SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended: January 31, 1998
Commission File No. 0-9496
----------------
GOLD STANDARD, INC.
-------------------
(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
--------------
Page 1
<PAGE>
<PAGE>
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
------ ---------------------------------
Page 1
<PAGE>
<PAGE>
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
----------------------------------------
(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
--- ---
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.
Page 2
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
GOLD STANDARD, INC.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR INCLUSION IN QUARTERLY REPORT
ON FORM 10-Q
January 31, 1998
Page 4
<PAGE>
<PAGE>
GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, 1998 and October 31, 1997
January 31, 1998 October 31, 1997
---------------- ----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,791,453 $ 3,231,441
Certificates of deposit 1,210,631 1,197,222
Accrued interest 321 9,039
Prepaid expenses 4,624 6,844
------------ ------------
TOTAL CURRENT ASSETS 4,007,029 4,444,546
PROPERTY AND EQUIPMENT
Equipment and leasehold improvements 192,335 206,465
------------ ------------
192,335 206,465
OTHER ASSETS
Securities available for sale 240,033 252,998
Deposits 3,404 3,404
------------ ------------
243,437 256,402
------------ ------------
$ 4,442,801 $ 4,907,413
============ ============
Page 5
<PAGE>
<PAGE>
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 73,928 $ 85,890
Accrued liabilities 29,204 29,434
Income tax payable 300 300
------------ ------------
TOTAL CURRENT LIABILITIES 103,432 115,624
STOCKHOLDERS' EQUITY
Common stock 18,698 18,698
Additional paid-in capital 13,515,927 13,515,927
Unrealized holding gain (loss) on
securities available for sale (6,816) 6,149
Accumulated deficit (9,188,440) (8,748,985)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,339,369 4,791,789
------------ ------------
$ 4,442,801 $ 4,907,413
============ ============
See accompanying notes to consolidated financial statements.
Page 6
<PAGE>
<PAGE>
GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three month periods ended January 31, 1998 and 1997
Three months ended
January 31,
-------------------------
1998 1997
----------- -----------
(Unaudited) (Unaudited)
INCOME FROM OPERATIONS $ - $ -
EXPENSES
Depreciation 14,130 12,264
Leasehold exploration
and carrying costs 391,368 339,829
General and administrative:
Legal 2,589 4,001
Other 81,267 88,249
----------- -----------
NET INCOME/(LOSS) FROM OPERATIONS (489,354) (444,343)
OTHER INCOME (EXPENSES)
Interest income 49,799 64,211
Loss from investments - (44,920)
----------- -----------
(439,555) (425,052)
NET LOSS - MINORITY INTEREST - 53,717
----------- -----------
NET INCOME/(LOSS) $ (439,555) $ (371,335)
=========== ===========
Net income/(loss) per common share $ (0.02) $ (0.02)
=========== ===========
See accompanying notes to consolidated financial statements.
Page 7
<PAGE>
<PAGE>
GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three month periods ended January 31, 1998 and 1997
Three months ended
January 31,
--------------------------
1998 1997
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (439,555) $ (371,335)
Add (deduct) adjustments
to cash basis:
Depreciation 14,130 12,264
Disposal of equipment - 11,361
Unrealized loss on securities (12,965)
Net loss - minority interest - (53,717)
Increase (decrease) in:
Accounts payable (11,962) (19,031)
Accrued liabilities (230) (425)
Decrease (increase) in:
Accrued interest 8,718 (12,341)
Prepaid expenses 2,220 (4,491)
Securities available for sale 12,965 46,423
Deposits - (50)
----------- -----------
NET CASH PROVIDED BY/(USED IN)
OPERATING ACTIVITIES (426,679) (391,342)
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Increase in certificates of deposit (13,309) -
Equipment purchased - (2,297)
----------- -----------
Page 8
<PAGE>
<PAGE>
NET CASH USED IN INVESTMENT ACTIVITIES (13,309) (2,297)
NET INCREASE (DECREASE) IN CASH (439,988) (393,639)
CASH BALANCE AT BEGINNING OF PERIOD 3,231,441 6,078,321
----------- -----------
CASH BALANCE AT END OF PERIOD $2,791,453 $5,684,682
=========== ===========
See accompanying notes to consolidated financial statements.
Page 9
<PAGE>
<PAGE>
GOLD STANDARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1998 and October 31, 1997
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies reflect industry practices
and conform to generally accepted accounting principles. The
following policies are considered to be significant:
Financial Statements
--------------------
The financial information provided in the Consolidated Balance
Sheet for the year ended October 31, 1997, has been taken from
the audited financial statements at that date. In the opinion
of management, all adjustments necessary to present fairly the
financial position, results of operations and cash flow at
January 31, 1998, have been made. All such adjustments were
of a normal, recurring nature.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements at January
31, 1998, include the accounts of Gold Standard, Inc., its
wholly owned subsidiaries, Gold Standard South and 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 refers to Gold Standard, Inc.
and its consolidated subsidiaries. All significant
intercompany transactions are eliminated.
Gold Standard South, a Utah corporation, was organized for the
express purpose of carrying on a property acquisition and gold
exploration program in the country of Uruguay. Big Pony Gold
holds certain mineral exploration concessions in Uruguay and
is conducting exploration work on those properties. Gold
Standard Minas was organized for the purpose of carrying on a
gold exploration program in the country of Brazil.
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 geological areas
are either put into production, sold or abandoned. As of
Page 10
<PAGE>
<PAGE>
January 31, 1998, there were no geological areas under
production.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings (Loss) Per Share
-------------------------
Earnings (loss) per share of common stock is computed on the
weighted-average number of shares outstanding during the
period.
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.
Securities Available for Sale and Options
-----------------------------------------
Instruments used in trading activities include both securities
and options and are stated at market value. Quoted market
prices are generally used as a basis to determine the market
value. If quoted market prices are not available, market
values are based on dealer quotes. Realized and unrealized
losses are recognized in the financial statements.
Foreign Currency Translation
----------------------------
Substantially all assets and liabilities of the Company's
international operations are translated at year-end exchange
rates and the resulting adjustments are accumulated in
stockholders' equity. Income and expenses are translated at
exchange rates prevailing during the period. 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.
NOTE 2 - 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 (AMZ) which was trading at $4.00 per share. This
Page 11
<PAGE>
<PAGE>
transaction resulted in a net gain to the Company of $300,000
($400,000 less $100,000 paid to three geologists as bonuses on
the transaction).
During 1996 the Company realized gains on the sale of this
stock in the amount of $152,356. The value of the remaining
49,000 shares has fluctuated, resulting in an unrealized
holding loss of $6,816 at January 31, 1998.
NOTE 3 - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements 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 provided on the straight-line method using the
estimated lives 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 4 - MINING PROPERTIES
The Company holds directly or through its subsidiary
companies, mineral and exploration rights to property located
in Western Utah, Southern Uruguay, Brazil and other South
American locations. All exploration costs associated with
these properties have been charged to operations as incurred,
consistent with the Company's accounting policies (see Note
1). The Company's leasehold exploration and carrying expenses for
the three month period ended January 31, 1998 are summarized
as follows:
Uruguay $ 93,099
Brazil 292,186
United States 6,083
0
----------
Total $ 391,368
==========
Page 12
<PAGE>
<PAGE>
NOTE 5 - CAPITAL STOCK
In February, 1996, outstanding stock warrants that were issued
in March, 1992, were exercised 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.
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 June, 1996, the Company extended the expiration dates of
warrants for the purchase of 500,000 shares of common stock
from June, 1996 to June, 1999. The Company also extended the
expiration date of warrants for the purchase of an additional
100,000 shares of common stock from October, 1996, to October,
1999. Warrants for the purchase of 200,000 shares of common
stock expired in June, 1996, and were not extended.
The Company's stock purchase warrants outstanding as of
January 31, 1998, are summarized as follows:
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
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
---------
Total outstanding warrants 5,900,000
=========
Page 13
<PAGE>
<PAGE>
If all outstanding stock purchase warrants were exercised, the
total proceeds would be $8,675,000.
In March, 1996, Big Pony Gold, the Company's 64.4% owned
subsidiary issued 100,000 shares of its unregistered and
restricted common stock to two individuals in consideration of
consulting services rendered.
In May, 1996, Sun Valley Gold Company purchased 500,000 shares
of Big Pony Gold's common stock for $1.00 per share. 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. If all outstanding warrants were exercised,
proceeds would be $625,000.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has funded the majority of the operations of its
subsidiaries Big Pony Gold, Gold Standard South, and Gold
Standard Minas with unsecured non-interest bearing long term
cash advances. As of January 31, 1998, the Company had
receivables from these companies of $662,506, $513,936, and
$938,526, respectively. All intercompany transactions have
been eliminated in consolidation.
To guarantee the future reclamation commitments in Uruguay of
the Company's subsidiary, Big Pony Gold, Inc., the Company has
obtained a standby letter of credit in the amount of
$1,000,000 and extended the benefits of the letter of credit
to their subsidiary.
On March 14, 1996, the Company acquired 750,000 shares of the
common stock of its subsidiary Big Pony Gold, Inc. in exchange
for cancellation of $10,000 in debt owed by the subsidiary to
the Company and transfer by the Company of all its interest in
certain mineral rights and assets pursuant to the cancellation
of a joint venture agreement.
In 1997, the Company converted cash advances to Gold Standard
Minas, to equity in the amount of $817,652.
Page 14
<PAGE>
<PAGE>
NOTE 7 - COMMITMENTS
To guarantee future reclamation commitments in Uruguay, the
Company has obtained a standby letter of credit in the amount
of $1,000,000. No amounts have been drawn on this line. The
benefits of this letter of credit have been extended to the
subsidiary, Big Pony Gold, Inc., and its subsidiary, Tormin
S.A.
A similar letter of credit under similar terms, in the amount
of $100,000 has been obtained to guarantee commitments in
Paraguay. No amounts had been drawn against the line as of
January 31, 1998.
NOTE 8 - INCOME TAX
The Company has significant net operating loss and net capital
loss carryforwards which should give rise to a deferred tax
asset. Because the Company has no assurance that the tax
benefit from the net operating loss and net capital loss will
ever be realized, a valuation allowance has been provided
equal to the deferred tax asset.
The amounts and expiration dates of net operating loss
carryforwards and investment tax credits at January 31, 1998
are detailed in the following summary:
Federal State Net
Net Operating Net Operating Capital
Expiration Date Loss Loss Loss
----------------- ------------- ------------- ---------
October 31, 1998 $ -- $ 15,927 $ --
October 31, 1999 -- 674,075 --
October 31, 2000 -- -- 150,056
October 31, 2002 -- -- 18,503
October 31, 2003 1,440,772 -- --
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 -- --
Page 15
<PAGE>
<PAGE>
October 31, 2009 673,421 -- --
October 31, 2010 185,357 185,057 --
October 31, 2011 241,032 240,932 --
October 31, 2012 790,574 790,274 --
---------- ----------- ---------
$7,202,237 $ 1,906,265 $ 168,559
NOTE 9 - LITIGATION
In 1986, the Company filed a lawsuit against American Barrick
Resources Corporation, Getty Oil Company, and Texaco, relative to
party's interest on the Mercur gold mine located in Tooele
County, Utah. The lawsuit alleges breach of contract, breach of
fiduciary duty and several other causes of action related to the
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 cash
settlement with American Barrick Resources Corporation, one of
the defendants in the action, for a net of $5,225,000.
The lawsuit against the other defendants went to trial in July,
1993. Following a seven week trial, the jury returned a verdict
in favor of the Company on September 3, 1993, and awarded the
Company $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
Court announced 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 must pay approximately $48,000
in court costs. These costs have been accrued in the January 31,
1998 financial statements.
In May, 1996, the Company was notified that a Writ of
Reconsideration filed with the Utah Supreme Court was denied.
The Company has decided to no longer continue its efforts in the
lawsuit.
Page 16
<PAGE>
<PAGE>
Item 2. 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 producing or potentially productive gold
properties. Its activities are concentrated, for the most part, in
southern Uruguay, Brazil and Paraguay.
A significant factor effecting the Registrant's operations
for years was its lawsuit against the operators and former
operators of the Mercur Gold Mine in Tooele County, Utah. A
January, 1996 ruling against the Registrant, and a subsequent
denial for reconsideration has ended the Registrant's efforts in
the case.
RESULTS OF OPERATIONS
No revenue was generated through operations by the Registrant
during the three months ended January 31, 1998 and it is not
expected that any operating revenue will be generated during 1998.
For several years the Registrant was a partner in joint ventures in
mining properties in Uruguay. Royalty revenue was received from
these properties in 1996 and 1995. At the present time all joint
ventures have been dissolved.
The Registrant's operating activities have been solely
exploration related and have been concentrated on their Uruguay,
Brazil, and Paraguay. Exploration related expenses for the three
month period ended January 31, 1998 were $391,368 ($339,829 for the
three month period ended January 31, 1997). Exploration costs
incurred during the three month period ended January 31, 1998 are
summarized as follows:
Uruguay $ 93,099
Brazil 292,186
Paraguay 6,083
----------
$ 391,368
==========
Exploration expenses have been higher in 1998 than in 1997
because of the Registrant's increased activity in its properties in
Brazil. This exploration activity is being conducted by the
Registrant's subsidiary, Gold Standard Minas, S.A. The
Page 17
<PAGE>
<PAGE>
Registrant's exploration activities at its properties in Uruguay is
being conducted through its subsidiary, Big Pony Gold.
The Registrant's general and administrative expenses,
excluding legal expenses totaled $81,267 for the three month period
ended January 31, 1998 ($88,249 for the three month period ended
January 31, 1997). The two most significant general and
administrative expense categories during the three month period
ended January 31, 1998 were (a) professional and consulting fees
$20,800 ($18,810 in 1997) and (b) wages and salaries $33,000
($38,000 in 1997). The balance of general and administrative
expenses includes office supplies and expenses, office rent,
travel, etc.
LIQUIDITY AND CAPITAL RESOURCES
In the absence of income from operations the Registrant will
continue to rely on funds received in prior years for its
operations. These funds include royalty revenues, lawsuit
settlements, equity funding, and proceeds from sales of securities.
The Registrant has no material capital commitments or
agreements which would require significant outlays of capital
during the remaining nine months of the year.
Expenses in the remaining nine months of 1998 should remain
close to the level during the first three months of the year.
In the short term, the Registrant has sufficient cash reserves to
fund operations. In the long-term there can be no assurance that
cash on hand will be sufficient for all operating costs. However,
if necessary the Registrant will look to the issuance of additional
equity capital and increased production from its properties.
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 effect the Registrant's future operating
revenue.
Serious increases in inflation could increase general and
administrative expenses for the Registrant and make it difficult to
remain within budget. However, management does not expect any
material increases in the inflation rate during the near future.
Page 18
<PAGE>
<PAGE>
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.
The Registrant has obtained a standby letter of credit in the
amount of $1,000,000 which is pledged as security against future
potential reclamation costs of mineral properties under exploration
in Uruguay. A similar $100,000 letter of credit has been pledged
as security for operations in Paraguay. Furthermore, the
Registrant is not aware of any potential reclamation costs. Except
for the above, the Registrant has no actual or potential
involvement in environmental remediation activities.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. Not Applicable
ITEM 2. CHANGES IN SECURITIES. Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No items were presented for a vote of security holders
during the period ended January 31, 1998.
ITEM 5. OTHER INFORMATION. Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
Page 19
<PAGE>
<PAGE>
SIGNATURES
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 Standard, Inc.
Date 16 March 1998 By:/s/ Scott L. Smith
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> $2,791,453
<SECURITIES> $240,033
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> $4,007,029
<PP&E> $192,335
<DEPRECIATION> 0
<TOTAL-ASSETS> $4,442,801
<CURRENT-LIABILITIES> $103,432
<BONDS> 0
0
0
<COMMON> $18,698
<OTHER-SE> $4,424,801
<TOTAL-LIABILITY-AND-EQUITY> $4,442,801
<SALES> 0
<TOTAL-REVENUES> $49,799
<CGS> 0
<TOTAL-COSTS> $391,368
<OTHER-EXPENSES> $439,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> $(439,555)
<INCOME-TAX> 0
<INCOME-CONTINUING> $(439,555)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $(439,555)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
