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: April 30, 1999
Commission File No. 0-9496
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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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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
April 30, 1999
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GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 1999 and October 31, 1998
April 30, 1999 October 31, 1998
-------------- ----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,451,567 $ 1,940,615
Certificates of deposit 1,289,243 1,252,723
Accounts receivable 6,992 4,312
Accrued interest 9,214 9,789
Prepaid expenses 1,513 4,094
------------- -------------
TOTAL CURRENT ASSETS 2,758,529 3,211,533
PROPERTY AND EQUIPMENT
Equipment and leasehold
improvements 106,448 131,956
------------- -------------
106,448 131,956
OTHER ASSETS
Investment in affiliate 351,943 351,943
Deposits 1,087 1,087
------------- -------------
353,030 353,030
------------- -------------
$ 3,218,007 $ 3,696,519
============= =============
LIABILITIES AND EQUITY
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CURRENT LIABILITIES
Accounts payable - trade $ 50,448 $ 67,309
Accrued liabilities 460 18,518
Income tax payable 100 100
------------- -------------
TOTAL CURRENT LIABILITIES 51,008 85,927
STOCKHOLDERS' EQUITY
Common Stock 1,169 1,169
Additional paid-in capital 13,197,456 13,197,456
Accumulated deficit (10,031,626) (9,588,033)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 3,166,999 3,610,592
------------- -------------
$ 3,218,007 $ 3,696,519
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GOLD STANDARD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and six month periods ended April 30, 1999 and 1998
Three months ended Six months ended
April 30, April 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INCOME FROM
OPERATIONS $ $ $ $
EXPENSES
Depreciation 13,575 9,410 27,150 23,540
Leasehold
exploration and
carrying costs 123,246 80,597 292,214 471,965
General and
administrative:
Legal 4,219 17,819 7,680 20,408
Other 110,489 102,758 190,926 184,025
---------- ------------ ------------ -----------
NET LOSS FROM
OPERATIONS (251,529) (210,584) (517,970) (699,938)
OTHER INCOME (EXPENSES)
Interest income 32,803 29,146 72,166 78,945
Miscellaneous income 1,992 - 2,210 -
Gain (loss) on
exchange - (10,000) - (10,000)
Gain (loss) from
investments - (101,409) - (101,409)
---------- ------------ ------------ -----------
NET INCOME (LOSS) $(216,734) $ (292,847) $ (443,594) $ (732,402)
========== ============ ============ ===========
Net income (loss) per
common share $ (0.19) $ (0.25) $ (0.38) $ (0.63)
========== ============ ============ ===========
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GOLD STANDARD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and six month periods ended April 30, 1999 and 1998
Three months ended Six months ended
April 30, April 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES
Net income (loss) $(216,734) $(292,847) $(443,594) $(732,402)
Add (deduct) adjust-
ments to cash basis:
Depreciation 13,575 9,410 27,150 23,540
Net exchange
adjustment - 793,500 - 793,500
Decrease (increase)
in:
Accrued interest 13 (16) 575 8,702
Prepaid expenses 1,290 2,773 2,581 4,993
Accounts
receivable (1,148) - (2,680) -
Deposits - 2,284 - 2,284
Increase (decrease)
in:
Accounts payable (833) (34,400) (16,860) (58,927)
Income tax payable - (200) - (50)
Accrued liabilities (10) 180 (18,058) (200)
---------- ---------- ---------- ----------
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES (203,847) 480,684 (450,886) 41,440
CASH USED IN INVESTMENT
ACTIVITIES
Decrease (increase)
in certificates
of deposits (15,198) (4,526) (36,520) (17,935)
Equipment purchased - (7,007) (1,642) (7,007)
Decrease (increase)
in of securities - 240,333 - 252,998
Increase in equity
investments - (982,592) - (982,592)
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NET CASH USED IN
INVESTMENT ACTIVITIES (15,198) (753,792) (38,162) (754,536)
NET INCREASE (DECREASE)
IN CASH (219,045) (273,108) (489,048) (713,096)
CASH BALANCE AT
BEGINNING OF
PERIOD 1,670,612 2,791,453 1,940,615 3,231,441
CASH BALANCE AT END
OF PERIOD $1,451,567 $2,518,345 $1,451,567 $2,518,345
========== ========== ========== ==========
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GOLD STANDARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1999 and October 31, 1998
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 April
30, 1999, have been made. All such adjustments were of a normal,
recurring nature.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements at April 30,
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.
Investment in Mining Properties
-------------------------------
Prospecting and exploration costs incurred in the search for new
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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 April 30, 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.
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
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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 April 30, 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 April 30, 1999. They carry a weighted average
price of $24 per share and have a weighted average remaining life
of 1.4 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 April 30, 1999 are as follows:
Net loss
As reported $ (443,594)
Pro forma $ (407,156)
Loss per share
As reported (.38)
Pro forma (.35)
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.
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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 of
80%; and (iii) expected weighted average lives of 1.8 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 April 30, 1999:
Exercise Price Shares Life
-------------- ------ ----
$20.00 43,750 .6 yr
24.00 6,250 4.3 yrs
------
50,000
======
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 April 30, 1999, the Company had receivables from these
companies of $513,936, $1,618,737 and $232,615, respectively.
All intercompany transactions have been eliminated in
consolidation.
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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 assets.The amounts and expiration dates of net
operating loss carry forwards and investment tax credits at April
30, 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
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.
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RESULTS OF OPERATIONS
No revenue was generated through operations by the Registrant
during the three and six month periods ended April 30, 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
six month period ended April 30, 1999 were $292,214 ($471,965 for the
three month period ended April 30, 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 six months
of the current year.
The Registrant's general and administrative expenses, excluding
legal expenses totaled $190,926 for the six month period ended April
30, 1999 ($184,025 for the six month period ended April 30, 1998).
The two most significant general and administrative expense categories
during the six month period ended April 30, 1999 were (a) professional
and consulting fees $58,453 ($57,738 in 1998) and (b) wages and
salaries $78,000 ($68,000 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. With the exception of
professional and consulting fees which should decrease, general and
administrative expenses are expected to remain at approximately the
same level for the remaining six months of the current year.
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 six months of the year.
With the exception of professional and consulting fees which
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should decrease, expenses in the remaining six months of 1999 should
remain close to the level during in the first six 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.
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,
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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.
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 April 30, 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
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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 8 June 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> APR-30-1999
<CASH> $2,740,810
<SECURITIES> 0
<RECEIVABLES> $6,992
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> $2,758,529
<PP&E> $106,448
<DEPRECIATION> 0
<TOTAL-ASSETS> $3,218,007
<CURRENT-LIABILITIES> $51,008
<BONDS> 0
0
0
<COMMON> $1,169
<OTHER-SE> $3,165,830
<TOTAL-LIABILITY-AND-EQUITY> $3,218,007
<SALES> 0
<TOTAL-REVENUES> $34,795
<CGS> 0
<TOTAL-COSTS> $251,529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> $(216,734)
<INCOME-TAX> 0
<INCOME-CONTINUING> $(216,734)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $(216,734)
<EPS-BASIC> $(.19)
<EPS-DILUTED> $(.19)
</TABLE>
