BRUSH CREEK MINING & DEVELOPMENT CO INC, 10KSB, 1997-10-14

BRUSH CREEK MINING & DEVELOPMENT CO INC
10KSB, 1997-10-14
GOLD AND SILVER ORES

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-KSB

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended JUNE 30, 1997

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-12761

BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
(Name of Small Business Issuer in Its Charter)

NEVADA 88-0180496
(State or other jurisdiction I.R.S. Employer
of incorporation or Identification
organization) Number)

970 E. MAIN STREET, SUITE 200
GRASS VALLEY, CALIFORNIA 95945
(Address of principal (Zip Code)
executive offices)

Issuer's telephone number, including area code: (916) 477-5961

Securities registered under Section 12(b) of the Exchange Act: NONE

Securities registered under Section 12(g) of the Exchange Act:
COMMON, PAR VALUE $.0001

Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
-----

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [X]

State Issuer's revenues for its most recent fiscal year: $22,266.

As of September 30, 1997, the aggregate market value of the Common Stock held
by non-affiliates of the Issuer (38,849,552 shares) was approximately
$13,364,246. The number of shares outstanding of the Common Stock ($.0001 par
value) of the Issuer as of the close of business on September 30, 1997 was
41,949,483.

Documents Incorporated by Reference: Portions of the registrant's proxy
statement for the annual meeting of shareholders to be held in fiscal 1998
are incorporated by reference into Part III of this report.

Transitional Small Business Disclosure Format: Yes X No
--- ---

<PAGE>
PART I

Item 1. DESCRIPTION OF BUSINESS.

RISK FACTORS

LACK OF PROFITABILITY; CONTINUING LOSSES; AND DOUBTFUL ABILITY TO CONTINUE AS
A GOING CONCERN.

The Company has incurred losses of $39,279,422 from inception to June 30,
1997 and had not realized economic production as of June 30, 1997. As a result
of the Company's cumulative losses from operations, and the fact that the
Company has not realized economic production from its mineral properties, the
Company's independent auditor's report, dated August 29, 1997, for the year
ended June 30, 1997, states that these conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management
continues to actively seek additional sources of capital to fund current and
future operations. There is no assurance that the Company will be successful
in continuing to raise additional capital, establishing probable or proven ore
reserves, or determining if the mineral properties can be mined economically.
Additionally, the Company is in default on the leases of certain of its mining
properties. The lessors have not taken action to foreclose on the leases and
the Company is making every effort to fulfill the agreements. The loss of
these leases would have a material adverse effect on the Company.

NEED FOR ADDITIONAL FINANCING; LACK OF LIQUIDITY; NO MATERIAL REVENUES.

The mining industry is capital intensive. During the fiscal year ended
June 30, 1997, the Company raised $2,111,101 from the sale of 16,387,113
shares of Common Stock. At June 30, 1997, the Company had a working capital
deficit of $2,332,905 and had no material revenues from mining operations.
Additional financing will be required in order for the Company to cover its
future mining and development costs and to engage in full scale mining
operation. At this time, the Company has no definitive plans regarding
additional financing, but believes that it will likely be obtained through
equity financing such as stock offerings or joint ventures. No assurances can
be given that the Company will be able to raise cash from additional financing
efforts and, even if such cash is raised, that it will be sufficient to
satisfy the Company's capital requirements. If the Company is unable to obtain
sufficient funds from future financings and/or operations, the Company may not
be able to achieve its business objectives and may have to scale back its
development plans. In addition, the Company may have to sell its assets in
order to meet its obligations and may lose some of its properties for failure
to make lease payments. In fiscal 1997, the Company sold equipment in order to
meet some of its obligations. In addition, the Company could lose some of its
properties for failure to make lease payments. On March 23, 1997, the
Company's lease on the Kate Hardy mine expired. However, the Company paid
$10,000 to the Kate Hardy lessor to extend the lease agreement on the Kate
Hardy mine for an additional three months. The Company is required to pay an
additional $10,000 to extend the lease for another three month period. The
Company also negotiated a modification agreement with Ruby Development Co.,
Inc. to pay, in cash, one lease payment in arrears for the Ruby mine, to pay
in cash, one month lease payment in arrears for the Rising Sun, increase the
amount of equipment held as collateral pursuant to the Ruby mine lease
agreement by filing a UCC-l financing statement listing the additional
equipment, all right, title and interest of certain "ore specimens" for which
Ruby Development Co., Inc. will credit the value against past due minimum
royalty payments, and grant Ruby Development Co., Inc., an option to purchase
up to 50,000 shares of the Company's common stock at a price of $.25 per share
until July 1, 1999. In the event the Company is unable to obtain additional
financing the Company may be required to seek protection under the bankruptcy
laws.

<PAGE>
POSSIBLE DELISTING OF SECURITIES FROM NASDAQ SYSTEM; RISKS RELATING TO
LOW-PRICED STOCKS.

The Company's Common Stock is currently listed on the Nasdaq SmallCap
Market. The Securities and Exchange Commission recently approved substantial
changes in Nasdaq's SmallCap Market maintenance standards. The continued
listing requirements will be effective in February 1998. The new minimum
maintenance requirements will require net tangible assets of $2,000,000, or
market capitalization of $35,000,000, or $500,000 in net income for two of the
last three years. In addition, continued inclusion on Nasdaq will require a
public float of 500,000 shares, a $1,000,000 market value for the public
float, 300 shareholders, a bid price of $1.00 per share and two market makers.
Since August 1996, the bid price for the Company's Common Stock has not been
$1.00 or more per share. Accordingly, unless the price for the Company's
Common Stock improves, the Company may not be in compliance with the new
maintenance criteria once such criteria are in effect as of February 1998. A
company will not be deemed in compliance with the minimum bid price of $1.00
per share when its stock drops below $1.00 for thirty days. The company will
be notified of delisting proceedings unless the stock closes at $1.00 or more
for ten consecutive days, within 90 days of falling out of compliance. The
failure to meet these maintenance criteria in the future may result in the
delisting of the Company's securities from Nasdaq, and trading if any, in the
Company's securities would thereafter be conducted in the non-Nasdaq
over-the-counter market. As a result of such delisting, an investor could find
it more difficult to dispose of, or to obtain accurate quotations as to the
market value of, the Company's securities. In addition, if the Common Stock
were to become delisted from trading on Nasdaq and the trading price of the
Common Stock were to remain below $5.00 per share, trading in the Common Stock
would also be subject to the requirements of certain rules promulgated under
the Securities Exchange Act of 1934, as amended, which require additional
disclosure by broker-dealers in connection with any trades involving a stock
(generally, any non-Nasdaq equity security that has a market price of less
than $5.00 per share, subject to certain exceptions). Such rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and
impose various sales practice requirements on broker-dealers who sell penny
stocks to persons other than established customers and accredited investors
(generally institutions). For these types of transactions, the broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale. The
additional burdens imposed upon-broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in the Common Stock,
which could severely limit the market liquidity of the Common Stock.

LACK OF PROVEN OR PROBABLE ORE RESERVES OF COMMERCIAL QUANTITY AT THE MINES.

Although the Company has begun preliminary exploration activities on its
mining properties, the Company has not yet established proven or probable ore
reserves. Consequently, the Company has been unable to ascertain with
certainty whether adequate ore reserves sufficient for profitable operations
exist. Management believes, however, that an evaluation of the Company's mines
completed in May 1991 indicates the existence of sufficient mineralization to
warrant continued exploration. There can be no assurance that proven or
probable ore reserves will be established.

<PAGE>
GOVERNMENT REGULATION; ENVIRONMENTAL MATTERS.

The Company's mining facilities and operations are subject to substantial
government regulation, including federal, state and local laws concerning mine
safety, land use and environmental protection. The Company must comply with
local, state and federal requirements regarding exploration operations, public
safety, employee health and safety, use of explosives, air quality, water
pollution, noxious odor, noise and dust controls, reclamation, solid waste,
hazardous waste and wildlife as well as laws protecting the rights of other
property owners and the public. Although the Company believes that it is in
substantial compliance with such regulations, laws and requirements with
respect to the mines currently in operation, failure to comply could have a
material adverse effect on the Company, including substantial penalties, fees
and expenses, significant delays in the Company's operations and the potential
shutdown of the Company's operations.

The Company must also obtain and comply with local, state and federal
permits, including waste discharge requirements, other environmental permits,
use permits, plans of operation and other authorizations. Obtaining these
permits can be very costly and take significant amounts of time. Although the
Company foresees no material problems or delays, no assurances can be given
that the Company can obtain the necessary permits or commence mining
operations, or that, if permits are obtained, there will be no delay in the
Company operations or the Company can maintain economic production in
compliance with the necessary
permits.

COMPETITION.

The Company operates in an industry that is characterized by intense
competition for resources, equipment and personnel. Some of the Company's
principal competitors are substantially larger, have substantially greater
resources, and expend considerably larger sums of capital than the Company for
exploration, rehabilitation and development.

RISKS IN MINING OPERATIONS, INSURANCE COVERAGE AND UNINSURED LOSSES.

The Company's activities are subject to all the risk and hazards commonly
associated with mining operations, including, but not limited to unforeseen
geological formations, cave-ins, environmental concerns and personal injury.
The Company has insurance covering personal injury, workers' compensation and
damage to property and equipment, although in view of recent trends in damage
awards in personal injury lawsuits, such insurance may be insufficient to
satisfy large losses or judgments against the Company. Furthermore, certain
types of insurance coverage (generally against losses caused by natural
disasters and Acts of God) are either unattainable or prohibitively expensive.
Substantial damage awards against the Company or substantial damages not
covered by insurance will affect the Company's ability to continue as a going
concern and may force the Company to seek protection under the federal
bankruptcy laws.

VOLATILE MARKET PRICES FOR GOLD.

The price of gold has a material effect on the Company's financial
operations. Following deregulation, the market price for gold has been highly
speculative and volatile. Since the end of 1987 the price of gold has declined
from a high of approximately $500 per ounce to approximately $332 per ounce at
September 30, 1997. Instability in the price of gold may affect the
profitability of the Company's operations. No assurances can be given that the
Company's mines contain ore in commercial quantities or, if ore in commercial
quantities is discovered, that gold could be produced at a profit given the
recent market price range for gold.

<PAGE>
LITIGATION; ADMINISTRATIVE PROCEEDINGS.

The Company has been involved in various litigation matters. During
fiscal 1996, the Company entered into two significant settlement agreements
involving two of such matters. In connection with one of such matters, the
Company in fiscal 1997 defaulted under its obligations under the Settlement
Agreement relating thereto. Thereafter, the Company entered into revised
settlement terms which provide for various significant cash payments to be
made. No assurance can be given that the Company will be able to meet its
obligations thereunder. Any default thereunder will have a materially adverse
effect on the Company which could result in the Company seeking protection
under the bankruptcy laws. Also, the Company was notified in fiscal 1996 that
it was the subject of an informal inquiry being conducted by the staff of the
Securities and Exchange Commission in connection with the Company's financing
activities pursuant to Regulation S under the Securities Act. An adverse
determination could have a material adverse effect on the Company. See "Legal
Proceedings".

DESCRIPTION OF BUSINESS

Brush Creek Mining and Development Co., Inc. (the "Company") was
incorporated in 1982 and is engaged in the exploration and development of gold
and diamond mining properties. From its incorporation until April 1989, the
Company operated as a mining and mineral development company at which time its
mining operations, conducted through the Brush Creek Joint Venture of which
the Company owned 40%, were terminated. Shortly thereafter, the Company became
actively engaged in acquiring additional mineral properties, raising capital,
and preparing properties for resumed production. The Company did not have any
significant operations or activities from April 1989 through June 1989, and
suspended all mining operations and reduced its activities to a care and
maintenance level. Accordingly, the Company is deemed to have reentered the
development stage effective July 1, 1989.

The Company currently owns the Brush Creek, Carson, High Commission,
Gardner's Point and Pioneer Mines. The Company also has leases with options to
purchase the Ruby, Rising Sun, Kate Hardy and Omega Mines. In addition, in
fiscal 1997, the Company acquired options to purchase the New California
Placer Mine and Wilbank's Placer and Loade Mine. All of these mines, except
for the Gardner's Point and Pioneer Mines, are located in the
Allegheny-Forest-Downieville mining districts on the western slope of the
Sierra Nevada mountain range in northern California and comprise approximately
6,300 acres. Because of the proximity of the mines to each other, the Company
believes it can efficiently mine and operate these properties since it will be
able to take advantage of economies of scale by sharing personnel, mill
facilities and equipment.

Based on previous studies completed in December 1990, management believed
that the Company's mines had sufficient mineralization to warrant feasibility
studies and in January 1991 engaged Keewatin Engineering to conduct and
document those studies. The Company received Phase I and Phase II reports from
Keewatin Engineering, the Phase II report being dated October 1992. The Phase
I and Phase II reports were exploration and development reports of the
Allegheny-Forest-Downieville mining district and mining properties of the
Company, including an evaluation of the underground hard-rock system and
surface geology studies to identify precious metal rock units, and additional
structural geology studies within the district. The Ruby Mine was the
Company's original focus because of its rich production history and because
permits were in place for placer production and hard rock exploration.

<PAGE>
The Company filed its plan of operation for the Ruby and Carson Mines
with the United States Forestry Department, and has obtained all necessary
permits for continued production and milling at the Ruby Mine of up to 225
tons of material per day. In order to continue the underground development of
the Carson vein system, a more extensive geologic evaluation using diamond
drilling on surface and subsurface should be completed. As this was a capital
intensive expense the Company decided to detain further development of the
Carson Mine until the Company decides to integrate this program into its
future development budget.

From February 1992 when the Company began limited production at the Ruby
Mine to December 1992 when the Company ceased production due to inclement
weather, the Company milled approximately 7,300 tons of mineralized placer
material and recovered approximately 200 ounces of gold, an amount which is
inconsistent with historical production at the Ruby Mine in the early 1940's.
However, the Company's management believes that these preliminary results are
too small to be a reliable representative sample of the expected placer
grades.

See Part I, Item 2 for a discussion of the mining properties controlled
by the Company, which information is herein incorporated by reference.

THE COMPANY'S CURRENT FOCUS.

During fiscal 1997, the Company decided that, under the right conditions,
it would be in the best interest of shareholders to secure a joint venture
partner to aid in developing the Company's properties. Accordingly, the
Company engaged an investment banker to approach qualified mining companies.
At the same time, the Company began rehabilitating and permitting the lower
Brush Creek Mine in an effort to access 9,000 tons of remnant pillars and
50,000 tons of potential ore blocks. In June 1997, the Company received
interim approval from the United States Forest Service to transport thirty
tons of ore per day from the lower Brush Creek Mine to the Ruby mill site. The
historical grade of the lower Brush Creek Mine is approximately one ounce gold
per ton of ore milled. Keewatin Engineering stated in its 1991 report on the
mines that Nealon and Associates sampled one of the ore blocks, taking twelve
six-foot chip samples which assayed from .002 to 273 ounces per ton gold. By
combining the assays with records of production from 1958 to 1962, Nealon
estimated that the ore blocks would yield approximately .5 ounces per ton
milled. As the Company continues to pursue joint ventures, it is hoped that
production of ore from the lower Brush Creek will contribute meaningfully to
cash flow.

The Company intends also to explore in the lower Brush Creek for a
parallel ore shoot which may exist to the south of the known ore shoot on a
flatter trajectory and for the potential continuation of the known ore-shoot
offset to the north of the post mineral dyke. However, the real potential in
the lower Brush Creek is the down-dip extension of the Golden Gate ore shoot.
The vein was mined to a distance of six hundred feet below current workings.
There, it began to pinch and steepen. When funds are available, or with a
partner, the Company intends to follow its established plan to drill at
intervals up to 1,000 feet beneath the old workings in an effort to block a
resource of 129,000 ounces of gold.

In an effort to strengthen the Company's mining staff to better enable
the Company to successfully extract ore on its own or with the assistance of a
strategic investor, the Company has hired a new mine superintendent, mine
geologist, mining engineer and mill superintendent. Although no assurance can
be given, management is confident that, to the extent funds are available, the
newly added personnel will successfully pursue the Company's plan to steadily
increase production and block new reserves.

<PAGE>
DIAMOND EXPLORATION.

Diamonds have been reported from gold workings since 1849 in the
paleoplacer gold deposits of Butte, Plumas, Sierra, Nevada, El Dorado and
Amador counties, California. The principal district of reported diamonds was
in the Cherokee District of Butte County due west of Gardners Point.

Diamonds have also been recovered from Brush Creek's Gardners Point
property. In 1872 a diamond recovered from the Gardners Point property was cut
into a one carat stone. Another diamond was also recovered at the time from
the Gardners Point Property but was "lost by the foreman, who did not know its
value". These two diamonds were recovered from a 109 square foot area of a 30
foot thick section of the paleoplacer gold deposit. A third diamond was
recovered from hydraulic tailings in Slate Creek which probably came from the
Gardners Point hydraulic workings.

During fiscal 1997 the Company tested Gardners Point for diamond
indicator minerals. Encouraging results prompted further evaluation upstream
toward the Poker Flat area. There the Company located diamond indicator
minerals in a hard-rock breccia source. The Company is currently looking for a
joint venture partner to take the project forward.

CERTAIN SUBSEQUENT EVENTS.

Subsequent to the fiscal year ended June 30, 1997, the Company has sold a
total of 10,203,333 restricted shares of the Company's Common Stock and has
received a net amount of $1,021,000. All shares have been sold under
Regulation D and Section 4(2) of the Securities Act of 1933, as amended.

Also, subsequent to the fiscal year ended June 30, 1997, the Company has
issued 375,668 shares of its Common Stock for certain consulting services.
Such shares have been registered with the Securities and Exchange Commission
on Form S-8.

EMPLOYEES.

The Company has 25 full-time employees, and operates in only one industry
segment.

Item 2. DESCRIPTION OF PROPERTY.

The following is a discussion of the mining properties controlled by the
Company. The Company began geological and engineering studies on all of its
mining properties in January 1991. The Company received Phase I and Phase II
Reports, the most recent of which is dated October 1992, following these
studies. The Company has not completed sufficient geological activities and
drilling to establish proven or probable ore reserves for its mines. The
Company has no present intention of conducting further geological exploration
and drilling to establish ore reserves for its mining properties.

<PAGE>
The Company began limited production at the Wolf vein and Lawry area
placer gravels at the Ruby Mine during the fiscal year ended June 30, 1996,
however, limited production was suspended in October 1996 as the Company
focused its efforts on rehabilitating the lower Brush Creek mine. In early
1997, the Company began preparing the lower Brush Creek Mine for limited
production. In June 1997, the Company received interim approval from the
United States Forest Service to transport thirty tons of ore per day from the
lower Brush Creek Mine to the Ruby mill site. The Company has not commenced
economic production and is therefore still considered to be in the development
stage. Further work at these mines is subject to the Company receiving
additional financing. There can be no assurance that the Company will obtain
any required financing or any part thereof. In the event the Company is unable
to raise the required financing, the Company will be forced to scale back its
operations. See "Risk Factors--Need For Additional Financing; Lack of
Liquidity; No Material Revenues".

BRUSH CREEK MINE.

The Brush Creek Mine is an underground lode gold mine located in Sierra
County, California, approximately eight miles west of the town of Downieville,
California. It consists of eight patented mining claims comprising
approximately 245 acres and 45 unpatented mining claims comprising
approximately 960 acres. The Company's investment in this property is
$2,144,555 at June 30, 1997, consisting of $408,496 of land and land options,
$1,460,669 of development costs, and $275,390 of mining equipment.

All of the unpatented claims in the property package are in good standing
with assessment work documents for 1997 filed with both the Bureau of Land
Management (BLM) in Sacramento and Sierra County in Downieville. The patented
claims of the Brush Creek Mine are not fully permitted for underground
exploration, development and production. A waste discharge permit is required
and a plan of operation must be filed with the U.S. Department of Forestry and
Sierra County before full scale mining may begin. The Company is in the
process of obtaining such permit or filing a plan.

The Brush Creek Mine was opened in 1868 when the old Brush Creek Shaft
was sunk to a depth of approximately 600 feet. Reports indicate that between
1868 and 1870 it produced approximately 19,632 ounces of gold. Between 1870
and 1944, operations at the Brush Creek Mine were limited. In 1870, it was
closed due to poor ground conditions, flooding of the shaft and a fatal
accident. In 1922, the Ante Up Mining Company drove a 2,200 foot drift which
eventually connected with the old Brush Creek tunnel. In 1927, shafts were
driven into the Brush Creek Mine by the Kate Hardy Mining Company. Between
1870 and 1994, production records are sparse. Reports during this period
indicate that 223 ounces of gold were produced in April of 1929. Between 1944
and 1950, A.L. Merritt made additional improvements to the Brush Creek Mine
including the sinking of the Golden Gate Shaft to a depth of approximately 647
feet. Mining activity occurred between 1978 and 1979 when new equipment was
installed and a new level was started. This activity ended when the Brush
Creek Mine was flooded due to a power failure in 1979.

In April of 1982, the Company leased the Brush Creek Mine and, in
February of 1984, it purchased all patented and unpatented claims of the Brush
Creek Mine. The Company continued limited development and production until the
end of 1985 when the Brush Creek Mine was closed. Until the Brush Creek Mine
was closed in 1985, work was carried out on an extension of the old Brush
Creek Shaft and ore pockets were exploited between the 410 and 465 foot level.
A new 60 tons-per-day mill was assembled near the portal of the Brush Creek
tunnel and 14 holes totaling 4,950 feet were cored from various underground
locations. Subsequent mining produced approximately 700 to 1,000 ounces of
gold.

<PAGE>
Both upper and lower adits are reinforced with concrete and have steel
security doors. The Brush Creek Mine has 30-pound rail, and electrical and air
lines on both levels. The rail is in good condition. There is also a steel
corrugated equipment building and a small changing room for miners located on
the property.

Water normally accumulates from underground sources in the Brush Creek
Mine. This water can be pumped in sufficient quantity and quality for mining
operations and the Company anticipates that it will be sufficient to meet its
mining and milling needs. In addition to underground water, two streams flow
all year on the property.

The Brush Creek Mine is accessible by a graveled road maintained by
Sierra County. Snow removal is performed during the winter by the Company.
Electrical power is supplied by Pacific Gas and Electric Company, a public
utility.

GARDNER'S POINT AND PIONEER MINES.

The Gardner's Point and Pioneer Mines include two placer mines located on
the same parcel of land comprising approximately 700 acres. These mines are
approximately 10 air miles northwest of Downieville and three air miles east
of La Porte in Sierra County, California in the Port Wine Gold Mining Region.
The Gardner's Point and Pioneer Mines are approximately 12.5 air miles from
the Company's other mines. These mines consist of three patented claims, the
Pioneer, the Comet, and the Challenge, and two unpatented claims. The
Company's investment in this property is $1,084,325 at June 30, 1997,
consisting of $185,477 of land and land options, $770,327 of development
costs, and $128,521 of mining equipment.

All of the unpatented claims in the property package are in good standing
with assessment work documents for 1997 filed with both the BLM in Sacramento
and Sierra County in Downieville. A new operating permit and a waste discharge
permit are required before full scale mining may begin at the Pioneer Mine.
The Company has no current plans to obtain such a permit.

Gold was first discovered in the area of the Gardner's Point and Pioneer
Mines on Rabbit Creek in 1850 at the approximate location of the present town
of La Porte. After 1885, drift mining continued along portions of the Port
Wine Tertiary Channel, but progressively diminished after the turn of the
century. In 1934, renewed activity occurred as a result of an increase in the
price of gold mandated by the federal government. Following the outbreak of
World War II, however, the federal government brought a halt to gold mining
activities.

In 1980, the higher price of gold led to the search for and leasing of
the Gardner's Point and pioneer Mines by Mr. L.F. Goodson and the Gardner's
Point Mine, a California Limited Partnership. Appealing characteristics of the
Gardner's Point and Pioneer Mines were the unusually large amount of flat
working space and areas of low overburden.

In 1985, the Brush Creek Joint Venture, consisting of the Company and two
other companies, purchased all patented and unpatented claims of the Gardner's
Point and Pioneer Mines, and it produced approximately 2,800 ounces of gold
from its operations before deciding in August of 1988 to suspend operations at
the Gardner's Point and Pioneer Mines and reduce operations to a care and
maintenance level. The Gardner's Point and Pioneer Mines were subsequently
purchased by the Company in connection with the change of control of the
Company in 1989.

<PAGE>
The Gardner's Point and Pioneer Mines have a Yuba-Lowe trommel which
contains new interior screens and a water hutch. Additionally, the property
has a two-story gold recovery building which houses a large Deister table and
associated equipment for gold recovery. The Company spent approximately
$100,000 to upgrade and improve water quality measures on these mines.

The Gardner's Point and Pioneer Mines are accessible year round by roads
maintained by Sierra County. However, the Company is responsible for snow
removal in the winter. Existing access to the Gardner's Point and Pioneer
Mines is from La Porte, California through the site of Queen City. It is also
possible to reach these mines from Challenge, California through Union Hill.
Access to the Gardner's Point and Pioneer Mines for heavy equipment is by
United States Forest Service Roads from Strawberry Valley, California. Power
is generated on the site of the Gardner's Point and Pioneer Mines.

Pursuant to SMARA guidelines, the Company has submitted through its
consultant, Vector Engineering, Inc., a revised reclamation cost estimate on
Gardner's Point and is entering into a phased program for approval with the
lead agency and the Department of Conservation. Also during the same
procedure, the Company will address the use permit for the mine as well as an
interim management plan for up to a five year period. Additional reclamation
bonding will be required subsequent to final approval estimated to be
completed in May 1998.

The Brush Creek Joint Venture submitted applications to Sierra County and
the U.S. Forest Service in March of 1987 to initiate production activity at
the Pioneer Mine. However, the authorities determined that an Environmental
Impact Report (EIR) was necessary before exploration permits could be granted.
Sierra County, acting as the lead agency, contracted with an engineering firm
to complete the study. The draft EIR has been completed, distributed to the
public and interested agencies, and comments have been returned and addressed
by the Company. A final EIR must be submitted to and approved by Sierra County
before production at the Pioneer Mine may begin. The Company has not submitted
the request to continue the EIR process, and does not intend to do so at this
time. Currently, the property is in a care and maintenance status.

RUBY MINE.

In December of 1989, the Company issued 100,000 shares of its Common
Stock which it used to purchase an option to lease the Ruby Mine and to
purchase equipment located on the site. In March of 1990, the Company paid
$50,000 to extend the option period to April 30, 1990. In April of 1990, the
Company issued an additional 125,000 shares of its common stock in order to
extend the option period to June 30, 1990. The Company exercised the option on
June 30, 1990 by paying the owner $150,000 cash, which represents lease
consideration of $50,000 and a $100,000 down payment on the purchase of the
equipment. To complete the equipment purchase, the Company agreed to pay an
additional $100,000 in cash in three equal semi-annual installments, which
have been paid. The Company's investment in this property is $4,554,575 at
June 30, 1997, consisting of $327,336 of land and land options, $2,251,714 of
development costs, and $1,975,525 of mining equipment.

<PAGE>
Pursuant to the terms of the lease, which was most recently modified on
November 1, 1994, the Company must pay a 7-1/2% net smelter royalty on all
minerals produced from lode deposits and 10% on minerals produced from placer
deposits with a minimum lease payment of $10,000 per month through June 30,
2000, subject to an adjustment based on the Consumer Price Index. The lease
may be extended for two additional five-year periods or the property may be
purchased for $4,000,000 subject to adjustment based on the Consumer Price
Index payable by June 30, 2000. All payments made subsequent to July 1, 1995,
to acquire the lease/option and all payments made under the lease subsequent
to July 1, 1995, will be credited against the option purchase price.
Performance under the lease purchase agreement is secured by the Company's
equipment used in the mining operations on the leased premises.

During 1997, the Company negotiated modification agreements for the Ruby
Mine and the Rising Sun Mine (see below) to pay, in cash, one month lease
payment in arrears, increase the amount of equipment held as collateral
pursuant to the Ruby Mine and the Rising Sun Mine lease agreements by filing
UCC-1 financing statements listing the additional equipment, all right, title
and interest of certain "ore specimens" for which Ruby Development Co., Inc.
will credit the value against past due minimum royalty payments and grant Ruby
Development Co., Inc. an option to purchase up to 50,000 shares of the
Company's common stock at a price of $.25 per share until July 1, 1999.

The Ruby Mine is an underground placer and lode mine located between
Downieville and Forest City, California in Sierra County. The Ruby Mine
consists of two patented claims comprising approximately 435 acres and 37
unpatented claims comprising approximately 1,150 acres. The mine encompasses
four distinct underground river channels and three known lode gold veins.

All of the unpatented claims in the property package are in good standing
with assessment work documents for 1997 filed with both the BLM in Sacramento
and Sierra County in Downieville. The patented claims of the Ruby Mine are
fully permitted for underground exploration, small scale development and small
scale production. However, a waste discharge permit is required and a plan of
operation must be filed with the U.S. Department of Forestry before operations
can be expanded beyond the current 225 tons-per-day.

Production began at the Ruby Mine in the late 1870's when approximately
50,000 ounces of gold were extracted from what became known as the Old Ruby
Channel. In the 1930's, the Ruby Mine was purchased by Clarence L. Best, who
produced gold from the mine until it was closed in 1942 by War Production
Board Order L- 208. High labor rates and a gold price freeze kept the Ruby
Mine from re-opening. In the 1950's, the Ruby Mine was sold and was
subsequently mined by small operators until the mid-1970's. In 1979, the mine
was leased to Alhambra Mines, Inc. After limited rehabilitation, Alhambra
Mines, Inc. failed to make lease payments and the Ruby Mine reverted to its
owner.

The majority of the historical production at the Ruby Mine has come from
underground placers. Since 1942 virtually no new ground has been opened and
most of the attention has been directed at the Wolf lode vein and the Big Bend
area of the Black Channel, a famous underground placer. Due to extensive
overburden of up to 700 feet on the property, the only way new reserves will
be established is from underground, utilizing mapping, sampling, and drilling
techniques and by opening new ground.

<PAGE>
The Ruby Mine hosts a gold recovery washing plant with all associated
equipment, a mill building, and a separate compressor building in good
condition. The Ruby Tunnel has been rehabilitated, retimbered and refitted.
The underground workings include 30-pound mine rail and electrical and
ventilation equipment. The Ruby Mine has compressors, generators and an
electric train with sufficient haulage capacity to feed a 200 ton
per-day-mill. There are 21 mine ore cars and a Mancha locomotive in good
condition on the property.

The Ruby Mine is accessible via State Highway 49 to Pliocene Road to the
Henness Pass paved road then via five miles of paved and gravel road. Power is
generated on the site.

The Company filed its plan of operation for the Ruby and Carson Mines
with the United States Forestry Department, and has obtained all necessary
permits for production and milling at the Ruby Mine of up to 225 tons of
material per day. The mine, if operated, however, has been operating at less
than 225 tons of material per day. From February 1992 when the Company began
limited production at the Ruby Mine to December 1992 when the Company ceased
production due to inclement weather, the Company milled approximately 7,300
tons of mineralized material and recovered approximately 200 ounces of gold,
an amount which is inconsistent with historical production at the Ruby Mine in
the early 1900's, and is insufficient in total quantity to be a reliable
representative sample of the expected grade of the mineralized gravel.
Consequently, no assurances can be given that future production will result in
grades of similar or historical amount. Furthermore, the Company has not
completed sufficient geological activities and drilling to establish proven or
probable ore reserves at the Ruby Mine. The Company has no present intention
of conducting further geological exploration and drilling to establish ore
reserves at the Ruby Mine at this time.

From December 1992 when the Company ceased production at the Ruby Mine
until July 2, 1993, when the Company recommenced production, the Company
rehabilitated and re-timbered approximately one and one-quarter miles of
horizontal haulage tunnel supports and a 210 foot vertical shaft for mine
safety, built underground roads for use by diesel loaders, constructed a new
sixty-foot steel head frame and installed a hoist over the Lawry Shaft at the
Ruby Mine, installed a complete underground ventilation system and electrical
system at the Lawry Shaft, constructed a new waste water treatment system for
use at the mill site, modified and enlarged the structures and ore bins at the
mill site, and removed two main mill and warehouse structures at the Carson
Mine.

The Company commenced production in the Lawry Shaft, a new area of the
Ruby Mine, on July 2, 1993, and in August 1993 recommenced production in the
Black Channel of the Ruby Mine where most of the production occurred between
February 1992 and December 1992. The Company has completed the sixty foot
steel head frame at the Lawry Shaft and set-up electrical lines and
constructed a hoist house, with associated hoist equipment.

The Company recommenced production in the Lawry Shaft on June 26, 1994.
Underground programs consisted of driving exploration drifts towards potential
primary channels. Sampling programs were undertaken to allow the mining of
approximately 5,000 tons of material. The Company drove a total of
approximately 430 feet downstream and 520 feet upstream in the Lawry Channels.
The Lawry shaft is currently under care and maintenance as the Company
concentrates on its hard rock targets.

<PAGE>
RISING SUN MINE.

In December of 1989, the Company issued 10,000 shares of its common stock
for an option to lease the Rising Sun Mine. On June 30, 1990, the Company
exercised the option upon payment of $20,000 cash and entered into a five year
lease with an option to purchase. Pursuant to the terms of the lease, which
was most recently modified on November 11, 1994, the Company must pay a net
smelter royalty of 8% on all minerals produced with a minimum royalty of
$4,590 per month, through June 30, 2000, subject to an adjustment based on the
Consumer price index. The property may be purchased for $1,000,000 payable on
or before June 30, 2000, subject to adjustment based on the Consumer Price
Index. All payments made to acquire the lease/option and all payments made
under the lease will be credited against the option purchase price. See the
discussion of the Ruby Mine above for information on the modification
agreement entered into in 1997. The Company's investment in this property is
$139,091 at June 30, 1997, consisting of $9,111 of land and land options and
$129,980 of development costs.

The Rising Sun Mine is an underground lode gold mine located
approximately three miles southeast of Allegheny, California. It consists of
four patented claims comprising approximately 52 acres, three unpatented
claims comprising approximately 60 acres, and one placer claim comprising 10
acres.

The Rising Sun Mine produced gold as early as 1882. By 1883 two tunnels
had been driven and production is estimated to have exceeded 3,000 ounces of
gold. The Rising Sun Mine closed after an attempt to design and construct a
mill failed in the 1890's. During the early 1960's the Mine re-opened and
considerable drilling and raising was conducted in an effort to intersect the
Rising Sun Vein and Cedar Vein. Mining ceased as custom milling became
prohibitively expensive. In 1960, the Rising Sun Mine was acquired by the
Rising Sun Development Company. In 1973, G.R. Beechel completed a mapping
program and compiled a list of recommendations for further work.

There is a generator, compressor, rock drills, and a mucking machine on
the property. The overall ground condition of the mine is good. Since the
early 1960's, the Rising Sun Mine has operated on a care and maintenance level
only. Currently, however, the Company is driving around a caved in area in an
attempt to get to the face of the drift where high-grade assays have been
reported. The Company also is attempting to find the potentially high grade
intersection of the Belmont and Rising Sun veins.

The Rising Sun Mine is accessible via Kanaka Creek Road, a graveled road.
The property will require on-site generators to supply power.

<PAGE>
CARSON MINE.

The Carson Mine is located in Sierra County, California, on the western
slope of the Sierra Nevada Mountain Range. Access to the Carson Mine is by a
two mile dirt road, which connects the Henness Pass Road, an all weather paved
road. The nearest large population center is Grass Valley, about 40 miles
south of the site. Downieville is located two miles north of the Carson Mine.
Allegheny, California is approximately four miles south of the Carson Mine.
The Carson Mine, also known as the City of Six Mine, is an underground mine
and consists of 21 unpatented lode claims and two unpatented placer claims
comprising approximately 550 acres. The Company's investment in this property
is $3,294,424 at June 30, 1997, consisting of $2,199,858 of land and land
options, $1,051,731 of development costs, and $42,835 of mining equipment.

The City of Six gravel deposit was discovered at the site of the Carson
Mine in the 1850's. The property was operated as a hydraulic pit until 1886,
when hydraulic mining was stopped in California by judicial mandate. From 1860
to 1879, the gravel was worked underground by drift mining. Reports from 1879
indicate that a channel had been tunneled from the City of Six pit to Rock
Creek, a distance of about one mile.

Work began on the Carson Mine in the mid 1920's. By 1930, two adits had
been driven on the Carson Mine vein; the upper adit 925 feet and the lower
adit about 2,600 feet. The two adits are separated vertically by 460 feet and
on the dip by 500 feet. From 1932 to 1942, a 500 foot raise was constructed
from the lower level to the upper level. The raise was used as an ore pass,
allowing ore mined on the upper level to be transported from the lower level.

A 30 foot winze is operable in the same areas as the raise. The winze
accesses the vein about 25 feet downdip from the upper level. The vein has
been drifted on for 60 feet to the south from the winze. A 14-foot cross cut
connects the main raise with the winze sub level. The main rise is open from
the winze sub level downward, for about 350 feet on the vein. The bottom 125
feet of the raise above the lower level is plugged with ore and muck as is
that above the upper level. The underground portion of the property has
20-pound mine rail in good condition.

In the early 1980's, the Carson Mine was sold to Golden Lion Mining
Corporation. Golden Lion's work consisted of rehabilitation of the upper adit,
construction of a 30 foot winze in the upper adit, and limited stopping both
above and below track level in the upper workings. In 1986 and 1987, a 50
tons-per-day gravity circuit mill was constructed on the property. In 1988,
Golden Lion Mining Corporation leased the Carson Mine to the Ireland Mining
Corporation, which operated the Carson Mine to July of 1990 when it was
acquired by the Company.

On July 31, 1990, the Company acquired the Carson Mine, together with the
improvements, inventory and equipment located on the property, from Golden
Lion Mining for a total consideration of approximately $2,299,000. The
consideration paid to Golden Lion Mining consisted of $50,000 cash, an $89,000
promissory note due August 15, 1990, 502,070 shares of common stock, and an
agreement to deliver 61.3 ounces of gold bullion by August 1, 1992. In
addition, Golden Lion Mining had forward sold 2,000 ounces of gold to four
individuals. As further consideration, the Company assumed Golden Lion
Mining's forward sell obligation by issuing a total of 781,072 shares of its
common stock. Finally, the Company issued 976,000 shares of common stock to
Ireland Mining Corporation in consideration for Ireland Mining Corporation
terminating its lease and option to purchase the property with Golden Lion
Mining.

<PAGE>
All of the unpatented claims in the property package are in good standing
with assessment work documents for 1997 filed with both the BLM in Sacramento
and Sierra County in Downieville. However, a waste discharge permit is
required and a plan of operation must be filed with the U.S. Department of
Forestry before full scale mining may begin.

The Carson Mine previously had a 50 tons-per-day gravity flow mill and
mill housing which was in need of engineering and structural work to meet
current building codes. A large seven-bedroom cabin, a smaller cabin that has
been improved and a mobile home are currently located on the Carson Mine
property. Although not currently planned for production in the next fiscal
year, when the Company does begin production at the Carson Mine it intends to
mill the ore at the Ruby mill site. Power at the Carson Mine is supplied by
Pacific Gas and Electric Company, a public utility.

The upper level of the Carson Mine is fully supplied and operational for
small scale operations. Air and water lines are installed throughout and
adequate natural ventilation is assisted by a 12 foot fan. This level is
serviced by a 925 foot traced adit, the entire length of which is open. A
raise, which was once open to the surface (125 ft.), is present about 600 feet
in by the portal. A north-south subdrift is present off the raise for 150
feet.

On July 24, 1990, the Company obtained from an independent mining
laboratory 64 channel samples of ore from the Carson Mine. Each sample weighed
approximately 25 pounds and had an average width of over 4.6 feet. Samples
taken yielded an overall uncut weighted average of 5.45 ounces of gold per
ton. These substantial-grade ore shoots were tested in two levels with a
distance of 400 feet vertical separation. All of the assays occurred within a
strike length of 125 feet. On August 29, 1990, the Company received
confirmation of these substantial grades from a separate independent mining
laboratory. The confirmation report consisted of nine channel sample checks of
ore taken from the Carson Mine. Although no assurances can be given that these
substantial grades will continue through the length of the entire vein, the
strike length potential of this vein is believed to be 4,100 feet and is
thought to extend into additional ground currently controlled by the Company.
In order to determine the magnitude of its discovery and to evaluate its
findings further the Company has completely mapped and sludge drilled the vein
system in the exposed portions of the Carson vein. Because the Company decided
to begin production at the Ruby Mine, the Company postponed further
development at the Carson Mine.

The Company also has 16 lode claims named the BC Claims which are located
on the northern border of the Carson Mines.

HIGH COMMISSION MINE.

In September of 1990, the Company entered into an agreement to purchase
the High Commission Mine for 50,000 shares of the Company's common stock and
$30,000 in cash. The Company's investment in this property is $107,993 at June
30, 1997, consisting of $101,875 of land and land options, and $6,118 of
development costs.

The High Commission Mine is located in the Allegheny-Forest-Downieville
mining districts in Sierra County, California, approximately one-half to two
miles northeast of Downieville. The High Commission Mine is an underground
mine and consists of 22 unpatented lode claims comprising 440 acres and five
unpatented placer claims comprising 500 acres. The unpatented claims in the
property package are in good standing with assessment work documents filed
with both the BLM in Sacramento and Sierra County in Downieville. Its current
configuration is a consolidation of four past producing gold mines.

<PAGE>
THE HIGH COMMISSION, THE BIG LEDGE, THE MEXICAN, AND THE GOLDEN STAR.

The High Commission Mine was discovered in 1888 and produced
approximately 1,234 ounces in a bunch of arsenopyrite from the sinking of an
18-foot shaft. In addition, approximately 177 ounces were produced about 1914.

Three veins were developed on the property, the High Commission, Big
Ledge, and Mexican. The High Commission has a 280-foot tunnel with a quartz
vein averaging 4.5 feet and carries free gold and arsenopyrite. The strike was
over three miles on the surface. The Big Ledge vein is 11 feet wide, carries
free gold and no sulphide, and parallels the High Commission vein. The
subsequently developed Mexican vein parallels and is 300 feet in length. Both
tunnels were in pay shoots, with open cuts occurring over 900 feet. Quartz
fissure veins occur along a slate foot wall and porphyry hanging wall contact
which carry free gold, arsenopyrite and pyrite mineralization. The veins vary
from two to fifteen feet in width and the parallel vein 40 feet west averages
four to five feet in width. The strike is north, dips 70 to 80 degrees east,
and has a length on surface of 3,000 feet.

The geology of the property consists mainly of the Calaverous Formation,
Carboniferous Period, comprised of slate, quartzite and porphyry. The quartz
veins carrying the free gold mineralization occur along the porphyryslate
contact within a 300 to 400-foot shear zone associated with the Melonese Fault
Zone. The High Commission, Big Ledge and Mexican veins all occur within this
wide contact rock formation. The veins vary from a few inches up to 20 feet in
width, striking mainly a north-south direction and dipping 70 to 80 degrees
east. Another vein formation strikes northeast and dips 60 degrees northwest.
The zone appears to be altered and mineralized.

The High Commission Mine is accessible by State Highway 49. The property
will require on-site generators for power. Because of the Company' focus on
the Ruby Mine, the Company has put the High Commission on a care and
maintenance program.

KATE HARDY MINE.

The Kate Hardy Mine was discovered in 1860 and is an underground lode
gold mine located in Sierra County, California, and is approximately three
miles south of the Brush Creek Mine. The Kate Hardy Mine consists of two
patented claims comprising approximately 42 acres and 15 unpatented claims
comprising approximately 320 acres. The Company's investment in this property
is $156,456 at June 30, 1997, consisting of $58,667 of land and land options,
and $97,789 of development costs.

In 1957, Richmond Flatland, Sr. acquired the Kate Hardy Mine. In the mid
to late 1970's, various attempts were made to rehabilitate the Kate Hardy
Mine. On June 30, 1992, the Company entered into a lease effective March 23,
1992, in the form of a mining option agreement for a term of five years
expiring March 22, 1997. The Company paid a $50,000 payment (initial option
payment) upon the execution of the agreement; and during the term of the
lease, must pay $5,500 per month for each month during the first year; $6,500
per month during the second year; $7,500 per month during the third year;
$8,500 per month during the fourth year; and $9,500 per month during the fifth
year. In addition, the Company must pay a 6% net smelter royalty on all
minerals produced. The option purchase price for the mine is $1,500,000 less
75% of all option payments paid up to a maximum of $750,000.

<PAGE>
The Kate Hardy Mine contains a quartz vein on a reverse fault. The vein
is traceable along the surface for approximately 1,500 feet and disappears
under tertiary lava both to the north and the south. The vein varies in width
from a few inches to over 55 feet. Dykes of gabbro and serpentine cut the vein
irregularly. Considerable slate has been replaced by carbonate close to, and
within, the vein. Mariposite is erratic in distribution and is not necessarily
confined to the exposed serpentine zones. Historically, the best gold
production has come from the foot wall and hanging wall portions of the vein.
The vein core is largely barren bull quartz. Sulphide minerals associated with
gold in the vein include arsenopyrite, pyrite, galena and trace sphalerite.

Development has been carried out over 2,700 feet of strike length on the
Principal No. 1 North and South Drifts. The vein has been developed on five
levels, two of which are accessed by an internal shaft. Stopping has been
carried out with three principal blocks over a vertical range of 600 feet.

The Kate Hardy mine has been in a care and maintenance level since 1975.
The site has a 100 tons-per-day gravity flow mill which requires some
upgrading and repair. The underground workings in the south adit are in fair
condition with appropriate 20-pound mine rail and all electrical and
ventilation utilities installed. The north adit is caved-in for approximately
75 feet and will have to be rehabilitated with new timbering before access to
the north section of the property is permitted. There is a corrugated mill
building in fair condition and an equipment building in fair condition on the
property.

The Company has been permitted to dewater the mine. This will allow the
Company access to approximately 16,000 tons of ore and will enable the Company
to explore the O'Donnell winze and the five existing ore shafts.

The Kate Hardy Mine is accessible by Mountain House Road, a graveled
road. Power is supplied by Pacific Gas and Electric Company, a public utility.

During 1997, the Company paid $10,000 to the Kate-Hardy Mine lessor to
extend the lease agreement for an additional three month period. The extension
expired on June 27, 1997. No other extensions and/or agreements had been
negotiated to date.

OMEGA MINE.

The Omega Mine is an underground drift placer mine in Sierra County,
California, and is contiguous with the Kate Hardy Mine and is covered by the
Kate Hardy lease referred to above. The Omega mine consists of seven
unpatented claims comprising approximately 440 acres.

All claims in the property package are in good standing with assessment
work documents for 1997 filed with both the BLM in Sacramento and Sierra
County in Downieville. However, a waste discharge permit is required and a
plan of operation must be filed with the U.S. Department of Forestry before
full scale mining operation may begin. The Company has no current plans to
obtain such a permit or file such a plan.

The Omega Mine was active during the 1920's and 1930's when a labyrinth 9
of tunnels exceeding 2,000 feet was driven in the underlying serpentine mainly
in pursuit of high grade pay streaks. Raises were driven to access stopping
areas in the gravel. In 1957, Richmond Flatland, Sr. acquired the Omega mine.
There was no activity on the claims until 1980, at which time the underground
workings were completely remapped. Most of the gravel was found to be of
igneous origin containing a small percentage of white quartz cobbles. Cobbles
vary from a few inches to twelve inches in diameter and are tightly cemented
by sand and silt.

<PAGE>
Before any production may begin at the Omega Mine, the underground
workings will have to be retimbered. There is no equipment at the mine site at
the present time.

The Omega Mine is accessible by Mountain House Road, a graveled road.
Power is supplied by Pacific Gas and Electric Company, a public utility.

NEW CALIFORNIA PLACER MINE - SIERRA COUNTY, CALIFORNIA.

In February 1997, the Company entered into an exploration license and
option to purchase the New California Mine for 20,000 shares of the Company's
restricted stock and $10,000 payable annually for up to a three year period.
The purchase price is $250,000 should the Company decide to exercise that
option under the agreement.

The New California Mine is an unpatented placer mine containing
approximately 800 acres of land and is located between Poker Flat and Gardners
Point. The unpatented claims are in good standing.

WILBANK'S PLACER AND LOADE MINE - POKER FLAT MINING DISTRICT.

In March 1997, the Company entered into an exploration license and option
to purchase the Wilbanks claims for a $10,000 cash payment and $1,000 per
month during the option period. The purchase price is $200,000 should the
Company exercise that option. The Company has, under the terms of the
agreement, an additional five year term to purchase the property for $300,000
payable at $2,000 per month.

The property contains approximately 46 acres of land and is strategically
located in the diamond exploration center of the Poker Flat Mining District.
There are three unpatented placer claims and one unpatented lode claim, and
all are in good standing with the Bureau of Land Management. The Company is
exploring for diamonds, and not for gold, in the Placer Flat Mining District.

THE POKER FLAT DISTRICT: (DIAMOND POTENTIAL).

In 1872, two diamonds were recovered from Brush Creek's Garner's Point
property and one diamond was cut into a one carat stone. These two diamonds
were recovered from a 109 square foot area of a 30 foot thick section of the
paleoplacer gold deposit. A diamond was recovered from hydraulic tailings in
Slate Creek, adjacent to the west side of Gardner's Point.

Based upon historical data and other relevant information, the Company
hired a consulting geologist who sampled the drainage areas around Gardners
Point and proceeded to take stream sediment samples and rock chip samples for
diamond indicator minerals. Initial results of the samplings were positive.
The Company staked 199 unpatented lode mining claims in the old mining
district of Poker Flat. Over a three month period the Company performed
additional sampling and testing for diamond indicator minerals, and recent
results have continued to be encouraging.

The Company phase exploration program is complete. The Company is
attempting to negotiate a joint venture with certain diamond mining companies
to continue the exploration and development of the property.

<PAGE>
Unpatented Property Interests.

The Company has acquired rights to explore for and produce minerals on
federally owned lands and paid all required fees to maintain the unpatented
claims. The Company acquired these rights through the acquisition of
previously located mining claims from the claimant or through the location of
unpatented mining claims upon unappropriated federal land pursuant to
procedures established by the General Mining Law of 1872, the Federal Land
Policy and Management Act of 1976, and various state laws. These referenced
laws generally provide that a citizen of the United States, including a
corporation, may acquire a possessory right to explore for and to develop and
produce valuable mineral deposits discovered upon unappropriated federal
lands, provided that such lands have not been withdrawn from mineral location.
Withdrawn lands would include, for example, lands included in national parks
and military reservations and lands designated as part of the National
Wilderness Preservation System (NWPS).

The location of a valid mining claim on federal lands requires the
discovery of a valuable mineral deposit, the erection of appropriate
monuments, the posting of a location notice at the point of discovery, the
marking of the boundaries of the claim in accordance with federal law and the
laws of the state in which it is located, and the filing of a notice or
certificate of location and a map with the BLM and the real property recording
official of the county in which the claim is located. Failure to follow the
required procedures may render the mining claim void. If the statutes and
regulations for the location of a mining claim are complied with, the locator
obtains a valid possessory right to explore for, develop and produce minerals
from the claim. This property right can be freely transferred and is protected
against appropriation by the government without just compensation. Also, the
claim locator acquires the right to obtain a patent (or deed) conveying fee
title to his claim from the federal government upon payment of fees and
compliance with certain additional procedures.

Unpatented mining claim interests possess certain unique vulnerabilities
not associated with other types of property interests. For example, in order
to maintain each unpatented mining claim, the claimant must annually perform
not less than $100 worth of work or improvements on or for the benefit of the
claim and must file with state and federal authorities an affidavit attesting
to the performance of such work. Although currently not a requirement, the
Company feels it should continue to file proofs of labor to prevent adverse
claimants from occupation of the claim and to have a proper chain of title
should the Company decide to apply for patents. In addition, the Bureau of
Land Management currently assesses a $100 per claim rental fee which, if not
paid annually before August 31 of each year, invalidates the unpatented
claims. In the fiscal year ended June 30, 1996, the Company paid approximately
$16,000 of rental fees to the Bureau of Land Management to validate said
claims. Failure to perform such work will render the claim subject to
relocation by third parties and constitutes abandonment of the claim. Further,
because mining claims are often located with less then sophisticated surveying
techniques, great difficulty may arise in determining the validity and
ownership of specific mining claims. Moreover, under applicable regulations
and court decisions, in order for unpatented mining claims to be valid against
a governmental challenge, the claimant must be able to prove that the mineral
deposit on which the claim is based can be mined at a profit. Thus, it is
conceivable that, during times of declining metal prices, claims that were
valid when located could be invalidated by the federal government.

<PAGE>
Item 3. LEGAL PROCEEDINGS.

During fiscal 1996, the Company entered into two significant settlement
agreements involving claims made by Zuri Invest A.G., et al. and the Royal
Bank of Scotland, et al. which in effect resolved all material litigation
against the Company. The terms of the settlement with the Royal Bank were
amended in fiscal 1997.

THE ZURI INVEST ACTION.

During the fiscal year ended June 30, 1997, the Company completed its
obligations to the Zuri Plaintiffs (as defined below) under a settlement
agreement entered into on December 14, 1995 (the "Zuri Agreement") with Zuri
Invest A.G., Andre Michaels and Peter Woodfield (the "Zuri Plaintiffs"), in
connection with an action which had been commenced in December 1991 (the "Zuri
Invest action"), to partially satisfy the joint and several judgment entered
in the Zuri Invest action against the Company and Simone Anderson and James
Anderson (collectively, the "Andersons") on October 31, 1995 (the "Judgment").
The Zuri Plaintiffs agreed, subject to the receipt of the consideration
described below, not to seek any further recovery directly from the Company on
the Judgment, and to release the Company from any further liability
thereunder. The Zuri Plaintiffs also agreed not to pursue recovery against the
Andersons on the Judgment if it is judicially determined that the Andersons
have indemnification rights against the Company with respect to the Judgment.
The Company issued and delivered to each of Woodfield and Michaels 250,000
shares of the Company's Common Stock. The Company issued 600,000 shares of the
Company's Common Stock to Zuri Invest and delivered 200,000 of such shares to
Zuri Invest on or about April 10, 1996, 200,000 shares on or about June 11,
1996, and the remaining 200,000 shares on or about September 9, 1996. As
security for the Company's obligations to issue and deliver the above
described shares of Common Stock, the Company issued a promissory note in the
amount of $1.2 million payable to the Zuri Plaintiffs. The note was secured by
a deed of trust on all real property and patented and unpatented mining claims
owned by the Company. Pursuant to the Zuri Agreement, the principal amount of
the note shall be reduced as the shares issued to the Zuri Plaintiffs are
sold, dollar for dollar by the gross proceeds generated from such sales until
such time as sales collectively total in gross $1.2 million at which time the
note shall be deemed paid. Notwithstanding the foregoing, the note shall also
be deemed paid after the passage of 180 days after the last distribution of
shares which, as stated above, was distributed in September 1996. As a result
thereof, such note has been deemed paid by the Company.

Pursuant to the Zuri Agreement, the Company also assigned to the Zuri
Plaintiffs an interest (33% of the Company's 60% interest) in claims asserted
against the Andersons and their controlled corporations in the action entitled
Brush Creek Mining and Development v. F. James Anderson, et al., currently
pending in the United States District Court, Northern District of California.

THE ROYAL BANK ACTION.

<PAGE>
Company was further required to deliver to each of the Royal Bank Plaintiffs,
at his or her option, additional shares of the Company's common stock or
additional cash. The number of shares of Common Stock or the amount of cash
each Royal Bank Plaintiff would be entitled to receive is based on the amount
of his or her pro rata interest in amounts paid by the Company pursuant to the
Royal Bank Agreement. If all Royal Bank Plaintiffs would elect to receive
Common Stock, the Company would be required to issue and deliver a maximum of
300,000 shares in the aggregate and if all Royal Bank Plaintiffs elect to
receive cash, the Company would be required to deliver cash in the maximum
aggregate amount of $600,000.

Prior to December 13, 1996, the Royal Bank Plaintiffs elected to receive
$600,000 in cash pursuant to the term of the Royal Bank Agreement. On or about
December 17, 1996, the Company received notice from the Royal Bank Plaintiffs
that the Company was in default of its obligation to pay them $600,000 on
December 13, 1996. Under the Royal Bank Agreement, such default caused the
Company to incur an immediate $3.25 million debt to the Royal Bank Plaintiffs.
Subsequently, in January 1997, the Company entered into a Forbearance
Agreement (the "Forbearance Agreement") with the Royal Bank Plaintiffs which
provided that notwithstanding the $3.25 million obligation, the Royal Bank
Plaintiffs will forbear from exercising their rights and remedies against the
Company provided the Company makes a payment of $629,100 on or before March
20, 1997 and a payment of $175,000 on or before July 1, 1997. The Company has
the option to postpone the second payment ($175,000) by delivering written
notice to the Royal Bank Plaintiffs no later than June 25, 1997 whereupon the
second payment shall be paid no later than December 15, 1997 and the amount
shall be increased to $250,000. The Company also agreed to reimburse the Royal
Bank Plaintiffs for their attorney fees and costs. Thereafter, the Royal Bank
Plaintiffs agreed to extend the time period for paying the $629,100 to them
until May 15, 1997. In addition, the second payment was increased to $225,000
to be payable July 1, 1997 provided it may be postponed until December 15,
1997 in which event the amount shall be increased to $300,000. The amount
which was due May 15, 1997 was not paid by such date. However, as of June 2,
1997, the Company entered into an Amendment No. 2 to the Forbearance Agreement
("Amendment No. 2") which, among other things, provided that the Royal Bank
Plaintiffs shall continue to forbear from exercising its rights and remedies
under the Royal Bank Agreement and related Forbearance Agreement, provided the
Company performs the following: (a) pay $896,000 in eight installments of
$112,000 each on May 31, July 31, September 30 and November 30, 1997 and
January 31, March 31, May 31 and July 31, 1998 (the "Periodic Payments"), (b)
pay $250,000 on or before September 30, 1998, (c) makes payments of $25,000
within five business days after any closing(s) since March 20, 1997, of any
single or series of sale-leaseback transaction(s) which the Company shall have
received in the aggregate of at least $65,000 in proceeds, and (d) makes a
final payment on or before September 30, 1998 of the Judgment Amount (as
defined in the Forbearance Agreement) less the aggregate amount of the
Periodic Payments previously paid, provided, however, that if the Company has
timely performed its obligations under its settlement documents with the
Plaintiffs and either (i) Plaintiffs have received all of the Periodic
Payments, or (ii) the Company makes one final payment in an amount set forth
in Amendment No. 2 which amount ranges from $950,000 if such final payment is
paid on or before May 31, 1997 to $350,000 if such final payment is paid after
May 31, 1998 and on or before July 31, 1998 (and assuming all Periodic
Payments coming due prior to the final payment has been made), and in such
event the Plaintiffs shall waive the enforceability of the Judgment Amount
against the Company and no further payments shall be required of the Company.
In addition, the Company has agreed that upon the execution of a Joint Venture
Agreement, the Company shall pay the final payment within 90 days after the
earlier of the date such joint venture is signed or effective date of a Joint
Venture Agreement. The Company has paid all Periodic Payments due to date.

<PAGE>
The Company has also agreed to issue 433,334 shares (the "Forbearance
Agreement Shares") of its Common Stock to the Royal Bank Plaintiffs. The
Company has agreed to register such shares for resale pursuant to a
Registration Statement to be filed with the Securities and Exchange
Commission. Also, the Company has agreed to issue to the Plaintiffs, from time
to time until the payments referred to above have been completed, .025 shares
of its Common Stock for each share issued in excess of 24,000,000 of the
Company's outstanding shares. Amendment No. 2 also provides that the Company
reimburse Plaintiffs for attorneys' fees and costs incurred in connection with
the preparation and negotiation of Amendment No. 2.

The Company's obligations under the Royal Bank Agreement are secured by
(1) a deed of trust on all real property and patented and unpatented mineral
claims owned by the Company; (2) a first priority security interest in all of
the Company's right, title and interest in and to any and all goods, products,
yield, receivables, inventory (including any gold from any mines), any and all
exploration and drilling information, data, maps, reports or surveys, and any
and all income and proceeds derived from the Company's mining operations on
property which the Company presently or subsequently owns or leases; (3) a
first-priority security interest in the Company's right, title and interest in
and to any total recovery by the Company on the claims against Bartel, Eng;
and (4) a stipulated judgment in the amount of $3,250,000.

In fiscal 1996, the Company registered the 1,616,667 shares of Common
Stock to be issued and delivered pursuant to the Zuri Agreement and the Royal
Bank Agreement, which included the 300,000 additional shares that may have
been issued pursuant to the Royal Bank Agreement as described above. This
number does not include the Forbearance Agreement Shares (as described above).

OTHER MATTERS.

In fiscal 1996 and 1997, the Company was requested pursuant to a
non-public informal inquiry by the staff of the Securities and Exchange
Commission, to provide information to the staff of the Commission regarding
the Company's financing activities in reliance upon Regulation S under the
Securities Act. The Commission advised the Company that the inquiry should not
be construed as an indication by the Commission or its staff that any
violations of law have occurred, nor should it be considered a reflection upon
any person.

On October 24, 1994, the Company filed an amended complaint against F.
James Anderson, Simone Anderson, Edward M. Lawson, Consolidated Sierra Gold
Mines, Inc. ("CSGM"), Independent Sierra Gold Mines, Inc. ("ISGM"), Bartel,
Eng, Miller & Torngren, attorneys, Robert Sibthorpe, Coopers & Lybrand and
Yorkton Securities as defendants in an action to recover damages. The suit was
filed in the United States District Court for the Northern District of
California as Case No. C94-3487 (the "Federal Action"). On April 28, 1995, the
Company filed a third amended complaint which seeks to recover damages against
James and Simone Anderson for breach of fiduciary duty, for violations of Rule
10b-5 and 16(b), and for violations of California Corporations Code Section
25400(d) and Section 25401. The lawsuit seeks to recover damages against
Edward M. Lawson, Robert Sibthorpe and Yorkton Securities, Inc. for breach of
fiduciary duty. The lawsuit seeks to recover damages against James and Simone
Anderson, ISGM, CSGM, Robert Sibthorpe, and Yorkton Securities, Inc. for
intentional and negligent misrepresentation. The lawsuit seeks to recover
damages against the firm of Bartel, Eng, Miller & Torngren based upon breach
of fiduciary duty and negligence claims. The law firm of Bartel, Eng, Linn &
Schroder has (as successor in interest to Bartel, Eng, Miller

<PAGE>
& Torngren) filed a counterclaim in this litigation seeking recovery from the
Company of legal fees totaling approximately $95,000. The accounting firm of
Coopers & Lybrand has been dismissed as a defendant from the litigation
without prejudice.

As to the progress of the case to date, an initial round of discovery has
been completed. On November 15, 1996, the court granted defendants Yorkton
Securities and Robert Sibthorpe's Motion for Summary Judgment. Subsequent to
entry of summary judgment in their favor, Yorkton Securities filed a cost bill
for the sum of $15,752.85 and Mr. Sibthorpe filed a cost bill for $3,842.83.
These costs are not payable until the conclusion of the litigation against all
other parties. The insurer for Bartel, Eng, Miller & Torngren is in
liquidation proceedings under the control of the California Department of
Insurance. The Company intends to file a claim in that liquidation proceeding
when claim forms are issued. The court has set a trial date for the remaining
parties of November 24, 1997.

On February 8, 1996, the Company filed a complaint against F. James
Anderson and Simone Anderson in Superior Court of the State of California, in
and for the County of Sacramento, Case No. 96AS 00513 (the "Sacramento
Action"). The complaint seeks (a) judicial determination and declarations that
the Company (1) has no further obligations to advance defense fees and costs
incurred by the Andersons in connection with the Zuri litigation, including on
the Andersons' appeal of that judgment (which fees and costs the Company
agreed to pay pursuant to a settlement in a previously resolved matter); (2)
is entitled to recoup defense fees and costs allocable to the Andersons'
defense of claims in the Zuri Invest litigation for which they were found
liable; (3) is not required to indemnify the Andersons for their liability in
the Zuri Invest litigation; (4) has no duty or obligation to the Andersons to
account for, replenish, and/or return monies to or pay interest on the
$200,000 provided by the Andersons as partial indemnification to the Company
in connection with the Royal Bank litigation; and (5) is entitled to have all
amounts returned to the Company from the $200,000 which were disbursed for the
purposes other than to indemnify the Company such that the Company receives
the full net benefit of the $200,000, and (b) equitable indemnification to
collect from the Andersons their proportionate share of the judgment in the
Zuri Invest litigation.

On April 4, 1996, the Company was served with the Andersons' answer to
the Sacramento Action and their cross-complaint against the Company. The
answer generally denied the allegations of the Company's complaint and
asserted various affirmative defenses. The cross-complaint seeks judicial
determination and declarations that the Company (1) is obligated to advance
the Andersons' defense costs (including costs of appeal) in the Zuri
litigation and defense costs in the Federal Action and (2) is obligated to
indemnify them from the judgment in the Zuri Invest litigation and any
judgment that might be rendered against them in the Federal Action.

Also, on April 4, 1996, the Company was served with a motion by the
Andersons for summary adjudication of two of their cross claims which would
have forced the Company to advance the Andersons' defense cost in the Zuri
litigation and the Federal Action. On May 3, 1996, the Andersons' motion was
heard by the superior court and denied.

The Company answered the Andersons' cross complaint on May 6, 1996
generally denying the allegations and asserting various defenses. Although the
Company has not done so to date, the Company may attempt to amend its original
complaint to assert an additional claim to hold the Andersons liable for the
entire amount of the Royal Bank of Scotland settlement.

<PAGE>
The Company is a party to other various claims, legal actions and
complaints arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the business or financial position of the Company.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders.

<PAGE>
PART II

Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's Common Stock is traded in the over-the-counter market and
is quoted on The Nasdaq SmallCap Market under the symbol BCMD.

The following table sets forth the range of the high and low bid
quotations for the Company's Common Stock for each period indicated during the
fiscal years ended June 30, 1996 and 1997.
<TABLE>
<CAPTION>

Period Bid Prices
- -------------- -----------
<S> <C> <C>

Fiscal 1996 High Low
- -------------- ----------- -----
First Quarter $ 4.31 $2.37
Second Quarter $ 2.88 $0.25
Third Quarter $ 1.00 $0.75
Fourth Quarter $ 1.94 $0.81

Period Bid Prices
- -------------- -----------

Fiscal 1997 High Low
- -------------- ----------- -----
First Quarter $ 1.06 $0.63
Second Quarter $ 0.63 $0.13
Third Quarter $ 0.31 $0.06
Fourth Quarter $ 0.44 $0.19
</TABLE>

The foregoing over-the-counter market quotations reflect inter-dealer
prices, without retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.

As of September 30, 1997 there were approximately 1,500 record holders of
the Company's Common Stock. The number of shares outstanding of the Company's
Common Stock as of September 30, 1997, was 41,949,483. The foregoing does not
include 433,334 shares and any additional shares of Common Stock to be issued
to the Royal Bank Plaintiffs under the Forbearance Agreement, as amended (see
Part I, Item 3 for a discussion thereof).

During the last two fiscal years of the Company, no cash dividends have
been declared or paid on the Company's Common Stock.

Other than unregistered sales of equity securities made in reliance on
Regulation S, during the fiscal year ended June 30, 1997, the Company sold the
following equity securities that were not registered under the Securities Act
of 1933: 3,600,005 restricted shares of Common Stock at $.0625 per share
wherein the Company received net proceeds of $225,000 in January and February
1997; 6,600,000 restricted shares of Common Stock at $.07 per share wherein
the Company received net proceeds of $460,600 in February through May 1997;
1,754,545 restricted shares of Common Stock at $.11 per share wherein the
Company received net proceeds of $193,000 in May and June 1997; and 1,400,000
restricted shares of Common Stock at $.125 per share wherein the Company
received net proceeds of $175,000. All shares were sold under Regulation D and
Section 4(2). Investors who acquired such shares were required to be
accredited investors. The Company has agreed to register the shares pursuant
to a registration statement to be filed with the Securities and Exchange
Commission. In addition, in March 1997, the Company cancelled all previously
issued options to directors and issued in place thereof 960,000 options
exercisable at $.225 per share. Also, in fiscal 1997, the Company issued
20,000 restricted shares of Common Stock, under Section 4(2) of the Securities
Act of 1933, in connection with the acquisition of the New California Placer
Mine.

<PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FISCAL YEAR ENDED JUNE 30, 1997 COMPARED WITH FISCAL YEAR ENDED JUNE 30, 1996

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1997, the Company had working capital deficit of $2,332,905,
which represents an increase in working capital deficit of $100,231 as
compared to a working capital deficit of $2,232,674 at June 30, 1996. The
decrease in working capital was primarily due to a decrease in available cash,
an increase in accounts payable and accrued liabilities partially offset by a
decrease in current portion of long-term debt.

The mining industry is capital intensive. During the fiscal year ended
June 30, 1997, the Company raised $2,111,101 from the sale of shares of Common
Stock. At June 30, 1997, the Company had a working capital deficit of
$2,332,905 and had no material revenues from mining operations. Additional
financing will be required in order for the Company to cover its mining and
development costs and to engage in full scale mining operation. At this time,
the Company has no definitive plans regarding additional financing, but
believes that it will likely be obtained through equity financing such as
stock offerings or joint ventures. No assurances can be given that the Company
will be able to raise cash from additional financing efforts and, even if such
cash is raised, that it will be sufficient to satisfy the Company's capital
requirements. If the Company is unable to obtain sufficient funds from future
financings and/or operations, the Company may not be able to achieve its
business objectives and may have to scale back its development plans. In
addition, the Company may be required to seek protection under the bankruptcy
laws.

During fiscal 1997, the Company sold equipment in order to meet some of
its obligations. In addition, the Company could lose some of its properties
for failure to make lease payments. On March 23, 1997, the Company's lease on
the Kate Hardy mine expired. However, the Company paid $10,000 to the Kate
Hardy lessor to extend the lease agreement on the Kate Hardy mine for an
additional three months. The Company is required to pay an additional $10,000
to extend the lease for another three month period. The Company also
negotiated a modification agreement with Ruby Development Co., Inc. to pay, in
cash, one lease payment in arrears for the Ruby mine, to pay in cash, one
month lease payment in arrears for the Rising Sun, increase the amount of
equipment held as collateral pursuant to the Ruby mine lease agreement by
filing a UCC-1 financing statement listing the additional equipment, all
right, title and interest of certain "ore specimens" for which Ruby
Development Co., Inc. will credit the value against past due minimum royalty
payments, and grant Ruby Development Co., Inc., an option to purchase up to
50,000 shares of the Company's common stock at price of $.25 per share until
July 1, 1999.

The Company estimates its mining development and operating costs to be
approximately $4 million for the fiscal year ending June 30, 1998. The
majority of the funds will be used for operations in the lower Brush Creek
mine and Ruby mill. Additional financing will be required to perform the
intended work. There can be no assurance that the Company will be able to
obtain such financing or that financing will be obtained on terms favorable to
the Company.

<PAGE>
RESULTS OF OPERATIONS

The Company had total revenues of $22,266 (from interest only) during
fiscal 1997 compared to total revenues of $42,160 (from interest only) during
fiscal 1996. The Company had no revenues from operations during fiscal 1997
and 1996. The Company had a $4,288,420 net loss for the fiscal year ended June
30, 1997, compared to a net loss of $9,270,102 for the fiscal year ended June
30, 1996. This change in net loss is primarily due to a reduction in general
and administrative expenses, general mining and exploration and a reduction in
expenses due to litigation settlement.

FISCAL YEAR ENDED JUNE 30, 1996 COMPARED WITH FISCAL YEAR ENDED JUNE 30, 1995

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1996, the Company had working capital deficit of $2,328,674,
a decrease in working capital of $2,475,597 as compared to working capital of
$146,923 at June 30, 1995. The decrease in working capital was due to the
expenses associated with opening several new areas of the Ruby Mine for
hard-rock mining, litigation fees and expenses, and a litigation settlement of
$2,389,668.

The Company estimated its mining development and operating costs to be
approximately $4 million for the fiscal year ended June 30, 1996. Actual
development and operating costs were $9,270,102. The Company raised $6,875,416
from the sale of securities pursuant to Regulation S under the Securities Act.
The majority of the funds were used for the operations in the Ruby Mine, and
at the Lawry, Irene and Wolf sites. The Company expected revenues from current
operations to increase. Revenues from operations were not sufficient. The
Company was able to fund continued operations from sales of Common Stock, so
it met its long-term liquidity requirements and kept its mining properties in
operation.

During the fiscal year ended June 30, 1996, the Board of Directors
approved options to purchase 747,000 shares of the Company's Common Stock,
ratified the settlement for the Zuri-Invest and the Royal Bank of Scotland
matters, and raised $6,875,416 from the sale of 6,783,503 shares pursuant to
Regulations S. Such shares were sold at a discount of between 35% and 50% of
the closing bid price of the Common Stock on the day before the sale.

RESULTS OF OPERATIONS

The Company had a $9,270,102 net loss for the fiscal year ended June 30,
1996, compared to a net loss of $4,671,396 for the fiscal year ended June 30,
1995. This loss was due to an increase in mining expenses, legal fees and
expenses and a litigation settlement of $2,389,668.

Item 7. FINANCIAL STATEMENTS.

See the Consolidated Financial Statements annexed to this report.

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

None.

<PAGE>
PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

There is incorporated by reference herein information which will be
contained in the Company's definitive proxy statement to be filed within 120
days of the Company's year end in connection with the annual meeting of
shareholders to be held in fiscal 1998.

Item 10. EXECUTIVE COMPENSATION.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Item 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS.

3.1 Articles of Incorporation of the Company with Amendments thereto.(1)

3.2 Amended and Restated Bylaws of the Company.(1)

4.1 Specimen Certificate for the Company's common stock.(1)

4.2 Form of Warrant Agreements.(1)

10.1 Voting Agreement between the Company, Simone M. Anderson and
EuroCanadian Securities Limited.(1)

10.2 Agency Agreement between the Company and Euro Canadian
Securities Limited.(1)

10.3 Stock Purchase Agreement between the Company, Simone M. Anderson and
Euro Canadian Securities Limited.(1)

10.4 Merger Agreement and Plan of Reorganization between the Company,
Sierra Gold Properties, Inc. and California Properties, Ltd.,and Addendum
thereto.(1)

10.5 Lease Purchase Agreement for the Ruby Mine, and Modifications
thereto.(1)

10.6 Modification of Lease Purchase Agreement for the Ruby Mine dated
November 1, 1994.(7)

<PAGE>
10.7 Agreement to Lease with Option for the Rising Sun Mine, and
Modifications thereto.(1)

10.8 Agreements to Purchase Carson Mine.(1)

10.9 Agreement to Purchase High Commission Mine.(1)

10.11 Promissory Note between the Company and Consolidated Sierra Gold
Mines, Inc.(1)

10.12 Promissory Note between the Company and Independent Sierra Gold
Mines, Inc.(1)

10.13 Consulting Agreement between the Company and Consolidated Sierra
gold Mines, Inc.(2)

10.14 Revolving Credit Facility between the Company and Consolidated
Sierra Gold Mines, Inc.(1)

10.15 Stock Option Agreements for G. Michael Pickering.(1)

10.17 Credit Facility Agreement between the Company and Epsom Investment
Services N.V.(1)

10.18 Settlement Agreement between the Company, Simone Anderson, Euro
Canadian Securities Limited, and Georges Benarroch.(1)

10.19 Agency Agreement between Epsom Investment Services N.V. and the
Company.(1)

10.20 Letter Agreement with Grande Portage.(1)

10.21 Letter Agreement with the All-Union Research Institute of Geology of
Foreign Countries (VZG).(1)

10.22 Contract for Services between the Company and F. James Anderson.(7)

10.23 Stock Option Agreement with Simone Anderson.(7)

10.24 Stock Option Agreement with G. Michael Pickering.(7)

10.25 Stock Option Agreement with Edward Lawson.(7)

10.26 Stock Option Agreement with Susan Miller.(7)

10.27 Stock Option Agreement with Michael Skopos.(7)

10.28 Stock Option Agreement with Dave Trueman.(7)

10.29 Stock Option Agreement with Peter LeCoutier.(7)

10.30 Lease on the Kate Hardy - Omega Mines.(3)

10.31 Letter of Agreement with Morrison Knudsen.(4)

10.32 Joint Venture Agreement with MK Gold Company.(5)

10.33 Modification of Lease Purchase Agreement for Rising Sun Mine dated
November 1, 1994.(7)

10.34 Letter agreements regarding option to lease Dreadnaught Mine.(7)

<PAGE>
10.35 Settlement Agreement between the Company, Zuri Invest, A.G., Andre
Michaels and Peter Woodfield.(7)

10.36 Settlement Agreement between the Company, Werner Aeberhard, Chris
Lambrianos, Mikis Theodosiou, Andreas Samuel, as Executor of the Estate of
Dinos N. Samuel, Tania Bruntsfield, Jacques Philippou and the Royal Bank of
Scotland, A.G.(7)

11.1 Computation of per share earnings.

16.1 Letter regarding change in certifying accountant.(6)

21.1 List of Subsidiaries of the Company.

23.1 Consent of Brown Armstrong Randall & Reyes, CPA's.

(1) Incorporated by reference to the Company's Registration Statement on
Form S-1, File No. 33-39867, and pre-effective amendments thereto which was
previously filed with the Commission on April 8, 1991.

(2) Incorporated by reference to the Company's Registration Statement on
Form S-8, File No. 33-38646, which was previously field with the Commission on
January 23, 1991.

(3) Previously filed in connection with the Registration Statement on Form
S-3, File No. 33-45174, and combined Registration Statement on Form S-3, File
No. 33-63374.

(4) Previously filed on Form 8-K on September 10, 1992.

(5) Previously filed on Form 8-K on June 15, 1994.

(6) Previously filed on Form 8-K on July 12, 1994.

(7) Previously filed on Form 10-KSB on September 28, 1995.

(8) Previously filed in connection with the Registration Statement on Form
S-3, File No. 333-286.

(b) REPORTS ON FORM 8-K.

Listed below are reports on Form 8-K filed during the last quarter of the
period covered by this report:

None.

<PAGE>

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

BRUSH CREEK MINING AND
DEVELOPMENT CO., INC.
(Registrant)

By: /s/ James S. Chapin
James S. Chapin,
Chief Executive Officer

Dated: 10/13/97

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, and in the capacities and on the dates indicated:

Signature Title Date
- --------- ----- ----

/s/ James S. Chapin Chief Executive Officer 10/13/97
James S. Chapin Chief Financial Officer,
Chairman of the Board
and Director
(Principal Executive Officer
and Principal Financial and
Accounting Officer)

/s/ Howard I. Kalodner Director 10/13/97
Howard I. Kalodner

/s/ Albert Miller Director 10/13/97
Albert Miller

/s/ Kenneth Friedman Director 10/13/97
Kenneth Friedman

\dmk\brus5050

<PAGE>

<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Brush Creek Mining and Development Company, Inc.
Grass Valley, California

We have audited the accompanying consolidated balance sheet of Brush Creek
Mining and Development Company, Inc. and Subsidiary (a development stage
enterprise) as of June 30, 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the two years in
the period ended June 30, 1997, and for the period from the date of resumption
of development stage activities (July 1, 1989) through June 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 the 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Brush Creek
Mining and Development Company, Inc. and Subsidiary (a development stage
enterprise) as of June 30, 1997, and the results of its operations and its
cash flows for each of the two years in the period ended June 30, 1997, and
the period from the date of resumption of development stage activities (July
1, 1989) through June 30, 1997 in conformity with generally accepted
accounting principles.

<PAGE>

<PAGE>
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1,
there are conditions which raise substantial doubt about the Company's ability
to continue as a going concern, including the Company's ability to raise
additional capital to fund its operations and development programs and to
establish ore reserves. Management's plans in regard to these matters are
described in Note 1. Additionally, the Company is in default on the leases
of certain of its mining properties. The lessors have not taken action to
foreclose on the leases. The loss of these leases would have a material
adverse effect on the Company. The consolidated financial statements do not
include any adjustments relating to the recoverability and classification
of reported asset amounts and classification of liabilities that might
result from the outcome of these uncertainties.

BROWN ARMSTRONG RANDALL & REYES
ACCOUNTANCY CORPORATION

Bakersfield, California

<PAGE>
August 29, 1997

<PAGE>

BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997

ASSETS
<TABLE>
<CAPTION>

<S> <C>

Current Assets
Cash $ 111,059
Inventory 2,750
-------------

Total Current Assets 113,809

Office Furniture and Equipment, Net 45,547

Mineral Properties and Mining Equipment, Net 10,190,581

Deposits 272,095
-------------

Total Assets $ 10,622,032
=============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued liabilities 1,771,014
Current portion of long-term debt 672,000
Other 3,700
-------------

Total Current Liabilities 2,446,714

Long-term debt, net of current portion 362,000
-------------

Total Liabilities 2,808,714
-------------

Shareholders' Equity
Common stock, no par value; authorized
100,000,000 shares; issued and
Outstanding, 31,370,482 shares 47,092,740
Accumulated Deficit (11,260,214)
Accumulated Deficit during the Development
Stage (28,019,208)
-------------

Total Shareholders' Equity 7,813,318
-------------

Total Liabilities and Shareholders' Equity $ 10,622,032
=============

</TABLE>
The accompanying notes are an integral part
of these financial statements

<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 AND FOR
THE PERIOD FROM JULY 1, 1989 (DATE OF RESUMPTION OF DEVELOPMENT
STAGE ENTERPRISE ACTIVITIES) THROUGH JUNE 30, 1997

Development Stage
--------------------------------------------------
Period from
July 1, 1989
Through
1997 1996 June 30, 1997
-------------------- ------------ ---------------
<S> <C> <C> <C>

Revenues
Sale of Joint
Venture $ - $ - $ 4,232,000
Other Income - - 156,444
Interest 22,266 42,160 187,779
-------------------- ------------ ---------------

Total Revenues 22,266 42,160 4,576,223
-------------------- ------------ ---------------

Expenses
General and
Administrative
Expenses 1,159,156 2,471,067 15,058,921
General Mining
and Exploration 2,140,228 4,010,966 11,054,253
Loss on Lease
Abandonments - - 392,317
Depreciation and
Amortization 370,642 373,443 1,433,902
(Gain) Loss on
Sale of Mining
Equipment 84,264 (116) 171,174
Interest Expense 116,626 67,234 492,294
Litigation
Settlement 439,770 2,389,668 4,137,032
-------------------- ------------ ---------------

Total Expenses 4,310,686 9,312,262 32,739,893
-------------------- ------------ ---------------

Loss Before Extra-
ordinary Item (4,288,420) (9,270,102) (28,163,670)

Extraordinary Item, Net
Gain from Debt
Extinguishment, Net
of Tax - - 144,462
-------------------- ------------ ---------------
Net Loss $ (4,288,420) $(9,270,102) $ (28,019,208)
==================== ============ ===============
Loss per Common Share
Before Extraordinary
Item $ (.21) $ (.96)
==================== ============

Net Loss per Common
Share $ (.21) $ (.96)
==================== ============

Weighted Average
Common Shares
Outstanding 20,831,619 9,634,616
==================== ============
</TABLE>

<PAGE>

<PAGE>
The accompanying notes are an integral part of these
consolidated financial statements.

BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 AND FOR THE PERIOD
FROM JULY 1, 1989 (DATE OF RESUMPTION OF DEVELOPMENT STAGE ENTERPRISE
ACTIVITIES) THROUGH JUNE 30, 1997

<TABLE>
<CAPTION>
Accumulated
Common Stock Deficit
----------------------- During the
Number of Accumulated Development
Shares Amount Deficit Stage Total
---------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>

Balance,
June 30, 1989 1,233,041 $12,318,877 $(11,260,214) $ - $ 1,058,663

Issuance of stock
for options
on mining
properties 15,667 117,500 - - 117,500
Sale of stock in
private placement,
net of offering
costs 150,000 434,000 - - 434,000
Issuance of stock
for services 23,500 72,500 - - 72,500
Sale of stock in
private placement,
net of offering
costs 131,727 828,110 - - 828,110
Issuance of units
for debt to
affiliates 73,766 553,242 - - 553,242
Net loss - - - (768,436) (768,436)
---------- ----------- ------------- ----------- ------------

Balance,
June 30, 1990 1,627,701 14,324,229 (11,260,214) (768,436) 2,295,579

Issuance of stock
for options on
mining properties 154,737 2,283,020 - - 2,283,020
Sale of stock in
private placement,
net of offering
costs 141,606 910,840 - - 910,840
Exercise of
warrants 3,333 35,000 - - 35,000
Issuance of stock
for services 64,122 1,097,258 - - 1,097,258
Issuance of stock
for debt 5,150 114,560 - - 114,560
Cancellation of
units from CSGM (73,766) - - - -
Issuance of shares
to CSGM 120,000 - - - -
Issuance of stock
for litigation
settlement, net 33,334 875,000 - - 875,000
Net loss - - - (2,558,381) (2,558,381)
---------- ----------- ------------- ----------- ------------
</TABLE>

<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 AND FOR THE PERIOD
FROM JULY 1, 1989 (DATE OF RESUMPTION OF DEVELOPMENT STAGE ENTERPRISE
ACTIVITIES) THROUGH JUNE 30, 1997 - (CONTINUED)

Accumulated
Common Stock Deficit
--------------------- During the
Number of Accumulated Development
Shares Amount Deficit Stage Total
--------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>

Balance,
June 30, 1991 2,076,217 19,639,907 (11,260,214) (3,326,817) 5,052,876

Issuance of stock
for options on
mining properties 195,780 564,899 - - 564,899
Sale of stock in
private placement,
net of offering
costs 142,100 2,298,451 - - 2,298,451
Exercise of warrants
and options 124,834 1,250,750 - - 1,250,750
Issuance of stock
for services 184,579 1,818,102 - - 1,818,102
Issuance of stock
for debt 24,440 336,617 - - 336,617
Issuance of shares
to CSGM 88,000 748,750 - - 748,750
Capital
contributions - 312,805 - - 312,805
Net loss - - - (3,178,878) (3,178,878)
--------- ----------- ------------ ----------- -----------

Balance,
June 30, 1992 2,835,950 26,970,281 (11,260,214) (6,505,695) 9,204,372

Issuance of stock
for mining
properties and
equipment 37,290 255,238 - - 255,238
Sale of stock 10,664 80,000 - - 80,000
Exercise of warrants
and options 95,404 707,105 - - 707,105
Exchange of options
for debt, CSGM 33,334 250,000 - - 250,000
Issuance of stock
for services 183,190 1,616,659 - - 1,616,659
Issuance of stock
for debt 105,140 713,494 - - 713,494
Issuance of shares
for CSGM 100,256 500,285 - - 500,285
Issuance of stock
for the acquisition
of Trans-Russian 539,402 (84,176) - - (84,176)
Net loss - - - (3,420,220) (3,420,220)
--------- ----------- ------------ ----------- -----------
</TABLE>

<TABLE>
<CAPTION>
Accumulated
Common Stock Deficit
---------------------- During the
Number of Accumulated Development
Shares Amount Deficit Stage Total
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance,
June 30, 1993 3,940,630 31,008,886 (11,260,214) (9,925,915) 9,822,757

Sale of stock 82,485 241,139 - - 241,139
Exercise of
warrants and
options 58,319 608,925 - - 608,925
Issuance of stock
for services 215,099 938,159 - - 938,159
Net income - - - 136,625 136,625
--------- ---------- ------------ ------------ ------------

Balance,
June 30, 1994 4,296,533 32,797,109 (11,260,214) (9,789,290) 11,747,605

Sale of stock 2,566,666 3,696,457 - - 3,696,457
Net loss - - - (4,671,396) (4,671,396)
--------- ---------- ------------ ------------- -------------

Balance,
June 30, 1995 6,863,199 36,493,566 (11,260,214) (14,460,686) 10,772,666

Sale of stock 6,783,503 6,875,416 - - 6,875,416
Issuance of stock
for partial
settlement of
Royal Bank
agreement 216,667 223,436 - - 223,436
Compensation
recognized on
stock options
granted - 160,021 - - 160,021
Issuance of stock
for partial
settlement of
Zuri Invest
litigation 1,100,000 - - - -
Net loss - - - (9,270,102) (9,270,102)
--------- ---------- ------------ ------------ -------------
</TABLE>

Accumulated
Common Stock Deficit
---------------------- During the
Number of Accumulated Development
Shares Amount Deficit Stage Total
---------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>

Balance,
June 30, 1996 14,963,369 43,752,439 (11,260,214) (23,730,788) 8,761,437

Sale of stock 16,387,113 2,111,101 - - 2,111,101
Issuance of stock
for New California
Placer mine 20,000 5,200 - - 5,200
Zuri Invest Litigation
Settlement - 1,200,000 - - 1,200,000
Compensation
recognized on
stock options
granted - 24,000 - - 24,000
Net loss - - - (4,288,420) (4,288,420)
---------- ----------- ------------- ------------- ------------

Balance,
June 30, 1997 31,370,482 $47,092,740 $(11,260,214) $(28,019,208) $ 7,813,318
========== =========== ============= ============= ============

</TABLE>

<PAGE>

<PAGE>
The accompanying notes are an integral part of these
consolidated financial statements.

BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996 AND FOR
THE PERIOD FROM JULY 1, 1989 (DATE OF RESUMPTION OF DEVELOPMENT
STAGE ENTERPRISE ACTIVITIES) THROUGH JUNE 30, 1997

Development Stage
------------------------------------------
Period from
July 1, 1989
Through
1997 1996 June 30, 1997
------------ ------------ ---------------
<S> <C> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(4,288,420) $(9,270,102) $ (28,019,208)
------------ ------------ ---------------

Gain on debt restructuring - - (144,462)
Depreciation and amortization 370,642 373,443 1,433,902
Loss on lease abandonments - - 444,359
Loss on litigation settlement 439,770 2,389,668 4,107,032
(Gain) loss on sale of mining
equipment 84,264 (116) 49,164
Other - - 43,576
Shareholder payment of services - - 105,055
Stock and debt for services - - 703,068
Change in stock purchase price
adjustment receivable - 284,749 -
Change in note receivable 40,462 7,000 47,462
Change in inventory 21,590 41,282 (410)
Change in prepaid expenses 51,290 (4,530) 501,736
Change in deposits and other
current assets - (2,490) (115,961)
Change in deposits 105,052 (115,500) (29,065)
Change in accounts payable and
accrued liabilities 330,746 495,065 4,323,471
------------ ------------ ---------------

Total adjustment 1,443,816 3,468,571 11,468,927
------------ ------------ ---------------

NET CASH USED IN OPERATING ACTIVITIES (2,844,604) (5,801,531) (16,550,281)
------------ ------------ ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of mineral properties,
equipment and deferred
developments (64,370) (652,735) (5,074,429)
Acquisition of office equipment - (69,460) (260,101)
Proceeds from sale of equipment 90,000 - 384,356
Proceeds from the acquisition of
Trans-Russian - - 20,060
------------ ------------ ---------------

NET CASH PROVIDED (USED) IN INVESTING
ACTIVITIES 25,630 (722,195) (4,930,114)
------------ ------------ ---------------

</TABLE>

<PAGE>

Development Stage
---------------------------------------
Period from
July 1, 1989
Through
1997 1996 June 30, 1997
---------- ----------- --------------
<S> <C> <C> <C>

CASH FLOWS FROM FINANCING ACTIVITIES
Advances from affiliates - - 2,009,127
Payments made to affiliates - - (343,798)
Proceeds from issuance of stock 2,140,301 7,035,435 20,266,513
Proceeds from warrant extensions - - 207,750
Proceeds from issuance of notes payable - - 870,043
Payments on long-term debt (185,681) (220,449) (1,422,029)
Proceeds from convertible debenture - 300,000 300,000
Payments on convertible debenture (300,000) - (300,000)
------------ ----------- ---------------

NET CASH PROVIDED BY FINANCING ACTIVITIES 1,654,620 7,114,986 21,587,606
------------ ----------- ---------------

Net Increase (Decrease) in Cash (1,164,354) 591,260 107,211

Cash at Beginning of Period 1,275,413 684,153 3,848
------------ ----------- ---------------

Cash at End of Period $ 111,059 $1,275,413 $ 111,059
============ =========== ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for interest
(net of amounts capitalized) $ 116,626 $ 67,234 $ 337,602
============ =========== ===============

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES(See Note 15)

</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.

<PAGE>

<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - OPERATIONS AND BASIS OF PRESENTATION
----------------------------------------

Brush Creek Mining and Development Company, Inc. (the Company) was
incorporated in 1982 and operated as a mining and mineral development company
until April 17, 1989, at which time its mining operations, all of which had
been conducted through the Brush Creek Joint Venture (BCJV) (40% owned) were
terminated. Shortly thereafter, the Company became actively engaged in
acquiring additional mineral properties, raising capital, and preparing
properties for resumed production. The Company did not have any significant
operations or activities from April 17, 1989 through June 30, 1989 and
suspended all mining operations and reduced its activities to a care and
maintenance level. Accordingly, the Company is deemed to have reentered the
development stage effective July 1, 1989.

In February 1992, the Company began limited production at the Ruby Mine under
a permit that limited mill capacity to 225 tons per day. Production was
terminated due to adverse weather conditions in December 1992. The Company
resumed limited production at the Ruby Mine in July 1993 and gradually
increased production until October 1996 when production was suspended. In
early 1997, the Company began preparing the lower Brush Creek Mine for limited
production. In June 1997, the Company received interim approval from the
United States Forest Service to transport thirty tons of ore per day from the
lower Brush Creek Mine to the Ruby mill site. The Company has not commenced
economic production and is therefore still considered to be in the development
stage.

The Company's consolidated financial statements have been presented on the
basis that it is a going concern, which contemplates the realization of the
mineral properties and other assets and the satisfaction of liabilities in the
normal course of business. The Company has incurred losses of $39,279,422 from
inception to June 30, 1997. The Company has not realized economic production
from its mineral properties as of June 30, 1997. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management continues to actively seek additional sources of capital to fund
current and future operations. There is no assurance that the Company will be
successful in continuing to raise additional capital, establishing probable or
proven ore reserves, or determining if the mineral properties can be mined
economically. Additionally, the Company is in default on the leases of certain
of its mining properties. The lessors have not taken action to foreclose on
the leases and the Company is making every effort to fulfill the agreements.
The loss of these leases would have a material adverse effect on the Company.
These consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------

Principles of Consolidation
- -----------------------------

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, B. Creek Acquisition Corporation and Alpha
Hardware. All material intercompany accounts and transactions have been
eliminated.

<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
----------------------------------------------

Use of Estimates
- ------------------

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, and
disclosure of contingent liabilities at the date of the financial statements,
and the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those results.

Mineral Properties and Mining Equipment
- -------------------------------------------

Mineral properties and mining equipment include land, mining claims,
development costs and mining equipment carried at cost. Mining equipment
including mill facilities is depreciated using the straight-line method over
estimated useful lives of 5 to 15 years, or the units-of-production method
based on estimated tons of ore reserves if the equipment is located at a
producing property with a shorter economic life. Mining equipment not in
service is not depreciated.

The Company defers direct costs related to the acquisition, exploration and
development of mineral properties pending determination of their economic
viability which normally entails performing an in-depth geological and
geophysical study. If no minable ore body is discovered, previously
capitalized costs are expensed in the period the property is abandoned. Any
revenue generated from pre-production activities is offset against the related
deferred development and pre-production costs. When a property is placed in
commercial production, such deferred costs are depleted using the
units-of-production method.

Asset Impairment
- -----------------

In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of," (SFAS 121), management of the Company reviews the net
carrying value of each mine and development property on a regular basis.
Estimated future net cash flows from each mine are calculated using estimated
future prices, operating capital, and reclamation costs on an undiscounted
basis. Reductions in the carrying value of each mine are recorded to the
extent the net book value of the investment exceeds the estimate of future
discounted net cash flows. Upon adoption of SFAS 121 in fiscal year 1995-96,
there was no impact to the financial statements.

The recoverability of the carrying value of development projects is evaluated
based upon estimated future net cash flows from each property, determined as
described above, using estimates of contained mineralization expected to be
classified as proven and probable reserves upon completion of a feasibility
study. Reductions in the carrying value of each property are recorded to the
extent that the Company's carrying value in each property exceeds management's
estimate of future discounted net cash flows.

Management's estimates of gold prices, recoverable proven and probable
reserves, operating capital, and reclamation costs are subject to certain
risks and uncertainties which may affect the recoverability of the Company's
investment in property, plant, and equipment. Although management has made its
best estimate of these factors based on current conditions, it is reasonably
possible that changes could occur in the near term which could adversely
affect management's estimate of the net cash flow expected to be generated
from its operations.

<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
----------------------------------------------

Office Furniture and Equipment
- ---------------------------------

Office furniture and equipment are recorded at cost. Depreciation is computed
by the straight-line method based upon the estimated useful lives of the
respective assets, generally three to five years.

Income (Loss) per Common Stock
- ----------------------------------

Income (loss) per share of common stock is computed based on the weighted
average number of shares outstanding. Warrants, options and convertible
debentures have not been included in the calculation as their effect would be
anti-dilutive. All common shares included in the financial statements reflect
a reverse stock split of 15:1, which the Board of Directors approved November
29, 1993.

Reclamation and Environmental Costs
- --------------------------------------

Reclamation costs and related accruals are based on the Company's
interpretation of environmental and regulatory requirements. Minimum standards
for mine reclamation have been established by various governmental agencies.
Reclamation, site restoration, and closure costs for each producing mine are
accrued over the life of the mine using the units-of-production method.
Ongoing reclamation activities are expensed in the period incurred.

Income Taxes
- -------------

The Company accounts for income taxes using the liability method which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax assets and liabilities are determined
based on the difference between the financial statements and tax basis of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.

Inventory
- ---------

Inventory is stated at net realizable value.

Stock Based Compensation
- --------------------------

In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (SFAS 123), which is effective for periods beginning after
December 15, 1995. SFAS 123 requires that companies either recognize
compensation expense for grants of stock, stock options, and other equity
instruments based on fair value or provide proforma disclosure of the effect
on net income and earnings per share in the Notes to the Financial Statements.
The Company intends to continue to account for its stock-based compensation
under Accounting Principles Board No. 25; however, the Company has adopted the
disclosure provisions of SFAS 123 for the fiscal year ended June 30, 1997.

Cash and Cash Equivalents
- ----------------------------

For purposes of reporting cash flows, cash and cash equivalents include highly
liquid debt instruments purchased with a maturity of five months or less. Of
the $111,059 cash balance at June 30, 1997, $11,059 was not covered by Federal
Depository Insurance.

<PAGE>
NOTE 3 - AFFILIATES AND RELATED PARTIES
---------------------------------

Significant relationships with (1) companies affiliated through common
ownership and/or management, and (2) other related parties are as follows:

In prior years the Company entered into a number of relationships with
California Properties, Independent Sierra Gold Mines (ISGM) and Consolidated
Sierra Gold Mines (CSGM) at times when Ms. Simone Anderson was (i) an officer,
director and substantial shareholder of the Company, (ii) an officer and
director of California Properties and its wholly-owned subsidiary Sierra Gold
Properties, Inc., and (iii) the sole shareholder of ISGM and CSGM. The
Company has terminated its relationships with these entities, and the Company
understands that Ms. Anderson and her affiliates no longer hold 5% or more of
the Company's securities.

The former chief executive officer and director of the Company, Mr. James
Anderson, who is the spouse of the individual discussed in the previous
paragraph, is a director of California Properties and director and president
of ISGM and CSGM. Mr. James Anderson is also the chief executive officer of
the Moscow Country Club.

On October 18, 1993, the Company entered into a severance agreement with James
Anderson, the former chief executive officer and director of the Company. In
total satisfaction of all amounts owing Anderson, the Company issued 1,500,000
shares of its common stock to Anderson, 800,000 shares of which have already
been issued to Anderson. The remaining 700,000 shares are being held in an
escrow account until certain conditions are met. Included in these conditions
is the payment of approximately $80,000 owed to the Company by entities under
the direct or indirect control by Anderson. These amounts were not repaid.
The 700,000 shares remain in escrow.

Mr. Georges Benarroch, who previously served as a director of the Company from
August 1990 to May 1991 and was an officer of the Company during a portion of
that period, has a controlling interest in Euro Canadian, a Canadian
corporation.

During the year ended June 30, 1995, the Company borrowed a total of $143,821
from two stockholders and two Directors. The loans were used to provide the
Company with working capital. The loans were secured by gold inventory and
equipment. The loans were repaid in full, including interest at 8.5% per
annum.

NOTE 4 - STOCK PURCHASE PRICE ADJUSTMENTS
-----------------------------------

During the year ended June 30, 1996, the Company entered into investment
agreements in connection with offerings of its Common Stock in reliance on
Regulations S under the Securities and Exchange Act of 1933, as amended.
Several of these agreements contained purchase price adjustment clauses which
require that the initial purchase price be adjusted up or down depending on
the average share price of the Company's Common Stock during a stated period,
typically 45 days, subsequent to the stock purchase closing date. The
valuation period for one particular transaction ended on September 27, 1996,
however, the actual adjustment was not resolved between the Company and the
purchaser. As a result, 695,652 shares of common stock are currently being
held in escrow.

In addition to purchase price adjustments, shares of Common Stock were issued
at various times during 1996 and 1997 pursuant to Regulation S of the
Securities and Exchange Act of 1933 and Regulation D of the Securities and
Exchange Act of 1933 at discounts of up to 50% from the closing bid price on
the day prior to the sales.

<PAGE>
NOTE 5 - OFFICE FURNITURE AND EQUIPMENT
---------------------------------

Office furniture and equipment consists of the following at June 30, 1997:
<TABLE>
<CAPTION>

<S> <C>

Office furniture and equipment $ 83,819
Vehicles 131,776
----------
215,595
Less accumulated depreciation (170,048)
----------
$ 45,547
==========
</TABLE>

NOTE 6 - MINERAL PROPERTIES AND MINING EQUIPMENT
-------------------------------------------

The Company's net investment in mineral properties and mining equipment as of
June 30, 1997 is as follows:
<TABLE>
<CAPTION>

Land and Development Mining
Land Options Costs Equipment Total
------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>

Carson Mine $ 2,199,858 $1,051,731 $ 42,835 $ 3,294,424
Brush Creek Mine 408,496 1,460,669 275,390 2,144,555
Gardners' Point
and Pioneer
Mines 185,477 770,327 128,521 1,084,325
Ruby Mine 327,336 2,251,714 1,626,804 4,205,854
High Commission
Mine 101,875 6,118 - 107,993
Kate-Hardy Mine 58,667 97,789 - 156,456
Rising Sun Mine 9,111 129,980 - 139,091
------------- ---------- ----------- ------------

3,290,820 5,768,328 2,073,550 11,132,698
Accumulated
depreciation - - (942,117) (942,117)
------------- ---------- ----------- ------------

$ 3,290,820 $5,768,328 $1,131,433 $10,190,581
============= ========== =========== ============
</TABLE>

All of the Company's mineral properties contain mines which were in production
previously. All such mines, except for the Gardners's Point and Pioneer
Mines, are located in the Allegheny-Forest-Downieville mining districts on the
western slope of the Sierra Nevada mountain range in Northern California and
aggregate approximately 6,300 acres. Because of the close proximity of the
mines to each other, the Company plans to centralize milling operations. The
Gardner's Point and Pioneer Mines are located outside this district and
management has been evaluating alternatives to placing them into current
production. Current developments and commitments related to certain properties
follow:

<PAGE>
NOTE 6 - MINERAL PROPERTIES AND MINING EQUIPMENT (Continued)
-------------------------------------------

Ruby Mine
- ----------

During 1992, the Company entered into an option agreement to lease this
property in exchange for a total of 225,000 shares of the Company's common
stock with a value of $112,500. In 1990, the Company entered into a lease
purchase agreement, for this property. This lease was modified on November 1,
1994. Pursuant to the terms of this lease, the Company must pay a 7-1/2% net
smelter royalty on all minerals produced from lode deposits and 10% on
minerals produced from placer deposits with a minimum lease payment of $10,000
per month through June 30, 2000, subject to an adjustment based on the
Consumer Price Index. The lease may be extended for two additional five-year
periods or the property may be purchased for $4,000,000 subject to adjustment
based on the Consumer Price Index payable by June 30, 2000. All payments made
subsequent to July 1, 1995, to acquire the lease/option and all payments made
under the lease subsequent to July 1, 1995, will be credited against the
option purchase price. Performance under the lease purchase agreement is
secured by the Company's equipment used in the mining operations on the leased
premises.

The Rising Sun Mine
- ----------------------

In December of 1989, the Company issued 10,000 shares of its common stock for
an option to lease the Rising Sun Mine. On June 30, 1990, the Company
exercised the option upon payment of $20,000 cash and entered into a five year
lease with an option to purchase. Pursuant to the terms of the lease, which
were modified on November 11, 1994, the Company must pay a net smelter royalty
of 8% on all minerals produced with a minimum royalty of $4,590 per month,
through June 30, 2000, subject to an adjustment based on the Consumer Price
Index. The property may be purchased for $1,000,000 payable on or before June
30, 2000, subject to adjustment based on the Consumer Price Index. All
payments made to acquire the lease/option and all payments made under the
lease will be credited against the option purchase price.

Ruby Mine and Rising Sun Mine - 1997 Modification Agreement
- --------------------------------------------------------------------

During 1997, the Company negotiated modification agreements for the Ruby Mine
and the Rising Sun Mine to pay, in cash, one month lease payment in arrears,
increase the amount of equipment held as collateral pursuant to the Ruby Mine
and the Rising Sun Mine lease agreements by filing UCC-1 financing statements
listing the additional equipment, all right, title and interest of certain
"ore specimens" for which Ruby Development Co., Inc. will credit the value
against past due minimum royalty payments and grant Ruby Development Co., Inc.
an option to purchase up to 50,000 shares of the Company's common stock at a
price of $.25 per share until July 1, 1999.

At June 30, 1997, the Company owed approximately $100,000 on the Ruby Mine
lease and approximately $50,000 on the Rising Sun lease which constitutes
default on the agreements. The outstanding balances are included in accounts
payable at June 30, 1997.

A valuation allowance to reduce the carrying balance of capitalized land/land
options and development costs associated with these leases has not been
recorded. The Company's general default of the agreements places the Company
at risk of losing its rights to mine at these locations. The valuation
allowance required, should the lessor take action to assert its right under
the lease agreements, would approximate $4,205,854 for the Ruby Mine and
$139,091 for the Rising Sun Mine.

<PAGE>
NOTE 6 - MINERAL PROPERTIES AND MINING EQUIPMENT (Continued)
-------------------------------------------

Merger with Sierra Gold Properties, Inc. - Kate-Hardy Mine
- ------------------------------------------------------------------

In January 1992, the shareholders of California Properties approved a merger
between its wholly owned subsidiary, Sierra Gold and B. Creek Acquisition
Corporation, a wholly owned subsidiary of the Company. The merger was
recorded effective March 31, 1992. The Company issued 2,330,020 shares of
common stock with a value of $74,807 and gave up certain assets and assumed
certain liabilities totaling $175,193 in exchange for all of the common stock
of Sierra Gold. Management determined the value of Sierra Gold's assets to be
approximately $250,000 at the time the letter of intent was entered into and
announced in April 1989. Proforma results of operations for the interim
periods presented are not shown as Sierra Gold conducted no significant
activities during these periods.

The primary asset of Sierra Gold, a lease with an option to acquire the
Kate-Hardy Mine, expired on April 24, 1992, and as a result, during the
nine-months ended March 31, 1992, the Company recognized a loss on the
expiration of the lease of $250,000. On June 30, 1992, the Company entered
into a new lease, effective March 23, 1992, in the form of a mining option
agreement for a term of five years expiring March 22, 1997. During the term
of the option, the Company must pay a $50,000 payment (initial option payment)
upon the execution of the agreement; $5,500 per month for each month during
the first year; $6,500 per month during the second year; $7,500 per month
during the third year; $8,500 per month during the fourth year; and $9,500 per
month during the fifth year. In addition, the Company must pay a 6% net
smelter royalty on all minerals produced. The option purchase price for the
mine is $1,500,000 less 75% of all option payments paid up to a maximum of
$750,000.

During 1997, the Company paid $10,000 to the Kate-Hardy Mine lessor to extend
the lease agreement for an additional three month period. The extension
expired on June 27, 1997. No other extensions and/or agreements had been
negotiated prior to the date of the auditor's report.

At June 30, 1997, the Company owed approximately $140,000 to the Kate-Hardy
Mine lessor. The outstanding balance is included in accounts payable at June
30, 1997.

A valuation allowance to reduce the carrying balance of capitalized land/land
options and development costs associated with the Kate-Hardy Mine lease has
not been recorded. The Company's general default of the expired agreement and
the lack of a current agreement places the Company at risk of losing its
rights to mine at this location. The valuation allowance required, should the
lessor take action to assert its right under the lease agreement, would
approximate $156,456.

New California Placer Mine - Sierra County, California
- -------------------------------------------------------------

In February 1997, the Company entered into an exploration license and option
to purchase the New California Mine for 20,000 shares of the Company's
restricted stock and $10,000 payable annually for up to a three year period.
The purchase price is $250,000 should the Company decide to exercise that
option under the agreement.

The New California Mine is an unpatented placer mine containing approximately
800 acres of land and is located between Poker Flat and Gardners Point. The
unpatented claims are in good standing.

<PAGE>
NOTE 6 - MINERAL PROPERTIES AND MINING EQUIPMENT (Continued)
-------------------------------------------

Wilbank's Placer and Loade Mine - Poker Flat Mining District
- ---------------------------------------------------------------------

In March 1997, the Company entered into an exploration license and option to
purchase the Wilbank's claims for a $10,000 cash payment and $1,000 per month
during the option period. The purchase price is $200,000 should the Company
exercise that option. The Company has, under the terms of the agreement, an
additional five year term to purchase the property for $300,000 payable at
$2,000 per month.

NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
--------------------------------------------

Accounts payable and accrued liabilities consist of the following at June 30,
1997:
<TABLE>
<CAPTION>

<S> <C>

Accounts payable $1,365,207
Accrued payroll and other 405,807
----------

$1,771,014
==========
</TABLE>

NOTE 8 - LONG-TERM DEBT
---------------

Long-term debt consists of the following at June 30, 1997:
<TABLE>
<CAPTION>

<S> <C>

Royal Bank of Scotland litigation settlement
dated December 13, 1995. Settlement calls
for a combination of cash and stock
(see Note 13). 1,034,000

Less current portion 672,000
----------

$ 362,000
==========
</TABLE>

NOTE 9 - INCOME TAXES
-------------

At June 30, 1997, the Company had available net operating loss carryforwards
for financial statement and federal income tax purposes of approximately
$25,000,000. These loss carryforwards expire between 1999 and 2010.

The Company has reported income tax losses of approximately $31,000,000 in
prior years. In general, income tax losses are carried forward to future years
to reduce future income taxes.

In the case of a loss corporation which changes more than 50% of its
ownership, Internal Revenue Code Section 382 limits the amount carried forward
to a small percentage of the fair market value of the corporation's stock
immediately before the ownership change. The Company's 1989 ownership change
reduced the amount of the pre-change loss carryforward from approximately
$6,000,000 to approximately $70,000.

A valuation allowance of approximately $8,500,000 has been provided to offset
the benefit of approximately $8,500,000 from the remaining $25,000,000 loss
carryforwards. This valuation allowance is necessary because at June 30, 1997,
the available benefits are more likely than not to expire before they can be
used.

<PAGE>
NOTE 10 - SHAREHOLDERS' EQUITY
---------------------

During fiscal 1997, the following major equity transactions occurred:

The Company sold 2,867,563 shares of Common Stock for $1,016,250. These
shares were sold pursuant to Regulation S of the Securities Act of 1933.

The Company issued 20,000 shares of Common Stock with a value of $5,200 in
connection with its acquisition of the New California Placer Mine.

The Company issued 165,000 shares of Common Stock with a value of $41,250.
The shares were registered with the Securities and Exchange Commission
on Form S-8.

Shareholders' equity increased by $1,200,000 as shares issued in the prior
year were used to settle the Zuri Invest litigation.

The Company sold 3,600,005 restricted shares of Common Stock at $.0625 per
share wherein the Company received net proceeds of $225,000; 6,600,000
restricted shares of Common Stock at $.07 per share wherein the Company
received net proceeds of $460,600; 1,754,545 restricted shares of Common
Stock at $.11 per share wherein the Company received net proceeds of
$193,000; 1,400,000 restricted shares of Common Stock at $.125 per share
wherein the Company received net proceeds of $175,000. All shares were sold
under Regulation D and Section 4(2) of the Securities Act of 1933.
Investors who acquired such shares were required to be accredited
investors. The Company has agreed to register theshares pursuant to a
registration statement to be filed with the Securitiesand Exchange Commission.

During fiscal 1996, the following major equity transactions occurred:

The Company sold 6,783,503 shares of Common Stock for $6,875,416. These
shares were sold pursuant to Regulation S of the Securities Act of 1933.

The Company issued 1,100,000 shares as partial settlement of the Zuri Invest
litigation.

The Company issued 216,667 shares as partial settlement of the Royal Bank of
Scotland litigation.

During fiscal 1995, the following major equity transactions occurred:

The Company sold 2,566,666 shares of Common Stock for $3,696,457. These
shares were sold pursuant to Regulation S of the Securities Act of 1933.

During fiscal 1994, the following major equity transactions occurred:

The Company issued 215,099 shares of Common Stock in exchange for certain
legal, engineering, consulting, and employment services rendered to the
Company totaling $938,159.(*)

The Company issued shares of the Company's Common Stock pursuant to a service
agreement with James Anderson totaling $421,875.

The Board of Directors of the Company approved a 15-for-1 reserve stock split
effective November 29, 1993.

<PAGE>
NOTE 10 - SHAREHOLDERS' EQUITY - (Continued)
---------------------

During fiscal 1993, the following major equity transactions occurred:

The Company issued 539,402 shares of Common Stock in connection with its
acquisition of Trans-Russian. Total reduction in equity in relation to the
acquisition was $84,176.(*)

In connection with its mining properties, the Company issued 37,290 shares of
Common Stock for accrued lease payments of $107,710, prepayment of certain
lease expenses of $113,153, and acquisition of mining equipment of $34,375.(*)

The Company issued 105,140 shares of Common Stock with a value of $713,494 in
satisfaction of outstanding debt obligations amounting to $558,592.(*)

The Company issued 100,256 shares of Common Stock with a value of $500,285 in
satisfaction of the Company's obligation to CSGM of $574,750.(*)

The Company issued 183,190 shares of Common Stock in exchange for certain
legal, engineering, consulting, and employment services rendered to the
Company totaling $1,616,659.(*)

The Company sold 10,664 shares of stock at $7.50 per share, totaling $80,000.

The Company issued 33,334 shares of Common Stock pursuant to the exercise of
options in settlement of debt to CSGM of $250,000.(*)

During fiscal 1992, the following major equity transactions occurred:

The Company issued 155,335 shares of Common Stock in connection with its
acquisition of Sierra Gold and the related options on mineral properties for
$74,807.(*)

The Company issued 10,311 shares of Common Stock in connection with its
acquisition of the Kate-hardy Mine for $88,667 and prepayment of certain lease
expenses of $66,000.(*)

In connection with its lease on the Ruby Mine, the Company issued 24,800
shares of Common Stock for: accrued lease payments of $72,502, prepayment of
lease obligation of $63,287, and modification and extension to lease term of
$154,836.(*)

In connection with its lease on the Rising Sun Mine, the Company issued 5,333
shares of Common Stock for accrued lease payments of $22,002, prepayment of
lease obligation of $18,687, and modification and extension to lease term of
$4,111.(*)

The Company issued 24,439 shares of Common Stock in satisfaction of
outstanding debt obligations amounting to $336,617.(*)

The Company issued 88,000 shares of Common Stock with a value of $748,750 to
CSGM in satisfaction of the Company's obligation to CSGM of $900,000.(*)

The Company issued 117,912 shares of Common Stock in exchange for certain
legal, engineering, and employment services rendered to the Company totaling
$1,286,852.(*)

<PAGE>
NOTE 10 - SHAREHOLDERS' EQUITY - (Continued)
---------------------

In May 1992, the Company entered into a three-year consulting contract with
Mr. Anderson in exchange for issuing 66,667 shares of Common Stock with a
value of $531,250.(*)

Ms. Anderson paid expenses on behalf of the Company amounting to $105,055.
This amount and the proceeds received from the extension of warrants of
$207,750 totaling $312,805 is accounted for as a contribution of capital.

The Company made several private placements of a total of 142,100 shares of
its Common Stock at prices ranging from $.90 to $1.50 per share totaling
$2,298,451, net of offering costs of $177,974.

During fiscal 1991, the following major equity transactions occurred:

On June 29, 1990, the Company sold 131,727 units for $987,955. Each unit
consisted of one share of Common Stock and a warrant to purchase one share of
Common Stock. The Company's previous chairman, Mr. Benarroch, is the president
of the underwriter, Euro Canadian, in this transaction, which received a
commission of $98,796. The underwriter also received warrants to purchase
33,333 shares of the Company's Common Stock at $.50 through July 1992. In July
1990, the Company sold an additional 141,606 units. The Company received
$910,840 after offering expenses. Warrants covering 253,333 shares are
exercisable at $.70 through June 1992, and warrants covering 20,000 shares are
exercisable at $.90 through June 1992.

On June 26, 1990, the Company's Board of Directors approved the issuance of
73,766 units to ISGM and CSGM in satisfaction of the Company's debt of
$553,242 to these entities. Each unit consists of one share of the Company's
Common Stock and one warrant to purchase one share of stock at $.50 per share,
exercisable through July 1992. As of December 31, 1990, these units had not
been delivered due to administrative delays. As an inducement to the approval
of the consulting agreement described below, CSGM and ISGM agreed to cancel
the units approved by the Board of Directors on June 26, 1990.

On January 23, 1991, the Company entered into an agreement with CSGM and ISGM
whereby CSGM and ISGM are obligated to render consulting services to the
Company to assist the Company in the acquisition of mining properties,
identification of and negotiation with the Company's creditors, and other
day-to-day business and administrative tasks. In exchange for rendering
consulting services, the Company agreed to issue 120,000 shares of its Common
Stock to CSGM. As the market value of the shares issued was approximately
equal to that of the units canceled, the issuance of the shares has been
treated as a replacement of the units for accounting purposes.(*)

In January 1991, an additional 49,272 shares of Common Stock were issued to
third parties. These shares, valued at fair market value of $630,568, were
issued for legal and consulting services rendered and the repayment of a note
payable issued for services of $114,560.(*)

The Company agreed to issue 20,000 shares of Common Stock valued at fair
market value of $581,250 to an engineering firm for past and future
services.(*)

<PAGE>
NOTE 10 - SHAREHOLDERS' EQUITY - (Continued)
---------------------

The Company entered into a litigation settlement with Mr. Benarroch, whereby
66,667 shares of the Company's outstanding Common Stock were returned to the
Company and, simultaneously, the Company issued back to Mr. Benarroch 100,000
shares, valued at fair market value of $1.75 per share. The settlement
resulted in a net issuance of 33,333 shares of Common Stock valued at
$875,000.(*)

During fiscal 1990, the Company initiated a private placement of its Common
Stock. In April 1990, the Company sold 150,000 shares for $450,000.

In March 1990, Ms. Anderson sold 66,667 shares of her Common Stock to Sungold
Mining Corp. (Sungold) for $10,000 as an inducement for an affiliate of
Sungold to lend the Company $140,000.(*)

In March and May 1990, the Company issued 235,000 shares of Common Stock in
exchange for legal services valued at $72,500.(*)

(*) For each issuance involving noncash consideration, the Company
recorded the fair market value of the shares issued as the consideration
received.

NOTE 11 - STOCK OPTIONS AND WARRANTS
-----------------------------

The Company has an incentive stock option plan under which five and ten-year
options may be granted to key employees to purchase up to 33,333 shares of the
Company's Common Stock at the market price on the date of grant. At June 30,
1997, no options had been granted under this plan. A total of 33,333 shares
of the Company's unissued Common Stock has been reserved for this plan.

The Company has a nonqualified stock option plan, under which options to
purchase a total of 1,186,000 shares from $.23 to $4.13 were outstanding and
exercisable at June 30, 1997.

The Company applies APB Opinion 25 and related interpretations in accounting
for its stock option plan. Accordingly, compensation cost has been recognized
for the difference between the market value of the stock at the date of
issuance and the exercise price of the stock options granted. Had compensation
cost for the Company's stock-based compensation plan been determined based on
the fair value at the grant dates for awards under the plan consistent with
the provision of SFAS 123, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

1997 1996
------------ -------------
<S> <C> <C> <C>

Net loss As reported $(4,288,420) $ (9,270,102)
Pro forma $(4,445,984) $(10,381,575)

Net loss per common
share As reported $ (.21) $ (.96)
Pro forma $ (.21) $ (1.08)
</TABLE>

The fair value of the option grant was estimated on the date of granting using
the Black-Scholes American option-pricing model with the following
assumptions: risk-free interest rate of 7.5 percent, dividend yield rate of
zero, expected life of 5.0 years, and volatility of 83.6 percent.

<PAGE>
NOTE 11 - STOCK OPTIONS AND WARRANTS (Continued)
-----------------------------

A summary of the status of the Company's stock option plan as of June 30, 1997
and 1996, and changes during the years ending on those dates is presented
below:

1997
- ----
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
---------- -----
<S> <C> <C> <C>

Fixed Options
Outstanding at beginning of year 1,051,000
Granted 1,010,000 .23
Cancelled (875,000) 2.27
Exercised -
----------
Outstanding at end of year 1,186,000
==========
Options exercisable at year end 1,186,000
==========
Weighted-average fair value of
options granted during the year $ .18
==========
</TABLE>

1996
- ----
<TABLE>
<CAPTION>

Weighted
Average
Exercise
Shares Price
---------- -----
<S> <C> <C> <C>

Fixed Options
Outstanding at beginning of year 279,000
Granted 789,500 2.11
Cancelled (17,500) 3.03
Exercised -
----------
Outstanding at end of year 1,051,000
==========
Options exercisable at year end 1,051,000
==========
Weighted-average fair value of
options granted during the year $ .93
==========
</TABLE>

The following table summarizes information about fixed stock options
outstanding at June 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exerciseable
------------------- --------------------
Weighted-
Number Average Number
Outstanding Remaining Weighted Outstanding Weighted
Range of at Contractual Average at Average
Exercise June 30, Life Exercise June 30, Exercise
Prices 1996 (Years) Price 1997 Price
- --------- ------- ------- ----- -------- --------

2.00-2.63 104,000 1.55 - 104,000 -
.85-4.13 72,000 3.29 2.00 72,000 2.00
.23 960,000 4.74 .23 960,000 .23
.25 50,000 2.00 .25 50,000 .25
</TABLE>

<PAGE>
NOTE 12 - COMMITMENTS AND CONTINGENCIES
-------------------------------

Lease expense consists principally of an operating lease for the Company's
office building which calls for monthly payments of $2,500 from June 1989
through May 1994. The rent is subject to annual adjustment based upon the
Consumer Price Index. Rent expense for the years ended June 30, 1997 and 1996
was approximately $30,000, respectively.

See Note 6 regarding mineral property commitments.

The Company's mining and exploration activities are subject to various federal
and state laws and regulations governing the protection of the environment.
These laws and regulations are continually changing and are generally becoming
more restrictive. The Company conducts its operations so as to protect the
public health and environment and believes its operations are in compliance
with all applicable laws and regulations. The Company has made, and expects to
make in the future, expenditures to comply with such laws and regulations. The
Company cannot predict such future expenditures.

The Company contracted with an outside consultant to develop a cost estimate
for future reclamation costs on the Gardner's Point Mine. This estimate was
developed pursuant to SMARA guidelines and required for submission to the lead
agency and the Department of Conservation as the Company develops a plan for
future mining at this site. Future reclamation costs are estimated to be
$380,000. Additional bonding for reclamation will be required subsequent to
final approval estimated to be completed in May of 1998. At June 30, 1997, a
contingent liability for the amount of the new estimate which exceeds the
liability accrued in prior years was not included in the Company's financial
statements. Consistent with the Company's policy, as discussed in Note 1,
reclamation costs are accrued over the life of the mine using the
units-of-production method. Once the mine enters the production stage, should
the end of the mine's production life become imminent, the entire estimated
liability would be expensed.

On April 1, 1997, the Company sold certain pieces of equipment with a net book
value of $73,191 for $60,000 pursuant to a sale-leaseback agreement. The
agreement required a single $90,000 payment on July 31, 1997 to reacquire
title to the equipment. The Company did not make the $90,000 payment and
defaulted on the agreement. Subsequent to the default, the Company made a
$10,000 payment to continue to use the equipment. No additional agreements or
modifications to the original agreement have been made. Due to the Company's
default, the assets are not included on the books of the Company.

NOTE 13 - LEGAL PROCEEDINGS
------------------

<PAGE>
NOTE 13 - LEGAL PROCEEDINGS (Continued)
------------------

THE ZURI INVEST ACTION.

During the fiscal year ended June 30, 1997, the Company completed its
obligations to the Zuri Plaintiffs (as defined below) under a settlement
agreement entered into on December 14, 1995 (the "Zuri Agreement") with Zuri
Invest A.G., Andre Michaels and Peter Woodfield (the "Zuri Plaintiffs"),
in connection with an action which had been commenced in December 1991 (the
"Zuri Invest action"), to partially satisfy the joint and several
judgment entered in the Zuri Invest action against the Company and Simone
Anderson and James Anderson (collectively, the "Andersons") on October 31,
1995 (the "Judgment"). The Zuri Plaintiffs agreed, subject to the receipt of
the consideration described below, not to seek any further recovery
directly from the Company on the Judgment, and to release the Company from any
further liability thereunder. The Zuri Plaintiffs also agreed not to
pursue recovery against the Andersons on the Judgment if it is judicially
determined that the Andersons have indemnification rights against the
Company with respect to the Judgment. The Company issued and delivered to
each of Woodfield and Michaels 250,000 shares of the Company's Common Stock.
The Company issued 600,000 shares of the Company's Common Stock to Zuri
Invest and delivered 200,000 of such shares to Zuri Invest on or about
April 10, 1996, 200,000 shares on or about June 11, 1996, and the remaining
200,000 shares on or about September 9, 1996. As security for the Company's
obligations to issue and deliver the above described shares of Common Stock,
the Company issued a promissory note in the amount of $1.2 million payable to
the Zuri Plaintiffs. The note was secured by a deed of trust on all real
property and patented and unpatented mining claims owned by the Company.
Pursuant to the Zuri Agreement, the principal amount of the note shall be
reduced as the shares issued to the Zuri Plaintiffs are sold, dollar for
dollar by the gross proceeds generated from such sales until such time as
sales collectively total in gross $1.2 million at which time the note shall be
deemed paid. Notwithstanding the foregoing, the note shall also be deemed
paid after the passage of 180 days after the last distribution of shares
which, as stated above, was distributed in September 1996. As a result
thereof, such note has been deemed paid by the Company.

Pursuant to the Zuri Agreement, the Company also assigned to the Zuri
Plaintiffs an interest (33% of the Company's 60% interest) in claims
asserted against the Andersons and their controlled corporations in the
action entitled Brush Creek Mining and Development v. F. James Anderson, et
al., currently pending in the United States District Court, Northern District
of California.

THE ROYAL BANK ACTION.

On December 13, 1995, the Company entered into an agreement (the "Royal Bank
Agreement") to settle an action commenced by the Royal Bank of Scotland,
et al. by delivering to the plaintiffs in such suit (the "Royal Bank
Plaintiffs") 216,667 shares of the Company's Common Stock and cash in the
amount of $241,000. The Company also assigned to the Royal Bank Plaintiffs
a portion of its interest in any total recovery from claims against the law
firm formerly known as Bartel, Eng, Miller & Torngren, the Company's formal
legal counsel ("Bartel, Eng"). On December 13, 1996, the Company was further
required to deliver to each of the Royal Bank Plaintiffs, at his or her
option, additional shares of the Company's common stock or additional cash.
The number of shares of Common Stock or the amount of cash each Royal Bank
Plaintiff would be entitled to receive is based on the amount of his or her
pro rata interest in amounts

<PAGE>
NOTE 13 - LEGAL PROCEEDINGS (Continued)
------------------

paid by the Company pursuant to the Royal Bank Agreement. If all Royal Bank
Plaintiffs would elect to receive Common Stock, the Company would be required
to issue and deliver a maximum of 300,000 shares in the aggregate and if all
Royal Bank Plaintiffs elect to receive cash, the Company would be required to
deliver cash in the maximum aggregate amount of $600,000.

Prior to December 13, 1996, the Royal Bank Plaintiffs elected to receive
$600,000 in cash pursuant to the term of the Royal Bank Agreement. On or
about December 17, 1996, the Company received notice from the Royal Bank
Plaintiffs that the Company was in default of its obligation to pay them
$600,000 on December 13, 1996. Under the Royal Bank Agreement, such default
caused the Company to incur an immediate $3.25 million debt to the Royal Bank
Plaintiffs. Subsequently, in January 1997, the Company entered into a
Forbearance Agreement (the "Forbearance Agreement") with the Royal Bank
Plaintiffs which provided that notwithstanding the $3.25 million obligation,
the Royal Bank Plaintiffs will forbear from exercising their rights and
remedies against the Company provided the Company makes a payment of $629,100
on or before March 20, 1997 and a payment of $175,000 on or before July 1,
1997. The Company has the option to postpone the second payment ($175,000) by
delivering written notice to the Royal Bank Plaintiffs no later than June 25,
1997 whereupon the second payment shall be paid no later than December 15,
1997 and the amount shall be increased to $250,000. The Company also agreed
to reimburse the Royal Bank Plaintiffs for their attorney fees and costs.
Thereafter, the Royal Bank Plaintiffs agreed to extend the time period for
paying the $629,100 to them until May 15, 1997. In addition, the second
payment was increased to $225,000 to be payable July 1, 1997 provided it may
be postponed until December 15, 1997 in which event the amount shall be
increased to $300,000. The amount which was due May 15, 1997 was not paid by
such date. However, as of June 2, 1997, the Company entered into an Amendment
No. 2 to the Forbearance Agreement ("Amendment No. 2") which, among other
things, provided that the Royal Bank Plaintiffs shall continue to forbear from
exercising its rights and remedies under the Royal Bank Agreement and related
Forbearance Agreement, provided the Company performs the following: (a) pay
$896,000 in eight installments of $112,000 each on May 31, July 31, September
30 and November 30, 1997 and January 31, March 31, May 31 and July 31, 1998
(the "Periodic Payments"), (b) pay $250,000 on or before September 30, 1998,
(c) makes payments of $25,000 within five business days after any closing(s)
since March 20, 1997, of any single or series of sale-leaseback transaction(s)
which the Company shall have received in the aggregate of at least $65,000 in
proceeds, and (d) makes a final payment on or before September 30, 1998 of the
Judgment Amount (as defined in the Forbearance Agreement) less the aggregate
amount of the Periodic Payments previously paid, provided, however, that if
the Company has timely performed its obligations under its settlement
documents with the Plaintiffs and either (i) Plaintiffs have received all of
the Periodic Payments, or (ii) the Company makes one final payment in an
amount set forth in Amendment No. 2 which amount ranges from $950,000 if such
final payment is paid on or before May 31, 1997 to $350,000 if such final
payment is paid after May 31, 1998 and on or before July 31, 1998 (and
assuming all Periodic Payments coming due prior to the final payment has been
made), and in such event the Plaintiffs shall waive the enforceability of the
Judgment Amount against the Company and no further payments shall be required
of the Company. In addition, the Company has agreed that upon the execution
of a Joint Venture Agreement, the Company shall pay the final payment within
90 days after the earlier of the date such joint venture is signed or
effective date of a Joint Venture Agreement. The Company has paid all Periodic
Payments due to date.

<PAGE>
NOTE 13 - LEGAL PROCEEDINGS (Continued)
------------------

The Company has also agreed to issue 433,334 shares (the "Forbearance
Agreement Shares") of its Common Stock to the Royal Bank Plaintiffs. The
Company has agreed to register such shares for resale pursuant to a
Registration Statement to be filed with the Securities and Exchange
Commission. Also, the Company has agreed to issue to the Plaintiffs, from
time to time until the payments referred to above have been completed, .025
shares of its Common Stock for each share issued in excess of 24,000,000 of
the Company's outstanding shares. Amendment No. 2 also provides that the
Company reimburse Plaintiffs for attorneys' fees and costs incurred in
connection with the preparation and negotiation of Amendment No. 2.

The Company's obligations under the Royal Bank Agreement are secured by (1) a
deed of trust on all real property and patented and unpatented mineral claims
owned by the Company; (2) a first priority security interest in all of
the Company's right, title and interest in and to any and all goods,
products, yield, receivables, inventory (including any gold from any mines),
any and all exploration and drilling information, data, maps, reports or
surveys, and any and all income and proceeds derived from the Company's
mining operations on property which the Company presently or subsequently
owns or leases; (3) a first-priority security interest in the Company's
right, title and interest in and to any total recovery by the Company on the
claims against Bartel, Eng; and (4) a stipulated judgment in the amount of
$3,250,000.

In fiscal 1996, the Company registered the 1,616,667 shares of Common Stock
to be issued and delivered pursuant to the Zuri Agreement and the Royal Bank
Agreement, which included the 300,000 additional shares that may have been
issued pursuant to the Royal Bank Agreement as described above. This number
does not include the Forbearance Agreement Shares (as described above).

OTHER MATTERS.

In fiscal 1996 and 1997, the Company was requested pursuant to a non-public
informal inquiry by the staff of the Securities and Exchange Commission, to
provide information to the staff of the Commission regarding the Company's
financing activities in reliance upon Regulation S under the Securities Act.
The Commission advised the Company that the inquiry should not be construed as
an indication by the Commission or its staff that any violations of law have
occurred, nor should it be considered a reflection upon any person.

On October 24, 1994, the Company filed an amended complaint against F.
James Anderson, Simone Anderson, Edward M. Lawson, Consolidated Sierra
Gold Mines, Inc. ("CSGM"), Independent Sierra Gold Mines, Inc. ("ISGM"),
Bartel, Eng, Miller & Torngren, attorneys, Robert Sibthorpe, Coopers &
Lybrand and Yorkton Securities as defendants in an action to recover damages.
The suit was filed in the United States District Court for the Northern
District of California as Case No. C94-3487 (the "Federal Action"). On
April 28, 1995, the Company filed a third amended complaint which seeks to
recover damages against James and Simone Anderson for breach of fiduciary
duty, for violations of Rule 10b-5 and 16(b), and for violations of
California Corporations Code Section 25400(d) and Section 25401. The lawsuit
seeks to recover damages against Edward M. Lawson, Robert Sibthorpe and
Yorkton Securities, Inc. for breach of fiduciary duty. The lawsuit seeks to
recover damages against James and Simone Anderson, ISGM, CSGM, Robert
Sibthorpe, and Yorkton Securities, Inc. for intentional and negligent
misrepresentation. The lawsuit seeks to recover damages against the firm
of Bartel, Eng, Miller & Torngren based upon breach of fiduciary
duty and negligence claims.

<PAGE>
NOTE 13 - LEGAL PROCEEDINGS (Continued)
------------------

The law firm of Bartel, Eng, Linn & Schroder has (as successor in
interest to Bartel, Eng, Miller & Torngren) filed a counterclaim in this
litigation seeking recovery from the Company of legal fees totaling
approximately $95,000. The accounting firm of Coopers & Lybrand has
been dismissed as a defendant from the litigation without prejudice.

On February 8, 1996, the Company filed a complaint against F. James
Anderson and Simone Anderson in Superior Court of the State of California,
in and for the County of Sacramento, Case No. 96AS 00513 (the "Sacramento
Action"). The complaint seeks (a) judicial determination and declarations
that the Company (1) has no further obligations to advance defense fees and
costs incurred by the Andersons in connection with the Zuri litigation,
including on the Andersons' appeal of that judgment (which fees and costs
the Company agreed to pay pursuant to a settlement in a previously resolved
matter); (2) is entitled to recoup defense fees and costs allocable to
the Andersons' defense of claims in the Zuri Invest litigation for which they
were found liable; (3) is not required to indemnify the Andersons for their
liability in the Zuri Invest litigation; (4) has no duty or obligation to the
Andersons to account for, replenish, and/or return monies to or pay interest
on the $200,000 provided by the Andersons as partial indemnification to the
Company in connection with the Royal Bank litigation; and (5) is entitled
to have all amounts returned to the Company from the $200,000 which were
disbursed for the purposes other than to indemnify the Company such that the
Company receives the full net benefit of the $200,000, and (b) equitable
indemnification to collect from the Andersons their proportionate share of the
judgment in the Zuri Invest litigation.

On April 4, 1996, the Company was served with the Andersons' answer to the
Sacramento Action and their cross-complaint against the Company. The answer
generally denied the allegations of the Company's complaint and asserted
various affirmative defenses. The cross-complaint seeks judicial
determination and declarations that the Company (1) is obligated to advance
the Andersons' defense costs (including costs of appeal) in the Zuri
litigation and defense costs in the Federal Action and (2) is obligated to
indemnify them from the judgment in the Zuri Invest litigation and any
judgment that might be rendered against them in the Federal Action.

The Company answered the Andersons' cross complaint on May 6, 1996
generally denying the allegations and asserting various defenses. Although
the Company has not done so to date, the Company may attempt to amend its
original complaint to assert an additional claim to hold the Andersons liable
for the entire amount of the Royal Bank of Scotland settlement.

<PAGE>
NOTE 13 - LEGAL PROCEEDINGS (Continued)
------------------

The Company is a party to other various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material adverse
effect on the business or financial position of the Company.

NOTE 14 - AGREEMENT WITH MK GOLD COMPANY
----------------------------------

During 1993, the Company and MK Gold Company, a wholly owned subsidiary of
Morrison Knudsen Corporation, entered into a nonbinding letter of intent to
jointly explore and develop mineral properties in, among other places, the
Republic of Kyrghzstan. The Company and MK Gold Company also entered into a
Joint Development Agreement to form a new corporation called MKZ Gold Company
(MKZ Gold) to explore, develop, and mine precious and base metals in the
Republic of Kyrghyzstan. On May 10, 1993, MK Gold Company and the Concern
Kyrghyzaltyn acting on behalf of the government of the Kyrghyzian Republic
entered into a general agreement to explore, develop, operate, and mine the
Jerooy Gold Project located in the Kyrghyzian Republic. The general agreement
was a binding agreement and called for the preparation of a mining Joint
Venture Foundation Document (the Venture Agreement) with the Kyrghyzian
Republic.

Under the terms of the Joint Development Agreement, MK Gold Company would own
60% and the Company, through a wholly owned subsidiary, would own 40% of MKZ
Gold. Further, the board of directors of MKZ Gold would consist of five
members, three nominated by MK Gold Company and two nominated by the Company.
MK Gold Company and the Company intended to capitalize MKZ Gold with $400,000
based on their percentage of ownership in MKZ Gold. MK Gold Company was to
provide mining operations and the Company was to provide geological services
to MKZ Gold.

On September 3, 1993, the Company served MK Gold Company with a complaint,
seeking declaratory relief with regard to the Joint Development Agreement.
The Company was seeking a declaration of its rights under the Joint
Development Agreement, including a declaration that the joint venture with MK
Gold Company exists under Idaho law, that the Company and MK Gold Company have
equal rights in the management of the joint venture, and that MK Gold Company
owes the Company $150,000. After serving the complaint, the Company and MK
Gold Company had discussions about resolving the dispute. MK Gold Company
paid the Company the $150,000 owed under the Joint Development Agreement.

On November 10, 1993, the Company amended its complaint seeking dissolution of
the joint venture between the Company and MK Gold Company and alleging fraud
and deceit, breach of fiduciary duty and breach of implied covenant of good
faith and fair dealing by MK Gold Company.

In December 1993, the Company settled the lawsuit with MK Gold Company
receiving: (1) $4,232,000 cash; (2) a 4% net smelter return on any interest
which MK Gold Company obtains in the Kumtor project; and (3) the assumption of
all the Company's obligations to the International Foundation for
Privatization. The $4,232,000 is shown as sale of joint venture in the June
30, 1994 consolidated statement of operations.

<PAGE>
NOTE 15 - SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING ANDFINANCING
--------------------------------------------------------------
ACTIVITIES
----------

Noncash investing and financing activities as of June 30, are as follows:
<TABLE>
<CAPTION>

1997 1996
---------- --------
<S> <C> <C>

Partial settlement of litigation $1,200,000 $223,436
Compensation recognized on stock
options granted 24,000 160,021
Company stock issued to satisfy
purchase price adjustments agreements 753,175 -
Company stock issued to convert 7%
convertible debenture 300,000 150,000
Company stock issued to acquire the
New California Placer Mine 20,000 -
</TABLE>

NOTE 16 - SEGMENT INFORMATION
--------------------

The Company's activities have been devoted to the acquisition, development,
and production of mineral properties. Accordingly, the Company is considered
to be in a single line of business. To date, substantially all of the
Company's identifiable assets and operating expenditures are in the United
States.

NOTE 17 - CONVERTIBLE DEBENTURE PAYABLE
-------------------------------

On April 3, 1996, the Company received net proceeds of $400,000 on gross
proceeds of $450,000 from an offshore; two year, $450,000, 7% convertible
debenture. The subscriber has the option of converting all or part of the
principal to the Company's Common Stock forty-five days after the closing date
of the transaction. The note is convertible to shares at 70% of the average
share price for the five days preceding conversion. On June 17, 1996, $150,000
of the note was converted to 161,360 shares.

On July 8, 1996, the remaining $300,000 of the note was converted into 439,560
shares of the Company's Common Stock. The convertible debentures outstanding
at June 30, 1996 were classified as current portion of long-term debt.

NOTE 18 - SUBSEQUENT EVENTS
------------------

In July 1997, the Company issued 150,000 shares of its Common Stock for
certain consulting services. The shares were registered with the Securities
and Exchange Commission on Form S-8. The shares are valued at $0.375, the
average of the bid and asked price for the Company's Common Stock on July 8,
1997.

Also in July 1997, the Company sold 600,000 shares of its Common Stock
pursuant to a Private Placement at a price of $0.125 per share. The shares
were sold pursuant to Regulation D and Section 4(2). The Company received a
net amount of $75,000 from the sale.

Also in July 1997, the Board of Directors approved a Private Placement for the
sale of 1,933,333 shares of the Company's Common Stock at a price of $0.15 per
share pursuant to Regulation D and Section 4(2). The Company received a net
amount of $290,000 from the sale. The Company also approved a 10% commission
for a finder's fee in connection with the Private Placement.

<PAGE>
NOTE 18 - SUBSEQUENT EVENTS (Continued)
------------------

In August 1997, the Board of Directors approved a Private Placement for the
sale of 1,350,000 of the Company's Common Stock at the price of $0.10 per
share pursuant to Regulation D and Section 4(2). The Company received a net
amount of $135,000 from the sale. The Company also approved a 10% commission
for a finder's fee in connection with the Private Placement.

Also in August 1997, the Company issued 125,668 shares to pay for certain
consulting fees. The shares were registered with the Securities and Exchange
Commission on Form S-8. The shares are valued at $0.40625, the average of the
bid and asked price for the Company's Common Stock on August 25, 1997.

In September 1997, the Board of Directors approved the sale of 4,200,000
shares of its Common Stock at a price of $0.07 per share pursuant to
Regulation D and Section 4(2). The Company received a net amount of $294,000
from the sale.

Also, in September 1997, the Board of Directors approved a private placement
for the sale of 2,120,000 of the Company's Common Stock at the price of $0.10
per share pursuant to Regulation D and Section 4(2). The Company received a
net amount of $227,000 from the sale.

Also in September 1997, the Company issued 100,000 shares to pay for certain
consulting fees. The shares were registered with the Securities and Exchange
Commision on Form S-8. The shares are valued at $0.313,the average of the bid
and the asked price for the Company's Common Stock on September 26, 1997.

<PAGE>
EXHIBIT 11.1

COMPUTATION OF EARNINGS PER SHARE

Year Ended
-----------------------

June 30, 1997 June 30, 1996
--------------- ---------------
<S> <C> <C>

Net Loss $ (4,288,420) $ (9,270,102)

Weighted Average Common
Shares Outstanding 20,831,619 9,634,616
--------------- ---------------

Net Loss per Common Share $ (.21) $ (.96)
=============== ===============
</TABLE>

<PAGE>
EXHIBIT 21.1

LIST OF SUBSIDIARIES

<PAGE>

1. B. Creek Acquisition Corporation

2. Alpha Hardware
<PAGE>

EXHIBIT 23.1

LETTER OF CONSENT OF INDEPENDENT AUDITORS

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to incoporation by reference om Registration Statement No. 333-286
on Form S-3 and Registration No. 333-25025, 333-31053, 333-34417 and 333-36443
on Form S-8 of Brush Creek Mining and Development Co., Inc., of our report
dated August 29, 1997 with respect to the consolidated financial statements of
Brush Creek Mining and Development Co., Inc. included in its Annual Report on
Form 10-KSB for the year ended June 30, 1997.

BROWN ARMSTRONG RANDALL & REYES
ACCOUNTANCY CORPORATION

/s/Brown Armstrong Randall & Reyes
Accountancy Corporation

Bakesfield, California
October 13, 1997

<PAGE>
EXHIBIT 27.1

FINANCIAL DATA SCHEDULE

<PAGE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 111,059
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,750
<CURRENT-ASSETS> 113,809
<PP&E> 11,348,293
<DEPRECIATION> 1,112,165
<TOTAL-ASSETS> 10,622,032
<CURRENT-LIABILITIES> 2,446,714
<BONDS> 0
0
0
<COMMON> 47,092,740
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,622,032
<SALES> 0
<TOTAL-REVENUES> 22,266
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,310,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116,626
<INCOME-PRETAX> (4,288,420)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,288,420)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,288,420)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)

</TABLE>