UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2000
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 001-08397
GOLD STANDARD, INC.
(Exact name of small business issuer as specified in its charter)
UTAH No. 87-0302579
---- --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
136 South Main Street, Suite 712, Salt Lake City, Utah 84101
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(Address of principal executive offices)
(801) 328-4452
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former
fiscal year, if changed since last
report.)
The number of shares of the issuer's common stock outstanding as of September
12, 2000, is 1,269,858 shares.
1
<PAGE>
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 31, 2000 and October 31, 1999
<TABLE>
<CAPTION>
July 31, 2000 October 31, 1999
------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 708,161 $ 1,173,257
Certificates of deposit 1,369,056 1,284,425
Accounts receivable 13,770 6,992
Accrued interest 4,865 9,192
Prepaid expenses 4,534 12,082
------------- -------------
TOTAL CURRENT ASSETS 2,100,386 2,485,948
PROPERTY AND EQUIPMENT
Equipment and leasehold improvements 41,620 79,463
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41,620 79,463
NOTES RECEIVABLE 150,000 0
OTHER ASSETS
Investment in affiliate 279,958 279,958
Deposits 2,520 690
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282,478 280,648
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$ 2,574,484 $ 2,846,059
============= =============
</TABLE>
2
<PAGE>
GOLD STANDARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 31, 2000 and October 31, 1999
(continued)
<TABLE>
<CAPTION>
July 31, 2000 October 31, 1999
------------- ----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 6,542 $ 9,630
Accrued liabilities 2,740 4,175
Income tax payable 100 100
------------- -------------
TOTAL CURRENT LIABILITIES 9,382 13,905
STOCKHOLDERS' EQUITY
Common stock 1,269 1,169
Additional paid-in capital 13,347,356 13,197,456
Accumulated deficit (10,783,523) (10,366,471)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 2,565,102 2,832,154
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$ 2,574,484 $ 2,846,059
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
GOLD STANDARD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and nine month periods ended July 31, 2000 and 1999
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
----------------------------------------- ---------------------------------------
2000 1999 2000 1999
------------------- ------------------- ----------------- ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INCOME FROM
OPERATIONS $ - $ - $ - $ -
EXPENSES
Depreciation 12,614 13,575 37,843 40,725
Leasehold exploration and
carrying costs 85,351 75,251 235,214 367,465
General and administrative:
Legal 9,309 11,952 25,117 19,632
Other 90,050 71,267 238,875 262,193
------------------ ----------------- ----------------- ------------------
NET LOSS FROM
OPERATIONS (197,324) (172,045) (537,049) (690,015)
OTHER INCOME
(EXPENSES)
Interest income 25,399 31,568 119,998 103,734
Miscellaneous income - - - 2,210
------------------ ----------------- ----------------- ------------------
NET INCOME (LOSS) $ (171,925) $ (140,477) $ (417,051) $ (584,071)
================== ================= ================= ==================
Net income (loss) per common
share $ (0.14) $ (0.12) $ (0.34) $ (0.50)
================== ================= ================= ==================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
GOLD STANDARD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three and nine month periods ended July 31, 2000 and 1999
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
--------------------------------------- ---------------------------------------
2000 1999 2000 1999
----------------- ------------------ ----------------- ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES
Net income (loss) $ (171,925) $ (140,477) $ (417,051) $ (584,071)
Add (deduct) adjustments to
cash basis:
Depreciation 12,614 13,575 37,843 40,725
Net exchange adjustment - - - -
Decrease (increase) in:
Accrued interest 5,796 (15,523) 4,327 (14,948)
Prepaid expenses (2,328) (2,782) 7,548 (201)
Accounts receivable - - (6,779) (2,680)
Deposits - - (1,830) -
Increase (decrease) in:
Accounts payable 67 (758) (3,088) (17,618)
Income tax payable - - - -
Accrued liabilities 2,337 - (1,435) (18,058)
------------ ----------- ------------ ------------
NET CASH PROVIDED
BY (USED IN)
OPERATING
ACTIVITIES (153,439) (145,965) (380,465) (596,851)
CASH USED IN
INVESTMENT ACTIVITIES
Decrease (increase) in
certificates of deposits (19,642) 6,647 (84,631) (29,873)
Equipment purchased - - - (1,642)
Decrease (increase) in of
securities - - - -
Increase in equity investments - - - -
------------ ----------- ------------ ------------
NET CASH USED IN
INVESTMENT
ACTIVITIES (19,642) 6,647 (84,631) (31,515)
NET INCREASE (DECREASE)
IN CASH (173,081) (139,318) (465,096) (628,366)
CASH BALANCE AT
BEGINNING OF PERIOD 881,242 1,451,567 1,173,257 1,940,615
------------ ----------- ------------ ------------
CASH BALANCE AT END OF
PERIOD $ 708,161 $ 1,312,249 $ 708,161 $ 1,312,249
============ =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
GOLD STANDARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2000 and October 31, 1999
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies reflect industry practices and conform to
generally accepted accounting principles. The following policies are considered
to be significant:
Financial Statements
--------------------
The financial information provided in the Consolidated Balance Sheet for the
year ended October 31, 1999, 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
July 31, 2000, have been made. All such adjustments were of a normal, recurring
nature.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements at July 31, 2000, 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 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 Minas was organized for the purpose of carrying on a gold
exploration program in the country of Brazil. 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, but is no longer
conducting operations. Tormin S.A. at one time held certain mineral exploration
concessions in Uruguay but is no longer operating.
Investment in Mining Properties
-------------------------------
Prospecting and exploration costs incurred in the search for new mining
properties are charged to expense as incurred. Direct costs associated with the
development of identified reserves are capitalized until the related geological
areas are either put into production, sold or abandoned. As of July 31, 2000,
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.
6
<PAGE>
GOLD STANDARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2000 and October 31, 1999
(Unaudited)
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 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 at July 31, 2000 is $279,958.
NOTE 4 - MINING PROPERTIES
The Company holds directly or through its subsidiary companies, mineral and
exploration rights to property located in Southern Uruguay, and Brazil. 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
July 31, 2000.
NOTE 5 - STOCK WARRANTS
In connection with issuance of its common stock, the Company has issued warrants
to outside parties for the purchase of additional shares at specified prices in
the future. Unexercised warrants aggregate 46,875 shares at July 31, 2000. They
carry a weighted average price of $12 per share and have a weighted average
remaining life of 2.92 years.
7
<PAGE>
GOLD STANDARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2000 and October 31, 1999
(Unaudited)
NOTE 6 - 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 pro forma net loss and loss per share for the period ended July 31,
2000 are as follows:
Net loss
As reported $ (380,465)
Pro forma $ (536,465)
Loss per share
As reported (.34)
Pro forma (.43)
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: (i) no expected dividend yields; (ii) an expected volatility rate
of 110%; and (iii) expected weighted average lives of 2.7 years. The
weighted-average risk-free interest rate applied was 5.78%.
Stock warrant activity is summarized as follows:
Avg.
Exercise
Shares Price
------ --------
Warrants outstanding
beginning of
period 200,000 $ 1.75
Granted - -
Exercised - -
Canceled or
expired 100,000 1.75
-------
Warrants outstanding
and exercisable,
end of period 100,000 $ 1.75
=======
All 100,000 outstanding warrants at July 31, 2000 were exercisable at $1.75 per
share and carried a weighted average remaining contractual life of 2.7 years.
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<PAGE>
GOLD STANDARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2000 and October 31, 1999
(Unaudited)
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 July 31, 2000, the Company had
receivables from these companies of $513,936, $1,979,048 and $270,360,
respectively. All intercompany transactions have been eliminated in
consolidation.
In January 2000 the Company president exercised options to purchase 100,000
shares of common stock at $1.50 per share. The shares were purchased with a
non-interest bearing promissory note to be repaid in four years. The shares will
be held by the Company until the note is repaid.
NOTE 8 - INCOME TAXES
The Company has significant net operating loss and net capital loss carry
forwards which should give rise to a deferred tax asset. Because the Company has
no assurance that the tax benefit from the net operating loss and net capital
loss will ever be realized, a valuation allowance has been provided equal to the
deferred tax asset.
The amounts and expiration dates of net operating loss carry forwards and
investment tax credits at July 31, 2000 are detailed in the following summary:
<TABLE>
<CAPTION>
Federal State Net
Net Operating Net Operating Capital
Expiration Date Loss Loss Loss
--------------- ------------- ------------- -------
<S> <C> <C> <C>
October 31, 2000 $ - $ - $ 150,056
October 31, 2002 - - 74,928
October 31, 2003 1,441,272 - 191,978
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 - 245,865 -
October 31, 2014 - 321,411 -
October 31, 2018 246,157 - -
October 31, 2019 321,611 - -
----------- ----------- ---------
$ 5,615,614 $ 754,624 $ 416,962
=========== =========== =========
</TABLE>
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
INTRODUCTION
Gold Standard, Inc. and its subsidiaries (the Registrant) were formed
to engage in the acquisition, exploration, and if warranted, development of hard
mineral properties. At the present time, Registrant's activities are solely
exploration related and concentrated in Brazil. Registrant is in the process of
discontinuing exploration activities in Uruguay and has discontinued exploration
activities in all other locations. The following discussion should be read in
conjunction with the text of Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in Registrant's Form 10-K for
fiscal year ended October 31, 1999.
RESULTS OF OPERATIONS
No revenue was generated through operations by the Registrant during
the nine month periods ended July 31, 2000 and 1999.
Exploration related expenses for the current three month period ended
July 31, 2000 were $85,351 compared to $75,251 for the three month period ended
July 31, 1999. Exploration related expenses for the current nine month period
ended July 31, 2000 were $235,214 compared to $367,465 for the nine month period
ended July 31, 1999. The decrease in exploration expenses compared to the prior
year 9-month period is due to termination in 1999 of all exploration activities
in Paraguay and most activities in Uruguay. Exploration costs for the
Registrant's Brazil properties have remained relatively constant between such
periods. Unless exploration activities discover deposits with development
potential or Registrant acquires new exploration opportunities, Registrant
currently anticipates that exploration expenses will continue at the level
experienced in the first nine months for the remainder of the current year.
Registrant's general and administrative expenses, excluding legal
expenses totaled $90,050 for the three month period ended July 31, 2000 compared
to $71,267 for the three month period ended July 31, 1999. Registrant's general
and administrative expenses, excluding legal expenses totaled $238,875 for the
nine month period ended July 31, 2000 compared to $262,193 for the nine month
period ended July 31, 1999. The two most significant general and administrative
expense categories during the nine month period ended July 31, 2000 were (a)
professional and consulting fees $39,201 ($68,884 in 1999) and (b) wages and
salaries $117,000 ($117,000 in 1999). 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.
PLAN OF OPERATION
Registrant currently plans to continue its present level of exploration
activities on the Brazilian properties where it previously acquired development
rights. To the extent that Registrant is unable to generate revenues from its
activities, for its operations Registrant will continue to rely on funds
received in prior years. As described in more detail in the Registrant's last
Annual Report on Form 10-K, the Registrant presently anticipates that, unless
10
<PAGE>
there are unanticipated increases in expenses, its current funds will allow it
to continue the current level of operations activities through the year 2002.
Unless Registrant is able to generate adequate revenues from its activities,
after such time (or prior to such time if operations or expenses exceed current
levels significantly), Registrant will need to raise additional funds through
debt or equity financing to continue operations. Registrant's ability to raise
such additional capital at such time will depend on the prospects for the
Registrant's activities. There is no assurance that Registrant will be able to
obtain the capital it requires to continue operations on terms and conditions
acceptable to Registrant, even if the Registrant's exploration activities prove
successful. Based on past experience, however, the Registrant believes it has
the ability to generate additional funds if needed.
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the
Private Securities Litigation Reform Act of 1995.
The Private Securities Litigation Reform Act of 1995 (the Act) provides
a safe harbor for forward-looking statements made by or on behalf of Registrant.
Registrant and its representatives may from time to time make written or oral
statements that are "forward- looking," including statements contained in this
report and other filings with the Securities and Exchange Commission and in
reports to Registrant's stockholders. Registrant's management believes that all
statements that express expectations and projections with respect to future
matters, as well as from developments beyond Registrant's control, including
changes in global economic conditions, are forward-looking statements within the
meaning of the Act. These statements are made on the basis of management's views
and assumptions, as of the time the statements are made, regarding future events
and business performance. There can be no assurance, however, that management's
expectations will necessarily come to pass. Factors that may affect
forward-looking statements include a wide range of factors that could materially
affect future developments and performance, including the following:
Changes in company-wide strategies, which may result in changes in
types or mix of businesses in which Registrant is involved or chooses to invest;
changes in U.S., global or regional economic conditions, changes in U.S. and
global financial and equity markets, including significant interest rate
fluctuations, which may impede Registrant's access to, or increase the cost of,
external financing for its operations; legal and regulatory developments, such
as regulatory actions affecting environmental activities; adverse weather
conditions or natural disasters, such as hurricanes and earthquakes; and labor
disputes, which may lead to increased costs or disruption of operations.
This list of factors that may affect future performance and the
accuracy of forward- looking statements is illustrative, but by no means
exhaustive. Accordingly, all forward-looking statements should be evaluated with
the understanding of their inherent uncertainty.
11
<PAGE>
PART II- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
--------
The following exhibits are attached hereto or are incorporated herein
by reference as indicated in the table below:
<TABLE>
<CAPTION>
Exhibit Location if other
No. Title of Document than attached hereto
------- ----------------- --------------------
<S> <C> <C>
3.01* Articles of Incorporation 1999 Form 10-K
(as amended to date) Exhibit 3.01
3.02* Bylaws 1999 Form 10-K
Exhibit 3.03
27.1 Financial Data Schedule
</TABLE>
* Denotes exhibits specifically incorporated in this Form 10-QSB by
reference to other filings of Registrant pursuant to the provisions of
Securities and Exchange Commission rule 12b-32 and Regulation S-B, Item
10(f)(2). These documents are located under File No. 001-10287 at, among other
locations, the Securities and Exchange Commission, Public Reference Branch, 450
5th St., N.W., Washington, D.C. 20549.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by Registrant during the quarter
ended July 31, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GOLD STANDARD, INC.
Date September 13, 2000 By: /s/ Scott L. Smith
------------------ ----------------------
Scott L. Smith
President and Chief Financial Officer
12
