SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(Mark One)
/ X / ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
(FEE REQUIRED)
For the fiscal year ended December 31, 1996
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the transition period from ________to _______________
Commission file number 33-4844-D
AMERICANA GOLD & DIAMOND HOLDINGS, INC.
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(Name of small business issuer in its charter)
Delaware 84-1023321
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification NO.)
Calle Los Laboratorios, Torre Beta, Piso 2, Ofic. 208, 1071
Los Ruices, Caracas 1071, Venezuela
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(Address of principal executive offices) (Zip code)
Issuer's telephone number, including
area code: (011)-(582)-238-2332 - Fx: 239-8429
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Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
Check whether the issue (1) filed all reprots 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 registratnt 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 Regulaton 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. / /
State issuer's revenues for its most recent year. $ 69,774
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State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the voting stock as
sold, or the average bid and asked prices of such stock, as of March 1, 1997
(See definition of affiliate in Rule 12b-2 of the Exchange Act).
$5,131,850
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Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumption , if the assumptions are stated.
Indicate the number of shares outstanding of the Issuer's Common Stock,
as of the latest practicable date. At March 1, 1997 there was outstanding
12,082,731 shares of the Issuer's Common Stock, $.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement (puursuant to Regulation 14A)
concerning the Annual Meeting of Shareholders is incorporated by reference to
Part III of this Form 10-KSB.
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PART I
Item 1. Business
(a) Business Development
Americana Gold & Diamond Holdings, Inc. (the "Company" or AGD") in its
current form resulted from the merger (the "Merger") in February 1993 of
Americana Gold & Diamond Mining, Inc., a corporation incorporated in Tortola,
British Virgin Islands in April 1990 ("Americana Gold") with and into Blue
Willow Holdings, Inc., a Colorado corporation incorporated in March 1986 ("Blue
Willows"). In connection with the Merger, Blue Willows changed its name to
Americana Gold & Diamond Holdings, Inc. and issued 2,823,180 shares of common
stock, $.001 par value (the "Common Stock") to the shareholders of Americana
Gold. Prior to the Merger, Blue Willows was a publicly-held shell corporation
and Americana Gold held several mining concessions which generated limited
revenue. Subsequent to the Merger, the Company purchased additional mining
concessions.
The Company has three wholly-owned Venezuelan subsidiaries, Latinvan
Metal Trading L.T.D., C.A., which holds the titles to the Company's mining
concessions, Consorcio Minero Miamo, C.A., which is the original owner of the
Fortuna I concession and AGD Holdings Inc. de Venezuela, C.A., which holds all
of the Company's exploitation and exploratin equipment. Unless the context
requires otherwise, references to the Company and AGD in this Form 10-KSB shall
mean Americana Gold & Diamond Holdings, Inc. and its subsidiaries.
The Company has limited capital resources and is actively seeking other
sources of capital in order to meet its working capital needs. The independent
auditor's report for the fiscal year ended December 31, 1996 has been prepared
assuming that the Company will continue as a going concern. There can be no
assurance that any additional financing will be available to the Company on
acceptable terms, or at all. See "Management's Discussions and Analysis or Plan
of Operation."
(b) Business of Issuer:
(1) Principal products or services and their markets.
The Company is engaged in the exploitation, exploration and development
of gold mining concessions in Venezuela's Guayana Shield. The Company currently
has the rights to four concessions (El Bochinchito, Fortuna I, Progresso IV and
Progresso V) and is in the process of acquiring a third (Bochinche 4) which it
believes may lead to gold production. However, there can be no assurance that
there will be any gold production from these
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concessions. The location and chief characteristics for each of these properties
are discussed below. Estimates for vein deposits on all of the Company's
projects are highly speculative and are based on experience at similar
properties. There can be no assurance that such estimates will in fact be
accurate.
El Bochinchito
Lying across a vast area near the border with Guyana, the Bochinche
zone of Pastora province is believed to have an immense gold reserve.
The Bochinche area has had a history of gold production dating back
more than a century. It is one of the four principal gold-bearing zones
in Bolivar State. Over the past two years, Monarch Resources of Canada
and others have introduced modern mining equipment and methods into the
Bochinche area, and are now producing gold from several deposits in the
district.
The Company's El Bochinchito prospect, a 250 acre parcel is a
concession contract with the Venezuelan government and was acquired by
the Company in 1993 from an unaffiliated third party who had controlled
the concession since 1988. There were very limited activities done on
the property prior to the Company's acquisition.
The concession contract terminates in 2003 and can be renewed for an
additional forty years. El Bochinchito is located east of Tumeremo
village, in a region that has been surveyed and explored by the
Venezuelan Corporation of Guyana (C.V.G.), the state-owned mining
company. It lies north of Kilometer 88, and just east of the El Callao
mine. El Callao was Venezuela's major nineteenth century discovery,
yielding 151,000 ounces of gold from 1871 to 1874. Mining continues at
the El Callao mine today. Access to the property is by an all weather
gravel road 72 kilometers from Tumeremo to the willage of Bochinche,
thence by a very rough 4 by 4 bush truck, 15 kilometers to the
concession.
AGD has completed sampling and geochemical work on El Bochinchito's
alluvial deposits. The alluvial gold plant was installed and fine tuned
at Bochinchito Concession during the first quarter of 1996. Production
at El Bochinchito has been delayed as the Company concentrates on what
appears to be a major discovery in altered gabbro at La Fortuna I. In
addition, trial runs with the plant have indicated some problems with
clay balls which will require some minor modifications to the plant.
Fortuna I Concession
In October 1994, the Company purchased the La Fortuna I Mining
Concession from Inversiones Megold C.A. ("Inversiones"), for a total
purchase price of $2,000,000.
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Fortuna I is located about 45 kilometers north of Las Cristinas, Placer
Dome's 7.7 million ounce gold find, at kilometer 88 in Bolivar State.
Fortuna I is accessible by a paved road to 34 kilometers then a 4 by 4
gravel road 22 kilometers to the property with a ferry crossing at the
Cuyuni River. The Las Cristinas area is considered by many North
American mining experts to be the prime gold exploration area in
Venezuela and exploration activity is taking place at this time.
Fortuna I possesses both alluvial deposits and veins. The petrology of
the La Fortuna Concession area is made up of basic to intermediate
volcanics, Pastora-Botanamo Super Group rock, mainly metabasalts and
metagalbroc and Caballape Formation, andesite agglomerates. The rocks
in the mineralized zones are usually sericitized, pyritized and
kaolinized, especially near the veins. No attempt has been made by the
Company's independent professional engineer to estimate tonnages for
this property.
During the first quarter of 1996 the Trenching Exploration Phase of La
Fortuna I Mining Concession was completed. Two broad zones of
mineralization were identified, both 100 meters (330 feet) in width,
and with assay results of 1.05 grams per tonne in saprolite rock. A
further trenching program conducted at La Fortuna I Mining Concession
during the Second and third quarter of 1996 confirmed results of
previous trenching, and better defined targets for drill-holes into
Central Zone. Additional trenching of Fortuna Zone and other targets in
the concession was completed at the end of the year. A drilling stage
will commence during 1997.
Bochinche 4
AGD is in the final stages of negotiating to acquire the Bochinche 4
concessions from the Venezuelan government. However, there can be no
assurance that the Company will in fact acquire such concession or as
to the terms of such acquisition. This 2,500 hectare concession which
surrounds the Company's El Bochinchito property is centered in an area
that the Company believes is one of the most active new mining areas in
the world. The Bochinche 4 alluvial deposits are estimated at more than
32,000 ounces.
Although the Bochinche area has been mined for over 100 years, modern
mining techniques have never been employed. Given the potential
richness of Bochinche 4 alluvials, possible deep vein reserves could be
significant. If the Company acquires the Bochinche 4, the Company
believes it could begin exploration of gold in mid 1997.
Progreso 4 and 5
AGD controls two additional gold concessions, Progreso 4 and 5, in the
Venezuelan State of Bolivar. These concessions total approximately 2500
acres and are located near the mining town of El Dorado. The area has a
long history of gold production form high-grade ore bodies, and there
has
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been a considerable amount of small to medium scale gold mining in the
concession adjacent to Progreso 4 and 5. Initial geological studies at
Progreso 4 and 5 indicate that it is the least promising of AGD's
properties and therefore no exploration is planned for this area at
this time.
(2) Distribution methods of the products or services.
Currently, the Company has not produced any gold for
distribution. If and when, the Company is in a position to distribute gold, such
distribution will be subjet to regulation by the Venezuelan government. See
"Business -- Effect of existing or probable governmental regulations on the
business."
(3) Status of any publicly announced new product or
services.
See "Business --- Principal Products or Services and
Their Markets" for a description of the current status of the Company's mining
operations.
(4) Competitive business conditions and the small
business issuer's competitive position in the
industry and methods of competition.
The Company will remain a minor participant among the
firms which engage in gold prospecting. There are many other established firms
with significantly greater capitalization and greater access to business
opportunities. In view of the Company's combined lack of financial resources and
limited managerial experience, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
(5) Sources and availability of raw material and the
names of principal suppliers.
Not applicable.
(6) Dependence on one or a few major customers.
See "Effect of existing or probable governmental
regulations on the business."
(7) Patents, trademarks, licenses, franchises,
concesions, royalty agreements or labor contracts,
including duration.
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The Company currently has the following mining
concessions: El Bochinchito, Fortuna I Concession, and Progreso 4 and 5. The
Company is also negotiating to acquire the Bochinche 4 Concession from the
Venezuelan government. For further information with respect to the Company's
concessions, see "Business -- Principal products or services and their markets."
(8) Need for any governmental approval of principal
products or services.
Not applicable.
(9) Effect of existing or probable governmental
regulations on the business.
The regime for the commercialization of gold in
Venezuela is essentially divided into two areas: (i) internal commercialiation
of gold; and (ii) external commercialization of gold. With respect to internal
commercialization, gold may be sold to either third parties or to the Venezuelan
Central Bank (the "VCB") or to one of its agent banks. Generally sales to third
parties in Venezuela require the payment of an exploitation tax of at least 3%
as opposed to 1% if it is sold to the VCB or one of its agents. With respect to
external commercialization, on May 31, 1995, the Central Bank of Venezuela
issued Resolution No.95-05-05 which regulates gold and gold alloy exports. The
most significant aspects of this regulation are as follows:
- The exportation of gold and gold alloys are authorized. For this
purpose, the interested party must register in the Gold Exporters'
registry maintained by the Central Bank of Venezuela.
- The authorization request will be effected before the Central Bank of
Venezuela, accompanied by certification that a minimum of fourty
percent (40%) of the amount calculated in kilograms of cast or refined
gold, resulting from adding the amount specified in the export request
to the amount destined to the internal market has been sent to the
internal market. This authorization will be granted for a term of 45
consecutive calendar days.
If and when the Company is in a position to produce and distribute gold,
the effect of these regulations could have a significant impact on the
Company's operations.
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(10) Estimate of the amount spent during each of the
last two fiscal years on research and development
activities, and if applicable the extent to which
the cost of such activities are borne directly by
consumers.
The Company has spent approximately $ 294,000 in gold deposit
exploration during 1995 and $ 322,000 during 1996.
(11) Costs and effects of compliance with environmental
laws.
The Company has spent approximately $ 2,812 in compliance with
Venezuelan environmental laws.
(12) Number of total employees and number of full time
employees.
At March 21, 1996, the Company employed twenty five (25)
employees.
Item 2. Description of Property.
The Company's principal executive offices are located in Calle
Los Laboratorios, Torre Beta, Piso 2, Ofic. 208, Urb. Los Ruices,
Caracas 1071, Venezuela. This facility consists of approximately
2,000 square feet and is occupied under a lease. The Company
leases a second facility in Tumeremo, a small town near the
Bochinche, and Fortuna I concessions. This second facility has
office and storage space.
For information relating to the Company's mining concessions, see
"Business - Business of Issuer."
Item 3. Legal Proceedings.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the holders of the
Company's Common Stock, during the fourth quarter of the
Company's fiscal year ended December 31, 1996.
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PART II
Item 5. Market for Common Equity and Related Stockholder
Matters.
The Common Stock of the Company is currently quoted on the NASDAQ Small
Cap Market ("NASDAQ"). The high and low bid quotations for each quarterly period
for fiscal 1995 and fiscal 1996 are listed below. The quotations set forth in
the table reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual.
Fiscal 1995 High Low
----------- ---- ---
1st quarter . . . . . . . . . .92 .85
2nd quarter . . . . . . . . . 1.03 .92
3rd quarter . . . . . . . . . .92 .64
4th quarter . . . . . . . . . .98 .79
Fiscal 1996 High Low
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1st quarter . . . . . . . . . 1.00 .56
2nd quarter . . . . . . . . . .87 .56
3rd quarter . . . . . . . . . .75 .50
4th quarter . . . . . . . . . 1.37 .37
(b) The Company has not paid any cash dividends on its Common Stock and
does not intend to pay cash dividends on its Common Stock for the foreseeable
future. The Company intends to retain future earnings, if any, to finance future
development.
(c) As of March 20, 1997, there were approximately 325 holders of
record of the Company's Common Stock. The Company believes that at such date
there were in excess of 500 beneficial owners of the Company's Common Stock.
Item 6. Management's Discussion and Analysis or Plan of
Operation.
Overview
The Company has only recently begun its business activities and
accordingly has generated limited revenues. The Company has generated an
accumulated deficit of $ 3,939,658 through December 31, 1996, due to its
significant research, development, administrative and exploration expenses and
insufficient revenues
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in relation to its operating expenses. Management believes that losses will
continue to be incurred until it is able to successfully acquire or place a
property in operation. There can be no assurance that management will be
successful in accomplishing this task. The independent auditor's report for the
fiscal year ended December 31, 1996 has been prepared assuming that the Company
will continue as a going concern.
During 1989, the Company purchased the rights for mining and
exploitation of gold and diamonds on a land extension designated "El Progreso 4"
and "El Progreso 5". Each concession has a surface area of 500 hectares. These
concessions are located in the Jurisdiction of the Dalla Costa Municipality, of
the Sifontes District of the State of Bolivar. The cost of these mining
concessions was approximately $5,400,000 of which the Company has paid
aproximately $ 2,833,000, and additional exploration costs have been incurred.
The Company is in the process of renegotiating the terms and conditions of the
Purchase Agreement for the El Progreso 4 and 5 concessions. The Company has
stopped payments and suspended exploration activities on such concessions until
a new agreement is reached.
During 1993, the Company purchased the alluvial exploitation and
exploration rights of a gold and diamond mine over a land extension known as
Bochinche. This concession covers a surface area of approximately 250 acres and
is located in the Jurisdiction of the Tumeremo Municipality, District of
Sifontes, in the State of Bolivar. The cost of the concession was approximately
$811,905.
In October 1994, the Company purchased the La Fortuna I Mining
Concession form Inversiones Megold C.A., for a total purchase price of
$2,000,000 as follows:
1) $500,000 in cash payments, to be paid on the following dates: a)
$100,000 on October 31, 1994; b) $200,000 on February 28, 1995; c)
$200,000 on May 31, 1995. The remaining balance of $1,500,000 was paid
to Inversiones Megold, C.A., through the delivery of capital stock of
the Company, as follows: a) an amount of Series C Convertible Preferred
Stock of the Company equivalent to $500,000 as of the date of the
agreement convetible to Common Stock market after an eighteen (18)
month period; b) an amount of Common Stock equivalent to $500,000 on
October 18, 1994; and c) an amount of Common Stock equivalent to
$500,000 on April 5, 1995. Conversion of dollars into Common Stock was
based on a formula prescribed in the agreement. Cash payments to
Inversiones Megold, C.A.
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relating to the La Fortuna I Concession purchase agreement have been
renegotiated so that they will commence once the Company's production
at Bochinchito reaches a stable productin level of at least 600 grams
per day. To date the balance to be paid in cash to Inversiones Megold,
C.A. is $390,000.
Results of Operations
Fiscal year ended December 31, 1996 Compared to Fiscal year ended
December 31, 1995.
Total income for the year ended December 31, 1996 was $ 69,774 compared
to $ 260,208 for the year ended December 31, 1995, a net decrease of $ 190,434.
This decrease is primarily attributable to the termination of additional income
from leases at the Company's "Bochinche" mining concession and a decrease in
gains from foreing currency exchanges.
Administrative expenses were $ 572,836 for the year ended December 31,
1996 compared to $ 937,981 for the year ended December 31, 1995, a decrease of $
365,145. Such decrease is primarily related to the capitalization of exploration
costs, and payment of interest on preferred stock during 1995.
Primarily due to a continued lack of revenues from operations, the net
loss for the year ended December 31, 1996 was $ 503,062. For the fiscal year
ended December 31, 1996 the Company had a net loss of $ 677,773.
Liquidity and Capital Resources
The Company had $ 677,843 in working capital as of December 31, 1996,
compared with working capital of $ 895,626 as of December 31, 1995.
The 1996 working capital was primarily due to the receipt of proceeds
from private placements offering described below offset by the funding of
operations and the Company's investments in La Fortuna and Bochinchito
concessions.
At December 31, 1996 the Company had a note payable to a bank
outstanding in the amount of $170,000. The loan bears interest at 6% per annum
and matures on August 2, 1997. Long-term debt of the Company relating to
liabilities assumed by the Company for the purchase of exploration and
explorations rights of mining concessions currently amounts to $ 2,960,251. Such
amount relates to payments due on the Fortuna I concession (approximately $
390,000) and the balance relates to the El Progreso concession, which the
Company is currently renegotiating. See "Management Discussions and Analysis or
Plan of Operation -- Overview."
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In 1994, the Company received an aggregate of approximately $400,000 in
net proceeds from a private placement of Series B Convertible Preferred Stock.
In addition, certain officers and directors agreed to convert approximately
$605,000 of debt into the Series B Preferred Convertible Stock. Such Series B
Convertible Preferred Stock payed a cumulative interest rate of 12% per annum
and were convertible into Common Stock at a 25% discount from the bid price of
the Company's Common Stock at the time of conversion.
In 1993, the Company also raised approximately $256,000 in net proceeds
from a private placement of Series A Convertible Preferred Stock. The Series A
Convertible Preferred Stock had similar terms as the Series B Convertible
Preferred Stock. In addition, in 1993, certain creditors of the Company,
including Directors and Officers agreed to convert approximately $1,233,800 of
debt into comon stock. The Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock and the Series C Convertible Preferred Stock are
sometimes collectively referred to herein as the "Preferred Stock".
In 1994 and 1995, the Company raised approximately $733,130 from a
private placement of Common Stock (the "Foreign Private Placement") to investors
who reside outside the United States, including officers and directors of the
Company. The Company issued 902,948 shares of Common Stock in connection with
the private placement.
In 1995, the Company issued 2,434,259 shares of Common Stock relating
either to the conversion of Preferred Stock into Common Stock or in lieu of (i)
the payment of interest on the Preferred Stock, and (ii) the issuance of stock
in exchange for the cancellation of debt in connection with Inversiones Megold,
C.A. agreement.
In 1995 and January 1996 the Company raised approximately $350,000 from
a private placement of 35 Units, each unit consisting of a $10,000 principal
amount promissory note. The note was due and payable on July 19, 1996 and beared
interest at 8%. The note was converted, into 20,000 shares of the Company's
Common Stock for each unit. In March 1996 the purchasers of the 35 units of the
private placement elected to convert their notes into shares of the Company's
Common Stock.
In 1996 the Company raised approximately $ 677,843 from Private
Placements of Common Stock to investors who reside outside the United Stetes
including officers and directors of the Company. The Company issued 1,250,000
shares of its Common Stock in connection with the Private Placements.
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The Company's management is currently meeting with select corporate
finance people in the financial community in order to seek to raise the
necessary funds to make sure the La Fortuna concession reaches its full
potencial. Other alternatives with other mining companies in the La Fortuna area
also being examined. There can be no assurance that the Company will be
successful in raising the necessary funds or finding other alternatives.
The Company will continue to rely upon management until additional
sources of financing are secured or a suitable property is acquired with
sufficient cash flow to sustain the Company.
Inflation
Venezuela has historically had a high rate of inflation and the Company
is potentially impacted by currency rate exchanges. While neither high inflation
or currency rate exchanges have had a material adverse effect on the Company,
there can be no assurance that such developments will not have a material
adverse effect on the Company in the future.
Forward Looking Statements
This Form 10-KSB contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1993, as amended, and Section
21E of the Securities Exchange Act of 1934, amended. Investors are cautioned
that all forward looking statements involve risks and uncertainty, including
without limitation, the viability of gold mines, exploration cost, foreign
currency exchange rates and general market conditions. Although the Company
believes the assumptions underlying the forward-looking statements contained
herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
contained in the report will prove to be accurate.
Item 7. Financial Statement
See Consolidated Financial Statement listed in the accompaning index to
Consolidated Financial Statements on Page F-1 herein.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
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PART III
Items 9, 10, 11, and 12. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act; Executive
Compensation; Security Ownership of Certain Beneficial Owners and Management;
Certain Relationships and Related Transactions.
The information required by these Items is omited because the Company
will file a definitive proxy statement pursuant to Regulation 14A, which
information is herein incorporated by reference as if set out in full.
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Item 13. Exhibits and Reports on Form 8-K.
None
(a) Exhibit
3.1 The Company's Amended and Restated Certificate of
Incorporation. **
3.2 The Company's By-laws. **
3.3 Certificate of Designation for the Series A. Series B
and Series C Convertible Preferred Stock. *
4.1 Form of Common Stock Certificate. **
10.1 Agreement between Inversiones Megold, C.A. and the
Company.*
* Incorporated by reference to the Company's Form
10-KSB for the fiscal year ended December 31, 1994.
** Incorporated by reference to the Company's Form
8-A, dated February 10, 1993.
*** Filed herewith.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Caracas, Country of
Venezuela on the 21th day of March, 1997.
AMERICANA GOLD & DIAMOND HOLDING, INC.
/s/ Henry Bloch
---------------------------------------
Henry Bloch
C.F.O. & Director
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities on
the dates indicated.
Signature Title Date
/s/ Carlos Hausmann
- ----------------------- C.E.O. & Director March 21, 1997
Carlos Hausmann
/s/ Jose Pereira
- ----------------------- Director & General Manager March 21, 1997
Jose Pereira
/s/ David Zrihen
- ----------------------- Treasurer & Director March 21, 1997
David Zrihen
/s/ David Bassan
- ----------------------- Director & Controller March 21, 1997
David Bassan
- ----------------------- Director March 21, 1997
Clement W. Cohen
/s/ Thomas Klingberg
- ----------------------- Director & Secretary March 21, 1997
Thomas Klingberg
- ----------------------- Director March 21, 1997
Alberto Cohen
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KRYGIER, MONTILLA & ASOCIADOS
Contadores Publicos
Caracas, Venezuela
To the Shareholders of
Americana Gold and Diamond Holdings, Inc. and subsidiaries:
We have audited the consolidated balance sheets of AMERICANA GOLD AND DIAMOND
HOLDINGS, INC. (a company incorporated in Delaware, USA) AND SUBSIDIARIES as of
December 31, 1996 and 1995, and the corresponding consolidated statements of
income, statement of shareholders' equity and cash flows for the years the
ended. These financial statements are the responsibility of Company Management.
Our responsibility is to issue an opinion on these consolidated financial
statements based on our audits.
We performed our audits in accordance with generally accepted auditing
standards. Such standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
Management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
As explained in Note 4, in late 1992, the Company suspended exploration
activities of the concessions denominated "El Progreso 4" and "El Progreso 5",
which are recorded for US$ 5,931,535 as of December 31, 1996 and 1995. The
Company has not performed an independent technical appraisal on such
concessions, in order to determine their net realization value at the
aforementioned dates, in accordance with generally accepted accounting
principles.
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In our opinion, except for the effect of the adjustments, if any, resulting from
obtaining the independent technical appraisal indicated in the preceding
paragraph, the aforementioned consolidated financial statements present fairly,
in all material respects, the consolidated financial position of Americana Gold
and Diamond Holdings, Inc. and Subsidiaries as of December 31, 1996 and 1995,
and the results of its operations and cash flows for the years then ended, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company's main activity
during 1996 has been the exploration of concessions acquired during 1993 and
1994 for US$ 3,428,426, whose geological studies show favorable indications for
continuing said exploration. Management's plans regarding the development of
this and other concessions are described in Note 4. We do not express an opinion
regarding the feasibility of such studies and plans. The Company's continuity as
a going concern and the recovery of acquisition costs of assets plus capitalized
exploration costs are subject to the success of the Company's future operations.
The financial statements do not include any adjustment that might result from
the outcome of this uncertainty.
KRYGIER, MONTILLA & ASOCIADOS
/s/ Jose G. Moros H.
- --------------------
Jose G. Moros H.
C.P.C. No. 8203
January 31, 1997
<PAGE>
AMERICANA GOLD AND DIAMOND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 1995
(Expressed in US dollars)
1996 1995
--------- ------------
ASSET
CURRENT ASSET:
Cash 133,280 44,169
Prepaid expenses and other
current assets 41,215 65,307
---------- ----------
Total current assets 174,495 109,476
PROPERTY AND EQUIPMENT, net 322,053 357,436
MINING CONCESSIONS-
In exploration activities 3,428,426 3,106,200
MINING CONCESSIONS-
Suspended exploration activities 5,931,535 5,931,535
OTHER ASSETS 515,677 507,935
---------- ----------
10,372,186 10,012,582
========== ==========
The accompanying notes (1 to 8) form an integral part of these consolidated
financial statements.
<PAGE>
AMERICANA GOLD AND DIAMOND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 1995
(Expressed in U.S. dollars)
1996 1995
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank loans 170,000 227,931
Accounts payable 15,968 709,186
Accrued liabilities 13,942 54,004
----------- -----------
Total current liabilities 199,910 991,121
LONG-TERM ACCOUNTS PAYABLE 2,960,251 2,963,309
PROVISION FOR EMPLOYEE SEVERANCE BENEFITS 6,843 5,862
Total liabilities 3,167,004 3,960,292
----------- -----------
SHAREHOLDERS' EQUITY:
Capital stock 11,144,840 9,488,886
----------- -----------
Accumulated losses (3,939,658) (3,436,596)
Total shareholders' equity 7,205,182 6,052,290
----------- -----------
10,372,186 10,012,582
=========== ===========
The accompanying notes (1 to 8) form an integral part of these consolidated
financial statements.
<PAGE>
AMERICANA GOLD AND DIAMOND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995
(Expressed in US dollars)
1996 1995
--------- ---------
INCOME:
Income from leasing - 98,438
Other income 36,635 -
Adjustment for currency translation 33,139 161,770
--------- ---------
Total income 69,774 260,208
--------- ---------
ADMINISTRATION EXPENSES (572,836) (937,981)
--------- ---------
Net loss (503,062) (677,773)
========= =========
The accompanying notes (1 to 8) form an integral part of these consolidated
financial statements.
<PAGE>
AMERICANA GOLD AND DIAMOND HOLDINGS, INC. AND SUBSIDIARIES
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Expressed in US dollars)
<TABLE>
<CAPTION>
Total
Capital Accumulated shareholders'
stock losses equity
------------- ------------- ---------------
<S> <C> <C> <C>
BALANCES, as of December 31, 1994 8,180,573 (2,758,823) 5,421,750
Capital increase (3,185,126 common
shares) 2,545,386 - 2,545,386
Capital decrease (1,236 preferential
shares) (1,236,000) - (1,236,000)
Decrease of contribution for
future capital increases (1,073) - (1,073)
Net loss - (677,773) (677,773)
------------- ------------ -----------
BALANCES, as of December 31, 1995 9,488,886 (3,436,596) 6,052,290
Capital increase (2,902,572 common
shares) 1,655,954 - 1,655,954
Capital increase (800,000 common
shares) 500,000 - 500,000
Capital decrease (500 preferential
shares) (500,000) - (500,000)
Net loss - (503,062) (503,062)
------------- ----------- ----------
BALANCES, as of December 31, 1996 11,144,840 (3,939,658) 7,205,182
============= =========== ==========
</TABLE>
The accompanying notes (1 to 8) form an integral part of these consolidated
financial statements.
<PAGE>
AMERICANA GOLD AND DIAMOND HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Expressed in US dollars)
<TABLE>
<CAPTION>
1996 1995
--------- -----------
CASH FLOWS USED IN OPERATING ACTIVITIES:
<S> <C> <C>
Net loss (503,062) (677,773)
Adjustments to reconcile net loss with net cash
used in operating activities-
Depreciation of property and equipment 59,188 61,596
Gain in translation of foreign currency (69,774) (161,770)
Provision for employee severance benefits 3,652 3,230
-------- --------
(509,996) (774,717)
NET CHANGES IN OPERATING ASSETS AND LIABILITIES:
Decrease (increase) in prepaid expenses
and other current assets 24,092 (63,080)
(Decrease) increase in accrued liabilities (40,062) 16,887
Increase in accounts payable 962,736 1,666,272
Payments of employee severance benefits (2,671) (942)
--------- -----------
Net cash used in operating activities 434,099 844,420
--------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment (33,276) (65,070)
Increase in mining concessions (322,226) (280,810)
Retirement of property and equipment 9,471 22,506
Increase in other assets (7,742) (167,857)
--------- ----------
Net cash used in investing activities (353,773) (491,231)
--------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
(Decrease) in long term account payable (3,058) (602,520)
(Decrease) increase in bank loans (57,931) 57,931
--------- ---------
Net cash provided by financing activities (60,989) (544,589)
EFFECT OF EXCHANGE RATE VARIATIONS ON CASH 69,774 161,770
-------- --------
INCREASE (DECREASE) IN CASH 89,111 (29,630)
CASH AT BEGINNING OF YEAR 44,16 73,799
CASH AT YEAR END 133,280 44,169
======== =========
</TABLE>
The accompanying notes (1 to 8) form an integral part of these consolidated
financial statements.
<PAGE>
AMERICANA GOLD AND DIAMOND HOLDINGS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1996 AND 1995
Note 1 - Incorporation and Purpose of the Company:
The Company was incorporated in 1993, through the merger of Americana Gold and
Diamond Mining Corporation (incorporated in Tortola, British Virgin Islands on
April 3, 1990) and Blue Willow, Holdings Inc. (Incorporated in the United States
of America) with the purposes of negotiating, exploiting, transporting and
effecting all those activities related to the handling of gold, diamonds, and
precious metals and stones, as well as participating in any activity of this
same nature.
Note 2 - Accounting Principles and Practices:
The most significant accounting principles and practices followed by the Company
in the recording of its operations and in the preparation of its consolidated
financial statements are summarized as follows:
a) Consolidation Principles-
The consolidated financial statements include the accounts of
Americana Gold and Diamond Holdings, Inc. and those of its wholly
owned subsidiaries: Latinvan Metal Trading Ltd., C.A., Consorcio
Minero Miamo, C.A., and A.G.D. Holdings Inc. de Venezuela, C.A.
(companies domiciled in Venezuela, in development stage) as of
December 31, 1996 and 1995. All balances and transactions between the
companies have been eliminated in the consolidation.
b) Property and Equipment-
Property and equipment are recorded at acquisition cost. Repairs and
maintenance expenses are charged directly to income, and improvements
and renovations are added to the cost of the corresponding property.
Depreciation is determined based on the straight-line method, in
accordance with the estimated useful lives of the assets. When assets
are sold or retired, the corresponding cost and accumulated
depreciation are eliminated from the accounts, and the gain or loss is
reflected in the year's income.
<PAGE>
c) Mining Concessions-
The mining concessions are owned by the subsidiaries Latinvan Metal
Trading Ltd., C.A. and Consorcio Minero Miamo, C.A. and are recorded
at the acquisition cost, consisting of the price agreed upon to obtain
the rights of exploration and exploitation, plus exploration costs
incurred. As of December 31, 1996 and 1995, there is no charge for
depletion, due to the fact that the capacity of the mines to be
exploited has not been determined, and the Companies have not
initiated extraction activities.
d) Provision for employee severance benefits-
The provision for employee severance benefits is recorded based on the
actual obligation on this account, in accordance with the Organic
Labor Law.
e) Translation of financial statements into foreign currency-
The financial statements of the subsidiaries are denominated in
bolivars and have been translated into US dollars using the following
procedure: all monetary assets and liabilities denominated in bolivars
were translated at the official exchange rates of Bs. 476.50 and Bs.
290 = US$ 1, in effect as of December 31, 1996 and 1995; property and
equipment, other assets and shareholders' equity at historical
exchange rates; and transactions included in the statement of income
at an average of the exchange rate in each month of the period in
which the transactions were effected. Subsidiaries operate in a
hyperinflationary economy.
f) Presentation of the financial statements-
Certain items in the financial statements as of December 31, 1995,have
been reclassified in order to conform their presentation to that of
the financial statements as of December 31, 1996.
<PAGE>
Note 3 - Property and Equipment:
The amounts shown in the consolidated balance sheets as property and equipment
as of December 31, are represented as follows:
Annual
Depreciation
1996 1995 rate
----------- ----------- -------------
US$ US$
Machinery and equipment 380,546 372,931 10%
Office furniture and 12,061 12,061 10%
equipment
Vehicles 55,277 39,087 10%
Tools and utensils 6,022 6,022 20%
Facilities and improvements 66,564 66,564 6%
Computer equipment 11,316 11,316 20%
--------- ---------
531,786 507,981
Less: accumulated
depreciation (209,733) (150,545)
322,053 357,436
========= =========
Note 4 - Mining Concessions:
The balances for mining concessions shown in the consolidated balance sheets as
of December 31, are represented as follows:
Name of the Concession 1996 1995
- ------------------------------- ----- -----
(Expressed in US dollars)
In exploration activities-
"Fortuna I" 2,169,235 2,057,083
"Bochinche" 1,259,191 1,049,117
--------- ----------
Suspended exploration activities- 3,428,426 3,106,200
"El Progreso 4 and 5" 5,931,535 5,931,535
9,359,961 9,037,735
========= ==========
The cost of these concessions includes exploration costs incurred for US$
1,134,571.
<PAGE>
For the acquisition of the concession known as "Fortuna I", the Company paid in
cash US$ 100,000 during 1994, US$ 10,000 during 1995 and US$ 1,500,000 was paid
through the issuance of the shares of the Company's common stock to the prior
owner, Inversiones Mengold (see Note 7). The remaining portion of the debt of
US$ 390,000, is pending payment as of December 31, 1996, and is included as part
of the long-term debt. Sampling effected by a specialist geologist has indicated
alluvial deposits which might be productively exploited. As part of the
acquisition, the Company assumed the payment agreement between 3% and 5% to a
third company of the net benefit obtained from gold ore exploitation. For 1997,
Company plans are an initial program of 2,400 meters of diamond drilling to test
the positive result found by the trenching and some road work required to assure
continued access for the drilling program.
The concession known as "Bochinche" was acquired during 1993 for Bs. 72,462,500
(US$ 811,905), and was paid mainly through leasing a portion of land to the
prior owner for two years for Bs. 66,937,500 (US$ 750,000), and Bs. 5,525,000
(US$ 61,905) payable in three installments. As of December 31, 1995, these
amounts are wholly amortized and belong to the income for leasing account in the
statement of income as of that date. The geochemical and sampling works in the
alluvial deposits of "Bochinche" have ended. Trials runs with the alluvials
treatment plan have indicated some problems with clay balls which will require
some modifications to the plant. A further pit exploration program is being
completed within the concession. Once this program is completed, the Company
will reinitiate activity.
Concessions "El Progreso 4" and "El Progreso 5" were acquired for US $5,400,000.
This amount plus US$ 531,535, total exploration costs incurred will be amortized
as of 1997. The acquisition contracts of these concessions establish that, in
case the evaluation of gold reserves of concessions are unfavorable, the owner
of the concession and the Company will mutually agree the fixing of new values
and payment forms for the concessions. In case no satisfactory agreement for
both parties is reached, the Company may just return the rights on same and all
payment obligation, which had become payable on demand, will cease after
notifying the owner of the concession the unfavorable results of the reserves
evaluation. At the end of 1992, the Company suspended the exploration
activities of these concessions (see Note 2-c). Since initial geological studies
indicate that these concessions are not so promising in comparison with other
properties, Management has decided to postpone investments in Progreso 4 and 5
until the Company is able to generate a cash flow provided by its operations.
<PAGE>
The Company is in the process of final negotiations for acquiring the concession
"Bochinche 4" to CVG-Ferromentec owned by the Venezuelan Government, and a
decision is expected during 1997. Bochinche 4"has an extension of 2,500 hectares
surrounding "Bochinche", owned by the Company.
Note 5 - Other Assets:
Balances of other assets shown in the consolidated balance sheets as of December
31, are represented as follows:
1996 1995
- -------------------------------------- ------ -------
(Expressed in US dollars)
Plant for future mineral
exploitation 512,952 503,977
Other 2,725 3,958
- ----- ------- -------
515,677 507,935
======= =======
Note 6 - Long-term Accounts Payable:
Balances corresponding to long-term debt shown in the consolidated balance
sheets as of December 31, 1996 and 1995 amounting to US$ 2,960,251 and US$
2,963,309, respectively, correspond to liabilities assumed by the Company for
the acquisition of exploitation and exploration rights of the mining concessions
maintained by its subsidiaries (see Note 4).
Note 7 - Capital Stock:
During 1996, the following capital stock modifications were effected:
1. Issuance of 2,092,572 common shares, which were paid as follows:
US$ 628,111 for payment of debts maintained to the directors and
suppliers for services rendered by the issuance of 952,572 common
shares.
US$ 1,027,843 for the issuance of 1,950,000 shares of the Company's
common stock paid by different shareholders in cash during 1995 and
1996.
<PAGE>
2. Conversion of C Series 500 preferential shares into 800,000 common
shares of the Company's common stock.
Capital stock activity during 1995 was as follows:
1. Conversion of 1,236 preferential shares into 1,934,259 common shares.
2. Issuance of 1,250,867 common shares, which were paid as follows:
- US$ 500,000 paid based on the agreement between the Company and the
prior owner of Fortuna I, Inversiones Mengold (see Note 4).
- US$ 564,693 for subscribing 715,797 shares paid by different
shareholders in cash.
- US$ 53,824, through the issuance of 35,070 common shares, which
were paid by the translation of the debt maintained by its
subsidiary, Latinvan Metal Trading, LTD. with the company
Transporte Conrado y Fumero, C.A. a)
Note 8 - Legal Aspects of Subsidiaries:
a) Common System for the Treatment of Foreign Capital and Regarding
Trademarks, Patents, Licenses and Royalties-
The most significant matters contained in the aforementioned decree as
follows:
a) Reinvestment of net income, distribution, remittance of dividends
to foreign investors and reexportation of foreign shareholder's
investment without any need of authorization from the
Superintendency of Foreign Investments (SIEX).
b) All agreements regarding the importation of technology and use of
patents and trademarks, regardless of the modality which said
agreements adopt, are authorized. There is a subsequent obligation
to register these with the Superintendency of Foreign Investments
(SIEX).
<PAGE>
If said agreements are signed by companies classified as foreign and
their parent companies or subsidiaries, and establish payments
exceeding the limits set forth in the Decree, such payments will have
to be previously authorized by SIEX.
b) Income Taxes-
Current tax legislation establishes the obligation of adjusting
non-monetary assets and liabilities and initial shareholders' equity in
order to recognize effects of inflation. The net effect of the regular
tax inflation adjustment will be added or deducted from taxable net
income, in order to determine the income tax expense of the fiscal
year:
<TABLE>
<CAPTION>
Year Carryforward
Company Amount incurred up to
- ---------------------------------------- ----------- ------------ ----------------
Bs.
<S> <C> <C> <C>
Latinvan Metal Trading LTD 23,637,370 1994 1997
Latinvan Metal Trading LTD 138,914,791 1995 1998
Consorcio Minero Miamo, C.A. 538,789 1995 1998
A.G.D. Holding Inc. de Venezuela, C.A. 8,424,032 1995 1998
-----------
147,877,612
-----------
Latinvan Metal Trading LTD 34,412,489 1996 1998
A.G.D. Holding Inc. de Venezuela, C.A. 71,589,389 1996 1998
-----------
106,001,878
-----------
</TABLE>
The subsidiaries are exempted from the fifty percent (50%) income tax
of net income obtained for five years, starting from the fiscal year in
which production begins.
c) Business Assets Tax Law:
The taxable basis of this tax is constituted by the average net amount
of values of taxable assets. The tax rate applicable to the taxable
basis will be one percent (1%) annually. Tax payable in accordance with
this Law will be the amount exceeding total income taxes caused on the
taxable fiscal year, if any. Afterwards, this surplus will be carried
as a credit against income taxes caused solely in the three subsequent
fiscal years. The Company's Subsidiaries are exempted from payment of
this tax since they are in preoperating phase.
<PAGE>
d) Luxury Consumption and Wholesale Tax:
Taxes the sale of chattel, service rendering and imports of goods and
services. The corresponding tax rate applicable to the corresponding
taxable basis will be set annually by the Budget Law and will be
between a minimum of five percent (5%) and a maximum of twenty percent
(20%). The annual tax rate is established at twelve and a half percent
(12.5%). From August 1, 1996, the tax rate amounts to sixteen and a
half percent (16.5%).
e) Exchange controls:
On April 17, 1996, the Government reestablished the free
translatability of currency throughout the country, eliminating the
exchange control system in effect in the country since July 27, 1994.
Therefore, as of April 22, 1996, US dollars can be freely acquired at
the exchange rate set by the currency market in accordance with free
supply and demand.
b) As of December 31, 1996 and 1995, the exchange rate was Bs. 476.50
and Bs. 290 to US$ 1, respectively.
f) Norms on Gold and Gold Alloys Exports-
On May 31, 1995, Resolution No. 95-05-05 entered into effect, issued by
the Venezuelan Central Bank, establishing the norms on gold and gold
alloys exports. The most significant aspects of this resolution are the
following:
- Gold and gold alloys exports are allowed, and interested parties
should be registered in the Gold Exporters Registry to be kept by
the Venezuelan Central Bank.
- Authorization requests will be effected before the Venezuelan
Central Bank, accompanied by a certification to the effect that to
the internal market has been destined, in bars, a minimum
equivalent to 40% of the amount calculated in kilograms of refined
or melted gold, resulting from adding the amount whose
authorization to be exported is requested, and the amount destined
for the local market. Said authorization will be granted in a term
of 45 consecutive calendar days.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Consolidated Financial Statements as of December 31, 1996 and is qualified in
its entirety by reference to each Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 133
<SECURITIES> 0
<RECEIVABLES> 41
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 174
<PP&E> 10,408
<DEPRECIATION> 210
<TOTAL-ASSETS> 10,372
<CURRENT-LIABILITIES> 207
<BONDS> 2,960
0
25
<COMMON> 11,120
<OTHER-SE> (3,940)
<TOTAL-LIABILITY-AND-EQUITY> 10,372
<SALES> 0
<TOTAL-REVENUES> 70
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 573
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (503)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (503)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
