FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1998
GOLD RESERVE CORPORATION
State Of Incorporation: Montana
Commission File Number: 1-8372
IRS Employer Identification No: 81-0266636
Address Of Principal Executive Offices: 601 West Riverside Avenue,
Suite 1940
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 SmallCap Market
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 issued at August 11, 1998 was
23,172,134.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997 (unaudited)
June 30, December 31,
1998 1997
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 14,945,684 $ 12,524,125
Investments:
Held-to-maturity securities 6,056,449 4,054,494
Accrued interest on investments 163,106 240,757
Deposits, advances and other 471,494 411,725
Litigation settlement held in escrow 4,500,000
------------ ------------
Total current assets 21,636,733 21,731,101
Property, plant and equipment, net 39,744,207 38,446,169
Investments:
Available-for-sale securities 1,175,771 127,754
Held-to-maturity securities 3,499,592 11,521,973
Other 1,373,841 1,465,997
------------ ------------
Total assets $ 67,430,144 $ 73,292,994
============ ============
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 457,724 $ 646,203
Note payable - KSOP, current portion 564,771 188,470
Litigation settlement payable 4,500,000
------------ ------------
Total current liabilities 1,022,495 5,334,673
Note payable - KSOP, non-current portion 434,390
Minority interest in consolidated
subsidiaries 993,541 974,522
------------ ------------
Total liabilities 2,016,036 6,743,585
------------ ------------
Commitments and contingencies
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
CONSOLIDATED BALANCE SHEETS, CONTINUED
June 30, 1998 and December 31, 1997 (unaudited)
June 30, December 31,
1998 1997
------------ ------------
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value
Authorized: 20,000,000 shares
Issued: none
Common stock, without par value
Authorized: 480,000,000 shares
Issued: 1998... 23,083,943;
1997... 22,918,143
Outstanding: 1998... 22,542,022;
1997... 22,437,099 $102,439,014 $102,269,494
Less, common stock held by affiliates (1,543,380) (1,428,565)
Accumulated other comprehensive (loss)
income-Unrealized gain (loss) on
available-for-sale securities (14,770) 11,000
Accumulated deficit (34,901,985) (33,679,660)
KSOP debt guarantee (564,771) (622,860)
------------ ------------
Total shareholders' equity 65,414,108 66,549,409
------------ ------------
Total liabilities and shareholders'
equity $ 67,430,144 $ 73,292,994
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Three and Six Months Ended June 30, 1998 and 1997 (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Other Income:
Interest $ 321,001 $ 533,238 $ 680,258 $ 967,729
Foreign currency gain (loss) (85,146) 5,067 (111,020) (20,299)
----------- ----------- ----------- -----------
235,855 538,305 569,238 947,430
----------- ----------- ----------- -----------
Expenses:
General and administrative 341,747 433,720 825,693 952,139
Directors' and officers'
compensation 261,741 201,175 757,241 651,029
Legal and accounting 63,348 118,554 151,212 196,726
Depreciation 9,623 11,697 20,867 23,271
Interest expense, net of amount
capitalized 6,302 4,480 17,531 9,023
Minority interest in net income of
consolidated subsidiaries 9,880 5,577 19,019 3,860
----------- ----------- ----------- -----------
692,641 775,203 1,791,563 1,836,048
----------- ----------- ----------- -----------
Net loss (456,786) (236,898) (1,222,325) (888,618)
Other comprehensive (loss) income (17,520) (1,750) (25,770) 3,000
----------- ----------- ----------- -----------
Comprehensive loss $ (474,306) $ (238,648) $(1,248,095) $ (885,618)
=========== =========== =========== ===========
Net loss per share - basic and
diluted $ (0.02) $ (0.01) $ (0.05) $ (0.04)
=========== =========== =========== ===========
Weighted average common shares
outstanding 22,518,961 22,332,555 22,480,680 22,298,493
=========== =========== =========== ===========
</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 June 30, 1998
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997 (unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,222,325) $ (888,618)
Adjustments to reconcile net loss to
net cash used by operating
activities:
Depreciation 20,867 23,271
Amortization of premium (discount) on held-to-
maturity securities 50,837 (108,724)
Foreign currency loss 111,020 20,299
Minority interest in net income of consolidated
subsidiaries 19,019 3,860
Changes in current assets and liabilities:
Net decrease in current assets 4,517,882 19,309
Net (decrease) increase in current
liabilities (4,688,479) 734,564
----------- -----------
Net cash used by operating activities (1,191,179) (196,039)
----------- -----------
Cash Flows from Investing Activities:
Proceeds from maturities of held-to-maturity
securities 13,056,187 8,550,000
Purchase of held-to-maturity securities (7,086,598) (12,999,375)
Purchase of available-for-sale securities (1,073,787)
Purchase of property, plant and equipment (1,429,925) (5,273,552)
Other 92,156 (470,716)
----------- -----------
Net cash provided by (used in) investing
activities 3,558,033 (10,193,643)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common shares 54,705 724,499
----------- -----------
Net cash provided by financing activities 54,705 724,499
----------- -----------
Change in Cash and Cash Equivalents:
Net increase (decrease) in cash and cash equivalents 2,421,559 (9,665,183)
Cash and cash equivalents - beginning of period 12,524,125 30,329,024
----------- -----------
Cash and cash equivalents, end of period $14,945,684 $20,663,841
=========== ===========
</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 June 30, 1998
THE COMPANY AND SELECTED NOTES TO THE FINANCIAL STATEMENTS
The Company
-----------
Gold Reserve Corporation (the "Company") is a mining company
incorporated in the state of Montana in 1956 for the purpose of
acquiring, exploring and developing mining properties and placing them
into production. The Company's principal asset, the Brisas property,
is a late exploration-stage gold and copper mineralized deposit
located in the KM 88 mining district of the State of Bolivar in
southeastern Venezuela.
The Company has no revenue producing mining operations at this time.
Development of the Brisas property is currently the Company's primary
activity. The initial stage of a feasibility study, a pre-feasibility
report, was completed in February of 1998. Further studies are ongoing
and management anticipates that the final feasibility study will be
completed in early 1999.
A number of significant events must occur before the Company could
proceed with commercial production on the Brisas property, including
the establishment of proven and probable reserves, obtaining financing
for anticipated mine development costs and the procurement of needed
regulatory permits and approvals.
The Company's strategy for growth is to develop mining and process
operations at its Brisas property through the successful development
of mineable reserves and by making selective property or corporate
acquisitions.
Financial Information
---------------------
The December 31, 1997 balance sheet has been derived from the
Company's 1997 audited consolidated financial statements. The notes
to the consolidated financial statements as of December 31, 1997 as
set forth in the Company's 1997 Form 10-K, apply to these interim
financial statements at June 30, 1998 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.
Consolidated Financial Statements
---------------------------------
The Company's operations in Venezuela are conducted through subsidiary
corporations. The consolidated financial statements include the
accounts of the Company, three Venezuelan subsidiaries, Gold Reserve
de Venezuela, C.A. (GLDRV), Compania Aurifera Brisas del Cuyuni, C.A.
(Brisas), Compania Minera Unicornio, C.A. (Unicorn), two domestic
majority-owned subsidiaries, Great Basin Energies, Inc. (Great Basin)
and MegaGold Corporation (MegaGold) and seven Aruban subsidiaries
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
which were formed to hold the Company's interest in its foreign
subsidiaries or for future transactions. 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 is other than temporary.
Net Loss Per Share
------------------
Net loss per share (basic and diluted) is based on the weighted
average number of common shares outstanding during each period which
has been reduced by the Company's proportionate ownership of common
shares owned by Great Basin, MegaGold and Stanco Investments, A.V.V.
(Stanco). As of June 30, 1998 and 1997, there were 3,617,275 and
2,435,731 shares available for issuance pursuant to the exercise of
previously granted stock options, respectively. These options were
not included in the computation of diluted loss per share as a loss
was incurred in each of the periods presented and their inclusion
would be anti-dilutive.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
The information presented in or incorporated by reference in this
Quarterly Report on Form 10-Q includes both historical information and
"forward-looking statements" (within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), relating to the future results of the Company (including
projections and business trends), which involve risks and
uncertainties. Prospective investors are cautioned not to put undue
reliance on forward-looking statements, and should not infer that
there has been no change in the affairs of the Company since the date
of this Quarterly Report on Form 10-Q that would warrant any
modification of any forward-looking statement made in this document or
other documents filed periodically with Securities and Exchange
Commission ("SEC"). All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by this notice. The Company
disclaims any intent or obligation to update publicly these forward-
looking statements, whether as a result of new information, future
events or otherwise.
The Company cautions that numerous factors which are disclosed in the
Company's Annual Report on Form 10-K under the heading "Risk Factors"
and elsewhere in documents filed from time to time with the SEC,
including this Quarterly Report on Form 10-Q, could cause actual
results to differ materially from those in the forward-looking
statements, including without limitation the risk that one or more of
the following matters may negatively affect the Company: the Company's
Brisas feasibility study may conclude that development of the Brisas
property would be uneconomic or actual ore reserves, costs, recovery
rates, construction schedules and metals production levels may vary
considerably from those used in the feasibility study. Likewise,
continued low metals prices, production volatility, concentration of
operations and assets in Venezuela, regulatory, environmental
(including concerns with the Imataca Forest Reserve), political and
economic issues associated with investments in Venezuela, anticipated
or estimated future project development costs, need for additional
funding, dependence upon the abilities and continued participation of
certain key employees of the Company, the impact of year 2000 issues,
and the uncertainty normally incident to the operation and development
of mining properties may also cause adverse results for the Company.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
BRISAS PROPERTY
Ownership
---------
The Brisas property consists of the Brisas alluvial concession, the
Brisas hardrock concession beneath the alluvial concession, other
applications for mineralization (primarily nominal values of copper
and silver) in the material contained in the alluvial concession and
other mineralization (primarily gold, copper and molybdenum) on small
land parcels contiguous to the existing alluvial and hardrock
concessions.
The Company acquired Brisas (which was granted the Brisas alluvial
concession in 1988) in 1992 and was granted the underlying Brisas
hardrock concession in March 1998. The Brisas alluvial and hardrock
concessions have original terms of twenty (20) years, renewable for
two subsequent ten year periods at the discretion of the Ministry of
Energy and Mines ("MEM") and provide for a three to four percent (3%
to 4%) tax on sales of gold production outside of Venezuela and a
seven percent (7%) mine-mouth tax on copper production. Gold sold
directly to the Central Bank of Venezuela (the "Central Bank") is
taxed at one percent (1%).
The Brisas property is located within the Imataca Forest Reserve (the
"Imataca"), which is comprised of 3.6 million hectares in the State of
Bolivar. In 1986, an area (in which the Brisas property is located) in
the southwestern part of the Imataca was authorized, by presidential
decree, for mining exploration and exploitation activities. Subsequent
legislation in 1997 identified additional uses and activities within
the Imataca including mining. The 1997 legislation and previously
issued regulations allowing mining activities within the Imataca were
later challenged by several parties as unconstitutional. In response
to this challenge, the Venezuelan Supreme Court (the "Court") issued
an order prohibiting the MEM from granting new concessions pursuant to
the 1997 legislation, but excluded challenges to previous legislation
authorizing mining in certain regions of the Imataca. The Company has
been advised by its Venezuelan attorneys that it is unlikely that
future rulings by the Court related to this issue will impact the
Company's concessions, but there can be no assurance that an adverse
ruling that affects the Company will not occur.
Development
-----------
The Company is presently in the process of completing a comprehensive
economic, technical and legal feasibility study on the Brisas
property, which is expected to be completed in late 1999. JE MinCorp,
a Division of Jacobs Engineering Group Inc., and a number of other
independent consultants were engaged by the Company to prepare a
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
feasibility study on the Brisas mineralized deposit, the initial stage
of which, a pre-feasibility report, was completed in early 1998. The
report included a "Base Case" analysis of the proposed project
assuming $375 per ounce gold and $1 per pound copper as well as
additional whittle-pit design sensitivity analyses using $350 and $300
per ounce gold and $.90 and $.80 per pound of copper, respectively.
The mineralized deposit referred to on the Brisas property does not
yet qualify as a commercially mineable ore body under standards
promulgated by the SEC and may so qualify only after a positive
feasibility study has been completed.
The conclusions contained in the pre-feasibility report are based on
the assumption that the project will be developed as a large-scale
open pit mining operation capable of processing approximately 55,000
tonnes per day, with an estimated average annual production of as much
as 335,000 ounces of gold and 38.3 million pounds of copper over a
14.2 year mine life. The report estimates also include assumptions of
gold and copper recovery of 83 percent and 73 percent, respectively,
and an internal cutoff grade of 0.40 grams of gold per tonne.
Construction of the mining facility as presently contemplated in the
pre-feasibility report is estimated to take approximately 18 months.
Under the Company's present timetable initial construction would
commence no earlier than late 1999 or early 2000, with full production
expected to commence no earlier than late 2001. Detailed engineering
work will commence after the completion of the feasibility study,
receipt of the necessary operating and environmental permits and as
gold and copper prices warrant. The ultimate design, construction
timetable and cost of the plant is subject to the results of the final
feasibility study. The recovery plant, as presently contemplated in
the Brisas pre-feasibility report, is expected to cost an estimated
$293 million. Ongoing life of mine capital requirements are estimated
at $53 million and working capital needs are estimated at $15
million.
Final development of the Brisas property is dependent upon the then
current price and/or expectation of future prices of gold and copper,
completion of a bankable feasibility study including the establishment
of proven and probable reserves, obtaining adequate financing, and
obtaining the appropriate environmental and operating permits.
Assuming a gold price of $375 per ounce and copper price of $1.00 per
pound, the pre-feasibility report determined that the Brisas property
contains mineralization consisting of approximately 249.2 million
tonnes with an average grade of 0.70 grams of gold per tonne and 0.14%
copper. Total material expected to be moved is estimated to be 668
million tonnes resulting in a strip ratio of 1.68:1 (waste to
mineralization). Alternatively, using a gold price of $350 and $300
per ounce and copper price of $0.90 and $0.80 per pound, the Brisas
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
property is estimated to contain mineralization (based on a
preliminary Whittle pit design) of approximately 239.3 and 177.1
million tonnes with an average grade of 0.71 and 0.80 grams per tonne
gold and 0.14% and 0.12% copper, respectively.
Base case pre-feasibility report estimates of pre-tax operating cash
costs, including mining, processing, concentrate transportation,
smelting and refining expenses, total $222 per ounce of gold net of
copper revenues. Total pre-tax costs per ounce of gold produced
including life of mine capital are estimated at $295, excluding
previously incurred sunk costs of approximately $38 million or
approximately $8 per ounce of gold. Exploitation taxes and royalties
add approximately $9 per ounce of gold to the total cost per ounce.
The base case pre-tax net present value of the project (assuming $375
per ounce of gold and $1.00 per pound of copper) at zero percent is
$354.9 million with an internal rate of return of 11.8%.
As part of the completion of the final feasibility study, the cost and
operating assumptions contained in the pre-feasibility report are
being reviewed and revised where appropriate. Revisions of operating
costs and capital requirement estimates which were contained in the
original pre-feasibility report are primarily a result of refinements
to the mining plan and process design. The updated estimate is
expected to be available within the next thirty days.
Outlook
-------
The primary focus of the Company in the upcoming twelve to eighteen
months while considering the current price of gold and copper
continues to be activities related to securing permits, acquiring
additional sites for process facility infrastructure, completion of
the final feasibility study and investigation of funding sources
needed to finance the construction of the Brisas mining facility.
A period of 12 to 18 months is anticipated in the overall project
schedule for permitting as well as completion of the final feasibility
study. In addition, continuation or completion of metallurgical
testing, geotechnical and hydrological investigations, electrical
power supply and concentrate sales agreements, and development and
condemnation drilling will occur prior to completion of the final
feasibility study. It is estimated that an additional $5 million will
be spent for completion of the final feasibility study.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by approximately $2.4 million to
approximately $15 million from December 31, 1997 to June 30, 1998.
Cash and current and long-term held-to-maturity securities combined
decreased approximately $2.6 million during the same six-month period.
Changes in the financial position of the Company are more fully
discussed below.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
Operations
----------
Cash used by operations for the six months ended June 30, 1998
compared to the same six-month period in 1997 increased from $0.2
million to $1.2 million, or by approximately $1 million. The increase
in the use of funds by operations is primarily a result of an increase
in net loss due to a reduction in the amount of cash flow from
invested funds and a reduction in accounts payable over the same
period in 1997.
Investing
---------
Cash flow from investing activities increased from a net use of funds
of approximately $10.2 million during the six months ended June 30,
1997 to a net of $3.6 million provided by investing activities during
the same six month period in 1998. The $13.8 million net change in
cash flow provided by investing activities is primarily comprised of
the following components.
Net proceeds from the maturity of investments during the six months
ended June 30, 1998 and 1997 increased from a net use of approximately
$4.5 million to a net of $4.9 million provided by maturing
investments, a change of approximately $9.4 million. In addition,
expenditures for the continued exploration and development of the
Brisas property decreased from approximately $5.3 million during the
six months ended June 30, 1997 to approximately $1.4 million for the
same six month period ended June 30, 1998, a change of approximately
$3.9 million.
Amounts recorded as property, plant and equipment (capitalized
exploration and development costs) include all costs associated with
the Brisas property, including personnel and related administrative
expenditures incurred in Venezuela, drilling and related exploration
costs, capitalized interest expenses and general support costs related
to the Brisas property.
Financing
---------
As of July 31, 1998, the Company held approximately $25 million in
cash and current and long-term held-to-maturity securities. The 1998
budget, which excludes any future construction costs related to the
proposed mining facilities, is estimated to be approximately $6
million. Management anticipates that its current cash and investment
positions are adequate to cover estimated operational and capital
expenditures (excluding estimated mine construction costs) associated
with the remainder of 1998 and all of 1999.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
Future construction costs and development expenses, and the cost of
placing the Brisas property or additional future properties into
production, if warranted, are expected to be financed by a combination
of the sale of additional common stock, bank borrowings or other
means. Whether and to what extent additional or alternative financing
options are pursued by the Company depends on a number of important
factors, including if and when mine development activities are
commenced on the Brisas property, management's assessment of the
financial markets, the price of gold, the potential acquisition of
additional properties or projects and the overall capital requirements
of the consolidated corporate group. There can be no assurances that
financing will be available on favorable terms or at all.
RESULTS OF OPERATIONS
June 30, 1998 compared to June 30, 1997.
Consolidated net loss for the three and six months ended June 30, 1998
amounted to $456,786 and $1,222,325 or $0.02 and $0.05 per share
respectively compared to consolidated net loss of $236,898 and
$888,618 or $0.01 and $0.04 per share respectively, for the same
periods in 1997.
Changes in operating results were caused by the following factors:
Other income for the current three and six month periods decreased
over the comparable periods in 1997 due to decreased interest income
from lower average levels of invested cash as well as increased
foreign exchange loss due to the depreciation of the Venezuelan
currency. Operating expenses during the three and six months ended
June 30, 1998 stayed substantially the same as the comparable periods
in 1997.
YEAR 2000 READINESS
The Company has made a preliminary assessment of its requirements
regarding year 2000 issues, which generally refers to the inability of
hardware, software and control systems to correctly identify two-digit
references to specific years, beginning with the year 2000. The
Company's present business operations are not dependent upon
sophisticated information systems and, as a result, management's
preliminary conclusions are that the Company's operations will not be
materially impacted by year 2000 issues. Further, the ongoing Brisas
feasibility study is also expected to include an evaluation of year
2000 issues as they relate to the proposed future development of the
Brisas property. Although management believes that the feasibility
study will adequately address such issues and prevent significant
future business disruptions, subsequent work may lead to discovery of
material issues or costs. In addition, compliance-related failures,
including those of material third-party suppliers, could also result
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
in temporary delays in the Company's future operations. Based on the
current information available to management, the impact of future
business disruption as a result of year 2000 issues cannot be
estimated at this time.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standards No. 133
(SFAS 133). "Accounting for Derivative Instruments and Hedging
Activities" was issued. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company does not believe the
adoption of this standard will have a material impact on the financial
condition or results of operations of the Company.
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
for an Enterprise and Related Information" in 1998. The implementation
of these new standards did not have a material impact on the
presentation of the consolidated financial statements.
PART II OTHER INFORMATION
Item 4. Submission of Matters To a Vote Of Security Holders.
The Annual meeting of Security Holders was held on June 16, 1998 in
Spokane, Washington. The following matters were submitted to a vote
of the shareholders: 1) Election of Directors; 2) Approval of the
purchase of common stock by the combined 401(k) Salary Reduction and
Employee Stock Ownership Plan and 3) Ratification of
PricewaterhouseCoopers L.L.P. as the Company's independent auditor for
the year ending December 31, 1998 and any interim period.
The Company's articles of incorporation require a minimum of 50% of
all shareholders eligible to vote either in person or by proxy be
present at the annual meeting in order for a quorum to be obtained.
The Company failed to obtain a quorum at its original meeting on June
16, 1998 and, after two postponements on July 14, and August 13, 1998,
the Company still had not obtained a quorum of shareholders.
Management has scheduled the next postponement of the shareholder
meeting for September 15, 1998 and, in the event a quorum is not
obtained prior to the required 120 days from the date of the original
meeting, the previously elected directors will continue to serve until
their successors can be elected in the future.
<PAGE>
GOLD RESERVE CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q June 30, 1998
Item 5. Other information.
In accordance with recent amendments to Rule 14a-4 under the
Securities Exchange Act of 1934 (the "Exchange Act"), if notice of a
non-Rule 14a-8 shareholder proposal is to be raised at the next annual
meeting of shareholders and it is received at the principal executive
offices of the Company after March 15, 1999 (45 days prior to the
month and date in 1999 corresponding to the date on which the Company
mailed its proxy materials for the 1998 annual meeting), proxy voting
on that proposal when and if raised at the 1999 annual meeting will be
subject to the discretionary voting authority of management proxy
holders and without any discussion of the matter in the Company's
Proxy Statement for the 1999 annual meeting. As stated in the
Company's 1998 Proxy Statement, any shareholder proposal to be
considered for inclusion in the Company's 1999 Proxy Statement must be
received at the principal executive offices of the Company no later
than December 16, 1998 [old 120 day rule].
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibit 27 Financial Data Schedule
b) There were no reports on Form 8-K for the quarter ended
June 30, 1998
SIGNATURE.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GOLD RESERVE CORPORATION
By: s/ Robert A. McGuinness
------------------------------------
Vice President - Finance
Chief Financial Officer
August 13, 1998
<PAGE>
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0
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