital Contribution - - 106 -
Net loss balance at
December 31, 1997 1,227,975 12,280 270,425 (2292,064)
----------- ---------- ---------- -----------
Capital Contribution - - 100 -
Net loss balance at
December 31, 1998 1,227,975 12,280 270,525 (292,064)
----------- ---------- ---------- -----------
Issuance of Stock for
services in Lieu of
Cash at $0.10 per share 175,000 1,750 15,750 -
Issuance of Stock for
mining claims in Lieu of
Cash at $0.10 per share 600,000 6,000 54,000 -
Net loss - - - (80,614)
Balance at
December 31, 1999 2,002,975 $ 20,030 $ 340,275 $ (372,678)
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
(F-6)
34 of 40
THE GOLD CHAIN MINING COMPANY
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
Since
For the years ended Inception
December 31, of
----------------------- Development
1999 1998 Stage
----------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss $ (80,614) $ (9,259) $ (372,678)
Stock issued for services 17,500 - 17,500
Loss on valuation of assists 60,000 - 101,421
Increase (Decrease) in
Accounts Payable 865 8,500 9,465
Net Cash Used in operating ----------- ---------- -----------
activities (2,249) (759) (244,292)
----------- ---------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Investment in Mining Claims - - (41,421)
----------- ---------- -----------
Net Cash provided by
investing activities - - (41,421)
----------- ---------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Capital Contributions - 100 206
Shareholder Advances 2,345 659 3,004
Issuance of Capital Stock - - 282,599
----------- ---------- -----------
Net Cash Provided by
Financing Activities 2,345 759 285,809
----------- ---------- -----------
Net (Decrease) Increase
in Cash and Cash Equivalents 96 - 96
Cash and Cash Equivalents at
Beginning of Period - - -
----------- ---------- -----------
Cash and Cash Equivalents at
End of Period $ 96 $ - $ 96
=========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ 100 100 200
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
None.
The accompanying notes are an integral part of these financial statements.
</TABLE>
(F-7)
35 of 40
THE GOLD CHAIN MINING COMPANY
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies from Gold Chain Mining Company is
presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Organization and Basis of Presentation
The Gold Chain Mining Company (the Company) was incorporated in the State
of Utah on August 19, 1907. The Company is a subsidiary of Mammoth Mining
Company, a Nevada corporation doing business in Utah. The Company is in the
development stage, and has not commenced planned principal operations.
Nature of Business
The company has no products or services as of December 31, 1999. the
Company was organized to explore and develop mining properties through the sale,
leasing or joint venture of such properties.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.
F6
36 of 40
THE GOLD CHAIN MINING COMPANY
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Income Shares Per-Share Amount
------ ------ ----------------
(Numerator) (Denominator)
For the year ended December, 31, 1999
-------------------------------------
Basic Loss per Share
Loss to common shareholders $ (80,614) 1,615,475 $ (0.05)
=========== =========== ==========
For the year ended December, 31, 1998
-------------------------------------
Basic Loss per Share
Loss to common shareholders $ (9,259) 1,227,975 $ (0.01)
=========== =========== ==========
The effect of outstanding common stock equivalents would be anti-dilutive
for December 31, 1999 and 1998 and are thus not considered.
NOTE 2 - INCOME TAXES
As of December 31, 1999, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $236,000 that may be offset
against future taxable income through 2014. Current tax laws limit the amount of
loss available to be offset against future taxable income when a substantial
change in ownership occurs. Therefore, the amount available to offset future
taxable income may be limited. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater chance the
carry-forwards will expire unused. Accordingly, the potential tax benefits of
the loss carry-forwards are offset by a valuation allowance of the same amount.
F7
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THE GOLD CHAIN MINING COMPANY
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
NOTE 3 - DEVELOPMENT STAGE COMPANY
The company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company shares office space provided by the Company's parent company,
Mammoth Mining Company. The office space is located in certain buildings and
offices situated at the Main Tintic Project Mine. Mammoth mining Company leases
its office space, on an intermittent basis, from Keystone Surveys, Inc., a
company that is owned and operated by an officer and director of the Company who
is also a principal shareholder of Mammoth Mining Company. The monthly rent
expense is $500.00 due at the beginning of each month.
At December 31, 1998, the company owed $2,500.00 accrued rent for the five
months between August 1, 1998 and December 31, 1998. The company paid that
expense during 1999 by issuing 25,000 shares with a basis of $0.10 per share to
Keystone Surveys, Inc. lieu of cash. Rent expense for 1999 was $6,000. The
company issued 45,000 shares of the Company's Common Stock at $0.10 during 1999,
in payment in lieu of cash of $4,500 with the remaining $1,500 owing at December
31, 1999.
In accordance with the stock option plan adopted by the Company on June 17,
1995, the Board of Directors authorized 5,000 shares to each director of the
Company per quarter of service. These shares were assigned a value of $0.10 per
share.
At December 31, 1998, the Company owed the directors, as a group, a total
of 60,000 shares, or $6,000, under the compensation agreement, although no
shares were issued at December 31, 1998. During 1999, the directors, as a group,
accrued an additional 115,000 shares, or $11,500, under the compensation
agreement. During 1999, the Company issued the directors a total of 105,000
shares, or $10,5000, to compensate the directors for the seven quarters of
service the directors had completed between January 1, 1998, and September 30,
1999. At December 31, 1999, the Company owed the directors, as a group, a total
of 70,000 shares, or $7,000.
Also during 1999 and 1998, shareholders advanced the Company $2,345 and
$659, payable upon demand without interest.
In aggregate at December 31, 1999, the Company owed $11,504 to related
parties.
F8
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THE GOLD CHAIN MINING COMPANY
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
NOTE 5 - MINING CLAIMS
The Company holds an interest in 19 patented mining claims, totaling
approximately 84 acres and located in the Tintic Mining District, Juab County,
Utah.
On June 21, 1999, the Company's Board of Directors authorized the purchase
of nine patented mining claims from a company that is owned and operated by an
officer and director of the company who is also a principal shareholder of
Mammoth Mining Company. The Board approved the issuance of 600,000 shares of the
Company's stock, valued at $60,000.00, in exchange for the nine patented mining
claims.
During the year ended December 31, 1996, and again during the nine months
ended September 30, 1999, the Company determined a loss on the valuation of the
mining claims should be taken in accordance with its policy of valuing the
mining claims at the lower of cost or net realizable value. The ultimate
realization of the Company's investment in exploration properties is dependent
upon a number of factors, including success of mineralization, the ability of
the Company to obtain financing or to make other arrangements to further explore
and develop the properties, and the profitability of future production or
royalties from production, if any. The ultimate realization of the Company's
investment cannot be ensured or determined at this time and, accordingly, it was
determined the cost of the mineral properties, $41,421.00, and $60,000.00,
should be charged to operations.
NOTE 6 - COMMON STOCK AND OPTION AWARD PLAN
At an annual Board of Directors Meeting, held June 17, 1995, the Company's
Directors approved a plan for the granting of stock, stock options and stock
appreciation rights that would be registered with the Securities and Exchange
Commission. The plan was approved to enable the Company to attract and retain
experienced and able directors, officers, employees and similar individuals who
provide significant service to the Company and are eligible under the Plan to
receive qualified plan awards. as of December 31, 1999 and 1998, the
shareholders have not authorized any amount of shares of common stock to be
administered under the plan and no shares, options, or stock appreciation rights
have been awarded under the Plan.
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NOTE 7 - SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Company approved the issuance of
15,000 shares of the Company's common stock in payment of office rental costs
and 70,000 shares of the Company's common stock in payment of directors fees.
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(End of Financial Statements)
