SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended October 31, 1996 Commission File No. 0-9496
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GOLD STANDARD, INC.
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(Exact name of registrant as specified in its charter)
Utah 87-0302579
------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 712 Kearns Building, Salt Lake City, Utah 84101
- ------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (801) 328-4452
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None NASDAQ and Pacific Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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(Title of class)
Indicate by check mark whether Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
As of October 31, 1996, the aggregate market value of Registrant's
Common Stock, par value $.001 per share, held by non-affiliates of
Registrant was approximately $13,656,475.00.
As of the close of the period covered by this report there were
outstanding 18,697,500 shares of Registrant's common stock, $.001 par
value per share.
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PART I
ITEM 1: BUSINESS.
- -----------------
Gold Standard, Inc. (the "Registrant") was incorporated pursuant
to the laws of the State of Utah on November 28, 1972, for the purpose
of engaging in the exploration for, and the production and sale of,
gold. Registrant is primarily engaged in acquiring, leasing and
selling hard mineral properties and, if warranted, developing those
properties which have the most economic potential. Registrant also
seeks joint ventures or other financial arrangements with other
companies to develop and/or operate the properties it controls.
Presently, Registrant is an exploration stage company and there is no
assurance that a commercially viable ore body (reserves) exists, in
any of Registrant's properties until further exploration work and
drilling is done and a final feasibility report based upon such test
results is concluded.
In June 1992, Registrant entered into a joint venture agreement
with Santa Fe Pacific Mining, Inc. (GAU-NYSE) ("Santa Fe") on its
properties held in the country of Uruguay. Through the year 1994
Santa Fe expended over four million dollars on the project. In
October 1994 a budget request was made by the Santa Fe personnel in
Uruguay for $2,500,000 for the 1995 year, and only one half of this
amount was declared available to the project. In the first quarter of
1995, this amount was reduce to $500,000 due to circumstances within
Santa Fe. Registrant strongly objected to the reduced spending levels
and the joint venture was finally dissolved on September 10, 1996.
The properties were returned to Registrant's subsidiary company Big
Pony Gold, Inc. ("Big Pony Gold"). Registrant relinquished the right
to its portion of the properties for 1,000,000 shares of Big Pony Gold
common stock and $10,000.
In the 1994-1995 period, Registrant initiated a large land
acquisition (mineral rights) program in the country of Brazil.
Offices were established and staffed in the city of Curitiba in the
state of Parana. Operations are carried on through a wholly-owned
Brazilian subsidiary company, Gold Standard Minas, S.A. Presently
this company has 24 employees consisting of senior and junior
geologists, technicians, prospectors and laborers. Registrant's focus
in Brazil changed in early 1995 from diamonds to the exploration for
gold. During 1996 Registrant sold its claims covering potential
diamond ground it held in Brazil to American Mineral Fields of Hope,
Arkansas (AMZ-TSE) ("AMZ"). Registrant received 100,000 shares of AMZ
common stock and retained a 2% royalty on the properties. 25,000 of
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these shares were disbursed to the three geologists that assisted in
the acquisition and the sale of the claims. During 1996, Registrant
sold 26,000 shares of AMZ common stock for a return of approximately
$153,000. Registrant still holds 46,000 shares of AMZ common stock.
Registrant holds a 40% participating interest in a joint venture
property in Southern Uruguay known as the San Juan Hills property.
Registrant's joint venture partner, Rea Gold Corporation ("Rea Gold"),
has been funding exploration activities on this property. Mining from
one defined deposit in this joint venture (the San Carlos deposit)
commenced in early 1995. The monthly cash flow from mining on this
property ended in the first half of 1996 with total receipts of
approximately $825,350 since the date of commencement. Rea Gold has
notified Registrant of its intention to drill and test for an
extension of the San Carlos deposit in 1997.
Except for the activities described herein, Registrant has not
engaged in any material business transactions during the fiscal year
ended October 31, 1996. Further, except as otherwise described
herein, no material expenditures have occurred during the Registrant's
last three (3) fiscal years for research and development activities,
nor has compliance with federal, state and local environmental laws
and regulations resulted in a material effect on the capital
expenditures, earnings or competitive position of Registrant or its
subsidiaries. Most of the time of Registrant's president is spent on
Registrant's activities. In addition to the president, Registrant has
twenty (20) full-time employees.
ITEM 2: PROPERTIES.
- -------------------
The Country of Brazil
---------------------
Registrant, through its 100% owned subsidiary company Gold
Standard Minas, S.A., holds mineral rights to approximately 1.5
million acres with priority and another one million acres under
application in the country of Brazil. These properties were selected
by Registrant's geologists and are considered to be highly prospective
for gold. The mineral claims with priority status are located in the
states of Mato Grosso, Goias, Rondonia and Amazonas, consisting of 197
parcels. Requested areas are made up of 527 parcels in seven states.
The properties are in the initial stages of development.
Generalized reconnaissance including rock sampling, stream sediment,
soil geochemistry, ground geophysics and geologic mapping are being
conducted at this time. Current project areas undergoing detailed
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investigation by Registrant's geologists, technicians and prospectors
include Novo Brazil and NE Goias in the state of Goias; Cachimbo, Apui
and Aripuana in Mato Grosso state; and Colorado in the state of
Rondonia. Registrant maintains fully computerized offices in
Curitiba, Parana. An additional office is located in Coromandel,
Minas Gerais for Gold Standard Mines, S.A., Registrant's landman. All
full time employees are Brazilian. Gold Standard Minas, S.A.
utilizes several consultants from North America.
The Country of Uruguay
----------------------
During the 1987 fiscal year, Registrant began application for
prospecting rights in the country of Uruguay. Acquisition of
properties continued for the next three years. In 1988 it acquired
from third parties a large property position and placed these
properties in a 50% owned subsidiary company, Big Pony Gold, Inc., a
Utah corporation (PONY NASDAQ.EBB). In September of 1988, Registrant
entered into a joint venture on a portion of their properties referred
to as the San Juan Hills with Compania Minera San Jose (St. Joe
Minerals), a wholly owned subsidiary of Bond International Gold
(BIG-NYSE) ("BIG"). Subsequently, BIG was acquired by Lac Minerals
("Lac"). Lac sold Compania Minera San Jose to American Resources
Corporation ("American Resources"). American Resources was merged
into Rea Gold (REO-ASE) in 1996. Rea Gold is the present joint
venture partner of Registrant on the 120,000 acre San Juan
Hills area. The joint venture agreement states that Rea Gold, the
operator of the joint venture, is responsible for payment of 100% of
the exploration costs to earn a 60% equity interest in the joint
venture, with Registrant retaining the remaining 40%. During the
years 1995 and 1996, Rea Gold developed and operated the San Carlos
deposit, a small but high grade gold mine on the joint venture's
properties. Registrant chose to forgo its 40% equity interest in the
San Carlos deposit in return for a 20% royalty interest. Proceeds
garnered from this operation amounted to $825,350 to the
Registrant.
Rea Gold is continuing exploration on the lands and is planning
an extensive drilling program in 1997. Rea Gold is developing the San
Gregorio mine in Uruguay and is scheduled to produce 70,000 ounces of
gold per year commencing in 1997. San Gregorio is not contained
within the joint venture holdings.
As explained in Item 1-Business, the remaining properties in
Uruguay are held in Registrant's 64% owned subsidiary company Big
Pony Gold. The properties in the San Juan Hills area under joint
venture with Rea Gold are held by Registrant's Uruguay corporation,
Gondol, S.A., while the properties under the control of Big Pony Gold
are held by its subsidiary, Tormin, S.A. ("Tormin"). The property
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position of Tormin is approximately 378,000 acres of prospecting
permits located north of Montevideo. Big Pony Gold has a fully
equipped exploration office in the town of Trinidad with attendant
automotive and geophysical equipment. The office is staffed with
three geologists, a draftsman, a bookkeeper and local laborers.
Ongoing exploration efforts consist of rock, soil and sediment
sampling, geological mapping, geochemical and geophysical data
compilation, auger drilling and government permits maintenance. An
extensive drilling program is planned for 1997.
Dugway Property-State of Utah
-----------------------------
During late 1986, Registrant entered into an agreement with the
majority of the owners of approximately 5,000 acres of patented and
unpatented mining claims in the Dugway Mining District, in Tooele
County, Utah. In 1992, Registrant entered into a joint venture on the
property with Santa Fe. Santa Fe drilled nine exploratory holes. The
joint venture was terminated in 1994 and Registrant reduced the claim
holdings to 1,000 acres. In late 1994 drilled four holes with
encouraging results. In 1996 Registrant drilled an additional 26
reverse circulation exploration holes on the property with only
minimal results. The leases and holdings are in the process of being
dropped and Registrant has no plans to continue with the Dugway
Project.
ITEM 3: LEGAL PROCEEDINGS.
- --------------------------
There are no material legal proceedings pending against or
involving Registrant.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
Registrant did not submit any matters to a vote of its security
holders during the fourth quarter of the fiscal year ended October 31,
1996.
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PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ----------------------------------------------------------------------
MATTERS.
- -------
(a) The common stock of Registrant is traded on NASDAQ and on
the Pacific Stock Exchange. The principal market makers of
Registrant's common stock on the NASDAQ system are Market Makers,
Wilson Davis & Co., Inc., Mayer & Schweitzer, Inc., Troster Singer
Corp., Nash Weiss, and Sherwood Securities Corp. However, Registrant
has made no independent verification of the magnitude of the
transactions of any of the above-mentioned or other firms. Other
broker/dealers also make a market in Registrant's stock.
Market Prices of Common Stock
-----------------------------
The following table sets forth, for the periods indicated, the
prices of Registrant's common stock from the Pacific Stock Exchange.
Fiscal Quarterly Sales Prices
Year Period High Low
- ------ ------------- ----- -----
1995: First Quarter $3.94 $3.25
Second Quarter 5.75 3.38
Third Quarter 6.00 2.75
Fourth Quarter 5.50 3.94
1996: First Quarter $5.75 $0.78
Second Quarter 2.09 1.00
Third Quarter 1.44 0.88
Fourth Quarter 1.22 0.69
(b) The approximate number of holders of record of each class of
equity securities (there being only one class) of Registrant as of
October 31, 1996, was as follows:
Approximate Number
of Record Holders
Title of Class as of October 31, 1996
-------------- ----------------------
Common Stock Non-assessable
$.001 par value per share 2,281
(c) Registrant has not declared or paid any dividends with
respect to its common stock during the past two years. Registrant has
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no present intention to pay any such dividends in the foreseeable
future due to its limited financial resources and the desire of
Registrant's management to reinvest most of whatever revenue it might
obtain into additional properties and investments.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
----------------------------------------------------
The information required by this item is contained in the
Financial Statements of Registrant which are attached as a separate
section of this report, and are incorporated herein by this reference.
ITEM 9: CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
- -----------------------------------------------------------------
DISCLOSURE.
- ----------
There were no developments relevant to this item during
Registrant's fiscal year ended October 31, 1996.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
- --------------------------------------------------------
The following is a listing of the names, ages, office(s) held and
terms of office of each director and executive officer of Registrant
as of October 31, 1996, including offices held with Registrant.
Name of Director/ Offices Held in Director
Executive Officer Age Registrant Since
- ----------------- ----- --------------- -------
Scott L. Smith
- --------------
For the past five years, the 70 Chairman of the 1972
principal occupation of Mr. Smith Board,President
has been President and Chief (Principal Executive
Executive Officer of Registrant. Officer) and Treasurer
Other than subsidiaries of (Principal Financial
Registrant, he does not serve as Officer and Chief
a director of any other public Accounting Officer)
corporation with the exception of
Consolidated Trilogy Ventures, in
Vancouver, British Columbia,
Canada.
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Bret C. Decker
- ---------------
For the past five years, the 42 Vice President 1996
principal occupation of Mr.
Decker has been as a consultant
to Registrant and its subsidiaries.
Charles W. Shannon
- ------------------
For the past five years, the 80 Secretary 1979
principal occupation of Mr.
Shannon has been a mining
consultant in Salt Lake City,
Utah. He does not serve as a
director of any other public
corporation.
Gerald R. Sneddon 66 Director 1996
- -----------------
For the past five years, the
principal occupation of Mr.
Sneddon had been Executive Vice
President of MK Gold Corporation
and is presently a mining engineering
consultant. Mr. Sneddon is a director
of Francisco Gold Corp., in Vancouver,
British Columbia, Canada
Each of the foregoing executive officers was elected by the Board
of Directors to hold office until the next annual election of officers
or until his successor is elected and qualified or until his earlier
resignation or removal. As provided by the By-Laws of Registrant, the
Board of Directors elects the officers and the Board has the power to
replace officers and to elect successors at any time.
There are no family relationships among the directors and
executive officers of Registrant. There is no arrangement or
understanding between any of the above directors or executive officers
and any other person pursuant to which any director or executive
officer was selected as a director or executive officer, respectively.
During the past five (5) years:
(a) No director or executive officer of Registrant has
been subject to any proceeding under the Bankruptcy
Act or any state insolvency law;
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(b) No director or executive officer of Registrant has
been convicted in any criminal proceeding or is
subject to any criminal proceeding which is
presently pending; and
(c) No director or executive officer of Registrant has
been the subject of any order, judgment or decree
involving activities in the investment or securities
business within the context of Item 401(f) of
Regulation S-K.
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
- --------------------------------------------------
Section 16 (a) of the Securities and Exchange Act of 1934
requires Registrant's executive officers and directors, and persons
who beneficially own more than ten percent of Registrant's stock, to
file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission. Officers, directors and
greater than ten-percent owners are required by applicable regulations
to furnish Registrant with copies of all Section 16 (a) forms that
they file.
Based solely on a review of the copies of such forms furnished to
Registrant or written representations from certain persons, Registrant
believes that during the 1996 fiscal year all filing requirements
applicable to its current officers and directors were complied with
except as described below. Messrs. Decker and Sneddon each filed one
form late.
ITEM 11: EXECUTIVE COMPENSATION.
- --------------------------------
Executive Remuneration
----------------------
The following table sets forth information concerning all cash
compensation paid by Registrant for services in all capacities to all
directors and executive officers of Registrant as a group during the
fiscal year ended October 31, 1996. Registrant has no directors or
executive officers whose total cash compensation exceeded $80,000. No
director or executive officer of Registrant received any deferred
compensation or any compensation other than shown below. Registrant
has no plans that will require Registrant to contribute to or to
provide pension, retirement or similar benefits to directors or
officers of Registrant. No director or executive officer was indebted
to Registrant during the 1996 fiscal year or involved in any financial
transaction with Registrant.
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Name of Individual or Capacities in
Number of Persons in Group which Served Cash Compensation
- -------------------------- -------------- -----------------
All Directors and Executive Various $115,000 (1)
Officers as a Group
(Four Persons)
- ---------------------------
(1) This amount includes $80,000 paid to Scott L. Smith as salary
for serving as president of Registrant during the 1996 fiscal year.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT.
- -----------
Registrant has authorized only common shares, par value one mill
($.001) per share, of which 18,697,500 shares were issued and
outstanding as of the close of business on October 31, 1996. Warrants
to purchase an additional 6,000,000 common shares were outstanding as
of the close of business on October 31, 1996. On June 15, 1994, the
expiration dates of all outstanding warrants were extended for an
additional two years from the then current expiration dates. In June
of 1996, the Board of Directors of Registrant extended the expiration
date of all existing warrants held by Directors Smith, Clarke and
Shannon and by Marjorie A. Smith for an additional period of three
years from the then current expiration date.
(a) The following table sets forth, as of October 31, 1996,
the outstanding common stock of Registrant owned of record
or beneficially by each person who owned of record, or was
known by Registrant to own beneficially, more than five
percent (5%) of Registrant's common stock.
Approximate
Name and Type of Amount Percent
Address Ownership Owned of Class
-------- --------- ------ --------
Scott L. Smith Record and 1,375,100 (1) 7.35% (1)
4931 Marilyn Drive Beneficial
Salt Lake City, Utah
FCMI Financial Record and 3,930,000 (2) 21.02%
Corporation Beneficial
347 Bay Street
Second Floor
Toronto, Ontario (Canada)
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Continental Casualty Record and 2,650,000 (3) 14.17%
Company Beneficial
c/o Sun Valley Gold
Company
620 Sun Valley Road
Sun Valley, Idaho 83353
Odyssey Partners, L.P. Record and 1,030,000 (4) 5.51%
c/o Sun Valley Gold Beneficial
Company
620 Sun Valley Road
Sun Valley, Idaho 83353
Sun Valley Gold Record and 1,710,000 (5) 9.15%
International, Ltd. Beneficial
c/o Sun Valley Gold
Company
620 Sun Valley Road
Sun Valley, Idaho 83353
- ---------------------------
(1) This amount includes 175,100 shares and 100,000 warrants to
purchase common stock owned directly by Mr. Smith's wife (the terms of
the warrants being described in the following paragraph). As of June
30, 1987, when the market price of Registrant's stock as $3.30 per
share, the Board of Directors of Registrant issued to Scott L. Smith,
Registrant's president, warrants entitling him to purchase up to
500,000 shares of the common stock of Registrant at $1.75 per share at
any time on or before June 30, 1992 (subsequently extended by the
Registrant to June 30, 1996). The issuance of those warrants to Mr.
Smith was in connection with a $5,000,000 equity financing program
with a private Canadian group announced by Registrant on June 24,
1987, discussed in note "2" below. As of the date of this report, all
of such warrants were still outstanding and Mr. Smith had not
exercised the right to purchase any of the shares of Registrant's
common stock represented by such warrants. In fiscal year 1990, Mr.
Smith transferred 100,000 of such warrants to his wife. On June 15,
1991, the Board of Directors of Registrant reduced the exercise price
on all outstanding warrants of Registrant, including the aforesaid
warrants, by $0.50 per share, when the market price of Registrant's
stock was $1.30 per share. The reduction in the exercise price was
made because of the market devaluation of Registrant's stock, and
Registrant's hope that a reduction in the warrant exercise price would
encourage the holders of the warrants to exercise such warrants.
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(2) On July 18, 1988, Registrant announced that FCMI Financial
Corporation, a Toronto, Canada financial resources company, had
completed a $2,500,000 investment in Registrant. Under the terms of
the transaction, when the market price of Registrant's stock was $2.25
per share, FCMI purchased 1,000,000 shares of the common stock of
Registrant at $2.25 per share; FCMI received seven-year warrants to
purchase 750,000 shares of the common stock of Registrant at $2.75 per
share; and Registrant received five-year warrants to purchase 350,000
FCMI Financial Corporation Class A Shares at $4.00 (Cdn) per share,
which then had a market price of $2.50 (Cdn) per share. In June of
1991, the Board of Directors of Registrant reduced the exercise price
on all outstanding warrants of Registrant, including the aforesaid
warrants, by $0.50 per share, as more fully discussed in the preceding
footnote. In June of 1991, FCMI bought warrants to purchase 500,000
shares of the common stock of Registrant from 321264 B.C. Ltd. and
exercised said warrants. In March of 1992, when the market price of
Registrant's stock was $0.75 per share, FCMI paid the Registrant
$100,000 to purchase warrants expiring on March 31, 2001, which
entitled FCMI to purchase an additional 1,000,000 shares of common
stock of Registrant at an exercise price of $0.75 per share. FCMI
purchased 600,000 shares of common stock of Registrant and 600,000
warrants in May of 1996, when the market price of Registrant's stock
was $1.125 per share.
(3) In May of 1996, Continental Casualty Company purchased
1,325,000 shares of Registrant's common stock, and warrants to
purchase an additional 1,325,000 shares, when the market price of
Registrant's stock was $1.125 per share. The warrants are
exercisable at $1.50 per share, and expire on May 10, 1999.
(4) In May of 1996, Odyssey Partners, L.P. purchased 515,000
shares of Registrant's common stock, and warrants to purchase an
additional 515,000 shares, when the market price of Registrant's stock
was $1.125 per share. The warrants are exercisable at $1.50 per
share, and expire on May 10, 1999.
(5) In May of 1996, Sun Valley Gold International, Ltd.
purchased 855,000 shares of Registrant's common stock, and warrants to
purchase an additional 855,000 shares, when the market price of
Registrant's stock was $1.125 per share. The warrants are
exercisable at $1.50 per share, and expire on May 10, 1999.
(b) The following table sets forth, as of October 31, 1996,
the shares of common stock of Registrant beneficially owned by
the management of Registrant, including all directors and
officers individually, and by all directors and officers of
Registrant as a group.
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Name of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership of Class
- ---------------- -------------------- -----------
Scott L. Smith
(Director) 1,375,100 (1) 7.35% (1)
David L. Clarke
(Director) 100,000 (2) .53% (2)
Charles W. Shannon
(Director) 90,000 (3) .48%
Bret C. Decker 50,000 (4) .27%
(Director)
Gerald R. Sneddon 0 0%
(Director)
All Directors and
Officers as a Group
(Five Persons)(2) 1,615,100 8.63%
- ---------------------------
(1) See Note (1) under Item 12(a).
(2) As of October 1, 1987, Registrant issued to David L. Clarke
warrants entitling him to purchase up to 100,000 shares of
the common stock of Registrant at $1.75 per share at any
time on or before October 1, 1992. Mr. Clarke also held
warrants entitling him to purchase up to 90,000 shares of
common stock of Registrant at $1.75 per share at any time
on or before June 30, 1992. On November 16, 1994 and on
December 7, 1994, Mr. Clarke sold 50,000 and 40,000,
respectively, of the warrants entitling him to purchase
the 90,000 shares of Registrant's common stock. In June of
1991, the Board of Directors of Registrant reduced the
exercise price on all outstanding warrants, including the
aforesaid warrants, by $0.50 per share. In June of 1992
and again in June of 1994, the Board of Directors of
Registrant extended the exercise date of all outstanding
warrants by two years. In June of 1996, the Board of
Directors or Registrant extended the expiration date of
Mr. Clarke's warrants for an additional three years from
their then current expiration date. As of the date of this
report, all of Mr. Clarke's remaining warrants were still
outstanding and Mr. Clarke has not exercised the right to
purchase any of the shares of Registrant's common stock
represented by such warrants. Mr. Clarke resigned as a
member of Registrant's Board of Directors during 1996, and
his resignation was accepted by the Board of Directors of
Registrant on September 18, 1996.
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(3) This amount includes warrants entitling Mr. Shannon to
purchase up to 50,000 shares of the common stock of
Registrant at $1.25 per share at any time on or before
January 18, 2001.
(4) This amount includes warrants entitling Mr. Decker to
purchase up to 50,000 shares of the common stock of
Registrant at $1.00 per share at any time on or before
January 19, 1998.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
There are no relationships or transactions concerning Registrant
which are required to be reported by it pursuant to this Item.
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
- ---------------------------------------------------------------------
8-K.
- ---
(a) The following documents are filed as a part of this
Report:
1 and 2. Financial Statements and Financial Statement
--------------------------------------------
Schedules.
---------
The Financial Statements and Financial Statement
Schedules filed as part of this Report are listed on
pages 18-50.
3. Exhibit Index.
--------------
In accordance with Item 601 of Regulation S-K, each
exhibit is listed here.
Exhibit 11. Statement of Computation of Per Share
Earnings, Page 42.
(b) There were no Current Reports on Form 8-K filed by
Registrant during the last quarter of the period covered
by this report.
(c) See Item 14(a)3 for a listing of exhibits to this Report.
(d) Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: January 31, 1997 GOLD STANDARD, INC.
By /s/ Scott L. Smith
---------------------------
Scott L. Smith, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of Registrant and in the capacities and on the dates indicated.
Date: January 31, 1997 By /s/ Scott L. Smith
------------------------------
Scott L. Smith, Director
Principal Executive Officer,
Principal Financial Officer,
and Chief Accounting Officer
Date: February 3, 1997 By /s/ Bret C. Decker
------------------------------
Bret C. Decker, Director
Date: February 3, 1997 By /s/ Charles W. Shannon
------------------------------
Charles W. Shannon, Director
Date: , 1997 By
-----------
----------------------------
Gerald R. Sneddon, Director
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EXHIBIT INDEX
The following Exhibit is attached hereto or incorporated herein
by reference as indicated in the table below.
Exhibit SEC Location or
No. Reference No. Title of Document Page No. Filing
- ------- -------------- ----------------- ------------ ---------
11.01 11 Computation of Net 42 Form 10-K
Income (Loss) per
(current) Common Share
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<PAGE>
GOLD STANDARD, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENTS: Page/Pages
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 19
CONSOLIDATED BALANCE SHEETS 20-1
CONSOLIDATED STATEMENTS OF OPERATIONS 22
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 23
CONSOLIDATED STATEMENTS OF CASH FLOWS 24-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 27-36
SCHEDULES:
SCHEDULE V - PROPERTY AND EQUIPMENT 40-1
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND 38-9
AMORTIZATION OF PROPERTY AND EQUIPMENT
Schedules other than those listed above are omitted as the required
information is inapplicable or the information is presented in the
financial statements or related notes to financial statements.
Page 18
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Gold Standard, Inc.
We have audited the accompanying consolidated balance sheets of Gold
Standard, Inc. and Subsidiaries as of October 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years ended October 31,
1996. 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 audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
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 October 31, 1996 and 1995 consolidated financial
statements referred to above present fairly, in all material respects,
the consolidated financial position of Gold Standard, Inc. and
Subsidiaries as of October 31, 1996 and 1995, and the consolidated
results of their operations and their consolidated cash flows for each
of the three years ended October 31, 1996, in conformity with
generally
accepted accounting principles.
FOOTE, PASSEY, GRIFFIN AND COMPANY
Salt Lake City, Utah
January 23, 1997
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Gold Standard, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
October 31,
ASSETS
1996 1995
CURRENT ASSETS ----------- -----------
Cash and cash equivalents $ 6,078,321 $ 2,465,980
Royalties receivable - 133,764
Accrued interest 7,123 99
Prepaid expenses 6,579 5,118
------------ -----------
Total current assets 6,092,023 2,604,961
------------ -----------
PROPERTY AND EQUIPMENT, at cost
Furniture and equipment 92,356 74,492
Transportation equipment 271,755 167,482
Leasehold improvements 3,200 3,200
----------- -----------
367,311 245,174
Less accumulated depreciation
and amortization 169,743 145,114
----------- -----------
197,568 100,060
OTHER ASSETS ----------- -----------
Securities available for sale 244,034 -
Deferred offering costs 77,954 50,259
Deposits 690 740
----------- -----------
322,678 50,999
----------- -----------
$ 6,612,269 $ 2,756,020
=========== ===========
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LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
CURRENT LIABILITIES ------------ ------------
Trade accounts payable $ 87,344 $ 58,396
Accrued liabilities 1,103 566
Income taxes payable 300 300
------------ ------------
Total current liabilities 88,747 59,262
------------ ------------
LONG-TERM OBLIGATIONS
Deferred liability 61,000 61,000
------------ ------------
MINORITY INTEREST 101,902 -
------------ ------------
STOCKHOLDERS' EQUITY
Common stock - authorized 100,000,000
shares of .001 par value; issued and
outstanding 18,697,500 shares in
1996 and 14,847,500 in 1995 18,698 14,848
Additional paid-in capital 13,515,927 9,396,277
Unrealized holding loss on
securities available for sale (20,888) -
Accumulated deficit (7,153,117) (6,775,367)
------------ ------------
6,360,620 2,635,758
------------ ------------
$ 6,612,269 $ 2,756,020
============ ============
The accompanying notes are an integral part of these statements.
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Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended October 31,
1996 1995 1994
------------- ------------ -----------
REVENUE
Royalties $ 339,726 $ 485,624 $ -
Gain on sale of property
rights and equipment 310,200 - 10,874
------------- ------------ -----------
649,926 485,624 10,874
------------- ------------ -----------
EXPENSES
Depreciation and amortization 40,786 22,163 25,508
Depletion - - -
Leasehold exploration and
carrying costs 719,276 320,022 147,244
General and administrative
Legal 34,306 343,398 289,216
Other 360,354 290,420 299,460
------------- ------------ -----------
1,154,722 976,003 761,428
------------- ------------ -----------
Net loss from operations (504,796) (490,379) (750,554)
OTHER INCOME (EXPENSE)
Interest income 177,689 120,443 119,533
Gain (loss) from investments (137,441) (315,500) 59,187
------------- ------------ -----------
40,248 (195,057) 178,720
------------- ------------ -----------
Net loss before income taxes (464,548) (685,436) (571,834)
INCOME TAX EXPENSE 300 300 13,066
------------- ------------ -----------
(464,848) (685,736) (584,900)
NET LOSS - MINORITY INTEREST 87,098 - -
------------- ------------ -----------
NET LOSS $ (377,750) $ (685,736) $ (584,900)
============= ============ ===========
NET LOSS PER COMMON SHARE $ (.02) $ ( .05) $ (.04)
============= ============ ===========
NET LOSS PER COMMON SHARE
Primary $ (.02) $ (.05) $ (.04)
============= ============ ===========
Fully diluted $ (.02) $ (.05) $ (.04)
============= ============ ===========
The accompanying notes are an integral part of these statements.
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Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended October 31,
1996 1995 1994
------------ ------------ -----------
Common stock
Balance beginning of period $ 14,848 $ 14,694 $ 14,544
Stock warrants exercised
(250,000 in 1996; 153,500 in
1995; 150,000 in 1994) 250 154 150
Proceeds from sale of stock 3,600 - -
------------ ------------ -----------
Balance end of period 18,698 14,848 14,694
------------ ------------ -----------
Additional paid-in capital
Balance beginning of period 9,396,277 9,159,931 8,972,581
Stock warrants exercised 187,250 236,346 187,350
Proceeds from sale of stock 3,596,400 - -
Proceeds from sale of
subsidiary stock 336,000 - -
------------ ------------ -----------
Balance end of period 13,515,927 9,396,277 9,159,931
------------ ------------ -----------
Cumulative translation adjustment
Balance beginning of period - (122,543) 6,078
Net change - 122,543 (128,621)
------------ ------------ -----------
Balance end of period - - (122,543)
------------ ------------ -----------
Unrealized holding gain (loss) on
mortgage-backed securities
Balance beginning of period - 128,965 (23,275)
Net change - 128,965) 152,240
------------ ------------ -----------
Balance end of period - - 128,965
------------ ------------ -----------
Unrealized holding loss on
securities available for sale (20,888) - -
------------ ------------ -----------
Accumulated deficit
Balance beginning of period (6,775,367) (6,089,631) (5,504,731)
Net loss (377,750) (685,736) (584,900)
------------ ------------ -----------
Balance end of period (7,153,117) (6,775,367) (6,089,631)
------------ ------------ -----------
$ 6,360,620 $ 2,635,758 $3,091,416
============ ============ ===========
The accompanying notes are an integral part of these statements.
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Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended October 31,
1996 1995 1994
------------ ------------ ------------
Increase (decrease) in cash
and cash equivalents
Cash flows from operating
activities:
Net earnings (loss) $ (377,750) $ (685,736) $ (584,900)
Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amorti-
zation 40,786 22,163 25,508
Gain on sale of
property rights (300,000) - -
Gain on sale of equipment (10,200) - (10,874)
Decrease (increase) in assets:
Receivables 133,764 (133,764) 22,553
Accrued interest (7,024) 27,414 (27,513)
Prepaid expenses (1,461) (142) (1,441)
Deferred offering
costs (27,695) (27,017) (23,242)
Deposits (50) - -
Increase (decrease) in liabilities:
Trade accounts payable 28,948 (99,044) 1,892
Accrued liabilities 537 (4) 21
Income taxes payable - - (321)
------------ ------------ ------------
Net cash used in
operating activities (520,145) (896,130) (598,317)
------------ ------------ ------------
Cash flows from investing activities:
Sale of investments, net 281,380 - -
Sale of equipment 10,200 - 11,000
Decrease (increase) in
restricted cash - 81,036 (1,646)
restricted investments - 20,605 141,988
Purchase of options (308,300) - -
Property and equipment
purchased (138,294) (46,714) (52,969)
------------ ------------ ------------
Net cash provided by (used
in) investing activities (155,014) 54,927 98,373
------------ ------------ ------------
(Continued)
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Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended October 31,
1996 1995 1994
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from stock
transactions 3,600,000 236,500 187,500
Proceeds from sale of
stock warrants 187,500 - -
Proceeds from sale of
subsidiary stock 500,000 - -
------------ ------------ ------------
Net cash provided by
financing activities 4,287,500 236,500 187,500
------------ ------------ ------------
(Decrease) increase in
foreign currency adjustments - 122,543 (128,621)
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents 3,612,341 (482,160) (441,065)
Cash and cash equivalents
at beginning of year 2,465,980 2,948,140 3,389,205
------------ ------------ ------------
Cash and cash equivalents
at end of year $ 6,078,321 $ 2,465,980 $ 2,948,140
============ ============ ============
Supplemental disclosures of cash flows information
- --------------------------------------------------
Cash paid during the year for:
Interest $ - $ - $ -
Income taxes $ 300 $ 200 $ 13,387
Non-cash transactions:
In 1996, property rights were exchanged for stock of a publicly traded
company for a net gain to the Company of $300,000.
In 1996, the Company had a temporary unrealized holding loss of
$20,888 on securities available for sale which was recorded in equity.
They also experienced a realized holding loss of $289,797 on gold
futures contracts.
In 1995, property with a cost of $1,376 and net book value of $0 was
retired.
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<PAGE>
In 1994, the Company experienced unrealized holding gains of $152,240
on its restricted use, mortgage-backed securities. The gains were
considered temporary in nature and were recorded in equity.
The accompanying notes are an integral part of these statements.
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Gold Standard, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial
statements follows.
1. Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of Gold Standard, Inc. (the Company), its wholly owned
subsidiaries, Gold Standard South, Kelwood Enterprises, Ltd., Gold
Standard Minas, S.A. and a 64.4% owned subsidiary, Big Pony Gold, Inc.
As used herein, references to Gold Standard, Inc., the Registrant, or
the Company refer to Gold Standard, Inc. and its consolidated subsidi-
iaries. All significant intercompany items and transactions are
eliminated.
Gold Standard South, a Utah Corporation, was organized for the purpose
of carrying on a property acquisition and gold exploration program in
the country of Uruguay. Kelwood Enterprises, Ltd. is a wholly owned
Canadian Corporation with no active operations and no material acti-
vity during 1996 or 1995. Gold Standard Minas was organized for the
purpose of carrying on a gold exploration program in the country of
Brazil. Big Pony Gold holds certain mineral exploration concessions
in Uruguay and is conducting exploration work on those properties.
The minority interest losses in Big Pony Gold are in excess of the
minority interest's equity capital and have, consequently, been
charged against the Company's equity. As of October 31, 1996 the
Company had absorbed $606,891 in losses attributable to the minority
owners in Big Pony Gold, Inc.
2. Investment in Mining Properties
-------------------------------
Prospecting and exploration costs incurred in the search for new
mining properties are charged to expense as incurred. Direct
costs associated with the development of identified reserves are
capitalized until the related geologic areas are either put into
production, sold or abandoned. As of October 31, 1996 there were no
geologic areas under production.
3. Foreign Currency Translation
----------------------------
Substantially all assets and liabilities of the Company's interna-tional
operations are translated at year end exchange rates and
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NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES - CONTINUED
the resulting translation adjustments are recorded directly into a
separate component of stockholders' equity. Income and expenses are
translated at exchange rates prevailing during the year. Foreign
currency transaction gains and losses are included in net income,
except for those relating to intercompany transactions of a long-term
investment nature, which are accumulated in stockholders' equity.
4. Earnings (Loss) Per Share
-------------------------
Earnings (loss) per share of common stock is computed based on the
weighted-average number of common shares outstanding during the period
16,496,233 in 1996, 14,808,836 in 1995 and 14,417,356 in 1994. The
Company had common stock equivalents outstanding at October 31, 1996,
1995, and 1994 in the form of stock warrants (see Note G). These
warrants were excluded in the calculations of loss per share during
the years ended October 31, 1996, 1995, and 1994 because their
inclusion in those calculations would have been anti-dilutive.
5. Cash Equivalents
----------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments and investments readily convertible
into cash, or purchased with a maturity of three months or less, to be
cash equivalents.
6. Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
7. Fair Values of Financial Instruments
------------------------------------
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in
the statement of financial position approximate fair values
because of the short maturities of those instruments.
Securities available for sale: The fair values of investments
are based on quoted market prices for those investments.
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NOTE B - SECURITIES AVAILABLE FOR SALE
In February 1996, the Company entered into a non-monetary transaction
exchanging rights to diamond potential properties located in Brazil
for 100,000 shares of American Mineral Fields stock which was trading
at $4.00 per share. This transaction resulted in a net gain to the
Company of $300,000 ($400,000 less $100,000 in stock paid to three
geologists as bonuses on the transaction). During 1996 the Company
realized gains on the sale of this stock of $152,356. The remaining
49,000 shares have declined in value since February resulting in an
unrealized holding loss of $20,888.
The Company has invested in options to purchase gold (Note F). The
options expire in May 1998. For the years ended October 31, 1996, and
1995, the Company has recorded a realized loss related to these
instruments of $289,797 and $327,800, respectively.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Maintenance, repairs, and
renewals which neither materially add to the value of the property nor
appreciably prolong its life are charged to expense as incurred. Gains
or losses on dispositions of property and equipment are included in
earnings. Depreciation and amortization of property and equipment is
is provided on the straight-line method using the estimated lives as
shown below:
Years
-----
Furniture and equipment 5-7
Transportation equipment 5
Leasehold improvements Lease term
Amortization of leasehold improvements is calculated using the
straight-line method over the term of the lease agreement.
NOTE D - MINING PROPERTIES
As of October 31, 1992, the Company owned an interest in the Mercur
Gold Mine, located in the Mercur Mining District in Tooele County,
Utah. The Mercur gold mine commenced production during 1983 and is
operated by American Barrick Resources Corporation, based in Toronto,
Canada.
The Company's interest in the Mercur mine was the subject of litiga-
tion brought against the present and former operators of the mine by
the Company during 1986 (Note J). During 1993, the Company accepted
a settlement offer from American Barrick Resources Corporation, the
Mercur mine operator and one of the defendants in the litigation. As
a condition of this settlement, the Company relinquished all rights
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<PAGE>
and interest to the Mercur mine and associated property. At the time
the settlement was consummated the net book value of the Company's
investment in the Mercur property was $68,871.
The Company holds directly or through its subsidiary Companies,
mineral and exploration rights to property located in the Dugway
region of western Utah, southern Uruguay, and some recently acquired
interests in Brazil. All exploration costs associated with these
activities during the three years in the period ended October 31,
1996 have been charged to operations as incurred, consistent with
the Company's accounting policy (Note A). No development costs have
been capitalized on these properties through October 31, 1996.
NOTE E - LONG-TERM OBLIGATIONS
Long-term debt at October 31, 1996 and 1995, consists of the following:
1996 1995
------------ -----------
Deferred liability; Deposit received
from joint venture participant for
use in funding future mine reclamation
expenses; non-interest bearing;
refundable on unspecified future
date when reclamation completed $ 61,000 $ 61,000
============ ==========
No portion of the long-term debt is considered to be currently
payable.
NOTE F - RELATED PARTY TRANSACTIONS
The Company has invested in gold futures contracts through a brokerage
account held by FCMI Financial Corp., a related party. FCMI Financial
Corp. is a Canadian company which owns approximately 12% of the
outstanding stock of the Company as of October 31, 1996. Commissions
paid to FCMI were $6,600, $40,920, and $17,800 for the years ended
October 31, 1996, 1995, and 1994 respectively (Note B).
During the period November 1, 1988 through October 31, 1996, the
Company has funded the majority of operations of its partially
owned subsidiary, Big Pony Gold, with unsecured, non-interest bearing
long-term cash advances. In March of 1996, Big Pony Gold initiated a
3:1 reverse stock split and the Company acquired 750,000 additional
shares of its subsidiary through a conversion of $10,000 of debt to
equity and the transfer of other assets with a net book value of zero.
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In addition, 100,000 shares valued at $25,000 were issued to employees
of the Company in exchange for services. In May of 1996, 500,000
shares of Big Pony Gold stock were sold at $1 a share to an outside
investor. The issuance of stock for services and sale of stock for
cash reduced the Company's percentage ownership of stock from 67.5% to
64.4% (Note G).
The Company has made unsecured, non-interest bearing, long-term cash
advances to all of its subsidiaries to fund exploration projects.
Amounts due from the Company's subsidiaries as of October 31, are as
follows:
1996 1995 1994
-------- -------- --------
Big Pony Gold $294,000 $140,000 $ 42,028
Gold Standard South 531,000 667,000 624,805
Gold Standard Minas 708,000 237,806 -
All of these balances were eliminated as part of the
consolidation.
NOTE G - TRANSACTIONS IN CAPITAL STOCK
In May and June 1996, Sun Valley Gold Company purchased 3,000,000
shares of the Company's common stock for $1.00 per share. As part
of the transaction, Sun Valley Gold also received warrants for the
purchase of 3,000,000 additional shares of the Company's common
stock. The exercise price of these warrants is $1.50 per share and
the warrants expire in May 1999. The Company realized $3,000,000 from
this transaction.
In May 1996, FCMI purchased 600,000 shares of the Company's common
stock for $1.00 per share. The Company realized $600,000 from this
transaction.
In February 1996, outstanding stock warrants that were issued in March
1992, were exercised by FCMI for the purchase of 250,000 shares of
common stock in the Company. The exercise price of these warrants was
$.75 per share. The Company realized $187,500 from the transaction.
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<PAGE>
The following stock purchase warrants are outstanding at
October 31, 1996:
Number
of Shares
Issue Expiration Exercise Subject to
Date Date Price Warrant
----- ---------- -------- ----------
06/87 06/30/99 1.25 500,000
10/87 10/01/99 1.25 100,000
07/88 07/18/99 2.25 750,000
03/92 03/31/03 .75 750,000
05/93 01/18/01 1.25 50,000
01/96 01/19/98 1.00 100,000
05/96 04/30/02 1.50 100,000
05/96 05/31/99 1.50 3,000,000
05/96 05/10/99 1.50 600,000
06/96 06/30/99 1.25 50,000
---------
6,000,000
=========
If all outstanding stock purchase warrants were exercised, the
total proceeds would be $8,775,000.
In March of 1996, 100,000 shares of Big Pony Gold's common stock were
issued to employees for services valued at $25,000. In May 1996, Sun
Valley Gold Company purchased 500,000 shares of Big Pony Gold's common
stock for $1.00 per share (Note F). Because the per share offering
price of the stock, exceeded the Company's carrying amount, $336,000
was recorded in the Company's books as paid in capital. As part of
the transaction, Sun Valley Gold also received warrants for the
purchase of 500,000 additional shares of Big Pony Gold's common stock.
The exercise price of these warrants is $1.25 per share and the
warrants expire in May 1999. Big Pony Gold realized $500,000 from
this transaction. These are the only outstanding warrants for the
purchase of Big Pony Gold common stock; and if they were all
exercised, proceeds would be $625,000.
NOTE H - INCOME TAXES
The Company has a significant net operating loss carryforward which
could give rise to a deferred tax asset. Because the Company has no
assurance that the tax benefit from the net operating loss will ever
be realized, a valuation allowance has been provided equal to the
deferred tax asset.
There are no other significant timing differences which arise from
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recognizing income and expense in different periods for financial and
tax reporting purposes. The Company's gross deferred tax asset
attributable to the net operating loss carryforward and the associ-ated
valuation allowance are summarized as follows at October 31:
1996 1995
----------- -----------
Total deferred tax assets (based
on net operating loss carryforward $ 2,604,277 $ 2,452,550
Less valuation allowance (2,604,277) (2,452,550)
------------ ------------
Net deferred tax asset $ - $ -
============ ============
The amounts and expiration dates of net operating loss carryforwards
and investment tax credits at October 31, 1996 are detailed in the
following summary:
Federal State
Net Operating Net Operating Net Operating
Expiration Date Loss Loss Tax Credit
--------------- ------------- ------------- -------------
December 31, 1996 $ - $ 216,911 $ 270
October 31, 1997 - 569,296 -
October 31, 1998 - 15,927 -
October 31, 1999 - 674,075 -
October 31, 2000 - 184,956 -
October 31, 2001 - 467,153 -
October 31, 2003 1,477,109 - -
December 31, 2003 1,391 - -
October 31, 2004 675,277 - -
December 31, 2004 332,153 - -
October 31, 2005 1,106,261 - -
December 31, 2005 408,740 - -
October 31, 2006 762,506 - -
October 31, 2007 568,726 - -
October 31, 2008 16,027 - -
October 31, 2009 673,421 - -
October 31, 2010 185,357 - -
October 31, 2011 467,553 - -
----------- ----------- ----------
$ 6,674,521 $ 2,128,318 $ 270
=========== =========== ==========
NOTE I - OPERATING AND JOINT VENTURE AGREEMENTS
The Company is a party to three separate operating or joint venture
agreements. While the terms of the agreements differ, they all
generally address the funding of exploration activities and subsequent
mine development and production activities, should exploration results
warrant development. The agreements are summarized as follows:
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<PAGE>
1. In 1988 the Company entered into a joint venture agreement
for the exploration of certain properties in Southern Uruguay with
Compania Minera San Jose S.A. (CMSJ), then a wholly owned subsidiary
of Bond International Gold. During 1992 CMSJ was acquired by American
Resources, Inc. (ARI) who has continued to drill and explore the
property under terms of the joint venture agreement. Pursuant to the
agreement, ARI is the project operator and is responsible for 100% of
the exploration expenditures. ARI has acquired a 60% interest in the
project by funding the project's exploration activities, while the
Company has retained a 40% participating interest. In an agreement
dated February 22, 1995, the Company's 40% participating interest was
replaced with a 20% royalty interest in a parcel of this property
known as the San Carlos Mine. Royalties earned under this agreement
totaled $339,726 and $485,624 for the years ended October 31, 1996 and
1995, respectively.
2. In June 1992, the Company entered into a joint venture
agreement with Santa Fe Pacific Mining, Inc. The objective of the
agreement was to facilitate exploration and potential future
development of all the Company's mineral holdings in southern Uruguay,
except for those properties covered by a joint venture agreement with
Compania Minera San Jose S.A. which is discussed in the preceding
paragraph. Under terms of this agreement, Santa Fe could earn up to a
60% interest in producible discoveries on the subject properties by
funding 100% of the exploration expenses up to either a specified
minimum investment or until a decision to develop a discovery was
reached. Thereafter, the Company was to participate by funding its
proportionate share of future development costs or have its 40%
participating interest eroded. In February 1996, the agreement was
terminated with all assets and properties being relinquished by Santa
Fe Pacific Mining, Inc. to the Company and its subsidiary Big Pony
Gold, Inc.
3. In November, 1994, Big Pony Gold, Inc., the Company's
64.4% owned subsidiary, entered into a joint venture agreement with
Ashton Mining of Australia and Santa Fe Pacific Gold. The objective
of the agreement is to facilitate the exploration for diamonds and
encompasses the entire country of Uruguay. Under terms of this
agreement Big Pony Gold's share of costs and proceeds is 16% for
diamonds and 24% for gold. These terms do not apply to any properties
covered by the two joint venture agreements discussed above.
NOTE J - COMMITMENTS
To guarantee future reclamation commitments in Uruguay, the company
has obtained a standby letter of credit in the amount of $1,000,000.
The benefits of this letter of credit have been extended to the
subsidiary, Big Pony Gold, Inc., and its subsidiary, Tormin S.A.
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<PAGE>
NOTE K - LITIGATION
In 1986, the Company filed a lawsuit against American Barrick
Resources Corporation, Getty Oil Company and Texaco, relative to
party's interest in the Mercur gold mine located in Tooele County,
Utah. The lawsuit alleged breach of contract, breach of fiduciary
duty and several other causes of action related to an operating
agreement between the Company and the defendants or their successors
in interest to the Mercur gold mine. Under the action the Company
sought the return of the Mercur property, monetary damages and other
appropriate relief.
In April, 1993 the Company accepted an out-of-court settlement with
American Barrick Resources Corporation, one of the defendant's in the
action, for total cash of $5,225,000. The net gain from the
settlement is as follows:
Settlement proceeds $ 5,225,000
Contingent legal fees paid to
attorneys from settlement proceeds (546,875)
Unrecovered basis in Mercur property
relinquished as part of settlement (68,871)
-------------
NET GAIN $ 4,609,254
=============
The lawsuit against the remaining defendants was tried in 1993. On
September 3, 1993, the jury returned a verdict in favor of the Company
and awarded them $404,164,000 in damages. Subsequently, the judge set
aside the jury verdict, thereby denying the Company the jury's award.
The Company appealed the judge's decision to the Supreme Court of the
State of Utah. On January 11, 1996, the Supreme its decision to
uphold the trial judge's directed verdict for the defendants in the
case. As a result of the unsuccessful appeal, the Company incurred
approximately $48,000 in court costs. These costs were accrued in the
1995 financial statements.
In May of 1996, the Company was notified that a writ of reconsidera-
tion filed with the Utah Supreme Court was denied. The Company has
decided not to continue to pursue this lawsuit.
NOTE L - CONCENTRATIONS OF CREDIT RISK
The Company maintains substantially all cash balances with various
financial institutions located in the State of Utah. Accounts at the
financial institutions are insured by the Federal Deposit Insurance.
Corporation up to $100,000 per institution. Uninsured balances
totalled $5,438,924 at October 31, 1996.
Page 35
<PAGE>
<PAGE>
NOTE M - SEGMENTAL INFORMATION
The Company's only activity and, therefore, dominant business segment
is gold exploration and development. During the years ended October
31, 1996, 1995 and 1994, the Company, in addition to its U.S.
activities, conducted acquisition and exploration activities in
Uruguay and Brazil through its subsidiaries (see Note A). A summary
of the Company's operations by geographic area at October 31, 1996,
1995 and 1994 and for fiscal years then ended follows:
By Geographic Area
United South
1996 States America Corporate Total
- ----------------- ----------- ---------- ----------- ----------
Operating revenue $ - $ 339,726 $ 310,200 $ 649,926
Operating loss - (321,220) (183,574) (504,796)
Identifiable Assets 525,861 135,150 5,951,258 6,612,269
Depreciation and
amortization 4,721 15,652 20,413 40,786
Capital expenditures 41,246 88,690 8,358 138,294
1995
- ----------------- ----------- ---------- ----------- ----------
Operating revenue $ - $ 485,624 $ - $ 485,624
Operating income
(loss) (49,126) (193,938) (635,191) (490,379)
Identifiable assets - 176,101 2,579,919 2,756,020
Depreciation and
amortization - 2,439 19,724 22,163
Capital expenditure - 38,900 7,814 46,714
1994
- ----------------- ----------- ---------- ----------- ----------
Operating revenue $ - $ - $ 10,874 $ 10,874
Operating loss (31,002) (174,002) (545,550) (750,554)
Identifiable assets - 412,218 2,898,508 3,310,726
Depreciation and
amortization - 5,162 20,346 25,508
Capital expenditure - 2,948 50,021 52,969
All revenue received in 1996 and 1995 was from a single source.
Page 36
<PAGE>
<PAGE>
SCHEDULES
Page 37
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
Additions Other
Balance at Charged to Charges Balance
Property Beginning Costs and and at End
Descrip. of Period Expen. Retirements Deduct. of Period
- -------- ---------- --------- ----------- -------- ---------
Year ended
October 31, 1996:
Furniture and
equipment $ 61,187 $ 4,943 $ - $ - $ 66,130
Transportation
equipment 80,727 35,843 16,157 - 100,413
Leasehold
improvements 3,200 - - - 3,200
-------- -------- ----------- -------- --------
TOTAL $145,114 $ 40,786 $ 16,157(A) $ - $169,743
======== ======== =========== ======== ========
Year ended
October 31, 1995:
Furniture and
equipment $ 57,658 $ 4,905 $ 1,376 $ - $ 61,187
Transportation
equipment 63,469 17,258 - - 80,727
Leasehold
improvements 3,200 - - - 3,200
-------- -------- ----------- -------- --------
TOTAL $124,327 $ 22,163 $ 1,376 $ - $145,114
======== ======== =========== ======== ========
Year ended
October 31, 1994:
Furniture and
equipment $ 55,916 $ 7,008 $ 830 $(4,436) $ 57,658
Transportation
equipment 58,339 18,500 17,804 4,434 63,469
Leasehold
improvements 3,200 - - - 3,200
-------- -------- ----------- -------- --------
TOTAL $117,455 $ 25,508 $ 18,634(A) $ (2) $124,327
======== ======== =========== ======== ========
Page 38
<PAGE>
<PAGE>
(A) Gain on sale of property and equipment is calculated as follows:
1996 1995 1994
--------- --------- ---------
Cost of prop. and equip. sold $ 16,157 $ 1,376 $ 8,760
Accumulated depreciation on property
and equipment sold (16,157) (1,376) (18,634)
--------- --------- ---------
Book value - - 126
Less cash received 10,200 - 11,000
--------- --------- ---------
Gain on sale $ 10,200 $ - $ 10,874
========= ========= =========
Depreciation is calculated on the straight line method based on the
estimated service lives of the assets.
Page 39
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
SCHEDULE V - PROPERTY AND EQUIPMENT
Balance Balance
at Begin- Addi- at
Property ning of tions Other End of
Classification Period At Cost Retirements Changes Period
- ----------------- --------- -------- ----------- -------- --------
Year ended
October 31, 1996:
Furniture and
equipment $ 74,492 $ 17,864 $ - $ - $ 92,356
Transportation equip. 167,482 120,430 16,157 - 1,755
Leasehold
improvements 3,200 - - - 3,200
-------- -------- ----------- -------- --------
TOTAL $245,174 $138,294 $ 16,157(A) $ - $367,311
======== ======== =========== ======== ========
Year ended
October 31, 1995:
Furniture and
equipment $ 68,054 $ 7,814 $ 1,376 $ - $ 74,492
Transportation equip. 128,582 38,900 - - 67,482
Leasehold
improvements 3,200 - - - 3,200
-------- -------- ----------- -------- --------
TOTAL $199,836 $ 46,714 $ 1,376 $ - $245,174
======== ======== =========== ======== ========
Year ended
October 31, 1994:
Furniture and
equipment $ 59,970 $ 9,038 $ 954 $ - $ 68,054
Transportation equip. 102,460 43,928 17,806 - 128,582
Leasehold
improvements 3,200 - - - 3,200
-------- -------- ----------- -------- --------
TOTAL $165,630 $ 52,966 $ 18,760(A) $ - $199,836
======== ======== =========== ======== ========
Page 40
<PAGE>
<PAGE>
(A) Gain on sale of property and equipment is calculated as follows:
1996 1995 1994
--------- --------- ---------
Cost of property and equipment $ 16,157 $ 1,376 $ 18,760
Accumulated depre. on prop. and
equip. sold (16,157) (1,376) (18,634)
--------- --------- ---------
Book value - - -
Less cash received 10,200 - 11,000
--------- --------- ---------
Gain on sale $ 10,200 $ - $ 10,874
========= ========= =========
Additions during 1996 and 1995 represent the acquisition of property
and equipment for cash.
Page 41
<PAGE>
<PAGE>
Exhibit 11
Gold Standard, Inc. and Subsidiaries
COMPUTATION OF NET EARNINGS (LOSS) PER COMMON SHARE
Years Ended October 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
Options and warrants out-
standing at end of period 6,000,000 2,625,500 2,779,000
Proceeds, assuming all out-
standing options and warrants
were exercised $ 8,775,000 $ 3,576,500 $ 3,813,000
Common stock assumed to be
purchased with option and
warrant proceeds:
a) Primary 3,299,247 845,368 1,579,209
b) Fully diluted 3,299,247 814,581 1,386,545
Net dilutive stock options and
warrants after applying the
treasury stock method
a) Primary - - -
b) Fully diluted - - -
Weighted average shares of
common stock outstanding
during period 16,496,233 14,808,836 14,417,356
Average common and common
equivalent shares outstanding:
a) Primary 16,496,233 16,578,027 15,622,400
b) Fully diluted 16,496,233 16,609,120 15,661,695
Net loss during the period $ (377,750) $ (685,736) $ (584,900)
Net loss per common and
common equivalent share
a) Primary $ (.02) $ (.05) $ (.04)
============ ============ ===========
b) Fully diluted $ (.02) $ (.05) $ (.04)
============ ============ ===========
See notes on following page.
Page 42
<PAGE>
<PAGE>
NOTE 1 - The proceeds from stock options and warrants were calculated
as follows:
Year No. of Exercise Potential
Issued Shares Price Proceeds
------ ------- --------- -----------
1987: 600,000 1.25 $ 750,000
1988: 750,000 2.25 1,687,500
1992: 750,000 .75 562,500
1993: 50,000 1.25 62,500
1996: 100,000 1.00 100,000
1996: 3,700,000 1.50 5,550,000
1996: 50,000 1.25 62,500
-----------
$ 8,775,000
===========
NOTE 2 - Average market prices determined on a quarterly basis were
used to calculate shares for primary earnings per share. Ending
market prices were used to calculate shares for fully diluted earnings
per share, unless average market prices were higher.
NOTE 3 - The primary and fully diluted loss per share for years ending
October 31, 1995 and 1994 are based on outstanding common only. Any
assumption of conversion of common stock equivalents for these years
would be anti-dilutive because the loss would be spread over more
shares, thereby reducing loss per share.
ITEM 6: SELECTED FINANCIAL DATA.
The selected financial data is presented on a consolidated basis with
the Company's wholly owned and partially owned subsidiaries. A
discussion of the changes in the results of operations is included in
this document at Item 7. A summary of selected financial data for the
five fiscal years ended October 31, 1996 is presented below:
Page 43
<PAGE>
<PAGE>
Fiscal Years Ended October 31,
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------
STATEMENT OF
OPERATIONS DATA
Oper rev $ 649,926 $ 485,624 $ 10,874 $ - $ 2,231
Oper exp 1,154,722 976,003 761,428 1,410,238 788,263
----------- ----------- ----------- ----------- ----------
Oper loss (504,796) (490,379) (750,554) (1,410,238) (786,032)
Other income/
(expense) 40,248 (195,057) 178,720 59,669 6,989
----------- ----------- ----------- ----------- ----------
Net income/(loss)
before income
taxes and
extraordinary
item (464,548) (685,436) (571,834) (1,350,569) (779,043)
Income tax exp (300) (300) (13,066) (621) -
----------- ----------- ----------- ----------- ----------
Income/(loss)
before
ordinary
item (464,848) (685,736) (584,900) (1,351,190) (779,043)
----------- ----------- ----------- ----------- ----------
Extraord.item - - - 4,609,254 -
----------- ----------- ----------- ----------- ----------
Net inc/
(loss) (464,848) (685,736) (584,900) 3,258,064 (779,043)
Net loss minority
interest 87,098 - - - -
----------- ----------- ----------- ----------- ----------
Net loss $ (377,750) - $ - - $ -
----------- ----------- ----------- ----------- ----------
Net loss per
common share
before extra-
ordinary
item $ (.02) $ (.05) $ (.04) $ (.09) $ (.05)
----------- ----------- ----------- ----------- -----------
Earnings/
(loss) per
share $ (.02) $ (.05) $ (.04) $ .22 $ (.05)
----------- ----------- ----------- ----------- -----------
Weighted
average
shares out-
standing 16,496,233 14,808,836 14,417,356 14,597,271 14,712,000
Page 44
<PAGE>
<PAGE>
BALANCE SHEET DATA
Current
assets $6,092,023 $2,604,961 $2,980,629 $3,415,293 $ 143,399
Current liab 88,747 59,262 158,310 156,718 75,311
Total
assets 6,612,269 2,756,020 3,310,726 3,682,915 578,756
Long-term
debt 61,000 61,000 61,000 61,000 321,300
Stockholders'
equity $6,360,620 $2,635,758 $3,091,416 $3,465,197 $ 182,145
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
__________________________________________________________
INTRODUCTION
Gold Standard, Inc. and its subsidiaries (the Registrant) are
principally engaged in the acquisition, exploration, and if warranted,
development of economically potential gold mineralized properties.
Its activities during 1996 were concentrated, for the most part, in
Southern Uruguay, Brazil and west central Utah. A significant factor
effecting the Registrant's operations during the past several years
has been its prosecution of a lawsuit against the operators and former
operators of the Mercur Gold Mine in Tooele County, Utah, alleging
breach of contract, breach of fiduciary duty and several other causes
of action relative to the Company's interest therein. In January of
1996 the Utah Supreme Court ruled against the registrant, and a
subsequent denial for reconsideration has ended the Registrant's
efforts in the case.
RESULTS OF OPERATIONS
During the period ended October 31, 1996 the registrant received
royalty revenue totaling $339,726 from its 20% royalty interest in a
joint venture with American Resources, Inc. The Registrant's
operating activities have been solely exploration related and, while
there is one identified mineral deposit that has produced royalty
revenue in 1996 and 1995, it was only of modest size and is now fully
depleted. The Registrant has focused its exploration activities
during the three years in the reporting period on its properties in
Utah and its mineral holdings in South America.
Page 45
<PAGE>
<PAGE>
Exploration costs incurred at these two locations are summarized as
follows:
Year Ended October 31,
1996 1995 1994
--------- --------- ---------
Utah Properties $ 133,037 $ 49,126 $ 19,514
South American Properties 586,239 270,896 127,730
--------- --------- ---------
$ 719,276 $ 320,022 $ 147,244
========= ========= =========
The increase in exploration costs from $147,244 in 1994,
$320,022 in 1995 and to $719,276 in 1996 is attributable to the
increased activity in South America. In 1992, the Registrant entered
into a joint venture agreement with Santa Fe Pacific Mining, Inc.
(Santa Fe), a division of Santa Fe Pacific Corporation, which
encompassed most of the property in Uruguay. Under this agreement
exploration activities were directed by Santa Fe who also was
responsible for funding 100% of the exploration costs. Consequently,
the Registrant's exploration costs declined significantly, as those
costs were born by Santa Fe. During these periods when the
Registrant's costs were declining, exploration activity
on the properties actually increased. This joint venture was
dissolved in 1996 and the Company has since paid more exploration
costs in Uruguay. Exploration activities in Brazil have increased
significantly during 1996 due to changes in Brazilian law regarding
foreign investment.
During the two years in the period ended October 31, 1995, a
major drain on the Registrant's resources of both time and working
capital has been the prosecution of the Mercur mine litigation. The
Registrant's interest in the Mercur mine was the subject of the
litigation, brought against current and former operators of the mine
by the Registrant. Legal fees and costs relative to this litigation
totaled $343,398 during the year ended October 31, 1995, $269,919
during the year ended October 31, 1994. Related expenses during the
year ended October 31, 1996 were less than $27,000.
In April, 1993, American Barrick Resources Corporation, one of
the defendants in the Mercur litigation, reached a settlement
agreement with the Registrant under which the Registrant relinquished
any and all claims to the Mercur mine or against the subject
defendant, for a cash payment totaling $5,225,000. After payment of
attorney's fees and other costs, the net gain from the settlement,
before taxes, was $4,609,254. This settlement provided the Registrant
with the working capital it needed to continue its action against the
other defendants in the lawsuit which subsequently went to trial in
Page 46
<PAGE>
<PAGE>
late July 1993. Following a seven week trial, the jury in the case
found in favor of the Registrant and awarded it $404,164,000 in
damages. The judge subsequently ruled in favor of the defendants on a
motion to set aside the jury verdict. An appeal was filed with the
Supreme Court of the State of Utah who, in their January 11, 1996
decision, ruled to uphold the trial judge's directed verdict for
he defendants in this case. In May of 1996, a denial for
reconsideration ended the Registrant's efforts in the case.
The Registrant held a 40% participating interest in a separate
joint venture property in Southern Uruguay known as the San Juan Hills
property. Its joint venture partner, American Resources, Inc.,
(American) had been funding exploration on this property. Mining from
one defined deposit in this joint venture (the San Carlos deposit)
began production in 1995 and produced royalty revenue for the Company
of $485,624 in 1995 and $339,726 in 1996. Production through early
1996 depleted all known reserves for this property. The Registrant
has no other properties or activities which are expected to generate
operating revenue during 1997.
Prior to the settlement with American Barrick Resources
Corporation, as described in a previous paragraph, the Registrant had,
for the most part, funded its operations through equity and some
limited debt financing during the past years. This equity and debt
financing is described more fully under the Liquidity and Capital
Resources section of this discussion. The Company does not anticipate
receiving a material amount of operating revenue within the
foreseeable future, and as such, the current trend in losses from
operations are expected to continue. The Company's current business
plans call for the continued exploration of potential mineral
deposits. Future operating losses will be funded through the cash and
cash equivalents currently on hand or through obtaining
additional equity capital.
The most significant components of expenses which have
contributed to the Registrant's net operating losses for the past
three fiscal years are exploration (shown above) and legal expenses.
Legal expenses of $289,286 in 1994 and $343,398 in 1995 contributed to
losses in those years. The Registrant's other general and
administrative expenses have remained fairly constant for the past
three years. The two most significant expense categories included in
general and administrative expenses are (a) professional fees, and (b)
wages and salaries. These two combined categories of expenses
represented 83%, 66% and 55% of the total general and administrative
expenses during the years ended October 31, 1994, 1995 and 1996,
Page 47
<PAGE>
<PAGE>
respectively. These two expense categories are further discussed as
follows:
a. The majority of professional fees included in general and
administrative expense are those of attorneys, consultants,
auditors and accountants. As discussed earlier, the
Registrant has expended a significant amount of its working
capital in the prosecution of the Mercur mine litigation.
During each of the three years in the period ended October
31, 1996, legal fees included in general and administrative
expenses (other than those associated with the Mercur
lawsuit) have totaled $19,297 in 1994, $0 in 1995, and
$7,239 in 1996. Audit and accounting fees during the same
periods have totaled $54,282 in 1994, $40,455 in 1995 and
$23,909 in 1996.
b. Wages, exclusive of payroll taxes, have changed from
$112,800 in both 1994 and 1995 to $131,400 in 1996 (an
increase of l6%). Prior to 1994, salary increases were not
given to employees for the previous three years due to
working capital constraints.
The balance of general and administrative expenses is an
aggregation of many expense accounts, none of them being individually
significant. These accounts include auto expense, travel, postage,
printing, office rent, office supplies, etc. In general, management
has been conscientious in striving to reduce and control G & A
expenses. The stability of G & A costs during the past three years is
a positive reflection on management's cost control efforts.
General and administrative expenses are expected to remain the
same as in 1996. Exploration expense in Uruguay could increase
significantly in 1997. Exploration expense and acquisition costs of
mineral rights on properties in Brazil are expected to go up during
1997 as well as the Registrant continues its exploration activities in
that country.
LIQUIDITY AND CAPITAL RESOURCES
In the absence of any income from operations prior to fiscal year
1993, the Registrant relied extensively on debt and equity financing
to provide needed working capital. The greatest drain to working
capital has been legal costs which totaled $289,216 in 1994 and
$343,398 in 1995.
Page 48
<PAGE>
<PAGE>
Operations during 1994, 1995 and 1996 were funded from the following
sources:
a. In 1994 and 1995 stock warrants were exercised which
resulted in cash proceeds of $187,500 and $236,600
respectively. In 1996 stock warrants were exercised
resulting in cash proceeds to the Company of $187,500. In
1996 stock of the Company and its subsidiary Big Pony Gold,
Inc. was sold resulting $4,100,000 in proceeds to the
Company.
b. In 1996 the Company exchanged rights to mineral properties
located in Brazil for stock in a company. Subsequent sales
of this stock generated $260,400 in cash to fund operations.
c. Working capital at October 31, 1994, 1995 and 1996 was
$2,822,319, $2,545,699, and $6,003,276, respectively. The
Registrant's working capital at October 31, 1996 is
sufficient to fund its projected exploration activities in
the countries of Uruguay, Brazil and in the state of Utah
and to maintain a level of corporate operations consistent
with the past several years.
The Registrant has no immediate plans to seek significant funding
during 1997 either through equity offerings or debt financing. The
Registrant has no material capital commitments or agreements which
would require significant outlays of capital during 1997. The
Company's anticipated capital requirements for the next three fiscal
years are as follows:
1997 1998 1999
-------- -------- --------
Leasehold exploration and
carrying costs $ 800,000 $ 800,000 $ 800,000
Legal expenses 25,000 25,000 25,000
Other general and
administrative expenses 225,000 225,000 225,000
Expenses should remain close to the 1996 level of expenditure.
The Company has cash and cash equivalents to meet its expenses for the
next three fiscal years. The Company has no significant term debt and
is expected to meet all of its obligations as they come due.
In the short term, the Registrant has sufficient cash reserves to
fund operations. In the long-term, there can be no assurance that the
cash on hand will be sufficient to defray all operating costs that
will be incurred. In the event additional long-term cash funds are
needed, the Registrant intends to obtain those funds through the
issuance of additional equity capital. Based upon its twenty three
years of experience in generating equity capital, the Company believes
it has the ability to generate additional funds when needed.
Page 49
<PAGE>
<PAGE>
INFLATION
The impact of inflation on the Registrant's operations will vary.
The future price of gold and the level of future interest rates could
directly affect the Registrant's share of any future operating
revenue. Lower interest rates and higher gold prices enhance the
value of the Registrant's investments. The Registrant's future
results of operations, to a significant degree, depend on their
success in locating, acquiring and producing commercial gold deposits.
With exploration currently proceeding on several properties whose
commercial production potential is not presently determinable, and
considering the difficulty of projecting future gold prices, which
tend to be volatile, it is, at best, difficult to accurately project
future results of operations.
Because the Registrant does not have a steady, dependable source
of revenue, serious increases in inflation could increase the
Registrant's general and administrative expenses and make it difficult
to remain within their budget. However, the inflation rate has
remained relatively low, with only a minor impact on the Registrant
during 1994, 1995 and 1996. Management does not anticipate material
increases in the inflation rate during the immediate future.
ENVIRONMENTAL RULES AND REGULATIONS
The Registrant is not aware of any noncompliance with
environmental rules and regulations, nor has the Registrant been cited
by any local, state or national agency either in the United States or
South America for noncompliance with environmental rules and
regulations.
At October 31, 1996, the Registrant had obtained a standby letter
of credit in the amount of $1,000,000 which is pledged as security
against future potential reclamation costs on mineral properties under
exploration in Uruguay. Furthermore, the Registrant is not aware of
any potential reclamation costs. Except for the above, the Company
has no factual or potential involvement in environmental remediation
activities.
Page 50
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> $6,078,321
<SECURITIES> $244,034
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> $6,092,023
<PP&E> $367,311
<DEPRECIATION> $169,743
<TOTAL-ASSETS> $6,612,269
<CURRENT-LIABILITIES> $88,747
<BONDS> 0
0
0
<COMMON> $18,698
<OTHER-SE> $6,341,862
<TOTAL-LIABILITY-AND-EQUITY> $6,612,269
<SALES> $310,200
<TOTAL-REVENUES> $649,926
<CGS> 0
<TOTAL-COSTS> $1,154,722
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> ($464,548)
<INCOME-TAX> $300
<INCOME-CONTINUING> ($464,848)
<DISCONTINUED> $87,098
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ($377,750)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
