FORM 10-Q/A
AMENDMENT No. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1995
GOLD RESERVE CORPORATION
State Of Incorporation: . . . . . . . Montana
Commission File Number: . . . . . . . . 1-8372
IRS Employer Identification No: . . . . 81-0266636
Address Of Principal Executive Offices: 1940 Seafirst Financial
Center
Spokane, Washington
99201
Registrant's Telephone Number: . . . . (509) 623-1500
Securities registered pursuant to Section 12(b) of the Act:
Title Of Each Class: . . . . . . . . . Common Stock
Name Of Each Exchange On Which Registered: NASDAQ
The Toronto Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period as the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes[X]
The number of shares of common stock outstanding at August 9, 1995,
was 20,432,444.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
CONSOLIDATED BALANCE SHEETS
June 30, 1995 and December 31, 1994
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,301,016 $ 6,675,771
Cash held in escrow (Note 3) 4,500,000
Investments:
Held-to-maturity securities, at
amortized cost 18,314,028 26,079,822
Accrued interest on investments 109,877 259,780
Deposits, advances and other assets 489,258 493,956
----------- -----------
Total current assets 31,714,179 33,509,329
Available-for-sale securities 221,851 177,809
Property, plant and equipment, net 20,516,283 9,551,676
Other assets 24,733 24,066
----------- -----------
Total assets $52,477,046 $43,262,880
=========== ===========
LIABILITIES
Current Liabilities:
Litigation settlement payable (Note 3) $ 4,500,000 $ 4,500,000
Accounts payable and accrued expenses 630,471 572,713
KSOP note payable, current portion 92,246 25,000
----------- -----------
Total current liabilities 5,222,717 5,097,713
KSOP note payable, non-current portion 56,514 123,760
Minority interest in consolidated
subsidiaries 95,394 141,651
----------- -----------
Total liabilities 5,374,625 5,363,124
----------- -----------
Commitments and contingencies (Note 2) _ _
(Continued)
</TABLE>
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
CONSOLIDATED BALANCE SHEETS, Continued
June 30, 1995 and December 31, 1994
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
SHAREHOLDERS' EQUITY
Serial preferred stock, no par value
Authorized: 10,000,000 shares, none issued $ _ $ _
Common stock, no par value (Note 2)
Shares authorized: 40,000,000 shares
Shares issued: 1995 - 20,407,188,
1994 - 18,929,668; shares outstanding:
1995 - 19,926,144, 1994 - 18,577,175 79,702,954 69,453,393
Common stock held by affiliates (1,428,565) (504,276)
Unrealized gain on available-for-sale
securities 80,677 79,017
Accumulated deficit (31,103,885) (30,979,618)
KSOP debt guarantee (148,760) (148,760)
----------- -----------
Total shareholders' equity 47,102,421 37,899,756
----------- -----------
Total liabilities and shareholders'
equity $52,477,046 $43,262,880
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 1995 and 1994 (unaudited)
<TABLE>
<CAPTION>
Three Months Ended SixMonthsEnded
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C>
Other Income:
Interest $ 354,387 $ 269,401 $ 782,998 $ 309,082
Foreign currency (loss) gain (4,510) 274,725 (8,372) 343,152
Miscellaneous - 14,309 - 35,985
----------- ----------- ----------- -----------
349,877 558,435 774,626 688,219
----------- ----------- ----------- -----------
Expenses:
General and administrative 368,386 424,113 543,720 776,466
Directors' and officers' compensation 54,987 71,225 123,817 152,378
Legal and accounting 142,149 72,259 217,508 170,150
Writedown of capitalized exploration
and development cost - 750,000 - 750,000
Depreciation 6,723 3,633 13,324 7,178
Minority interest in net loss of
consolidated subsidiaries - (1,970) (3,126) (2,087)
Interest expense, net of amount
capitalized 2,228 864 3,650 1,537
----------- ----------- ----------- -----------
574,473 1,320,124 898,893 1,855,622
----------- ----------- ----------- -----------
Loss before income taxes (224,596) (761,689) (124,267) (1,167,403)
Income tax provision - - - -
----------- ----------- ----------- -----------
Net loss $ (224,596) $ (761,689) $ (124,267) $(1,167,403)
=========== =========== =========== ===========
Net loss per share $ (0.01) $ (0.06) $ (0.01) $ (0.10)
=========== =========== =========== ===========
Weighted average common shares
outstanding 18,916,606 12,671,050 18,735,539 12,229,179
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Six Months Ended June 30, 1995 and the Year Ended December 31, 1994
(unaudited)
<TABLE>
<CAPTION>
Unrealized
Common Gain (Loss)
Common Shares Issued Stock Held on Available-
-------------------------- Accumulated By for-Sale
Shares Amount Deficit Affiliates Securities
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 11,723,451 $ 19,147,345 $ (7,239,140) $ (70,944) $ -
Effect of change in account-
ing for investments 108,425
Net loss (23,740,478)
Common stock issued for:
Services 6,000 33,000
Litigation settlement
(Note 3) 2,750,000 16,912,500
Cash 2,020,000 19,754,290
Options and warrants 2,430,217 13,650,244
Value attributed to
issuance of warrants
(Note 3) 800,000
Decrease in unrealized gain
on available-for-sale
securities (29,408)
Increase in common stock held
by consolidated subsidiaries (433,332)
Reduction of shareholders'
equity associated with
change in subsidiaries'
minority interest (843,986)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1994 18,929,668 69,453,393 (30,979,618) (504,276) 79,017
------------ ------------ ------------ ------------ ------------
(Continued)
</TABLE>
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY, Continued
For the Six Months Ended June 30, 1995 and the Year Ended December 31, 1994
(unaudited)
<TABLE>
<CAPTION>
Unrealized
Common Gain (Loss)
Common Shares Issued Stock Held on Available-
-------------------------- Accumulated By for-Sale
Shares Amount Deficit Affiliates Securities
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 18,929,668 $ 69,453,393 $(30,979,618) $ (504,276) $ 79,017
Net loss (124,267)
Common stock issued for:
Options 148,335 374,457
Minority interest of con-
solidated subsidiaries
(Note 2) 1,329,185 9,882,028
Increase in common stock
held by consolidated
subsidiaries (924,289)
Increase in unrealized
gain on available-for-
sale securities 1,660
Reduction of shareholder's
equity associated with
change in subsidiaries'
minority interest (6,924)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1995 20,407,188 $ 79,702,954 $(31,103,885) $ (1,428,565) $ 80,677
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,1995 and 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (124,267) $(1,167,403)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 13,324 7,178
Accreted interest on investments (412,814) -
Foreign currency loss (gain) 8,372 (363,235)
Writedown of capitalized exploration
and development costs - 750,000
Common stock issued for services - 33,000
Minority interest in net loss of
consolidated subsidiaries (3,126) (2,087)
Net gain on disposition and revalu-
ation of equity securities - (61,635)
Changes in current assets and
liabilities:
Net increase in current assets (4,345,399) (368)
Net increase in current liabilities 57,758 3,396
----------- -----------
Net cash used by operating
activities (4,806,152) (801,154)
----------- -----------
Cash flows from investing activities:
Proceeds from maturity of held-to-
maturity securities 16,170,000 -
Purchase of held-to-maturity securities (7,991,392) -
Purchase of property, plant and
equipment (2,121,001) (2,503,315)
Proceeds from sale of available-for-sale
securities - 75,769
Other (667) -
----------- -----------
Net cash provided (used) by investing
activities 6,056,940 (2,427,546)
----------- -----------
</TABLE>
(Continued)
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
For the Six Months Ended June 30,1995 and 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from financing activities:
Principal payments on Brisas contract $ - $ (30,661)
Proceeds from issuance of common shares 374,457 32,852,304
----------- -----------
Net cash provided by financing activities 374,457 32,821,643
----------- -----------
Change in cash and cash equivalents:
Net increase in cash and cash equivalents 1,625,245 29,592,943
Cash and cash equivalents - beginning of
period 6,675,771 6,766,712
----------- -----------
Cash and cash equivalents - end of period $ 8,301,016 $36,359,655
=========== ===========
Supplemental cash flow information:
Non-cash investing and financing
activities
Exchange of shares for minority interest
in subsidiaries 9,882,028 -
</TABLE>
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
Notes to Consolidated Financial Statements
June 30, 1995 (unaudited)
1. The Company and Significant Accounting Policies:
The Company was incorporated in Montana in 1956 for the purpose of
acquiring, exploring and developing mining properties and placing
these properties into production. The Company is currently
involved in the exploration and development of a potential gold
property in Venezuela.
The December 31, 1994 financial information has been derived from
the Company's 1994 audited financial statements. The notes to the
financial statements as of December 31, 1994, as set forth in the
Company's 1994 Form 10-K, substantially apply to these interim
financial statements at June 30, 1995, and are not repeated here.
The financial information given in the accompanying unaudited
financial statements reflects all normal, recurring adjustments,
which, in the opinion of management, are necessary for a fair
presentation for the periods reported.
The consolidated financial statements include the accounts of the
Company; Glandon Company A.V.V. ("Glandon"), and Gold Reserve de
Aruba ("Gold Reserve Aruba"); three Venezuelan subsidiaries,
Compania Minera Unicornio, C.A. (Unicorn), Gold Reserve de
Venezuela, C.A. (GLDRV) and Compania Aurifera Brisas del Cuyuni,
C.A. (Brisas); two domestic majority-owned subsidiaries, Great
Basin Energies, Inc. (Great Basin) and MegaGold Corporation
(MegaGold); and five additional Aruban subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation. The Company's policy is to
consolidate those subsidiaries where majority control exists and
control is other than temporary.
Three of the Company s majority or wholly-owned subsidiaries own
shares of the Company. The Company's effective ownership of its
own stock (481,044 shares) through these subsidiaries is deducted
from common stock outstanding at June 30, 1995 and December 31,
1994, resulting in a difference between common stock issued and
outstanding.
Due to the availability of net operating loss carryforwards, no
income tax provision has been recorded for the six months ended
June 30, 1995. Due to the incidence of net operating losses which
cannot be currently utilized, no income tax benefit was recorded
for the six months ended June 30, 1995.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
Notes to Consolidated Financial Statements, Continued
June 30, 1995 (unaudited)
2. Exchange of Shares for Minority Interest in Subsidiaries:
Pursuant to a plan of exchange approved by the Company s
shareholders on May 19, 1995, each issued and outstanding share of
Gold Reserve Aruba and Glandon, other than shares held by the
Company, was exchanged for shares of the Company. As a result of
the exchange which was completed on June 23, 1995, the Company
issued 1,329,185 common shares. In consequence of the exchange,
Gold Reserve Aruba and Glandon are now wholly-owned subsidiaries
of the Company and in effect the Company increased its indirect
ownership in the Brisas concession from 91% to 100%.
3. Litigation Settlement:
In late December 1994, Gold Reserve, on behalf of its Brisas
subsidiary, entered a binding agreement to settle all outstanding
litigation related to the Brisas concession. Brisas was the
plaintiff in a lawsuit commenced in Venezuela in July 1992 to
rescind a mining lease and purchase option agreement covering the
Brisas concession. Brisas and the Company contended the lease was
terminable for nonpayment of rentals during a thirteen month
period, and that a purchase option contained in the lease,
granting a right of first refusal to purchase the concession was
likewise terminable. Gold Reserve agreed to issue 2,750,000
common shares and 750,000 common share purchase warrants
(exercisable at $10 Cdn for 18 months) to the defendants and
further agreed to deposit $4.5 million into escrow, to be released
to one of the defendants upon the granting of the hardrock or veta
rights on the Brisas concession to the Company.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
June 30, 1995
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations:
RESULTS OF OPERATIONS
June 30, 1995 compared to June 30, 1994
The Company's primary business activity is the exploration and
development of the Brisas Concession, located in Venezuela. All
expenditures related to exploration activities on the Brisas
concession have been recorded as capitalized exploration and
development costs. The Company has no producing mineral properties at
this time.
Consolidated net loss for the three and six months ended June 30, 1995
amounted to $224,596 and $124,267, or $0.01 and $0.01 per share,
respectively, compared to a consolidated net loss of $761,689 and
1,167,403, or $0.06 and $0.10 per share, respectively, for the same
periods in 1994.
Other income during the three and six months ended June 30, 1995
decreased approximately $209,000 and increased $86,000, respectively,
compared to the same periods in 1994. The net change in other income
is primarily attributable to an increase in interest income of
approximately $85,000 and $474,000, respectively, due to higher levels
of invested cash and a decrease in foreign currency gain of
approximately $279,000 and $351,000, respectively, due primarily to
the effect of exchange and price controls implemented by the
Venezuelan government and the payment of a note payable denominated in
the Venezuelan currency, in 1994.
Total expenses during the three and six months ended June 30, 1995
decreased approximately $746,000 and $957,000 compared to the same
period in 1994. The net change in operating expenses for the three
month comparison is primarily due to the writedown of $750,000 of
capitalized exploration and development costs related to the Alfa
concession in June, 1994, a decrease in general and administrative
costs and directors and officers compensation of $56,000 and $16,000
respectively and an increase in legal and accounting costs of $70,000.
The net change in operating expenses for the six month comparison is
primarily due to the $750,000 writedown of capitalized exploration and
development costs, a decrease in general and administrative costs and
directors and officers compensation of approximately $233,000 and
$29,000 respectively and an increase in legal and accounting costs of
$47,000. The decrease in general and administrative costs and
directors and officers compensation for the three month and six months
ended June 30, 1995 was due to a reduction in employee related costs.
The increase in legal and accounting costs over the same periods was
related to completion of the settlement of the Brisas litigation.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
June 30, 1995
The Company has incurred losses in each of the last five years due to
the lack of an operating property or other revenue-generating business
activity. Management anticipates that net losses of the Company will
continue over the next several years as the result of expenditures
associated with the management of exploration and development
activities on the Brisas concession and other properties, even though
such expenditures are expected to be offset to some extent by interest
income on invested funds. In addition, management expects continued
increases in capitalized exploration and development costs as a result
of activities on the Brisas concession which may or may not be
recovered in future periods. Management estimates the trend of
consolidated losses will reverse if and when commercial production
occurs at the Brisas concession. However, a number of significant
events must occur before commercial production, if any, on the Brisas
concession can begin, these being the establishment of proven and
probable reserves, financing of anticipated mine development costs,
and the procurement of all necessary regulatory permits and approvals.
The Company filed an application with the Venezuelan Ministry of
Energy and Mines ( MEM ) in February of 1993 to obtain an exploration
and exploitation concession to the bedrock or veta mineralization
believed to underlie the Brisas alluvial concession. MEM has informed
the Company the application was approved on March 3, 1995, but has not
been submitted for public comment as of August 9, 1995. The Company is
not aware of any facts or circumstances which would prevent MEM from
submitting the application for public comment and ultimately granting
the bedrock or veta concession to the Company.
The Venezuelan government, amid economic uncertainties and a bank
crisis, suspended certain constitutional rights and implemented
certain currency exchange and price controls on June 27, 1994. Some
constitutional rights have been re-established although the exchange
and price controls remain in place as of the date of this report, and
there is no indication when, and if, such controls will be eliminated
or significantly modified. Senior government officials have publicly
stated that foreign private investment is encouraged, particularly in
the Guayana region where the Company's Brisas concession is located.
Venezuela has generally encouraged foreign investment in the past, and
the Company believes there presently exist no significant policies,
license requirements or other regulations which might present barriers
to its continued investment in the country. Venezuela has experienced
significant inflation during each of the years in which the Company
has been present in the country, and such inflation can be expected to
continue. Inflation and other economic conditions have resulted in
political and social turmoil on occasion, which also can be expected
to continue. Whether and to what extent these conditions may
materially adversely affect the Company's operations in the future, if
at all, cannot be predicted.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
June 30, 1995
LIQUIDITY AND CAPITAL RESOURCES
Investing:
Gold Reserve acquired the Brisas concession in late 1992 and initiated
a limited auger and diamond drill program. At that time the property
was the subject of a lawsuit over ownership, which was ultimately
settled in December, 1994. Exploration activities on the concession
have included mapping, surface sampling and assaying, geophysics,
geochemistry, preliminary metallurgical testing, airborne magnetic and
radiometric surveys, and diamond and auger drilling. These activities
have confirmed the existence of an anomaly approximately one mile (1.8
kilometers) in length, on strike with a deposit on Placer Dome Inc.'s
Las Cristinas concession to the north. Placer Dome Inc. has announced
geologic reserves on its Las Cristinas concession of more than 9
million ounces of gold. The drilling conducted in 1993 indicated a
potentially large area of gold and copper mineralization, including
some high-grade gold and copper intercepts. Drilling in 1994 was
severely interrupted by activities related to the lawsuit. In early
1995, drilling recommenced with the objective of gathering sufficient
drilling data to establish an initial geologic resource prior to the
end of 1995.
The Company's primary focus is the exploration and development of the
Brisas concession. During the three and six months ended June 30,
1995, the Company expended approximately $1.3 and 2.2 million,
respectively, on the Brisas concession. On a cumulative basis since
inception, the Company has expended approximately $43.8 million
relating to the Brisas concession.
These cumulative costs are attributable to litigation settlement costs
of $22.5 million ($17.5 million of which was stock and warrants) which
were expensed in 1994, common stock valued at $9.8 million issued to
purchase the minority interest in subsidiaries which own the Brisas
concession, concession acquisition costs of approximately $2.0
million, capitalized development and exploration costs of $8.9 million
and $.6 million for equipment.
The present 1995 exploration program is expected to include up to
30,000 meters of auger and core drilling and management estimates the
program will cost approximately $5 to 6 million, inclusive of related
personnel and administrative costs. Actual amounts expended on the
1995 drilling program may vary, however, depending on the drilling
results as the program proceeds.
The Company is currently working in three significant areas or zones
contained within the main trend in its efforts to define the
mineralization located on the concession. The main trend generally has
a variable width of 200 to 300 meters, with some areas of the main
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
June 30, 1995
trend extending to 600 meters in width. To-date, in 1995, there have
been 55 diamond drill holes that have averaged 200 meters in depth
with a few over 300 meters. All holes have been spaced at 100 meter
intervals. Based on current information, the mineralized trend appears
to extend at least two-thirds of the length of the 2500 meter long
concession. The three significant areas or zones of interest within
this trend are 1) the Pozo Azul zone located in the northern part of
the concession, 2) the high-grade Blue Whale hardrock structure which
is contained within the Pozo Azul zone and 3) the Laguna Donna zone
immediately to the south of the Pozo Azul zone. Generally the
mineralization is characterized by a large low grade system with a
higher grade core. In addition to this the Pozo Azul zone contains
the high grade gold copper zone called the "Blue Whale" which is
characterized by much higher grades of gold as well as copper. Low
grade copper is also present in the Pozo Azul zone outside the higher
grade core, whereas there is little copper present in the Laguna Donna
area.
The Pozo Azul zone has been drilled with over 100 diamond and auger
holes and to-date an area of wide spaced mineralization has been
indicated. Drilling has confirmed a strike length of at least 850
meters and is open to the south. The width of the mineralization
typically ranges from 200 meters to more than 300 meters with depths
of up to 200 meters and is surrounded, mainly to the east, by
additional shallow mineralization of as much as 600 meters wide. The
mineralization is also open at depth as some of the holes bottomed in
gold and/or copper mineralization.
The high-grade Blue Whale horizon, which is contained within the Pozo
Azul zone, outcrops in the northeast corner of the property in the
Pozo Azul pit, and dips to the southwest of the property. This is
believed to be the locus or "feeder zone" for the Brisas
mineralization. Limited drilling has indicated the length of the Blue
Whale may be over 600 meters along strike. The Blue Whale is
characterized by much higher grade gold and copper mineralization,
with grades of 6 grams of gold per ton and higher, and over one
percent copper has been encountered with very limited drilling.
Preliminary results indicate that the Blue Whale could be up to 32
meters thick and 120 meters down dip. The Blue Whale has been
encountered at a depth of 328 meters and appears to be open at depth.
The Laguna Donna area is in the center of the property and along
strike and south of Pozo Azul zone. The drilling to date indicates a
mineralized zone of up to 350 meters in width, 350 meters long and has
mineralization at depths exceeding 300 meters. The mineralization is
open to the north as well as the south. So far, this zone is more
characterized by gold. Currently, one drill rig is working on the
property. As drill information and assay data is received it is
entered into our geologic computer modeling program which will assist
in locating future drill holes. This next phase will be mostly in-
fill drilling, directed towards the compilation of data for a
feasibility study.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q/A
AMENDMENT No. 1
June 30, 1995
The Company has not obtained sufficient information to date to
calculate an initial geologic resource or proven (measured) or
probable (indicated) reserves, if any. The limited results from the
drilling efforts to-date are preliminary and no mineral reserves can
be inferred or assumed at this time.
Management estimates that an announcement regarding an initial
geologic resource, if any, will be made in late September, 1995. The
exact timing of such an announcement will be subject to the results of
exploration on the property. Commercial development, if warranted, is
not likely to commence in less than twelve to eighteen months and
significant revenue and cash flow from mining operations is unlikely
to occur before twelve to eighteen months thereafter.
Financing:
Cashflow used by operating activities during the six months ended
June 30, 1995 and 1994 increased by approximately $4 million. This
increased use of cash is principally the result of the transfer of
$4.5 million into escrow, pursuant to the Brisas litigation settlement
agreement finalized in January 1995, offset by a decrease in net loss
from $1.2 million for the six months ended June 30, 1994 to $.12
million for the six months ended June 30, 1995. A reduction in
foreign currency gain of approximately $.35 million and an increase in
accreted interest of approximately $.41 million over the prior
comparable period also contributed to the change in cash used by
operating activities. Cashflow provided from investing activities
increased from a $2.5 million use of funds during the six months ended
June 30, 1994 to a $6 million source of funds during the six months
ended June 30, 1995. The net change of approximately $8.5 million is
primarily a result of net maturities of investment securities which
provided approximately $8 million. Cashflow provided by financing
activities decreased by approximately $32.5 million as a result of a
reduction in sales of common stock.
As of August 9, 1995, the Company held approximately $26 million in
unrestricted cash and held-to-maturity securities. In addition, $4.5
million in cash was held in escrow, to be released to one of the
defendants in the Brisas litigation upon the granting of the hardrock
or veta rights on the Brisas concession to the Company. Whether, and
to what extent, additional or alternative financing options are
pursued by the Company in the future will depend on a number of
important factors, including: the results of exploration and
development activities on the Brisas concession; management's
assessment of the financial markets; the successful acquisition of
additional properties or projects, if any; and the overall capital
requirements of the consolidated group. At this time, management
anticipates that its current cash position, together with the proceeds
expected to be received from any future exercise of outstanding
warrants, will be sufficient to cover estimated operational and
capital expenditures associated with the exploration and development
of the Brisas concession into 1997.
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