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, 1997 Commission File No. 0-9496
---------------- -------
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
------ ---------------------------------
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
--- ---
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, 1997, the aggregate market value of Registrant's
Common Stock, par value $.001 per share, held by non-affiliates of
Registrant was approximately $14,581,568.
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.
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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 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 approximately 40 employees consisting of senior and
junior geologists, technicians, prospectors, clerical and laborers.
Gold Standard Minas, S.A. is presently involved in active exploration
programs in the Brazilian states of Mato Grasso, Rondonia, Amazonas
and Santa Catarina. 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
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. Registrant still holds 49,000 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. After generating approximately $825,000 of
royalty revenue for Registrant through early 1996, production ceased
when all known reserves for the property were depleted.
Except for the activities described herein, Registrant has not
engaged in any material business transactions during the fiscal year
ended October 31, 1997. Further, except as otherwise described
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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
forty (40) full-time employees.
ITEM 2: PROPERTIES.
-----------
The Country of Brazil
---------------------
Registrant, through its 100% owned subsidiary company Gold
Standard Minas, S.A., in 1994 and 1995 acquired mineral rights to
1.5 million acres with priority and another one million acres appli-
cation in the country of Brazil. These properties were selected by
Registrant's geologists and were considered to be highly prospective
for gold. The huge land position has been pared down to 87 parcels
in granted or priority status totaling 1,441,265 acres. These claims
are located in states of Gois, Mato Grosso, Amazonas and Rondonia.
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
investigation by Registrant's geologists, technicians and prospectors
include Novo Brazil and NE Goias in the state of Goias; Cachimbo and
Apui 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 Minas, S.A., Registrant's landman. All full time employees
are Brazilian.
During fiscal year 1997, Registrant engaged in mineral
exploration in Brazil. Gold deposits discovered on Registrant's
property in Mato Grosso state have thus far not revealed sufficient
continuity to justify development at the present time given current
low gold prices. Exploration activities in Brazil will continue in
1998.
The Country of Uruguay
----------------------
During 1987, Registrant began application for prospecting rights
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in the country of Uruguay. Acquisition of properties continued for
the next three years. In 1988 Registrant 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 its 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 approximately $825,000 to the Registrant. All
known reserves on this property have been depleted, and no mining or
exploration activities on the property are anticipated during 1998.
REA Gold and Registrant have terminated their joint venture, and
Registrant retains a six-man crew consisting of a geologist, a
technician, a landman and laborers at the property.
Registrant's properties in Uruguay are currently 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 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.
The Country of Paraguay
-----------------------
During the period ended October 31, 1997, Registrant conducted a
preliminary geologic evaluation in the country of Paraguay.
Registrant's geologists believe that a portion of the country's
regional geology has been misinterpreted. In the southeastern portion
of the country they believe that an area designated as made up of
basement rocks is actually a sedimentary basin that can host economic
hydrocarbon deposits. Registrant has been granted an exclusive
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prospection permit for oil and gas by the government covering the area.
This area is referred to as the Pilar basin and the permit encompasses
3,447,500 acres (5,387 square miles).
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,
1997.
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.
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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
- ------- ------------- ----- -----
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
1997: First Quarter $1.94 $1.18
Second Quarter 1.25 0.69
Third Quarter 0.88 0.38
Fourth Quarter 1.13 0.50
(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, 1997, was as follows:
Approximate Number
of Record Holders
Title of Class as of October 31, 1997
-------------- ----------------------
Common Stock Non-assessable
$.001 par value per share 2,175
(c) Registrant has not declared or paid any dividends with
respect to its common stock during the past two years. Registrant has
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, 1997.
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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, 1997, 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 71 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.
Bret C. Decker
- --------------
For the past five years, the 43 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 81 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 L. Sneddon 67 Director 1996
- -----------------
For the past five years, the
principal occupation of Mr.
Sneddon had been Executive
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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;
(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 (10%) 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 (10%) 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
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Registrant or written representations from certain persons, Registrant
believes that during the 1997 fiscal year all filing requirements
applicable to its current officers and directors were complied with.
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, 1997. 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 1997 fiscal year or involved in any financial
transaction with Registrant.
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 $80,000 paid to Scott L. Smith as salary
for serving as president of Registrant during the 1997 fiscal year.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
----------------------------------------
Registrant has authorized only common shares, par value one mill
($.001) per share, of which 18,697,500 shares were issued and
outstanding as of the close of business on October 31, 1997. Warrants
to purchase an additional 6,000,000 common shares were outstanding as
of the close of business on October 31, 1997. 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
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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, 1997, 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.
The percentage ownership figures assume that all of the warrants of the
person or entity identified have been exercised, but that no other
warrants of any other person or entity have been exercised.
Approximate
Name and Type of Amount Percent
Address Ownership Owned of Class
-------- --------- --------- --------
FCMI Financial Record and 4,039,000 (1) 19.42% (1)
Corporation Beneficial
347 Bay Street
Second Floor
Toronto, Ontario (Canada)
Scott L. Smith Record and 1,375,100 (2) 7.16% (2)
4931 Marilyn Drive Beneficial
Salt Lake City, Utah
Continental Casualty Record and 2,650,000 (3) 13.24%
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) 5.36%
c/o Sun Valley Gold Beneficial
Company
620 Sun Valley Road
Sun Valley, Idaho 83353
Sun Valley Gold Record and 1,710,000 (5) 8.75%
International, Ltd. Beneficial ----
c/o Sun Valley Gold
Company
620 Sun Valley Road
Sun Valley, Idaho 83353
- ----------------------------
(1) 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
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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 (which expired in July
of 1993) 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. On
February 22, 1996, FCMI exercised 250,000 of the 1992 warrants, leaving
750,000 unexercised 1992 warrants. FCMI purchased 600,000 shares of
common stock of Registrant and 600,000 warrants in May of 1996. In
addition to the foregoing, FCMI purchased 119,500 shares of Registrant's
stock prior to July of 1988 from a third party, 30,000 of which have
previously been sold by FCMI.
(2) 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.
(3) In May of 1996, Continental Casualty Company purchased 1,325,000
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shares of Registrant's common stock, and warrants to purchase an
additional 1,325,000 shares. 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. 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. 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, 1997, the
shares of common stock of Registrant beneficially owned by the manage-
ment of Registrant, including all directors and officers individually,
and by all directors and officers of Registrant as a group. The
percentage ownership figures assume that all of the warrants of the
person identified have been exercised, but that no other warrants of any
other person or entity have been exercised.
Name of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership of Class
- ---------------- -------------------- -----------
Scott L. Smith
(Director) 1,375,100 (1) 7.16% (1)
Charles W. Shannon
(Director) 90,000 (2)
Bret C. Decker 50,000 (3) 0.27%
(Director)
Gerald R. Sneddon 0 0%
(Director)
All Directors and
Officers as a Group
(Four Persons)(2) 1,515,100 7.85%
- ----------------------------
(1) See Note (1) under Item 12(a).
(2) This amount includes warrants entitling Mr. Shannon to purchase up
to 50,000 shares of the common stock of Registrant at $1.25 per
per share at any time on or before January 18, 2001.
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(3) 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. These warrants expired
on 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 19-39.
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 40.
Exhibit 27. Financial Data Schedule, Page 50
(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 Securi-
ties Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 14, 1998 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: February 14, 1998 By /s/ Scott L. Smith
------------------------------
Scott L. Smith, Director
Principal Executive Officer,
Principal Financial Officer,
and Chief Accounting Officer
Date: February 14, 1998 By /s/ Bret C. Decker
------------------------------
Bret C. Decker, Director
Date: February 14, 1998 By /s/ Charles W. Shannon
------------------------------
Charles W. Shannon, Director
Date: , 1998 By
-----------
----------------------------
Gerald L. 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 40 Form 10-K
Income (Loss) per
(current) Common Share
27 27 Financial Data Schedule 50 Form 10-K
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Gold Standard, Inc. and Subsidiaries
CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997 and 1996
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 18
CONSOLIDATED BALANCE SHEETS 19-20
CONSOLIDATED STATEMENTS OF OPERATIONS 21-22
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 23-24
CONSOLIDATED STATEMENTS OF CASH FLOWS 25-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 28-39
Page 17
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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, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for the years ended October 31, 1997, 1996 and 1995. 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 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, 1997
and 1996, and the consolidated results of their operations and their
consolidated cash flows for the years ended October 31, 1997, 1996, and
1995 in conformity with generally accepted accounting principles.
Salt Lake City, Utah
January 24, 1998
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FINANCIAL STATEMENTS
Gold Standard, Inc., and Subsidiaries
CONSOLIDATED BALANCE SHEETS
October 31,
ASSETS
1997 1996
------------ -----------
CURRENT ASSETS
Cash and cash equivalents $ 3,231,441 $ 6,078,321
Certificates of deposit 1,197,222 -
Accrued interest 9,039 7,123
Prepaid expenses 6,844 6,579
------------ -----------
Total current assets 4,444,546 6,092,023
------------ -----------
PROPERTY AND EQUIPMENT, at cost
Furniture and equipment 120,718 92,356
Transportation equipment 255,069 271,755
Leasehold improvements 3,200 3,200
------------ -----------
378,987 367,311
Less accumulated depreciation and amortization (172,522) (169,743)
------------ -----------
206,465 197,568
------------ -----------
OTHER ASSETS
Securities available for sale 252,998 244,034
Deferred offering costs - 77,954
Deposits 3,404 690
------------ -----------
256,402 322,678
------------ -----------
$ 4,907,413 $ 6,612,269
============ ===========
Page 19
<PAGE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 85,890 $ 87,344
Accrued liabilities 29,434 1,103
Income taxes payable 300 300
------------ -----------
Total current liabilities 115,624 88,747
------------ -----------
LONG-TERM OBLIGATIONS
Deferred liability - 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
1997 and 1996 18,698 18,698
Additional paid-in capital 13,515,927 13,515,927
Unrealized holding gain (loss) on
securities available for sale 6,149 (20,888)
Accumulated deficit (8,748,985) (7,153,117)
------------ -----------
4,791,789 6,360,620
------------ -----------
$ 4,907,413 $ 6,612,269
=========== ===========
The accompanying notes are an integral part of these statements.
Page 20
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended October 31,
1997 1996 1995
REVENUE
Royalties $ - $ 339,726 $ 485,624
Gain on sale of property
rights and equipment - 310,200 -
----------- ------------- -----------
- 649,926 485,624
----------- ------------- -----------
EXPENSES
General and administrative
Legal 118,975 34,306 343,398
Other 364,642 360,354 290,420
Leasehold exploration and
carrying costs 1,357,066 719,276 320,022
Depreciation and amortization 55,118 40,786 22,163
----------- ------------- -----------
1,895,801 1,154,722 976,003
----------- ------------- -----------
Net loss from operations (1,895,801) (504,796) (490,379)
OTHER INCOME (EXPENSE)
Interest income 226,713 177,689 120,443
Loss from investments (18,503) (137,441) (315,500)
Loss on disposal of equipment (9,969) - -
------------ ------------ -----------
198,241 40,248 (195,057)
------------ ------------ -----------
Net loss before income taxes (1,697,560) (464,548) (685,436)
INCOME TAX EXPENSE 210 300 300
------------ ------------ -----------
(1,697,770) (464,848) (685,736)
Page 21
<PAGE>
<PAGE>
NET LOSS - MINORITY INTEREST 101,902 87,098 -
------------ ------------ -----------
NET LOSS $(1,595,868) $ (377,750) $ (685,736)
============ ============ ===========
NET LOSS PER COMMON SHARE $ (.09) $ (.02) $ (.05)
============ ============ ===========
NET LOSS PER COMMON SHARE
Primary $ (.09) $ (.02) $ (.05)
============ ============ ===========
Fully diluted $ (.09) $ (.02) $ (.05)
============ ============ ===========
The accompanying notes are an integral part of these statements.
Page 22
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended October 31,
1997 1996 1995
----------- ----------- -----------
Common stock
Balance beginning of period $ 18,698 $ 14,848 $ 14,694
Stock warrants exercised
(250,000 in 1996; 153,500
in 1995) - 250 154
Proceeds from sale
of stock - 3,600 -
----------- ----------- -----------
Balance end of period 18,698 18,698 14,848
----------- ----------- -----------
Additional paid-in capital
Balance beginning of period 13,515,927 9,396,277 9,159,931
Stock warrants exercised - 187,250 236,346
Proceeds from sale of stock - 3,596,400 -
Proceeds from sale of
subsidiary stock - 336,000 -
----------- ----------- -----------
Balance end of period 13,515,927 13,515,927 9,396,277
Cumulative translation
adjustment
Balance beginning of period - - (122,543)
Net change - - 122,543
----------- ----------- -----------
Balance end of period - - -
----------- ----------- -----------
Unrealized holding gain
(loss) on mortgage-backed
securities
Balance beginning of period - - 128,965
Net change - - (128,965)
----------- ----------- -----------
Balance end of period - - -
----------- ----------- -----------
Page 23
<PAGE>
<PAGE>
Unrealized holding gain
(loss) on securities
available for sale 6,149 (20,888) -
----------- ----------- -----------
Accumulated deficit
Balance beginning of period (7,153,117) (6,775,367) (6,089,631)
Net loss (1,595,868) (377,750) (685,736)
----------- ----------- -----------
Balance end of period (8,748,985) (7,153,117) (6,775,367)
----------- ----------- -----------
$4,791,789 $6,360,620 $2,635,758
=========== =========== ===========
The accompanying notes are an integral part of these statements.
Page 24
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended October 31,
1997 1996 1995
----------- ----------- ----------
Increase (decrease) in cash
and cash equivalents
Cash flows from operating activities:
Net loss $(1,595,868)$ (377,750)$ (685,736)
Adjustments to reconcile net
loss to net cash and cash
equivalents used in operating
activities:
Depreciation and amortization 55,118 40,786 22,163
Gain on sale of property rights - (310,200) -
Loss on disposal of equipment 9,969 - -
Loss from investments 18,503 - -
Write-off of deferred offering
costs 77,954 - -
Write-off of deferred liability (61,000) - -
Minority interest (101,902) - -
Decrease (increase) in assets:
Receivables - 133,764 (133,764)
Accrued interest (1,916) (7,024) 27,414
Prepaid expenses (265) (1,461) (142)
Increase (decrease) in liabilities:
Trade accounts payable (1,454) 28,948 (99,044)
Accrued liabilities 28,331 537 (4)
----------- ----------- ----------
Net cash used in
operating activities (1,572,530) (492,400) (869,113)
----------- ----------- ----------
Page 25
<PAGE>
<PAGE>
Cash flows from investing activities:
Sale of investments, net - 281,380 -
Proceeds from sale of equipment 17,500 10,200 -
Decrease (increase) in
Restricted cash - - 81,036
Restricted investments - - 20,605
Purchase of options - (308,300) -
Purchase of securities (430) - -
Purchase of certificate of deposit (1,197,222) - -
Property and equipment purchased 91,484) (138,294) (46,714)
Deposits (2,714) (50) -
----------- ----------- ----------
Net cash provided by (used
in) investing activities (1,274,350) (155,064) 54,927
----------- ----------- ----------
Cash flows from financing activities:
Proceeds from stock transactions - 3,600,000 236,500
Proceeds from sale of stock
warrants - 187,500 -
Deferred offering costs - (27,695) (27,017)
Proceeds from sale of subsidiary
stock - 500,000 -
----------- ----------- ----------
Net cash provided by
financing activities - 4,259,805 209,483
----------- ----------- ----------
Increase in foreign currency
adjustments - - 122,543
----------- ----------- ----------
Net increase (decrease) in
cash and cash equivalents (2,846,880) 3,612,341 (482,160)
Cash and cash equivalents
at beginning of year 6,078,321 2,465,980 2,948,140
----------- ----------- -----------
Cash and cash equivalents
at end of year $ 3,231,441 $ 6,078,321 $ 2,465,980
=========== =========== ===========
Page 26
<PAGE>
<PAGE>
Supplemental disclosures of cash flows information
- --------------------------------------------------
Cash paid during the year for:
Interest $ - $ - $ -
Income taxes $ 210 $ 300 $ 200
Non-cash transactions:
In 1997, the Company had a temporary unrealized holding gain of $27,037
on securities held which are classified as available for sale, which was
recorded in equity.
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 held which are classified as available for sale, which was
recorded in equity.
The accompanying notes are an integral part of these statements.
Page 27
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997 and 1996
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
subsidiaries, Gold Standard South, Kelwood Enterprises, Ltd., Gold
Standard Mines, 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 subsidiaries. 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. was a wholly owned Canadian Corporation with no
active operations and no material activity during 1997, 1996 or
1995. This entity was liquidated in 1997. 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, 1997 the Company had absorbed $153,840 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,
1997 there were no geologic areas under production.
3. Foreign Currency Translation
----------------------------
Substantially all assets and liabilities of the Company's
Page 28
<PAGE>
<PAGE>
international operations are translated at year end exchange rates
and 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 loss, except for those relating to intercompany transactions of
a long-term investment nature, which are accumulated in
stockholders' equity.
4. Loss Per Share
--------------
Loss per share of common stock is computed based on the
weighted-average number of common shares outstanding during the
period; 18,697,500 in 1997, 16,496,233 in 1996, and 14,808,836 in
1995. The Company had common stock equivalents outstanding at
October 31, 1997, 1996, and 1995 in the form of stock warrants
(Notes H and I). These warrants were excluded in the calculations
of loss per share during the years ended October 31, 1997, 1996,
and 1995 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, cash equivalents and certificates of deposit: 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.
Page 29
<PAGE>
<PAGE>
8. Recently Issued Accounting Standards
------------------------------------
In October 1995, SFAS No. 123, Accounting for Stock-Based
Compensation was issued. Management adopted this standard effec-
tive January 1, 1996, by means of disclosure of the pro forma
effect of the compensation components of stock-based compensation
(Note I).
In February 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128, Earnings Per Share. SFAS No. 128 applies to
entities with publicly held common stock or potential common stock
will be effective for the Company for the year ended October 31,
1998. Under SFAS No. 128, the presentation of primary earnings per
share is replaced with a presentation of basic earnings per share.
SFAS No. 128 requires dual presentation of basic and diluted
earnings per share for entities with complex capital structures.
Basic earnings per share includes no dilution and is computed by
dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution
of securities that could share in the earnings of an entity,
similar to fully diluted earnings per share. Management believes
the adoption of SFAS No. 128 will not have a material effect on the
financial statements.
In February 1997, the FASB issued SFAS No. 129, Disclosure of
Information about Capital Structure, to consolidate existing
disclosure requirements. This new standard contains no change in
disclosure requirements for the Company. It will be effective for
the Company for the year ending October 31, 1998.
In June 1997 the FASB issued SFAS No. 130, Reporting Comprehensive
Income, to establish standards for reporting and display of
comprehensive income (all changes in equity during a period except
those resulting from investments by and distributions to owners)
and its components in financial statements. This new standard,
which will be effective for the Company for the year ending October
31, 1998 is not currently anticipated to have a significant impact
on the Company's financial statements based on the current
financial structure and operations of the Company.
In June 1997, the FASB issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, to establish
standards for reporting information about operating segments in
annual financial statements, selected information about operating
segments in interim financial reports and disclosures about
products and services, geographic areas and major customers. This
new standard, which will be effective for the Company for the year
ending October 31, 1998, will require the Company to report
Page 30
<PAGE>
<PAGE>
financial information on the basis that is used internally for
evaluating segment performance and deciding how to allocate
resources to segments. It is currently anticipated that this will
result in more detailed information in the notes to the Company's
consolidated financial statements than is currently required and
provided.
9. Reclassifications
------------------
Certain amounts in the 1996 financial statements have been
reclassified to conform to current year presentation.
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 value of the remaining 49,000
shares has fluctuated resulting in an unrealized holding gain of
$6,149 at October 31, 1997.
The Company has invested in options to purchase gold (Note F). The
options expire in May 1998. For the years ended October 31, 1997,
1996, and 1995, the Company has recorded a realized loss related
to these instruments of $18,503, $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 operations. Depreciation and amortization of
property and equipment 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
Page 31
<PAGE>
<PAGE>
NOTE D - MINING PROPERTIES
The Company holds directly or through its subsidiaries, 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, 1997 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, 1997.
NOTE E - LONG-TERM OBLIGATIONS
Long-term debt at October 31, 1997 and 1996, consists of the
following:
1997 1996
-------- --------
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
=========== ===========
The liability was eliminated in 1997 due to the completion of the
joint venture.
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
19% of the outstanding stock of the Company as of October 31, 1997.
Commissions paid to FCMI were $6,600 and $40,9200 for the years ended
October 31, 1996, and 1995 (Note B).
During the period November 1, 1988 through October 31, 1997, 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. In addition, 100,000 shares valued at $25,000 were issued to
employees of the Company in exchange for services. In May of 1996,
Page 32
<PAGE>
<PAGE>
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:
1997 1996 1995
-------- -------- --------
Big Pony Gold $565,127 $294,000 $140,000
Gold Standard South 513,832 531,000 667,000
Gold Standard Minas 661,594 708,000 237,806
In 1997 the Company converted cash advances to Gold Standard Minas,
S.A., to equity in the amount of $817,652. Intercompany advances are
eliminated as part of the consolidation.
NOTE G - TRANSACTIONS IN CAPITAL STOCK
In May and June 1996, Investors purchased 3,000,000
shares of the Company's common stock for $1.00 per share. As part of
the transaction, they also received warrants for the
purchase of 3,000,000 additional shares (Note H) 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 with warrants 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.
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, investors 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, the investors 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
Page 33
<PAGE>
<PAGE>
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 - STOCK WARRANTS
In connection with issuance of its common stock, the Company has
issued warrants to others for the purchase of additional shares at
specified prices in the future. Unexercised warrants aggregate
5,100,000 shares at October 31, 1997. They carry a weighted average
price of $1.50 per share and have a weighted average remaining life
of 2.4 years.
NOTE I - WARRANTS ISSUED AS COMPENSATION
The Company has issued compensatory stock warrants to officers,
employees and consultants during the course of business. No
compensation expense has been recorded for these warrants.
Reported and proforma net loss and loss per share for the years
ended October 31, are as follows:
1997 1996 1995
------------ ---------- ----------
Net loss
As reported $(1,595,868) $(377,750) $(685,736)
Pro forma (1,595,868) (948,270) (685,736)
Loss per share
As reported (.09) (.02) (.05)
Pro forma (.09) (.05) (.05)
The pro forma effect on net loss for 1997, 1996 and 1995 may not be
representative of the pro forma effect on net income or loss for
future years because the SFAS No. 123 method of accounting for pro
forma compensation expense has not been applied to warrants granted
prior to January 1, 1995.
The weighted-average fair values at date of grant for compensatory
warrants granted in 1997, 1996 and 1995 were estimated using the
Black-Scholes option-pricing model, based on the following
assumptions: (i) no expected dividend yields; (ii) expected
volatility rates of 104%, 80% and 48% in 1997, 1996 and
1995,respectively,; and (iii) expected weighted average lives of 1.9
years. The weighted-average risk-free interest rate applied was
6.20%.
Page 34
<PAGE>
<PAGE>
Stock warrant activity is summarized as follows:
Year ended October 31,
-----------------------------------------------------
1997 1996 1995
-----------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
Warrants
outstanding
beginning
of period 900,000 $1.25 650,000 $1.25 778,000 $1.25
Granted - - 900,000 1.25 - -
Exercised - - - - (128,000) 1.25
Canceled or
expired - - (650,000) 1.25 - -
------- ----- --------- ----- --------- -----
Warrants
outstanding
and exercis-
able, end of
period 900,000 $1.25 900,000 $1.25 650,000 $1.25
======= ===== ======== ===== ======== =====
The following table summarizes information about stock warrants
outstanding and exercisable at October 31, 1997:
Weighted
Average
Remaining
Contractual
Exercise Price Shares Life (years)
-------------- ------- ------------
$1.00 100,000 .2
1.25 700,000 1.8
1.50 100,000 4.5
------- ---
Total 900,000 1.9
======= ===
NOTE J - INCOME TAXES
The Company has significant net operating loss and net capital loss
carryforwards which could give rise to a deferred tax asset.
Because the Company has no assurance that the tax benefit from the
Page 35
<PAGE>
<PAGE>
net operating loss and net capital 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
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 and net capital loss
carryforwards and the associated valuation allowance are summarized
as follows at October 31,:
1997 1996
----------- -----------
Total deferred tax assets
(based on net operating
loss carryforward) $ 2,609,812 $ 2,604,277
Less valuation allowance (2,609,812) (2,604,277)
------------ ------------
Net deferred tax asset $ - $ -
============ ============
The amounts and expiration dates of net operating loss and capital
loss carryforwards at October 31, 1997 are detailed in the following
summary:
Federal State Net
Net Operating 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 - -
October 31, 2009 673,421 - -
Page 36
<PAGE>
<PAGE>
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 K - OPERATING AND JOINT VENTURE AGREEMENTS
During the reporting period, the Company was a party to operating
or joint venture agreements. While the terms of the agreements
differ, they 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:
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. No revenue was generated
in 1997 and the agreement has been terminated.
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,
Page 37
<PAGE>
<PAGE>
Inc.
NOTE L - 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 October 31, 1997.
NOTE M - LITIGATION
In 1986, the Company filed a lawsuit against American Barrick
Resources Corporation, Getty Oil Company and Texaco, relative to the
Company'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.
In April 1993, the Company accepted a net settlement of $4,609,254
from American Barrick Resources Corporation. 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, 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 incurred approxi-
mately $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
reconsideration filed with the Utah Supreme Court was denied. The
Company has decided not to continue to pursue this lawsuit.
NOTE N - 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
totaled $4,160,182 at October 31, 1997.
NOTE O - SEGMENTAL INFORMATION
The Company's only activity and, therefore, dominant business
Page 38
<PAGE>
<PAGE>
segment is gold exploration and development. During the years ended
October 31, 1997, 1996 and 1995, the Company, in addition to its U.S.
activities, conducted acquisition and exploration activities in
Uruguay, Paraguay, and Brazil through its subsidiaries (Note A). A
summary of the Company's operations by geographic area at October 31,
1997, 1996 and 1995 and for fiscal years then ended follows:
United South
1997 States America Corporate Total
- ----------------- ------ ------- --------- ---------
Operating revenue $ - $ - $ - $ -
Operating loss (4,954) (1,539,864) (350,983) (1,895,801)
Identifiable assets - 187,894 4,719,519 4,907,413
Depreciation and
amortization - 36,946 18,172 55,118
Capital expenditures - 44,240 50,262 94,502
United South
1996 States America Corporate Total
- ----------------- ------ ------- --------- ---------
Operating revenue $ - $ 339,726 $ 310,200 $ 649,926
Operating loss (133,037) (321,220) (50,539) (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
United South
1995 States America Corporate Total
- ----------------- ------ ------- --------- ---------
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
All operating revenue received in 1996 and 1995 was from a single
source.
Page 39
<PAGE>
<PAGE>
Exhibit 11
Gold Standard, Inc. and Subsidiaries
COMPUTATION OF NET EARNINGS (LOSS) PER COMMON SHARE
Years Ended October 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
Options and warrants out-
standing at end of period 6,000,000 6,000,000 2,625,500
Proceeds, assuming all out-
standing options and warrants
were exercised $ 8,775,000 $ 8,775,000 $ 3,576,500
Common stock assumed to be
purchased with option and
warrant proceeds:
a) Primary 3,739,500 3,299,247 845,368
b) Fully diluted 3,739,500 3,299,247 814,581
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 18,697,500 16,496,233 14,808,836
Average common and common
equivalent shares outstanding:
a) Primary 18,697,500 16,496,233 16,578,027
b) Fully diluted 18,697,500 16,496,233 16,609,120
Net loss during the period $(1,595,868) $ (377,750) $ (685,736)
Net loss per common and
common equivalent share
a) Primary $ (.09) $ (.02) $ (.05)
============ ============= =============
b) Fully diluted $ (.09) $ (.02) $ (.05)
============ ============= =============
See notes on following page.
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<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 the year
ending October 31, 1997, 1996 and 1995 is based on outstanding
common only. Any assumption of conversion of common stock
equivalents for this year 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, 1997 is presented below:
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<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Fiscal Years Ended October 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
STATEMENT OF ------------- ------------ ------------ ------------ ------------
OPERATIONS DATA
Operating revenue $ - $ 649,926 $ 485,624 $ 10,874 $ -
Operating expense 1,895,801 1,154,722 976,003 761,428 1,410,238
------------- ------------ ------------ ------------ ------------
Operating loss (1,895,801) (504,796) (490,379) (750,554) (1,410,238)
Other income/
(expense) 198,241 40,248 (195,057) 178,720 59,669
------------- ------------ ------------ ------------ ------------
Net income/(loss)
before income
taxes and extra-
ordinary item (1,697,560) (464,548) (685,436) (571,834) (1,350,569)
Income tax expense (210) (300) (300) (13,066) (621)
------------- ------------ ------------ ------------ ------------
Income/(loss)
before extra-
ordinary item (1,697,770) (464,848) (685,736) (584,900) (1,351,190)
------------- ------------ ------------ ------------ ------------
Extraordinary item - - - - 4,609,254
------------- ------------ ------------ ------------ ------------
Page 42
<PAGE>
<PAGE>
Fiscal Years Ended October 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------ ------------ ------------ ------------
Net income/(loss) (1,697,770) (464,848) (685,736) (584,900) 3,258,064
Net loss minority
interest 101,902 87,098 - - -
------------- ------------ ------------ ------------ ------------
Net income (loss) (1,595,868) (377,750) (685,736) (584,900) 3,258,064
------------- ------------ ------------ ------------ ------------
Net loss per
common share
before extra-
ordinary item (.09) $ (.02) $ (.05) $ (.04) $ (.09)
------------- ------------ ------------ ------------ ------------
Earnings/(loss)
per share (.09) $ (.02) $ (.05) $ (.04) $ .22
------------- ------------ ------------ ------------ ------------
Weighted average
shares out-
standing 18,697,500 16,496,233 14,808,836 14,417,356 14,597,271
BALANCE SHEET DATA
Current assets $ 4,444,546 $ 6,092,023 $ 2,604,961 $ 2,980,629 $ 3,415,293
Current liabilities 115,624 88,747 59,262 158,310 156,718
Total assets 4,907,413 6,612,269 2,756,020 3,310,726 3,682,915
Long-term liability - 61,000 61,000 61,000 61,000
Stockholders'
equity $ 4,791,789 $ 6,360,620 $ 2,635,758 $ 3,091,416 $ 3,465,197
</TABLE>
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 oil and gas and gold mineralized properties. Its
activities during 1997 were concentrated, for the most part, in Uruguay,
Brazil and Paraguay.
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
Page 43
<PAGE>
<PAGE>
other causes of action relative to the Registrant'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
No revenue was generated by company operations for the year ended
October 31, 1997. During the periods ended October 31, 1996 and 1995
the Registrant received royalty revenue totaling $339,726 and $485,624
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 was 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 joint venture with American
Resources, Inc. has been dissolved.
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. Exploration costs incurred at these
locations are summarized as follows:
Year Ended October 31,
----------------------------------------
1997 1996 1995
---------- --------- ---------
Utah Properties $ 4,954 $ 133,037 $ 49,126
South American Properties 1,352,112 586,239 270,896
---------- --------- ---------
$1,357,066 $ 719,276 $ 320,022
The increase in exploration costs the last three years is
attributable to the increased activity in South America as outlined
below. In the years of 1994 and 1995 the Registrant secured a large
land position in the country of Brazil, and some 1.5 million acres of
mineral rights were obtained. Exploration costs have risen steadily to
where the period ended October 31, 1997 saw an expenditure of $847,666
by Gold Standard Minas, S.A., a Brazilian corporation, and a 100% owned
subsidiary of the Registrant. It maintains offices in Curitiba, Parana
and employs some 40 people comprised of geologists, technicians,
prospectors, clerical and laborers. Presently, Gold Standard Minas is
active with exploration programs in the states of Mato Grosso, Rondonia,
Amazonas and Santa Catarina.
In 1992, the Registrant entered into a joint venture in Uruguay
with Santa Fe Pacific Mining, Inc. (Santa Fe), a division of Santa Fe
Pacific Corporation. 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
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<PAGE>
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 Registrant again assumed responsibility for
exploration costs in Uruguay which totaled $548,796 during 1997.
During the period ended October 31, 1997, the Registrant conducted
a preliminary geologic evaluation in the country of Paraguay. The
Registrant's geologists believe that a portion of the country's regional
geology has been misinterpreted. In the southeastern portion of the
country they believe that an area designated as made up of basement
rocks is actually a sedimentary basin that can host economic hydrocarbon
deposits. An application was made by the Registrant to the government
of Paraguay for the exclusive right to explore for oil and gas in what
is referred to as the Pilar basin.
During the year ended October 31, 1995, a major drain on the
Registrant's resources of both time and working capital was the
prosecution of the Mercur mine litigation. Legal fees and costs
relative to this litigation totaled $343,398 during the year ended
October 31, 1995. Related expenses during the year ended October 31,
1996 were less than $27,000 and no expenses relating to this suit were
incurred during the years ended October 31, 1997.
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 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 the 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) funded 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 Registrant 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
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<PAGE>
properties or activities which are expected to generate operating
revenue during 1998.
Prior to the settlement with American Barrick Resources Corpora-
tion 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 Registrant 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 Registrant's current business plans call for the continued
exploration of potential mineral and oil and gas deposits. Future
operating losses will be funded through the cash, cash equivalents and
certificates of deposit currently on hand or through obtaining
additional equity capital.
The most significant component of expenses which has contributed to
the Registrant's net operating losses for the past two fiscal years is
exploration (shown above). Legal expenses of $343,398 contributed to
losses in 1995. 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%,
71%, and 74% of the total general and administrative expenses during the
years ended October 31, 1995 and 1996, and 1997, 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. During each of the three years in
the period ended October 31, 1997, legal fees included in
general and administrative expenses totaled $343,398 in
1995, $34,306 in 1996 and $118,975 in 1997. Of these
expenses $343,398 in 1995 and $27,067 in 1996 were
associated with the Mercur lawsuit. Audit, accounting and
outside consultants fees for the periods totaled $69,705 in
1995, $109,449 in 1996 and $100,294 in 1997.
b. Wages, exclusive of payroll taxes, were $112,800 in 1995,
to $131,400 in 1996, and $137,096 in 1997.
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 general and
administrative expenses. The stability of general and administrative
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<PAGE>
<PAGE>
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 1997. Exploration expense in Uruguay is expected to decrease
significantly in 1998. Exploration expense and acquisition costs of
mineral rights on proper- ties in Brazil are expected to remain
comparable to 1997 as the Registrant continues its exploration
activities in those countries.
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
had been legal costs which totaled $343,398 in 1995. Operations during
1995, 1996 and 1997 were funded from the following sources:
a. In 1995 stock warrants were exercised which resulted in
cash proceeds of $236,600. In 1996 stock warrants were
exercised resulting in cash proceeds to the Registrant of
$187,500. In 1996 stock of the Registrant and its
subsidiary Big Pony Gold, Inc. was sold resulting $4,100,000
in proceeds to the Registrant.
b. In 1996 the Registrant 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, 1995, 1996 and 1997 was
$2,545,699, $6,003,276, and $4,329,353 respectively. The
Registrant's working capital at October 31, 1997 is
sufficient to fund its projected exploration activities in
the countries of Uruguay, Brazil and Paraguay 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 1998 either through equity offerings or debt financing. The
Registrant has no material capital commitments or agreements which would
require significant outlays of capital during 1998. The Registrant's
anticipated capital requirements for the next three fiscal years are
as follows:
1998 1999 2000
---------- ---------- ----------
Leasehold exploration and
carrying costs $1,300,000 $1,000,000 $1,000,000
Page 47
<PAGE>
<PAGE>
Legal expenses 25,000 25,000 25,000
Other general and
administrative expenses 300,000 300,000 300,000
Expenses should remain close to the 1997 level of expenditure.
At this rate, the Registrant has cash and cash equivalents to meet its
expenses for the next three fiscal years. The Registrant has no 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 Registrant believes it has
the ability to generate additional funds when needed.
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 its 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 its budget. However, the inflation rate has remained relatively
low, with only a minor impact on the Registrant during 1995, 1996 and
1997. 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, 1997, the Registrant had obtained a standby letter
Page 48
<PAGE>
<PAGE>
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 and a similar letter of credit in the amount of
$100,000 pledged as security for operations in Paraguay. Furthermore,
the Registrant is not aware of any potential reclamation costs in any of
the areas in which it is conducting exploration. Except for the above,
the Registrant has no actual or potential involvement in environmental
remediation activities.
Page 49
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<CASH> $3,484,439
<SECURITIES> 252,998
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,444,546
<PP&E> 378,987
<DEPRECIATION> 172,522
<TOTAL-ASSETS> 4,907,413
<CURRENT-LIABILITIES> 115,624
<BONDS> 0
0
0
<COMMON> 18,698
<OTHER-SE> 4,773,100
<TOTAL-LIABILITY-AND-EQUITY> 4,907,413
<SALES> 0
<TOTAL-REVENUES> 226,713
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,924,273
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,697,560
<INCOME-TAX> 210
<INCOME-CONTINUING> 1,697,770
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,595,868
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
