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, 1999
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
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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
Common Stock, $.001 par value Pacific Exchange, Inc.
Common Stock, $.001 par value NASDAQ
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 1,168,594 shares of Registrant's common stock, $.001 par
value per share.
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GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, 1999 and October 31, 1998
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
GOLD STANDARD, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR INCLUSION IN QUARTERLY REPORT
ON FORM 10-Q
January 31, 1999
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GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, 1999 and October 31, 1998
January 31, 1999 October 31, 1998
---------------- ----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,670,612 $ 1,940,615
Certificates of deposit 1,274,045 1,252,723
Accounts receivable 5,844 4,312
Accrued interest 9,227 9,789
Prepaid expenses 2,803 4,094
-------------- --------------
TOTAL CURRENT ASSETS 2,962,531 3,211,533
PROPERTY AND EQUIPMENT
Equipment and leasehold
improvements 120,023 131,956
-------------- ---------------
120,023 131,956
OTHER ASSETS
Investment in affiliate 351,943 351,943
Deposits 1,087 1,087
-------------- --------------
353,030 353,030
-------------- --------------
$ 3,435,584 $ 3,696,519
============== ==============
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LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 51,281 $ 67,309
Accrued liabilities 469 18,518
Income tax payable 100 100
-------------- --------------
TOTAL CURRENT LIABILITIES 51,850 85,927
STOCKHOLDERS' EQUITY
Common stock 1,169 1,169
Additional paid-in capital 13,197,456 13,197,456
Accumulated deficit (9,814,891) (9,588,033)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 3,383,734 3,610,592
-------------- --------------
$ 3,435,584 $ 3,696,519
============== ==============
See accompanying notes to consolidated financial statements.
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GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three month periods ended January 31, 1999 and 1998
Three months ended
January 31, 1999
--------------------------
1999 1998
----------- -----------
(Unaudited) (Unaudited)
INCOME FROM OPERATIONS $ - $ -
EXPENSES
Depreciation 13,575 14,130
Leasehold exploration
and carrying costs 168,968 391,368
General and administrative:
Legal 3,461 2,589
Other 80,437 81,267
------------ -----------
NET INCOME/(LOSS) FROM OPERATIONS (266,441) (489,354)
OTHER INCOME (EXPENSES)
Interest income 39,363 49,799
Miscellaneous income 218 -
------------ -----------
NET INCOME/(LOSS) ($226,860) ($439,555)
============ ===========
Net income/(loss) per common share ($0.19) ($0.38)
============ ===========
See accompanying notes to consolidated financial statements.
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GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months periods ended January 31, 1999 and 1998
Three months ended
January 31, 1999
---------------------------
1999 1998
------------ ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (226,860) $ (439,555)
Add (deduct) adjustments
to cash basis:
Depreciation 13,575 14,130
Unrealized loss on securities - (12,965)
Increase (decrease) in:
Accounts payable (16,027) (11,962)
Accrued liabilities (18,048) (230)
Decrease (increase) in:
Accrued interest 562 8,718
Prepaid expenses 1,291 2,220
Accounts receivable (1,532) -
Securities available for sale - 12,965
------------ -----------
NET CASH PROVIDED BY/(USED IN)
OPERATING ACTIVITIES (247,039) (426,679)
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Property and equipment purchased (1,642) -
Increase in certificates of deposit (21,322) (13,309)
------------- ------------
NET CASH USED IN INVESTMENT ACTIVITIES (22,964) (13,309)
NET INCREASE (DECREASE) IN CASH (270,003) (439,988)
CASH BALANCE AT BEGINNING OF PERIOD 1,940,615 3,231,441
------------ -----------
CASH BALANCE AT END OF PERIOD $1,670,612 $2,791,453
============ ===========
See accompanying notes to consolidated financial statements.
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GOLD STANDARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999 and October 31, 1998
(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, 1998, 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, 1999, have been made. All such
adjustments were of a normal, recurring nature.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements at January
31, 1999, include the accounts of Gold Standard, Inc., and
its subsidiaries, Gold Standard South, Gold Standard Minas,
S.A. and Tormin, S.A. A former subsidiary, Pan American
Motor Sports, Inc. (PAMS) (formerly Big Pony Gold, Inc.) is
no longer included in the consolidated financial statements
but is being reported as an equity investment. 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 purpose of carrying on a property acquisition and gold
exploration program in the country of Uruguay. Gold Standard
Minas was organized for the purpose of carrying on a gold
exploration program in the country of Brazil. Tormin S.A.
holds certain mineral exploration concessions in Uruguay and
is conducting exploration work on these properties.
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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
January 31, 1999, there were no geological areas under
production.
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.
NOTE 2 - 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.
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NOTE 3 - INVESTMENT IN AFFILIATE
During 1998 the Company changed its method of accounting for
and reporting its investment in PAMS from the consolidated to
the equity method due to the decline in their ownership
interest from 64.4% to 20%. The Company adjusted the
carrying value of the investment balance for the exchange of
stock for assets, conversion of debt to equity, recognition
of the cumulative losses to be reported under the equity
method of accounting, and the recognition of losses for the
current year since the effective date of the change in
entity.
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). No development costs have been capitalized on these
properties through January 31, 1999.
NOTE 5 - STOCK WARRANTS
In connection with issuance of its common stock, the Company
has issued warrants to others for the purchase additional
shares at specified prices in the future. Unexercised
warrants aggregate 368,750 shares at January 31, 1999. They
carry a weighted average price of $24 per share and have a
weighted average remaining life of 1.2 years.
NOTE 6 - WARRANTS ISSUED AS COMPENSATION
The Company has issued compensatory stock warrants to
officers, employees and consultants during the coarse of
business. No compensation expense has been recorded for
these warrants.
Reported and pro forma net loss and loss per share for the
period ended January 31, 1999 are as follows:
Net loss
As reported $ (226,860)
Pro forma $ (190,425)
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Loss per share
As reported (.19)
Pro forma (.16)
The pro forma effect on net loss 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 were estimated using the Black-Scholes
option pricing model, based on the following assumptions: (1)
no expected dividend yields; (ii) an expected volatility rate
o 104%; and (iii) expected weighted average lives of 1.9
years. The weighted-average risk-free interest rate applied
was 6.20%.
Stock warrant activity is summarized as follows:
Avg.
Exercise
Shares Price
-------- ----------
Warrants outstanding
beginning of
period 50,000 $20.50
Granted - -
Exercised - -
Canceled or
expired - -
---------
Warrants outstanding
and exercisable,
end of period 50,000 $20.50
========
The following table summarizes information about stock
warrants outstanding and exercisable at January 31, 1999:
Exercise Price Shares Life
-------------- -------- ------
$20.00 43,750 .6 yr
24.00 6,250 4.3 yrs
--------
50,000
========
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NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has funded the majority of the operations of its
subsidiaries Gold Standard South, Gold Standard Minas, and
Tormin S.A. with unsecured non-interest bearing long term
cash advances. As of January 31, 1999, the Company had
receivables from these companies of $513,936, $1,537,553 and
$219,665, respectively. All intercompany transactions have
been eliminated in consolidation.
NOTE 8 - COMMITMENTS
To guarantee future reclamation commitments in Paraguay, the
Company has obtained a standby letter of credit in the amount
of $100,000. This letter of credit is secured with a $100,000
certificate of deposit.
NOTE 9 - INCOME TAXES
The Company has significant net operating loss and net
capital loss carry forwards 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 carry
forwards and investment tax credits at January 31, 1999 are
detailed in the following summary:
Federal State Net
Net Operating Net Operating Capital
Expiration Date Loss Loss Loss
--------------- ------------- ------------- -------
October 31, 1999 $ -- $ 614,409 $ --
October 31, 2000 -- -- 150,056
October 31, 2002 -- -- 74,928
October 31, 2003 1,441,272 -- 153,468
October 31, 2004 675,277 -- --
October 31, 2005 1,106,261 -- --
October 31, 2006 545,495 -- --
October 31, 2007 478,137 -- --
October 31, 2009 613,656 -- --
October 31, 2010 124,338 124,138 --
October 31, 2012 63,410 63,210 --
October 31, 2013 246,065 245,865 --
----------- ------------ -----------
$5,293,911 $ 1,047,622 $ 378,452
=========== ============= ===========
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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 oil and gas and gold mineralized properties. Its
activities are concentrated, for the most part, in Uruguay, Brazil and
Paraguay.
RESULTS OF OPERATIONS
No revenue was generated through operations by the Registrant
during the three month periods ended January 31, 1999 and 1998 and it
is not expected that any operating revenue will be generated during
1999.
The Registrant's operating activities have been solely
exploration related and have been concentrated on their Uruguay,
Brazil, and Paraguay properties. Exploration related expenses for the
three month period ended January 31, 1999 were $168,968 ($391,368 for
the three month period ended January 31, 1998). Exploration costs for
the Registrant's Paraguay and Brazil properties have remained
constant, however expenses for the Uruguay property have decreased
significantly, contributing to the overall decrease in exploration
expenses during the current year. Exploration expenses are expected
to remain at approximately the same level for the remaining nine
months of the current year.
The Registrant's general and administrative expenses, excluding
legal expenses totaled $80,437 for the three month period ended
January 31, 1999 ($81,267 for the three month period ended January 31,
1998). The two most significant general and administrative expense
categories during the three month period ended January 31, 1999 were
(a) professional and consulting fees $13,055 ($20,800 in 1998) and (b)
wages and salaries $39,000 ($38,000 in 1998). The balance of general
and administrative expenses includes office supplies and expenses,
office rent, travel, etc.
The Registrant's management has been conscientious in striving to
control general and administrative expenses. These expenses are
expected to remain at approximately the same level for the remaining
nine months of the current year.
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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
immediate plans to seek significant additional funding from any of
these sources during 1999.
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 1999 should remain close
to the level during in 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. Based on past experience, the Registrant believes it
has the ability to generate additional funds as 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 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.
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 $100,000 which is pledged as security against future
potential reclamation costs of mineral properties under exploration 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.
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YEAR 2000
Gold Standard has addressed its requirements regarding Year 2000
issues, which generally refers to the inability of hardware, software,
and control systems to correctly identify two digit references to
specific years, beginning with the year 2000. The Company has minimal
reliance on computer systems that produce financial information.
Although Gold Standard believes that its review will adequately
address Year 2000 issues and prevent significant business disruptions,
there can be no assurances that compliance-related failures will not
occur. Such compliance-related failures, including those of material
third-party suppliers and financial institutions in South America,
could result in temporary delays in Gold Standard's ability to
maintain its operations. Contingency plans are being developed to
mitigate any such temporary delays. However, if such delays occur,
they are not reasonably likely to have a material adverse effect on
Gold Standard's financial condition or results of operations.
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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, 1999.
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
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 15 March 1999 By:/s/ Scott L. Smith
Exhibit Index
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule.
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JAN-31-1999
<CASH> $2,944,657
<SECURITIES> 0
<RECEIVABLES> $5,844
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> $2,962,531
<PP&E> $120,023
<DEPRECIATION> 0
<TOTAL-ASSETS> $3,435,584
<CURRENT-LIABILITIES> $51,850
<BONDS> 0
0
0
<COMMON> $1,169
<OTHER-SE> $3,382,565
<TOTAL-LIABILITY-AND-EQUITY> $3,435,584
<SALES> 0
<TOTAL-REVENUES> $39,581
<CGS> 0
<TOTAL-COSTS> $266,441
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> $(226,860)
<INCOME-TAX> 0
<INCOME-CONTINUING> $(226,860)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $(226,860)
<EPS-PRIMARY> $(0.19)
<EPS-DILUTED> $(0.19)
</TABLE>
