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, 1998 Commission File No. 0-9496
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GOLD STANDARD, INC.
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(Exact name of registrant as specified in its charter)
Utah 87-0302579
------------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 712 Kearns Building, Salt Lake City, Utah 84101
- ----------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (801) 328-4452
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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
--- ---
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, 1998, the aggregate market value of Registrant's
Common Stock, par value $.001 per share, held by non-affiliates of
Registrant was approximately $1,854,609.75 (for purposes of the
foregoing figure, affiliates were deemed to include holders of 5%
or more of Registrant's outstanding stock, as well as officers
and directors).
.
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 (adjusted to reflect reverse stock splits as of the
date of this filing).
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PART I
ITEM 1: BUSINESS.
---------
Gold Standard, Inc. (the "Registrant") was incorporated pursuant
to the laws of the State of Utah on November 28, 1972, for the purpose
of engaging in the exploration for, and the production and sale of,
gold. Registrant is primarily engaged in acquiring, leasing and
selling hard mineral properties and, if warranted, developing those
properties which have the most economic potential. Registrant also
seeks joint ventures or other financial arrangements with other
companies to develop and/or operate the properties it controls.
Presently, Registrant is an exploration stage company and there is no
assurance that a commercially viable ore body (reserves) exists, in
any of Registrant's properties until further exploration work and
drilling is done and a final feasibility report based upon such test
results is concluded.
In 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 twenty (20) 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 and 1997, Registrant sold their shares of AMZ common
stock.
Registrant held 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"),
funded 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. This venture
has been terminated.
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Registrant has not engaged in any material business transactions
during the fiscal year ended October 31, 1998. Further, except as
otherwise described herein, no material expenditures have occurred
during the Registrant's last three (3) fiscal years for research and
development activities, nor has compliance with federal, state and
local environmental laws and regulations resulted in a material effect
on the capital expenditures, earnings or competitive position of
Registrant or its subsidiaries. Most of the time of Registrant's
president is spent on Registrant's activities. In addition to the
president, Registrant has twenty-five (25) full-time employees.
ITEM 2: PROPERTIES.
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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. Gener-
alized 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 1998, Registrant engaged in mineral explora-
tion in Brazil, Uruguay and Paraguay. Exploration activities will
continue in 1999.
The Country of Uruguay
----------------------
During 1987, Registrant began application for prospecting rights
in the country of Uruguay. Acquisition of properties continued for
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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.
The joint venture agreement stated that Rea Gold, the operator
of the joint venture, was 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 inter-
est 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. REA Gold and Registrant have terminated
their joint venture.
The properties in the San Juan Hills area under joint venture with Rea
Gold are held by Registrant's Uruguay corporation, Gondol, S.A. The
property position of Registrant's subsidiary, Tormin, S.A., is
approximately 378,000 acres of prospecting permits located north of
Montevideo. Registrant 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, 1998, Registrant conducted
geologic and geophysical evaluations 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 pros-
pection 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).
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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,
1998.
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 trans-
actions of any of the above-mentioned or other firms. Other broker/
dealers also make a market in Registrant's stock.
Market Prices of Common Stock
-----------------------------
The following table sets forth, for the periods indicated, the
prices of Registrant's common stock from the Pacific Stock Exchange.
Fiscal Quarterly Sales Prices
Year Period High Low
- ------ ------------- ----- -----
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
1998*: First Quarter $13.83 $8.66
Second Quarter 8.29 4.50
Third Quarter 6.42 5.09
Fourth Quarter 4.05 1.67
*Restated to reflect two 4 for 1 reverse stock splits.
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(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, 1998, was as follows:
Approximate Number
of Record Holders
Title of Class as of October 31, 1998
-------------- ----------------------
Common Stock Non-assessable
$.001 par value per share 2,090
(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 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, 1998, is presented below:
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<TABLE>
<S> <C> <C> <C> <C> <C>
Fiscal Years Ended October 31,
------------------------------------------------------------------------
STATEMENT OF 1998 1997 1996 1995 1994
OPERATIONS DATA ------------ ------------ ------------ ------------ ------------
Operating revenue $ - $ - $ 649,926 $ 485,624 $ 10,874
Operating expense 1,433,648 1,174,684 906,519 928,900 701,756
------------ ------------ ------------ ------------ ------------
Operating loss (1,433,648) (1,174,684) (256,593) (443,276) (690,882)
Other income/(expense) (254,716) (96,535) (121,926) (195,065) 178,714
------------ ------------ ------------ ------------ ------------
Net income/(loss)
before income taxes (1,688,364) (1,271,219) (378,519) (638,341 (512,168)
Income tax expense (100) (100) (300) (200) (12,966)
------------ ------------ ------------ ------------ ------------
Net income/(loss) (1,688,464) (1,271,319) (378,819) (638,541) (525,134)
------------ ------------ ------------ ------------ ------------
Basic and diluted
loss per share $ (1.44) $ (1.09) $ (.37) $ (.69) $ (.59)
------------ ------------ ------------ ------------ ------------
Weighted average
shares outstanding 1,168,594 1,168,594 1,031,015 925,552 901,085
BALANCE SHEET DATA
Current assets $ 3,211,533 $ 4,408,033 $ 5,692,504 $ 2,604,017 $ 2,977,476
Current liabilities 85,927 95,067 128,274 120,162 165,257
Total assets 3,696,519 5,400,272 6,677,761 3,281,856 3,284,281
Stockholders' equity 3,610,592 5,305,205 6,549,487 3,161,694 3,119,024
</TABLE>
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In 1997, the Company had a temporary unrealized holding gain of
$27,037 on securities held which are classified as available-for-sale.
This unrealized gain was recorded in equity.
In 1996, the Company had a temporary unrealized holding loss of
$20,888 on securities classified as available-for-sale. This
unrealized loss was recorded in equity.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
- -------------------------------------------------------
INTRODUCTION
Gold Standard, Inc. and its subsidiaries (the Registrant) are prin-
cipally engaged in the acquisition, exploration, and if warranted,
development of oil and gas and gold mineralized properties. Its
activities during 1998 were concentrated, for the most part, in
Uruguay, Brazil and Paraguay.
RESULTS OF OPERATIONS
No revenue was generated by company operations for the year ended
October 31, 1998 and 1997. During the period ended October 31, 1996
the Registrant received royalty revenue totaling $339,726 from its
20% royalty interest in a venture with Rea Gold. 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, it was only of modest size and is
now fully depleted. The venture with Rea Gold has been terminated.
The Registrant has focused its exploration activities during the
three years in the reporting period on its mineral holdings in South
America. Exploration costs incurred at these locations are summarized
as follows:
Year Ended October 31,
1998 1997 1996
---------- --------- ---------
Utah Properties $ - $ 4,954 $ 133,037
South American Properties 1,023,119 803,316 426,157
---------- --------- ---------
$1,023,119 $ 808,270 $ 559,194
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
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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, 1998 saw an expenditure of $775,149
by Gold Standard Minas, S.A., a Brazilian corporation, and subsidiary
of the Registrant. This subsidiary maintains offices in Curitiba,
Parana and employs some 20 people comprising 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.
Exploration costs in Uruguay totaled $268,939 during 1998.
During the period ended October 31, 1998, the Registrant conducted
preliminary geologic and geophysical evaluations in the country of
Paraguay. The Registrant's geologists believe that a portion of the
country's regional geology has been misinterpreted. In the south-
eastern 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.
Exploration costs of $33,000 were incurred in Paraguay.
The Registrant held a 20% royalty interest in a separate joint
venture property in Southern Uruguay known as the San Juan Hills prop-
erty. Its joint venture partner, Rea Gold 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 $339,726 in 1996. Production
through early 1996 depleted all known reserves for this property.
The Registrant has no other properties or activities
which are expected to generate operating revenue during 1999.
The Registrant has funded its operations with settlement proceeds from
a suit prior to 1996 and through equity financing during the most re-
cent three years. This equity 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 operat-
ing revenue within the foreseeable future, and as such, the current
trend in losses from operations is expected to continue. The Regis-
trant'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 three fiscal years
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is exploration (shown above). 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 69%, 74%, and 70% of the total general and administrative
expenses during the years ended October 31, 1996 and 1997, and 1998,
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, 1998, legal fees included in general
and administrative expenses totaled $34,306 in 1996 and $10,149
in 1997, and $28,515 in 1998. Audit, accounting and outside
consultants fees for the periods totaled $70,392 in 1996 and
$ 57,555 in 1997 and $74,183 in 1998.
b. Wages, exclusive of payroll taxes, were $131,400 in 1996,
and $137,096 in 1997 and $146,000 in 1998.
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 conscien-
tious in striving to reduce and control general and administrative
expenses. The stability of general and administrative 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 1998. Exploration expense in Uruguay is expected to decrease
significantly in 1999. Exploration expense and acquisition costs of
mineral rights on properties in Brazil are expected to remain
comparable to 1998 as the Registrant continues its exploration
activities in that country.
LIQUIDITY AND CAPITAL RESOURCES
In the absence of any income from operations with the exception of
$339,726 in royalty income in 1996, the Registrant relied extensively
on equity financing to provide needed working capital. Operations
during 1996, 1997 and 1998 were funded from the following sources:
a. In 1996 stock warrants were exercised resulting in cash
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proceeds to the Registrant of $187,500. In 1996 stock of the
Registrant was sold resulting in proceeds to the Registrant of
$3,600,000.
b. In 1996 the Registrant exchanged rights to mineral
properties located in Brazil for stock in a company. Subsequent
sales of this stock generated approximately $300,000 in cash to
fund operations.
c. Working capital at October 31, 1996, 1997 and 1998
was $5,564,230, $4,312,966 and $3,125,606, respectively. The
Registrant's working capital at October 31, 1998 is sufficient
to fund its projected exploration activities in the countries
of 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 1999 either through equity offerings or debt financing. The
Registrant has no material capital commitments or agreements which
would require significant outlays of capital during 1999. The
Registrant's anticipated capital requirements for the next three
fiscal years are as follows:
1999 2000 2001
Leasehold exploration --------- --------- ---------
and carrying costs $ 750,000 $ 750,000 $ 675,000
Legal expenses 25,000 25,000 -
Other general and
administrative expenses 300,000 300,000 300,000
Expenses should remain close to the 1998 level. 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, oil and gas, and the level of future interest
rates could directly affect the Registrant's share of any future
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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 or oil
and gas deposits. With exploration currently proceeding on several
properties whose commercial production potential is not presently
determinable, and considering the difficulty of projecting future
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 Regis-
trant'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
1996, 1997 and 1998. 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.
As of October 31, 1998, the Registrant has obtained a standby 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.
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
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Gold Standard's financial condition or results of operations.
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, 1998.
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, 1998, 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 72 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 Thyssen Mining Exploration,
in Vancouver, British Columbia,
Canada.
Bret C. Decker
- --------------
For the past five years, the 44 Vice President 1996
principal occupation of Mr. Decker
Decker has been as a consultant to
Registrant and its subsidiaries.
Mr. Decker is an officer and director
of Panamerican Motor Sports.
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Charles W. Shannon
- ------------------
For the past five years, the 82 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 68 Director 1996
- -----------------
For the past five years, the
principal occupation of Mr. Sneddon
had been Executive Vice President
of MK Gold Corporation and is
presently a mining engineering
consultant. Mr. Sneddon is a
director of Francisco Gold Corp.,
in Vancouver, British Columbia, Canada.
Each of the foregoing executive officers was elected by the Board
of Directors to hold office until the next annual election of officers
or until his successor is elected and qualified or until his earlier
resignation or removal. As provided by the By-Laws of Registrant, the
Board of Directors elects the officers and the Board has the power to
replace officers and to elect successors at any time.
There are no family relationships among the directors and execu-
tive 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.
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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
Registrant or written representations from certain persons, Registrant
believes that during the 1998 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, 1998. Registrant has no directors or
executive officers whose total cash compensation exceeded $80,000. No
director or executive officer of Registrant received any deferred com-
pensation 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 Regis-
trant during the 1998 fiscal year or involved in any financial trans-
action 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 $80,000 paid to Scott L. Smith as salary
for serving as president of Registrant during the 1998 fiscal year.
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ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
----------------------------------------
Registrant has authorized only common shares, par value one mill
($.001) per share, of which 1,168,594 shares (adjusted to reflect
reverse stock splits through the date of this filing) were issued and
outstanding as of the close of business on October 31, 1998. Warrants
to purchase an additional 368,750 common shares were outstanding as
of the close of business on October 31, 1998. 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 current and former Directors
Smith, Clarke and Shannon and by Marjorie A. Smith for an additional
period of three years from the then current expiration date.
(a) The following table sets forth, as of October 31, 1998, 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 war-
rants 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 252,438 (1)(6) 21.60% (1)
Corporation Beneficial
347 Bay Street
Second Floor
Toronto, Ontario (Canada)
Scott L. Smith Record and 85,944 (2)(6) 7.35% (2)
4931 Marilyn Drive Beneficial
Salt Lake City, Utah
Continental Casualty Record and 165,625 (3)(6) 14.17%
Company Beneficial
c/o Sun Valley Gold
Company
620 Sun Valley Road
Sun Valley, Idaho 83353
Page 17
<PAGE>
<PAGE>
Odyssey Partners, L.P. Record and 64,375 (4)(6) 5.51%
c/o Sun Valley Gold Beneficial
Company
620 Sun Valley Road
Sun Valley, Idaho 83353
Sun Valley Gold Record and 106,875 (5)(6) 9.15%
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
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
Page 18
<PAGE>
<PAGE>
to 500,000 shares of the common stock of Registrant at $1.75 per share
to 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 exer-
cised 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
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.
(6) As a result of two reverse stock splits from November 1, 1997
through the date of this filing, the number of warrants referenced
in Notes (1) through (5) above should be divided by sixteen (16) to
reflect current figures, and the exercise price in each instance
should be correspondingly multiplied by sixteen (16). The ownership
numbers in the table under "(a)" above reflect current figures after
the two reverse stock splits.
(b) The following table sets forth, as of October 31, 1998, 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
Page 19
<PAGE>
<PAGE>
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) 85,944 (1) 7.35% (1)
Charles W. Shannon
(Director) 5,625 (2)(3) 0.5%
Bret C. Decker 0 0%
(Director)
Gerald L. Sneddon 0 0%
(Director)
All Directors and
Officers as a Group
(Four Persons)(2) 91,569 7.84%
- ----------------------------
(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 share
at any time on or before January 18, 2001.
(3) As a result of two reverse stock splits from November 1, 1997
through the date of this filing, the number of warrants referenced in
Note (1) above should be divided by sixteen (16) to reflect current
figures, and the exercise price should be multiplied by sixteen (16).
The ownership numbers in the table under "(b)" above reflect current
figures after the two reverse stock splits.
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:
Page 20
<PAGE>
<PAGE>
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 23-45.
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 45-46.
Exhibit 27. Financial Data Schedule, Page 47.
(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.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February 12, 1999 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.
Page 21
<PAGE>
<PAGE>
Date: February 12, 1999 By /s/ Scott L. Smith
------------------------------
Scott L. Smith, Director
Principal Executive Officer,
Principal Financial Officer,
and Chief Accounting Officer
Date: February 12, 1999 By /s/ Bret C. Decker
------------------------------
Bret C. Decker, Director
Date: February 12, 1999 By /s/ Charles W. Shannon
------------------------------
Charles W. Shannon, Director
Date: , 1999 By
----------- ------------------------------
Gerald L. Sneddon, Director
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 45-6 Form 10-K
Income (Loss) per
(current) Common Share
27 27 Financial Data Schedule 47 Form 10-K
Page 22
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1998 and 1997
Page 23
<PAGE>
<PAGE>
GOLD STANDARD, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 25
FINANCIAL STATEMENTS 26-45
CONSOLIDATED BALANCE SHEETS 26-27
CONSOLIDATED STATEMENTS OF OPERATIONS 28-29
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 30
CONSOLIDATED STATEMENTS OF CASH FLOWS 31-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 34-45
Page 24
<PAGE>
<PAGE>
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, 1998 and 1997,
and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years ended October 31, 1998, 1997 and
1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 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, 1998 and 1997, and the consolidated results of their
operations and their consolidated cash flows for the years ended
October 31, 1998, 1997, and 1996 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been restated to
reflect a change in reporting entity as discussed in Note C to the
consolidated financial statements.
FOOTE, PASSEY, GRIFFIN AND COMPANY
Salt Lake City, Utah
January 26, 1999
Page 25
<PAGE>
<PAGE>
FINANCIAL STATEMENTS
Gold Standard, Inc., and Subsidiaries
CONSOLIDATED BALANCE SHEETS
October 31,
ASSETS
1998 1997
----------- -----------
(Restated)
CURRENT ASSETS
Cash and cash equivalents $ 1,940,615 $ 3,194,928
Certificates of deposit
($100,000 restricted in 1998) 1,252,723 1,197,222
Accounts receivable 4,312 -
Accrued interest 9,789 9,039
Prepaid expenses 4,094 6,844
------------ ------------
Total current assets 3,211,533 4,408,033
------------ ------------
PROPERTY AND EQUIPMENT, at cost
Furniture and equipment 119,850 120,718
Transportation equipment 195,390 207,866
Leasehold improvements 3,200 3,200
------------ ------------
318,440 331,784
Less accumulated depreciation
and amortization (186,484) (158,361)
------------ ------------
131,956 173,423
OTHER ASSETS ------------ ------------
Investment in affiliate 351,943 -
Note receivable - affiliate - 565,128
Securities available for sale - 252,998
Deposits 1,087 690
------------ ------------
353,030 818,816
------------ ------------
$ 3,696,519 $ 5,400,272
============ ============
Page 26
<PAGE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 67,309 $ 65,433
Accrued liabilities 18,518 29,434
Income taxes payable 100 200
------------ ------------
Total current liabilities 85,927 95,067
------------ ------------
STOCKHOLDERS' EQUITY
Common stock - authorized 100,000,000
shares of .001 par value; issued,
and outstanding 1,168,594 shares
in 1998 and 1997 1,169 1,169
Additional paid-in capital 13,197,456 13,197,456
Other comprehensive income - 6,149
Accumulated deficit (9,588,033) (7,899,569)
------------ ------------
3,610,592 5,305,205
------------ ------------
$ 3,696,519 $ 5,400,272
============ ============
The accompanying notes are an integral part of these statements.
Page 27
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended October 31,
1998 1997 1996
----------- ----------- -----------
(Restated) (Restated)
REVENUE
Royalties $ - $ - $ 339,726
Gain on sale of
property rights
and equipment - - 310,200
------------ ------------ ------------
- - 649,926
EXPENSES ------------ ------------ ------------
General and administrative
Legal 28,515 10,149 34,306
Other 327,329 310,587 276,953
Leasehold exploration
and carrying costs 1,023,119 808,270 559,194
Depreciation and
amortization 54,685 45,678 36,066
------------ ------------ ------------
1,433,648 1,174,684 906,519
------------ ------------ ------------
Net loss from operations (1,433,648) (1,174,684) (256,593)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income 151,225 223,569 171,323
Loss from equity
investment (198,139) (291,352) (155,808)
Loss on securities
available-for-sale (101,409) (18,783) (137,441)
Loss on exchange of
stock for rights (90,569) - -
Loss on disposal of
equipment (15,824) (9,969) -
------------ ------------ ------------
(254,716) (96,535) (121,926)
------------ ------------ ------------
Net loss before income taxes (1,688,364) (1,271,219) (378,519)
INCOME TAX EXPENSE 100 100 300
------------ ------------ ------------
NET LOSS (1,688,464) (1,271,319) (378,819)
Page 28
<PAGE>
<PAGE>
OTHER COMPREHENSIVE INCOME
(LOSS) Unrealized
holding gain (loss) - 6,149 (20,888)
------------ ------------ ------------
COMPREHENSIVE LOSS $(1,688,464) $(1,265,170) $ (399,707)
============ ============ ============
Basic and diluted
earnings per share
Net loss per share $(1.44) $(1.09) $(.37)
======= ======= ======
Weighted average number
of shares outstanding 1,168,594 1,168,594 1,031,015
============ ============ ============
The accompanying notes are an integral part of these statements.
Page 29
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended October 31,
1998 1997 1996
----------- ----------- -----------
(Restated) (Restated)
Common stock
Balance beginning of period $ 1,169 $ 1,169 $ 688
Stock warrants exercised - - 31
Proceeds from sale of stock - - 450
----------- ----------- -----------
Balance end of period 1,169 1,169 1,169
----------- ----------- -----------
Additional paid-in capital
Balance beginning of period 13,197,456 13,197,456 9,410,437
Stock warrants exercised - - 187,469
Proceeds from sale of stock - - 3,599,550
----------- ----------- -----------
Balance end of period 13,197,456 13,197,456 13,197,456
----------- ----------- -----------
Other comprehensive income (loss)
Balance beginning of period - (20,888) -
Net unrealized holding gain
(loss) on securities
available-for-sale - 27,037 (20,888)
----------- ----------- -----------
Balance end of period - 6,149 (20,888)
Accumulated deficit
Balance beginning of period (7,899,569) (6,628,250) (6,249,431)
Net loss (1,688,464) (1,271,319) (378,819)
----------- ----------- -----------
Balance end of period (9,588,033) (7,899,569) (6,628,250)
----------- ----------- -----------
$3,610,592 $5,305,205 $6,549,487
=========== =========== ===========
The accompanying notes are an integral part of these statements.
Page 31
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended October 31,
1998 1997 1996
------------ ------------ ------------
Increase (decrease) in cash (Restated) (Restated)
and cash equivalents
Cash flows from operating activities:
Net loss $(1,688,464) $(1,271,319) $ (378,819)
Adjustments to reconcile
net loss to net cash and
cash equivalents used in
operating activities:
Depreciation and amortization 54,685 45,678 36,066
Gain on sale of property
rights - - (300,000)
Loss from equity investments 198,139 291,352 155,808
Loss on disposal of equipment 15,824 9,969 -
Loss from available-for-
sale securities 101,409 18,783 137,441
Loss on exchange of
stock for rights 90,569 - -
Write-off of deferred
liability (61,000) -
Decrease (increase) in assets:
Accounts Receivable (4,312) - 133,764
Accrued interest (750) (3,343) (5,597)
Prepaid expenses 2,750 (6,844) 4,851
Deposits (397) - -
Increase (decrease) in liabilities:
Trade accounts payable (7,524) (538) 7,641
Accrued liabilities (11,016) 28,331 1,103
------------ ------------ ------------
Net cash used in
operating activities (1,249,087) (948,931) (207,742)
------------ ------------ ------------
Page 31
<PAGE>
<PAGE>
Cash flows from investing activities:
Proceeds from exchange of stock 23,551 - -
Proceeds from disposal
of equipment 20,525 17,500 -
Investment in affiliate (123,964) (271,082) (154,000)
Proceeds from available-
for-sale securities 145,440 - -
Purchase of available-
for-sale securities - - (103,073)
Purchase of certificate
of deposit (55,501) (1,197,222) -
Property and equipment purchased (15,277) (91,485) (91,091)
------------ ------------ ------------
Net cash provided by (used
in) investing activities (5,226) (1,542,289) (348,164)
------------ ------------ ------------
Net cash provided by
financing activities - - 3,777,018
------------ ------------ ------------
Net increase (decrease) in
cash and cash equivalents (1,254,313) (2,491,220) 3,221,112
Cash and cash equivalents
at beginning of year 3,194,928 5,686,148 2,465,036
------------ ------------ ------------
Cash and cash equivalents
at end of year $ 1,940,615 $ 3,194,928 $ 5,686,148
============ ============ ============
Supplemental disclosures of cash flows information
- --------------------------------------------------
Cash paid during the year for:
Interest $ $ - $ -
Income taxes $ 100 $ 100 $ 100
Non-cash transactions:
In 1998, the Company exchanged 750,000 shares of stock in a former
subsidiary for 100% of the outstanding stock of a corporation which
held mineral exploration rights and certain assets located in Uruguay.
The following assets and liabilities were received:
Cash $23,551
Furniture and Fixtures 34,290
Accounts payable 9,400
In 1998, the Company converted $689,092 in debt of a former subsidiary
Page 32
<PAGE>
<PAGE>
to equity giving the Company a 20% equity investment in the former
subsidiary.
In 1998, the Company sold all of its available-for-sale securities
resulting in the recognition of an unrealized holding loss of $6,149
In 1997, the Company had a temporary unrealized holding gain of
$27,037 on securities held which are classified as available-for-sale.
This unrealized gain 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 classified as available-for-sale. This
unrealized loss was recorded in equity.
The accompanying notes are an integral part of these statements.
Page 33
<PAGE>
<PAGE>
Gold Standard, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
A summary of the significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial state
ments follows.
1. Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of Gold Standard, Inc. (the Company), 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 (Notes C and
D). 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. Gold Standard Minas S.A. 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 those
properties.
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, 1998 there were no geologic areas
under production.
3. Loss Per Share
--------------
Loss per share of common stock is computed based on the
weighted-average number of common shares outstanding during the
period; 1,168,594 in 1998, 1,168,594 in 1997, and 1,031,015 in 1996.
The Company had common stock equivalents outstanding at October 31,
Page 34
<PAGE>
<PAGE>
1998, 1997, and 1996 in the form of stock warrants (Notes G and H).
These warrants were excluded in the calculations of loss per share
during the years ended October 31, 1998, 1997, and 1996 because their
inclusion in those calculations would have been anti-dilutive.
4. Stock Split
-----------
The Company declared 1:4 reverse stock splits on March 2, 1998 and
November 9, 1998, (subsequent to the balance sheet date). All share
and per share amounts in the accompanying financial statements have
been retroactively restated to reflect these stock splits.
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 approxi-
mate 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.
8. Recently Adopted Accounting Standards
--------------------------------------
In 1998 the Company adopted Statement of Financial Accounting
Standards No. 128 Earnings Per Share (SFAS No. 128), which replaced
the calculation of primary and fully diluted loss per share with basic
and diluted loss per share. There was no material effect on the
presentation of loss per share.
Page 35
<PAGE>
<PAGE>
In 1998 the Company adopted Statement of Financial Accounting
Standards No. 130 REPORTING COMPREHENSIVE INCOME (SFAS No. 130).
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by
owners and distributions to owners. Certain reclassifications have
been made to the 1997 and 1996 financial statements to conform with
the 1998 presentation.
In 1998 the Company adopted Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS No. 131). This standard establishes
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
requires the Company to report financial information on the basis that
is used internally for evaluating segment performance and deciding how
to allocate resources to segments. Previously reported information in
1997 and 1996 has been restated to conform to the new information
requirements (Note M).
9. Reclassifications
-----------------
Certain amounts in the 1997 and 1996 financial statements have
been reclassified to conform to current year presentation.
NOTE B - PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment are stated at cost. Maintenance and repairs
which neither materially adds to the value of the property nor
appreciably prolongs its life are charged to expense as incurred.
Gains or losses on dispositions of property, equipment, and leasehold
improvements are included in operations. Depreciation and amortization
of property and equipment are 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
NOTE C - CHANGE IN REPORTING ENTITY - RESTATEMENT
- -------------------------------------------------
In March of 1998 the Company entered into an agreement and a series of
transactions (Note D) with PAMS (a subsidiary of the Company at the
Page 36
<PAGE>
<PAGE>
time the agreement was formed) which resulted in the Company changing
its method of reporting PAMS from the consolidated to the equity
method.
The Company returned 750,000 shares of stock of PAMS to PAMS in
exchange for stock, mineral rights and equipment held in Uruguay by a
subsidiary of PAMS, Tormin S.A. The return of the stock and issuance
of additional shares of PAMS stock by related parties and outside
investors reduced the Company's percentage ownership from 64.4% to
20%.
The effect of this change in reporting for the periods through
October 31, 1997, was a charge to accumulated deficit of $849,416.
In accordance with Accounting Principles Board Opinion No. 20, prior
year financial statements have been restated to reflect this change
on a retroactive basis.
The effect of the change on fiscal 1998 results was to reduce the
operating loss by $115,659 and net loss by $63,500 or $.05 per share.
The effect of the change on fiscal year 1997 was to reduce net loss
by $324,549 or $.28 per share. The effect of the change on fiscal
year 1996 was to increase net loss by $1,069 with no effect on loss
per share.
NOTE D - INVESTMENT IN AFFILIATE
- --------------------------------
During 1998 the Company changed its method of accounting for and
reporting on its investment in PAMS from the consolidated to the
equity method due to the decline in their ownership interest from
64.4% to 20% as described in Note C. 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.
The Company's investment in PAMS was adjusted as follows to arrive at
its new carrying value as of October 31, 1998:
Carrying value prior to return of
stock February 28, 1998 $ 1,060,000
Conversion of debt from PAMS to investment
in PAMS at February 28, 1998 689,092
Recognition of the Company's share of
cumulative losses in operations of PAMS
due to change to equity method (1,060,000)
Page 37
<PAGE>
<PAGE>
Recognition of the Company's share of losses
for the period November 1, 1997 to
October 31, 1998 (198,139)
Transfer of 750,000 shares of PAMS stock for
stock and underlying assets of Tormin S.A.
at $0.18 per share effective February 28, 1998 (139,010)
-------------
Investment in PAMS at October 31, 1998 -
equity method $ 351,943
-------------
The following is summarized financial information for the Company's equity
investment as of October 31:
Page 38
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
1998 1997 1996
------------------- --------------------- ---------------------
Gold Gold Gold
Standard Standard Standard
Total Amount Total Amount Total Amount
--------- --------- ---------- ---------- ---------- ----------
Current assets $114,000 $ 22,800 $ 36,500 $ 7,000 $ 392,000 $ 78,000
Other assets 105,000 21,000 35,800 7,000 128,000 25,000
Current liabilities (65,000) (13,000) (586,000) (569,000) (316,000) (298,000)
--------- --------- ---------- ---------- ---------- ----------
Net assets $154,000 $ 30,800 $(513,700) $(555,000) $(204,000) $(195,000)
========= ========= ========== ========== ========== ==========
Total revenue $ 5,800 $ 1,000 $ - $ - $ - $ -
Loss before
income taxes $511,000 $198,139 $ 717,700 $ 291,352 $ 242,000 $ 155,808
Net loss $511,000 $198,139 $ 717,900 $ 291,352 $ 242,000 $ 155,808
</TABLE>
For the years ended October 31, 1997 and 1996, the Company had
receivables from their affiliate of $565,000 and $294,000
respectively. Certain officers and directors of the Company were
given compensatory stock bonuses from Pan American Motor Sports, Inc.
in March of 1998, which PAMS valued at $200,000.
NOTE E - SECURITIES AVAILABLE-FOR-SALE
- --------------------------------------
Securities available-for-sale at October 31 are summarized as follows:
Gross Gross
Unrealized Unrealized
Holding Holding Market
1997 Cost Gain Loss Value
- ---- -------- ---------- --------- --------
Mutual funds $ 47,006 $ 2,471 $ - $ 49,477
Equity securities 199,843 24,566 (20,888) 203,521
-------- ------- --------- --------
$246,849 $27,037 $(20,888) $252,998
======== ======= ========= ========
1996
- ----
Mutual funds $ 46,576 $ - $ - $ 46,576
Equity securities 199,843 - (20,888) 178,955
Gold Futures
contracts 18,503 - - 18,503
-------- ------- --------- --------
$264,922 $ - $(20,888) $244,034
======== ======= ========= ========
Page 39
<PAGE>
<PAGE>
Differences between cost and market of $6,149 and $(20,888) in 1997
and 1996 were recorded as a separate component of stockholders' equity
under other comprehensive income. In 1998 all of the securities
available-for-sale were sold.
Losses on the sale of securities available-for-sale were $101,409,
$18,783, and $137,441 for the years ended October 31, 1998, 1997 and
1996, respectively.
NOTE F - 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 Brazil. All exploration costs
associated with these activities during the three years in the period
ended October 31, 1998 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, 1998.
NOTE G - 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, 1998. Commissions
paid to FCMI were $6,600 and $40,920 for the years ended October 31,
1997 and 1996.
The Company has made unsecured, non-interest bearing, long-term cash
advances to its subsidiaries to fund exploration projects. Amounts
due from the Company's subsidiaries as of October 31, are as follows:
1998 1997 1996
---------- -------- --------
Gold Standard South $ 513,936 $513,832 $531,000
Gold Standard Minas, S.A. 1,425,721 661,594 708,000
Tormin S.A. 207,640 - -
During 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 H - TRANSACTIONS IN CAPITAL STOCK
- --------------------------------------
In May and June 1996, investors purchased shares of the Company's
common stock for $16 per share realizing $3,000,000. As part of the
transaction, the investors received warrants for the purchase of
Page 40
<PAGE>
<PAGE>
187,500 additional shares (Note I) of the Company's common stock. The
exercise price of these warrants is $24 per share and the warrants
expire in May 1999.
In May 1996, FCMI (Note G) purchased 37,500 shares and warrants of the
Company's common stock for $16 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 15,625 shares of
common stock in the Company. The exercise price of these warrants was
$12 per share. The Company realized $187,500 from the transaction.
NOTE I - 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
368,750 shares at October 31, 1998. They carry a weighted average
price of $24 per share and have a weighted average remaining life of
1.4 years.
NOTE J - 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:
1998 1997 1996
Net loss ------------ ------------ ----------
As reported $(1,688,364) $(1,271,319) $(378,819)
Pro forma (1,651,929) (1,271,319) (949,339)
Loss per share
As reported $ (1.44) $ (1.09) $ (.37)
Pro forma (1.41) (1.09) (.92)
The pro forma effect on net loss for 1998, 1997 and 1996 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 1996 were estimated using the Black-Scholes
Page 41
<PAGE>
<PAGE>
option-pricing model, based on the following assumptions: (i) no
expected dividend yields; (ii) expected volatility rates of 80%; and
(iii) expected weighted average lives of 1.8 years. The
weighted-average risk-free interest rate applied was 6.20%. No
compensatory warrants were granted in 1998 and 1997.
Stock warrant activity is summarized as follows:
Year ended October 31,
----------------------------------------------
1998 1997 1996
-------------- -------------- ---------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- ------ ------ ------ -------- ------
Warrants outstand-
ing beginning
of period 56,250 $20.00 56,250 $20.00 40,625 $20.00
Granted - - - - 56,250 20.00
Exercised - - - - - -
Canceled or
expired (6,250) 16.00 - - (40,625) 20.00
------- ------ ------ ------ -------- ------
Warrants outstanding
and exercisable,
end of period 50,000 $20.50 56,250 $20.00 56,250 $20.00
======= ====== ====== ====== ======== ======
The following table summarizes information about stock warrants
outstanding and exercisable at October 31, 1998:
Weighted Average Remaining
Exercise Price Shares Contractual Life
-------------- ------ --------------------------
$20.00 43,750 .8
24.00 6,250 3.5
------ ---
Total 50,000 1.2
====== ===
NOTE K - 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 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
Page 42
<PAGE>
<PAGE>
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 is summarized as
follows at October 31,:
1998 1997
Total deferred tax asset (based ------------ ------------
on net operating loss and
capital loss carryforwards) $ 1,999,907 $ 2,609,812
Less valuation allowance (1,999,907) (2,609,812)
------------ ------------
Net deferred tax asset $ - $ -
The amounts and expiration dates of net operating loss and capital
loss carryforwards at October 31, 1998, are detailed in the following
summary:
Federal Net State Net Net
Net Operating Operating 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
NOTE L - 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 M - 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 $2,951,615 at October 31, 1998.
Page 43
<PAGE>
<PAGE>
NOTE N - SEGMENT INFORMATION
- -----------------------------
The Company's only activity and, therefore, dominant business segment
is gold exploration and development. During the years ended October
31, 1998, 1997 and 1996, 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,
1998, 1997 and 1996 and for fiscal years then ended follows:
United South
1998 States America Corporate Total
- ----------------- ------- ------------ ----------- -----------
Operating revenue $ - $ - $ - $ -
Interest income - 125 151,100 151,225
Operating loss - (1,024,306) (409,342) (1,433,648)
Identifiable assets - 116,545 3,618,484 3,735,029
Depreciation and
amortization - 33,706 20,979 54,685
Capital expenditure - 6,569 - 6,569
Equity investment - - 390,453 390,453
Share of equity
investment loss - - (198,139) (198,139)
1997
- -----------------
Operating revenue $ - $ - $ - $ -
Interest income - - 223,289 223,289
Operating loss (4,954) (818,747) (350,983) (1,174,684)
Identifiable assets - 137,913 5,262,359 5,400,272
Depreciation and
amortization - 27,506 18,172 45,678
Capital expenditures - 44,240 50,262 94,502
Equity investment - - - -
Share of equity
investment loss - - (291,352) (291,352)
1996
- -----------------
Operating revenue $ - $ 339,726 $ 310,200 $ 649,926
Interest income - 1,058 170,265 171,323
Operating loss (133,037) (73,017) (50,539) (256,593)
Identifiable assets 525,861 200,642 5,951,258 6,677,761
Page 44
<PAGE>
<PAGE>
Depreciation and
amortization 4,721 10,932 20,413 36,066
Capital expenditures - 82,733 8,358 91,091
Equity investment - - 291,352 291,352
Share of equity
investment loss - - (155,808) (155,808)
All operating revenue received in 1996 was from a single source.
Exhibit 11
Gold Standard, Inc. and Subsidiaries
COMPUTATION OF NET EARNINGS (LOSS) PER COMMON SHARE
Years Ended October 31,
-------------------------------------
1998 1997 1996
Numerator: ------------ ------------ -----------
Net loss attributable to
common shares $(1,688,464) $(1,271,319) $ (378,819)
Denominator:
Weighted average common
share outstanding 1,168,594 1,168,594 1,031,015
Basic and diluted loss per share:
Net loss attributable to
common shares $ (1.44) $ (1.09) $ (0.37)
NOTE 1 - Warrants to purchase shares of common stock were outstand-
ing during 1998 but were not included in the computation of
diluted loss per share because the warrants' exercise price
was greater than the average market price of the common
shares. The warrants, which will expire April 30, 2002, were
still outstanding at the end of October 31, 1998. Following
are the shares to be purchased with warrant proceeds at
average market prices:
Years Ended October 31,
----------------------------------
1998 1997 1996
---------- -------- --------
Common stock 1,291,163 555,309 324,374
Average market price $ 6.72 $ 15.81 $ 27.06
NOTE 2 - On March 2, 1998, the board of directors of the Company
approved a one for four reverse stock split, effective
April 1, 1998, affecting all of the Company's common stock.
On November 9, 1998, the board of directors of the company
Page 45
<PAGE>
<PAGE>
approved another one for four reverse stock split, effective
December 1, 1998, affecting all of the Company's common
stock. The financial statements have been adjusted retroac-
tively to reflect these reverse stock splits.
NOTE 3 - The proceeds from stock options and warrants were calculated
as follows:
Year Year No. of Exercise Potential
Issued Exercised Shares Price Proceeds
------ --------- -------- -------- -----------
1987 1999 37,500 $ 20.00 $ 750,000
1988 1999 46,875 36.00 1,687,500
1992 2003 46,875 12.00 562,500
1993 2001 3,125 20.00 62,500
1996 2002 6,250 24.00 150,000
1996 1999 225,000 24.00 5,400,000
1996 1999 3,125 20.00 62,500
-----------
$ 8,675,000
Page 46
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<CASH> $3,193,338
<SECURITIES> 0
<RECEIVABLES> $4,312
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> $3,211,533
<PP&E> $318,440
<DEPRECIATION> $186,484
<TOTAL-ASSETS> $3,696,519
<CURRENT-LIABILITIES> $85,927
<BONDS> 0
0
0
<COMMON> $1,169
<OTHER-SE> $3,610,592
<TOTAL-LIABILITY-AND-EQUITY> $3,696,519
<SALES> 0
<TOTAL-REVENUES> $151,225
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> $1,839,589
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> $(1,688,364)
<INCOME-TAX> $100
<INCOME-CONTINUING> $(1,688,464)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $(1,688,464)
<EPS-PRIMARY> $(1.44)
<EPS-DILUTED> $(1.44)
</TABLE>
