SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the fiscal year ended March 31, 1999
Commission File Number: 0-6334
AURIC METALS CORPORATION
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(Exact name of Registrant as specified in its Charter)
NEVADA 87-0281240
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1475 Terminal Way, Suite E
Reno, Nevada 89502
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number including Area Code: (318) 343-4448
(Not applicable)
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Former name, former address and former fiscal year, if changed since last
report.
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
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None None
Securities Registered Pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, during the preceding 12 months (or for such shorter period that 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 [ ]
The aggregate market value of the Registrant's voting stock held by
non-affiliates computed with reference to the bid prices in the
over-the-counter market on July 10, 1999, was approximately $140,314.
As of July 9, 1999, the Registrant had outstanding 1,000,000 shares of
its common stock, par value $.01, including a total of 16,511 shares held in
the Registrant's treasury.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
document is incorporated: (1) any annual report to security holders; (2) any
proxy or information statement; and (3) any prospectus filed pursuant to Rule
424(b) or (c) under the Securities Act of 1933.
NONE.
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TABLE OF CONTENTS
Page
Item Number and Caption Number
PART I
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1. Business 3
2. Properties 8
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security
Holders 9
PART II
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5. Market for Registrant's Common Equity and
Related Stockholder Matters 10
6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
7. Financial Statements and Supplementary Data 11
8. Changes in and Disagreements on Accounting and
Financial Disclosure 11
PART III
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9. Directors and Executive Officers of the Registrant 12
10. Executive Compensation 13
11. Security Ownership of Certain Beneficial Owners
and Management 14
12. Certain Relationships and Related Transactions 15
PART IV
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13. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 16
Signatures 17
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PART I
ITEM 1. BUSINESS
GENERAL/HISTORY
Auric Metals Corporation (the "Company") is a Nevada Corporation, which
holds interests in certain natural resource properties, and a minority
interest in a hotel operation in Santa Fe, New Mexico. Over the past several
years, the Company has principally been engaged in the acquisition,
exploration and development of interests in various natural resource
properties, primarily through participation with other parties in natural
resource joint ventures or other arrangements. The Company's involvement in
natural resource projects over the past few years has decreased, and the
Company does not currently have any active natural resource projects.
The Company was originally organized under the laws of the state of
Utah. In 1985, the Company became a Nevada corporation by merging with a
wholly-owned Nevada corporation created solely for the purpose of changing the
Company's state of domicile. The Company has one wholly-owned subsidiary,
Auric Minerals Corporation.
The Company was organized in 1969 for the purpose of engaging in mineral
exploration (principally silver, copper, gold, lead and zinc) on a mining
property located in Beaver County, Utah. In February 1970, the Company
completed a public offering under Regulation A of the Securities Act of 1933,
as amended, from which it raised approximately $350,327 in net proceeds for
its proposed exploration. In 1979, the Company's exploration activities on
its Beaver County mining claims were terminated, following the determination
by the Company that further exploration would be unproductive.
Since the termination of exploration activities in Beaver County, Utah,
in 1979, the Company has participated in a number of natural resource joint
ventures, and has performed limited exploration and assessment work on other
natural resource properties, with a view towards evaluating such properties
for future exploration and development.
The Company holds interests in a number of natural resource properties
in Utah, Nevada, Oklahoma, and California. The Company presently holds a
working interest in one oil and gas well near Oklahoma City, Oklahoma, which
has provided the Company with nominal revenue over the past few years. The
Company also holds a working interest in various patented and unpatented
mining claims in the Tintic Mining District of Utah. The Company subleases
forty-five (45) mining claims to USX, formerly United States Steel
Corporation. These claims have, in turn, been assigned to other parties which
have conducted limited exploration on these claims.
In the fiscal year ended March 31, 1994, Auric Minerals Corporation,
the Company's wholly-owned subsidiary, acquired from an unrelated third party,
a 50% interest in 7 patented mining claims and 11 unpatented claims in the
Tintic mining area west of the Company's Rex claims. The 7 patented mining
claims were terminated during the fiscal year ended March 31, 1995, due to
title problems. The Company has maintained its interest in the 11 unpatented
claims. Over the past several years, the Company has additionally held a 19%
interest in a limited partnership which holds certain sulfur and gold property
in Inyo County, California. Mining operations on this property were abandoned
during the fiscal year due primarily to a loss in demand for sulfur products.
(See "BUSINESS," under this caption).
During the fiscal year ended March 31, 1991, the Company purchased, in a
private transaction, a total of 89,600 shares of restricted common stock of
Dynamic Oil Limited ("Dynamic"), at an average price of $1.98 per share.
Dynamic Oil Limited is a publicly-held British Columbia corporation which is
engaged in oil and gas exploration. The Company sold 10,000 shares of Dynamic
in 1996. During the fiscal year ended March 31, 1999, the Company purchased
50,000 additional shares of common stock of Dynamic at a price of $62,939.
As of March 31, 1999, the market value of shares of Dynamic held by the
Company, was approximately $137,376.
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In addition to its natural resource investments, described above, the
Company is a principal shareholder in Corporacion de La Fonda, Inc. ("La
Fonda"), a corporation which owns the La Fonda Hotel in Santa Fe, New Mexico.
This investment has generated dividend revenues to the Company for the past
several years. Dividend revenue from this investment of $20,000 during the
past fiscal year, represents a $10,000 increase in dividend revenue from
$10,000 in dividend revenue for the 1998 fiscal year, and an increase in
dividend revenue in the 1997 fiscal year of of $12,600. During the fiscal
year ended March 31, 1998, the Company sold a total of 2,000 shares of its La
Fonda shares to the principal shareholders of La Fonda, at a gross sales price
of $240,000, for a net gain of $214,869.
The Company has one wholly-owned subsidiary, Auric Minerals Corporation,
a Nevada corporation. All of the assets of the Company, with the exception of
the Company's stock in La Fonda, and the Company Oklahoma property interests,
are held in Auric Minerals.
BUSINESS
During the fiscal year, the Company limited its activities to required
maintenance of its unpatented mining claims in the Tintic Mining District near
Eureka, Utah. The Company conducted no exploration activities during the
fiscal year, and realized no income from its mineral exploration activities.
The Company has realized most of its income from its interests in properties
developed and explored by other firms, and from lease payments and dividend
payments on the Company's equity holdings. The following is a general
description of the Company's holdings and business activities during the
fiscal year.
Hillcrest Claims
Since 1981, the Company has subleased forty-five (45) unpatented mining
claims covering approximately 600 acres north west of Elko, Nevada, to USX,
formerly United States Steel Corporation. The Company acquired this lease
from Hillcrest Mining Company ("Hillcrest") in 1981. The Company obtained the
lease for an initial term of three years, ending August 31, 1984, in
consideration of the agreement to do all the assessment work on the lease
during its term at a cost of $100 per claim per year, and to actively market
the property during such term. The lease grants to the Company the option to
extend the lease year by year for an additional twenty years by making advance
royalty payments of $6,000 to Hillcrest. The lease further provides that the
Company will pay to Hillcrest a royalty equal to 50% of the Company's earnings
from the property, after deducting all direct costs incurred by the Company in
the development of the property, exclusive of the Company's overhead.
USX acquired the claims from the Company for a primary term of two years,
expiring December 31, 1983, for which the Company received $9,000, $4,500 of
which was paid to Hillcrest. USX has the right to renew the options for
twenty additional one year terms by paying an advance royalty of $25,000 in
1984 and 1985 and $50,000 per year thereafter for the term of the lease or as
long as there is production. USX has paid the advance royalty for each year
to and including fiscal year ended March 31, 1998, and has paid for all
assessment work required during the term of the sublease. Pursuant to the
terms of a modification of the lease between Auric and Hillcrest, resulting in
an equal interest between Auric and Hillcrest, the Company and Hillcrest each
now receive a 1% royalty interest for gold, calculated on the basis of net
smelter returns, and a 3% royalty interest on other metals, calculated on the
same basis.
USX assigned its sublease to Touchstone Resources Company, which in 1992
assigned the sublease to Newmont Exporation Limited. In August, 1997, the
Company agreed to an assignment of the sublease to Great Basin Gold, Inc., and
an amendment to said sublease (the "Sublease Amendment"). Under the terms of
the Sublease Amendment, the Company and Hillcrest agreed to extend the
sublease for up to four 20-year periods commencing on December 31, 1997,
provided that the $50,000 annual advance royalty payment is paid for each year
for which there are no mining operations on the leased property. For each
20-year renewal period, the annual minimum advance royalty increases $5,000
per year. The parties have also agreed that the production royalty to be paid
to the Company based on net smelter returns, is in addition to the advance
royalty.
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The Sublease Amendment contemplates a joint venture between Great Basin
and Touchstone. The Company is advised that Great Basin will be the operating
company in connection with any exporation or development activities on the
property.
In 1992, Newmont Mining Company ("Newmont") acquired the leasehold
interest held by the Company in its Ivanho property near Elko, Nevada,
covering 85,000 acres. In the past few years, a deep drilling program with
drillsites on the Ivanho property, has been conducted. In 1995, Newmont and
Cornucopia entered into a joint venture arrangement providing for the joint
development of the Ivanho property. The Company does not know when the
Company's leased acreage will be developed, or the extent of such development.
In past years, a substantial amount of capital was expended for initial
mining and exploration activities on the Ivanho property, of which the
Company's property is a part. A 1992 report from Galactic and Cornucopia
indicates that in 1991 the joint venture produced 60,000 ounces of gold from
the USX pit located on a portion of the Ivanho property. The Company has been
further advised that gold and other minerals have been extracted by the joint
venture parties and their operator, Touchstone, on claims adjoining the
Company's claims. In August, 1994, a high-grade vein was drilled near the
western margin of the Clementine prospects of the Ivanho property. In a 1994
letter, Cornucopia to its shareholders that preliminary analysis of the
drilling encompassing the Clementine, Velvet and Butte prospects has developed
a geologic resource of 9,106,000 tons grading 0.035 ounces of gold per ton, or
320,000 ounces of gold.
The Company has been informed that Great Basin Gold, Inc., has raised up
to $3.5 million for a exploration program on the Ivanho property. As a
result, the Company anticipates increased exploration on the properties. As
indicated below, the Company owns a 25% interest in 107 "Robbie" claims
approximately one mile south of the Ivanho property, which have also been
leased to Great Basin Gold, Inc. To the Company's knowledge, there was no
significant activity on these claims during the fiscal year ended March 31,
1999. As indicated, the Company cannot predict at this time what further
exploration and development, if any, will be undertaken on these properties.
Tintic Claims
The Company holds a 50% working interest in eighteen (18) unpatented
mining claims located in the Tintic Mining District, near Eureka, Utah. The
Company will retain its interest in the claims as long as it makes required
annual payments on such claims, which the Company has paid through the fiscal
year ended March 31, 1999. Applicable government regulations increased the
annual fee for assessment and related work to $200 per claim during the fiscal
year ended March 31, 1993. These claims, acquired in 1984, have been held
since 1965 by directors and shareholders of the Company.
During the fiscal year, the Company paid the required lease payment to
the Bureau of Land Management, as required in lieu of exploration by drilling.
The Company has reduced the number of its claims from 43 to 18, to reduce its
annual fees associated with these claims.
The Company's claims are located on the south side of a caldera, or
ancient volcano. Sunshine Mining Company operates the Bergen Mine on the
north side of the caldera, which is located approximately twelve miles from
the Company's claims. The Company has been advised that Cornucopia Resources
has conducted exploration west of the Company's claims. The Company has also
been advised that Centurion Mines Corporation has staked adjoining claims.
The Company is aware of exploration activity in the area, there is no such
activity close to the Company's claims.
In October, 1993, Auric Minerals Corporation, the Company's
wholly-owned subsidiary, acquired by lease from unrelated third parties, a 50%
working interest in 7 patented mining claims, and a 50% interest in 11
additional unpatented mining claims located in the Tintic Mining District
approximately 15 miles west of the Company's Rex claims. The Company's
interest in the 7 patented mining claims terminated in the fiscal year ended
March 31, 1995,
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due to certain title and related problems. The Company has maintained its
interest in the 11 unpatented mining claims, by payment of the required annual
fee to the BLM of $100 per claim. Any profits on the claims are to be shared
equally between the Company and the lease holder.
During the fiscal year ended March 31, 1999, there was no significant
activity on these claims.
Inyo Claims
For the past several years, the Company has held an interest in the
Crater Limited Partnership, a California limited partnership (the
"Partnership".) During the fiscal year ended March 31, 1989, the Company paid
an additional $12,000 to increase its interest in the Partnership from 14% to
19%. The Partnership owns a sulfur and gold property in Inyo County, Nevada,
located northwest of Death Valley.
Subsequent to its organization, the Partnership subleased the property to
an independent third party for extraction of sulfur for agricultural use.
During the 1993 and 1994 fiscal years, the Company earned a nominal profit
from its interest in the Partnership. However, during 1993, the government
has prohibited the use of sulfur as a fertilizer for grapes. Additionally,
during the 1994 fiscal year, an access road to the property was closed to
protect a wilderness area, which has resulted in a loss of the market for
sulfur products in Nevada. Moreover, during the fiscal year ended March 31,
1995, the Company lost its contractor on the property, resulting in no profit
to the Partnership. Flooding in California in 1995 has also resulted in a
major loss of market demand for sulfur in 1995. As a result of these
developments, continuation of sulfur extraction on the property was considered
no longer viable, and these mining efforts were abandoned in the fiscal year
ended March 31, 1996.
Investment in Dynamic Oil Limited
During the fiscal year ended March 31, 1991, the Company purchased, in
two private transactions, a total of 89,600 shares of restricted common stock
of Dynamic Oil Limited, an unaffiliated publicly traded British Columbia
corporation ("Dynamic"), at a total purchase price of $175,880, or an average
cost of $1.98 per share. The Company's holdings in Dynamic represented, at
the time of purchase, approximately 1% of the outstanding common stock of
Dynamic. The stock was purchased at a price of 15% below the market value of
Dynamic common stock on the respective dates of purchase. In connection with
these transactions, Auric was granted a warrant with each share of Dynamic
purchased, which warrants have expired. During the recent fiscal year ended
March 31, 1999, the Company purchased an additional 50,000 shares of Dynamic
common stock at a price of $62,939.
Dynamic is a publicly held corporation incorporated in British Columbia,
which is engaged in oil and gas exploration. Auric has been advised that
Dynamic is a party to a joint venture agreement with Conoco Oil and British
Columbia Gas, providing for the development of a source of gas for Vancouver,
Canada. In 1994 and 1995, Dynamic reported that it participated in drilling
three successful horizontal oil wells in S.E. Saskatchewan, a new gas well in
N.W. Alberta, and doubled its landholdings in the Boundary Bay prospect area
of S.W. British Columbia. Dynamic has additionally reported that it has
conducted an extensive geochemistry program and successfully obtained
permission from the British Columbia government for the drilling of additional
Fraser Delta gas exploration wells in 1995. In 1994, Dynamic reported that
it purchased an additional 20% interest in its St. Albert 01-30 gas project
near Edmonton, Alberta, increasing its interest in the project to 70%.
Dynamic and its joint venture partner have reported a world class well at a
depth of 4,000 feet approximately 35 miles from Edmonton. In the second half
of 1998, Dynamic reported that, in its continuing efforts to shift its
business to natural gas exploration and production, it had constructed
pipelines in its St. Albert field to bring three wells into production. In
the end of 1998, Dynamic reported up to 11 additional proposed drilling
locations in the St. Albert field in the ensuing 12 months.
During the fiscal year ended March 31, 1996, the Company sold a total of
10,000 shares of Dynamic, at a price of $14,608, or a loss of approximately
$5,021. The common stock of Dynamic is quoted on NASDAQ under
the symbol "DYOLF." As of March 31, 1999, the market value of the common
stock of Dynamic held by the Company, was approximately $137,376.
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Acquisition of Interest in Robbie Claims
In September, 1995, the Company entered in a partnership agreement with
Hi-Tech Exploration, Ltd. ("Hi-Tech"), Hillcrest Mining Company ("Hillcrest"),
and James Fouts ("Fouts"), the Company's President, pursuant to which the
Company, Hillcrest and Fouts each purchased from Hi-Tech a 25% interest in 107
unpatented lode mining claims, known as the "Robbie Claims," for the sum of
$3,566.67 each. The Robbie claims are located within one-half mile of the
Company's Ivanho claims near Elko, Nevada, on Bureau of Land Management land.
These claims are believed to be deep gold prospects. The partnership
agreement requires the parties to maintain the mining claims, and make
required annual payments to the BLM, for a minimum period of 20 years. The
interest held by each of the parties cannot be assigned without approval by
the other partners, and any such assignment shall carry with it the obligation
to share in the annual maintenance of the claims. Each party is required to
notify the other parties on or before June 15 of each year, as to whether such
party will pay his or its share of the required annual fee to the BLM for the
following year. Failure to notify the other parties will result in a default
of such failing party's interest in the claims.
During the fiscal year, the parties leased the Robbie Claims to Great
Basin Gold, Inc., for the sum of $4,000 per year, together with a royalty of
2% of net smelter returns and an obligation by the leaseholder to cover the
annual fee to the BLM of $100 per claim, due by September 1 of each year. The
Company is entitled to receive one-fourth of the annual payment and one-fourth
of the net smelter returns, if any. As indicated, the Company's President,
James Fouts, also holds a 25% interest in the Robbie claims.
La Fonda Investment
The Company owns a total of 10,000 shares of restricted common stock, or
approximately 9.3% of the presently outstanding stock, of Corporation de La
Fonda, Inc. ("La Fonda"), a closely-held New Mexico corporation which owns
and operates the historic La Fonda Hotel in Santa Fe, New Mexico. During the
fiscal year ended March 31, 1998, the Company sold 2,000 shares of La Fonda to
La Fonda's principal shareholder, at a price of $120 per share, or an
aggregate of $240,000, and realized a gain of $214,869, resulting in the
10,000 shares currently held by the Company.
The operations of La Fonda have been profitable for the past several
years. La Fonda reported net earnings, after taxes, of $1,530,036,
$1,209,831, $1,177,393, $1,022,451, and $990,261 for its fiscal years ended
October 31, 1998, 1997, 1996, 1995, and 1994, respectively. Over the past
several years, LaFonda has continuously reinvested profits into new
improvements to the hotel. Over the past four years, La Fonda has undertaken
substantial renovations and improvements to the hotel, including a major
addition to the hotel, the installation of security, fire sprinkler and
heating and cooling systems, at a cost of several million dollars. In 1991, La
Fonda expended approximately $3,000,000 for the construction of a large
banquet hall, which has received a considerable amount of recognition and
national attention. Similarly, in 1987 and 1988, La Fonda expended in excess
of $560,000 to complete a renovation of its hotel rooms. La Fonda has
recently completed an expansion at a cost of approximately $5.5 million, and
is currently undertaking additional capital expenditures to construct a new
elevator and improve the parking garage. La Fonda has reported that these
improvements have contributed to the continued operating success of La Fonda.
During the fiscal years ended March 31, 1999, 1998, 1997, 1996, 1995,
1994, 1993, 1992, 1991 and 1990, the Company earned dividend income from its
investment in La Fonda of $20,000, $10,000, $12,600, $12,000, $15,000,
$27,000, $30,000, $6,000, $38,400 and $36,600, respectively. Although
dividends this past year doubled dividends for the year ended March 31, 1998,
dividends during the past few years have decreased as a result of La Fonda's
reinvestment of profits into improvements in, and expansion of, the hotel.
James Fouts, President, is a director and holder of 705 shares of La
Fonda. In addition, Elizabeth B. Fouts has recently been elected a director
of La Fonda. In October, 1989, the Company and the other shareholders holding
a total of approximately 45% of the outstanding common stock of La Fonda,
entered into a Voting Trust Agreement
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with Samuel Ballen, James Fouts and James Russell, trustees, under the terms
of which all of the voting rights of La Fonda held by such shareholders were
assigned to the trustees until December 31, 1999. The purpose of the Voting
Trust is to protect the assets of La Fonda and to reduce the likelihood of an
unfriendly takeover attempt.
OTHER ACTIVITIES
In the past several years, all of the Company's oil and gas exploration,
development and production has been conducted through various joint ventures
in which the Company is a participant. During the fiscal year ended March 31,
1999, the Company did not conduct any exploration activities, did not
participate in any exploration activities, and did not incur any expenditures
in connection with oil and gas exploration activities.
During the year ended March 31, 1996, the Company's interest in a joint
venture in Oklahoma was written off the Company's books. During the fiscal
year ended March 31, 1989, the Company formed Auric Minerals Corporation, a
wholly-owned Nevada subsidiary, to hold the Company's interest in the Hugoton
Joint Venture, a joint venture organized to acquire oil and gas lease options
in western Oklahoma. In 1989, Petroleum Consultants Energy Corporation
("Petroleum Consultants"), a joint venture partner located in Northfield,
Illinois, assumed control of the joint venture under an arrangement whereby it
agreed to assume all future expenditures of the project in exchange for an
interest in the project equal to its pro rata share of the entire investment
in the project since inception. The Company's interest in the joint venture,
as well as the interest of other parties, was reduced as Petroleum Consultants
expended sums on behalf of the joint venture. The Company held a net revenue
interest of approximately 10% in the joint venture. In 1996, the Company
completely reduced the remaining value of its interest in the joint venture to
zero, to reflect its assessment that there is no realistic recoverable value
in such interest.
EMPLOYEES
The Company has no regularly paid employees. The Company paid The
Fremont Corp., a corporation of which James Fouts is president and a
principal, a total of $15,000 during the fiscal year for secretarial services,
office space and clerical services. In addition, the Company has reimbursed
James F. Fouts for his expenses incurred on behalf of the Company. In the
past, the Company has also engaged the part-time services of others in
connection with exploration work conducted on its mining claims.
ITEM 2. PROPERTIES
NATURAL RESOURCE PROPERTIES
As discussed in "ITEM 1 - BUSINESS", the Company holds interests in
various natural resource properties in Utah, Nevada, California and Oklahoma.
For a more detailed discussion of the Company's interest in these properties
and exploration and development activities relating to such properties,
reference is made to "ITEM 1 - BUSINESS: Business Activities During Fiscal
Year".
SHARES OF LA FONDA
The Company is the holder of 10,000 shares or approximately 9.3% of the
outstanding common stock of Corporacion de La Fonda, Inc., a corporation which
owns the La Fonda Hotel in Santa Fe, New Mexico. (See "ITEM 1 - BUSINESS".)
OKLAHOMA OIL AND GAS INTERESTS
The Company currently has a working interest in one producing oil and
gas well located near Oklahoma City, Oklahoma. This oil well has negligible
reserves and, therefore, no estimates of proved oil and gas reserves is
available or material. Production from the well has declined to a nominal
amount over the past five years. All other oil and gas wells in which the
Company has had a working interest are no longer productive.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings, and
to the best of its knowledge, no such proceedings by or against the Company
have been threatened.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
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PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The common stock of the Company is traded in the over-the-counter market.
There is currently a very limited trading market for the Company's common
stock. The Company's shares of common stock are eligible for quotation on the
OTC Bulletin Board under the symbol "AURE" The following sets forth, for the
respective periods indicated, the prices of the Company's common stock in the
over-the-counter, as reported and summarized by the OTC Bulletin Board. Such
prices are based on inter-dealer bid and asked prices, without markup,
markdown, commissions or adjustments, and may not represent actual
transactions.
Quarter Ended High Bid Low Bid
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1997 Fiscal Year:
June 30, 1996 $ 0.750 $ 0.750
September 30, 1996 0.750 0.750
December 31, 1996 0.750 0.750
March 31, 1997 0.750 0.750
1998 Fiscal Year:
June 30, 1997 $ 0.750 $ 0.750
September 30, 1997 1.000 1.750
December 31, 1997 0.875 1.750
March 31, 1998 0.875 0.850
1999 Fiscal Year:
June 30, 1998 $ 1.500 $ 0.750
September 30, 1998 1.500 0.750
December 31, 1998 1.500 0.750
March 31, 1999 0.750 0.562
On July 9, 1999, the high and low bid prices quoted by broker-dealer
firms effecting transactions in the Company's common stock, were $1.00 and
$.5625, respectively.
Since inception, no dividends have been paid on the Company's common
stock, and the Company does not anticipate paying dividends in the foreseeable
future.
At July 9, 1999, there were approximately 720 holders of record of the
Company's common stock.
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ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's current assets as of March 31, 1999, of $203,489,
represents a decrease in current assets of $61,330, from current assets of
$264,819 one year earlier. Such decrease is attributable to the purchase by
the Company of 50,000 shares of Dynamic Oil, Ltd., for the sum of $62,939.
Total assets as of March 31, 1999, of $473,131, represent a small decrease in
total assets of approximately $20,500 from total assets of $493,622 one year
earlier, which is attributable to a loss in market value per share of
marketable securities. As a result, stockholders' equity of $472,641 at
March 31, 1999, represents a decrease in stockholders' equity of almost
$20,000, from stockholders' equity of $492,594 at March 31, 1998.
During the fiscal year ended March 31, 1998, the Company sold a total of
2,000 shares of common stock of La Fonda, resulting in a gain to the Company
of $214,869. As a result of the sale of La Fonda shares, resulting in a total
of $264,819 in cash as of March 31, 1998, the Company significantly improved
its liquidity and capital resources, which has continued through the year
ended March 31, 1999. Nevertheless, the Company continues to be very limited
in its ability to finance any major developments by the Company. Should the
Company decide to become engaged in any exploration activities in the future,
any such exploration or development activities would, in all likelihood,
require substantial additional financing or the participation of a larger,
better-financed company.
RESULTS OF OPERATIONS
In the fiscal year ended March 31, 1999, the Company had total revenues
of $55,478, and expenses of $49,555, resulting in net income of $5,923. In
the fiscal year ended March 31, 1998, the Company had gross revenue of $39,505
and expenses of $41,482, resulting in net loss of approximately $2,000, before
considering a $214,869 gain realized from the sale of La Fonda stock. The
Company's revenue over the past three years has been modest and fairly
constant, consisting largely of mineral royalty income of $25,000 per year,
and dividend income from the Company's La Fonda shares, ranging from between
$10,000 to $20,000. Similarly, expenses over the past years, exclusive of
extraordinary items and one-time losses, have remained fairly consistent, of
between $35,000 to $49,555.
During the fiscal years ended March 31, 1999, 1998, 8, 1997, 1996, and
1995, operating revenue from the Company's interest in oil wells in Oklahoma
was nominal. The Company received a $25,000 advance royalty payment during
the fiscal year on its leased mining claims in Nevada. Dividend income of
$20,000 from the Company's investment in La Fonda during the year represents
an increase of $10,000 from dividend income for the year ended March 31, 1998,
and an increase in dividend income from prior years.
Management does not believe that the Company's operations have been more
adversely impacted by inflation than other similar businesses, although
increased expenses have affected the cost of minerals exploration.
ITEM 7.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included beginning at
page F-1.
ITEM 8.
CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
During the fiscal year ended March 31, 1999, there has been no
disagreement with accountants on any matter of accounting principles or
practices or financial statement disclosure as provided in Regulation S-K,
Item 304.
11
<PAGE>
PART III
ITEM 9.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
LIST AND TERMS OF OFFICE
The table below sets forth the name, age, and position of each executive
officer and director of the Company.
Officer or
Name Age Position Director Since(1)
---- ---- -------- ----------------
James F. Fouts 80 Director, President 1969
and Chief Executive
Officer
Dan Ligino 75 Director and Vice President 1974
Elizabeth F. White 49 Director 1985(2)
Elizabeth B. Fouts 71 Secretary/Treasurer and 1975(2)
Principal Financial
Officer
- ---------------------------
(1) All directors and executive officers serve for a term of one year or
until their successors are chosen and qualified.
(2) James F. Fouts is the father of Elizabeth F. White and the husband
of Elizabeth B. Fouts. There are no other family relationships among any of
the above-named directors, executive officers, or nominees.
- ---------------------------
James F. Fouts. Mr. Fouts has been president of the Company since 1975.
From 1969 to 1975, he served as secretary/treasurer of the Company and has
served as director of the Company since its incorporation in 1969. Since 1967
he has also been employed as president of Fremont Corporation, a private
corporation and an affiliate of the Company engaged in holding and managing
investments (chiefly real estate), with its principal office and place of
business in Louisiana. Mr. Fouts graduated from Texas A&M University in 1940
with a bachelor's degree in chemical engineering. From 1940 to 1959, he was
employed as division superintendent for Bariod Division of the National Lead
Company, supervising oil well logging operations in the western United States
and Canada, with headquarters in Casper, Wyoming. From 1940 through 1966, he
was engaged in the business of technical reproduction and oil well log
distribution in Canada and the United States. He is a member of the American
Association of Petroleum Geologists; Intermountain Association of Petroleum
Geologists; and a past vice president of the Wyoming Geological Association.
He was formerly a director of the Rocky Mountain Oil & Gas Association. He is
presently a director of Corporation de La Fonda, an affiliate of the Company
engaged in the hotel business. Mr. Fouts and his wife also own 3,000 shares
of the common stock of La Fonda. Until 1996, Mr. Fouts was a director of High
Plains Natural Gas Company, a pipeline company serving five counties in the
Texas Panhandle.
Dan Ligino. Mr. Ligino has served as vice president and a director of
the Company since 1974. He is and has been for approximately the past sixteen
years a director of State Bank of East Moline, Illinois, and is a director of
the Colona Avenue State Bank in East Moline. He is a retired businessman.
Prior to his retirement, he had 23
12
<PAGE>
years of experience in the Dairy Queen business; 20 years of experience,
including serving as president of Hub City Implement Company, as a John Deere
equipment distributor; and over 25 years of experience in real estate.
Elizabeth F. White. Mrs. White as been a director of the Company since
1985. She graduated from Newcomb College of Tulane University, New Orleans,
Louisiana, in 1971. She was employed by Traveler's Insurance Company for five
years, where she was resident agent at Houma, Louisiana specializing in
investigations in oil exploration and offshore drilling accidents. In 1977,
she moved with her family to California and presently resides in Monte Sereno,
California with her husband and two children. She has founded, owned and
operated a successful business importing and selling European chocolate candy.
Since 1981, she has been a computer consultant for children's education and
has had several children's programs authored by her published. She has
consulted for Apple Computer and has served on the Apple Computer Grant
Committee. Mrs. White was a director of a science and computer school located
in San Jose, California. Mrs. White was a partner in Empower-Net, a business
consulting firm. Presently, Mrs. White is an instructor in AVATAR, a business
and personal development program.
Elizabeth B. Fouts. Mrs. Fouts has served as secretary/treasurer of the
Company since 1975. She is a graduate of Newcomb College of Tulane
University, New Orleans, Louisiana. She obtained a master of science degree
in psychology from Northeast Louisiana University of Monroe, Louisiana. For
a period of fifteen years until July, 1987, when she retired, she was employed
as a psychology consultant by the County School System of Ouachita Parish to
July 1987. In December, 1993, Mrs. Fouts was elected a director of La Fonda.
Mrs. Fouts is also secretary/treasurer for Fremont Corporation, an affiliate
of the Company, and has held similar positions in other companies.
ITEM 10.
EXECUTIVE COMPENSATION
REMUNERATION DURING FISCAL YEAR
During the fiscal year ended March 31, 1999, no officer or director
received compensation exceeding $60,000.
The following table sets forth the compensation paid by the Company
during the fiscal year to all officers and directors as a group:
Name/Position Cash Compensation*
------------- ------------------
All officers and directors as
a group (5 persons) $ 17,995*
* Consists of $15,000 paid to Fremont Corp., a corporation of which
James Fouts is an officer and principal shareholder, for office use
and bookkeeping, secretarial and clerical services; and $2,995 paid
in directors' fees.
The directors are compensated $500 per year for board membership, and are
paid $100 per meeting attended, plus expenses.
13
<PAGE>
ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table shows, as of July 9, 1999, the number of shares of
common stock, par value $.01, of the Company owned of record or beneficially
by each person who owned of record, or was known by the Company to own
beneficially, more than 5% of the Company's common stock, and the name and
shareholdings of each officer and director, and all officers and directors of
the Company as a group:
Amount and Nature of Ownership(1)
---------------------------------
Sole Voting Shared Voting Percent
& Investment & Investment Class
Name of Person or Group Power Power (1)
- ----------------------- ----------- ------------- -------
Principal Shareholders:
- -----------------------
Alan E. Fouts (2)(4)
4002 Bon Aire Drive 188,730 19.19
Monroe, Louisiana 71203 12,800(2) 1.30
Donovan B. Fouts (2)(4)
4002 Bon Aire Drive 121,750 12.38
Monroe, Louisiana 71203 0 0.00
James F. Fouts (2)(4)
4002 Bon Aire Drive 41,362 4.21
Monroe, Louisiana 71203 76,250(3) 7.76
Elizabeth B. Fouts (2)(4)
4002 Bon Aire Drive 9,875 0.10
Monroe, Louisiana 71203 76,250(3) 7.76
Dan Ligino
1407 19th Street 104,925 10.59
Easat Moline, IL 61244 43,500(5) 4.42
Elizabeth F. White (2)(4)
243 Via la Posada 134,850 13.71
Los Gatos, CA 95030 0 0.00
Officers and Directors:
- ----------------------
James F. Fouts ---------------See Above---------------
Elizabeth B. Fouts ---------------See Above---------------
Dan Ligino ---------------See Above---------------
Elizabeth F. White ---------------See Above---------------
All officers and directors 291,012 29.59
as a group (4 persons)(3)(4)(5) 119,750(3) 12.17
14
<PAGE>
(1) The percentages are calculated based on the number of outstanding
shares (1,000,056) of the Company as of the Record Date, after
deducting a total of 16,511 shares held by the Company in treasury.
(2) Alan E. Fouts, Donovan B. Fouts and Elizabeth F. White are the sons
and daughter, respectively, of James F. Fouts and Elizabeth Fouts,
husband and wife.
(3) Includes 51,237 shares owned by James F. Fouts and Elizabeth B.
Fouts, his wife, in joint tenancy.
(4) In addition to the beneficial stock ownership of Mr. Fouts and his
immediate family, described above, other relatives of Mr. Fouts own
the following interests: 12,800 shares owned by a brother; 800
shares owned by a sister; and 38,175 shares owned by a
brother-in-law. No agreement or understanding exists with respect
to the voting of these shares; however, it is anticipated that they
will be voted as Mr. Fouts recommends or that Mr. Fouts will be
designated as proxy with respect to the shares.
(5) These shares are held in joint tenancy by Mr. Ligino and his
brother.
There are no arrangements known to the Company the operation of which
may at a subsequent date result in a change of control of the Company.
ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the past, the Company has employed officers and principal shareholders
in the performance of exploration work on its mineral claims and in evaluating
new properties. Compensation paid in connection with these services has been
determined by the Company to compare favorably with amounts which could be
expected to be paid to third parties. No amounts were paid during the last
fiscal year.
No director, officer, nominee for director, or any associate of such
director, officer or nominee, has been indebted to the Company at any time
during the past several fiscal years.
The Company owns 10,000 shares or approximately 9.3% of the outstanding
common stock of Corporacion de La Fonda. James F. Fouts, President, is also a
shareholder and director of Corporation de La Fonda. Because of these
relationships, any transaction between the Company and this entity cannot be
deemed to be at arm's length.
In September, 1997, the Company granted options to its officers and
directors, authorizing each officer and director to purchase up to 15,000
shares of the Company's common stock at an exercise price of $.65 per share.
These options expire in September 1999, if not previously exercised. The
grant of these options cannot be considered to be result of arms' length
negotiations. All unexercised options previously granted to officers and
directors, have expired.
During the fiscal year ended March 31, 1996, the Company entered into a
partnership agreement whereby the Company acquired a 25% interest in the
"Robbie Claims," 107 unpatented mineral claim owned by Hi-Tech Exploration, at
a cost of $3,567. James F. Fouts, the Company's President, also acquired a
25% interest in such mining claims in the same transaction, at the same cost.
Therefore, this transaction cannot be considered the result of arms' length
negotiations.
During the fiscal year ended March 31, 1998, the Company's President,
James F. Fouts, loaned to the Company the sum of $5,000, which was
subsequently repaid in full. During the fiscal year ended March 31, 1997, Mr.
Fouts, loaned to the Company the sum of $13,000. This loan was repaid,
without interest, prior to the end of the fiscal year ended March 31, 1997.
15
<PAGE>
PART IV
ITEM 13.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
A. INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
The index (table of contents) to the financial statements and schedules
appears at page 18.
B. EXHIBITS:
None.
C. REPORTS ON FORM 8-K
During the fiscal year ended March 31, 1999, the Company did not file any
reports on Form 8-K.
16
<PAGE>
AURIC METALS CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
REGISTRANT:
AURIC METALS CORPORATION
By: /s/ James F. Fouts
----------------------
James F. Fouts, President
Date: July 9, 1999
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:
/s/ James F. Fouts Director and President Date: July 9, 1999
James F. Fouts (Principal Executive Officer)
/s/ Elizabeth B. Fouts Secretary-Treasurer Date: July 9, 1999
Elizabeth B. Fouts (Principal Financial Officer)
/s/ Dan Ligino Vice President and Director Date: July 9, 1999
Dan Ligino
/s/ Elizabeth F. White Vice President and Director Date: July 9, 1999
Elizabeth F. White
<PAGE>
<Letterhead of
ANDERSEN ANDERSEN & STRONG, L.C.
- --------------------------------
Certified Public Accountants and Business Consultants
941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
Telephone 801-486-0096
Fax 801-486-0098
E-mail KAndersen @msn.com>
REPORT OF INDEPENDENT ACCOUNTANTS
Shareholders and
Board of Directors
Auric Metals Corporation
We have audited the accompanying balance sheets of Auric Metals
Corporation as of March 31, 1999 and 1998, and the related statements of
income, stockholders' equity, and cash flows for the years ended March 31,
1999, 1998 and 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as will 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 Auric
Metals Corporation as of March 31, 1999 and 1998, and the results of its
operations and its cash flows for the years ended March 31, 1999, 1998 and
1997, in conformity with generally accepted accounting principles.
/s/ Andersen Andersen & Strong
Salt Lake City, Utah
June 24, 1999
1
A member of ACF International with affiliated offices worldwide
<PAGE>
AURIC METALS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND 1998
1999 1998
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 203,489 $ 264,819
----------- -----------
Total Current Assets 203,489 264,819
----------- -----------
INVESTMENTS:
Marketable equity securities (Notes 3) 137,376 99,500
Other investments (Note 3) 129,224 129,224
----------- -----------
266,600 228,724
----------- -----------
PROPERTY AND EQUIPMENT AT COST
Equipment 5,375 1,573
----------- -----------
5,375 1,573
Accumulated depreciation ( 2,333) ( 1,494)
----------- -----------
3,042 79
----------- -----------
$ 473,131 $ 493,622
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accrued liabilities $ 490 $ 1,028
----------- -----------
Total current liabilities 490 1,028
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value;
Authorized: 25,000,000 shares
Issued: 1,000,000 shares
(including treasury stock) 10,000 10,000
Additional paid-in capital 342,847 342,847
Unrealized loss on securities
available for sale (Note 3) ( 81,577) ( 56,751)
Accumulated earnings 212,396 206,473
Common stock in treasury at cost
16,511 shares 1999, 15,511 1998 ( 11,025) ( 9,975)
----------- -----------
472,641 492,594
----------- -----------
$ 473,131 $ 493,622
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
<PAGE>
AURIC METALS CORPORATION AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
YEARS ENDED MARCH 31, 1999 AND 1998 AND 1997
1999 1998 1997
------------- ------------- ------------
REVENUES:
Oil and gas sales $ 323 $ 407 $ 492
Mineral royalty 25,000 25,000 25,000
Interest income 10,155 4,098 69
Dividends 20,000 10,000 12,600
------------- ------------- ------------
55,478 39,505 38,161
------------- ------------- ------------
EXPENSES:
Mineral exploration 284 - 3,614
Mineral claims leasing 6,467 6,639 2,900
Depreciation 839 315 314
Legal and accounting 7,100 6,299 5,978
Travel and lodging 7,638 7,875 7,124
Directors' fees 2,995 1,797 2,396
Office expense (Note 5) 15,000 9,000 12,000
General and administrative 9,232 9,557 7,442
------------- ------------- ------------
49,555 41,482 41,768
------------- ------------- ------------
OTHER INCOME
Gain on sale of securities - 214,869 -
------------- ------------- ------------
INCOME (LOSS) BEFORE INCOME TAX 5,923 212,892 ( 3,607)
Provision for taxes on income - 69,423 -
Tax benefit from loss carryover - ( 69,423) -
------------- ------------- ------------
NET INCOME (LOSS) $ 5,923 $ 212,892 $ ( 3,607)
============= ============= ============
NET INCOME (LOSS) PER
COMMON SHARE $ .01 $ .22 $ -
============= ============= ============
NET INCOME (LOSS) PER COMMON
SHARE- ASSUMING DILUTION $ .01 $ .21 $ -
============= ============= ============
Weighted average number of
shares outstanding
(excluding treasury stock) 983,697 984,489 984,489
============= ============= ============
Weighted average number of shares 983,697 984,489 984,489
Dilutive effect of options - 13,442 -
------------- ------------- ------------
Diluted average number of shares 983,697 997,931 984,489
============= ============= ============
The accompanying notes are an integral part of these consolidated
financial statements
F-3
AURIC METALS CORPORATION AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
On
Securities
Accumulated Available
Stock Stock Paid-in Earnings Treasury Treasury For
Shares Amount Capital (Deficit) Shares Amount Sale Total
---------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE MARCH 31, 1996 1,000,000 $ 10,000 $ 342,847 $ (2,812) 15,511 $ (9,975) $ (111,266) $ 228,794
Net loss year ended
March 31, 1997 - - - (3,607) - - - (3,607)
Net change in unrealized gain
(loss) on securities available
for sale - - - - - - 47,025 47,025
---------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
BALANCE MARCH 31, 1997 1,000,000 10,000 342,847 (6,419) 15,511 (9,975) (64,241) 272,212
Net income year ended
March 31, 1998 - - - 212,892 - - - 212,892
Net change in unrealized loss on
securities available for sale - - - - - - 7,490 7,490
---------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
BALANCE MARCH 31, 1998 1,000,000 10,000 342,847 206,473 15,511 (9,975) (56,751) 492,594
Net loss year ended
March 31, 1999 - - - 5,923 - - - 5,923
Purchase treasury stock - - - - 1,000 (1,050) - (1,050)
Net change in unrealized gain
(loss) on securities available
for sale - - - - - - (24,826) (24,826)
---------- ---------- ---------- ----------- ---------- ---------- ----------- -----------
BALANCE MARCH 31, 1999 1,000,000 $ 10,000 $ 342,847 $ 212,396 16,511 $ (11,025) $ (81,577) $ 472,641
========== ========== ========== =========== ========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
AURIC METALS CORPORATION AND SUBSIDIARY
STATEMENT OF CONSOLIDATED CASH FLOWS
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
1999 1998 1997
------------- ------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 5,923 $ 212,892 $ ( 3,607)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, amortization
and valuation allowance 839 314 314
Equity in partnership loss - - -
(Gain) loss on sale of investment
securities - (214,869) -
Increase (decrease) in accrued
liabilities ( 538) 379 135
------------- ------------- ------------
Total adjustments 301 ( 14,176) 449
------------- ------------- ------------
Net cash provided (used) by
operating activities 6,224 ( 1,284) ( 3,158)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities (62,702) - -
Proceeds for sale of investment
securities - 240,000 -
Purchase of office equipment ( 3,802) - -
------------- ------------- ------------
Net cash provided (used) by
investing activities (66,504) 240,000 -
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock ( 1,050) - -
Short-term borrowings - 5,000 13,000
Short-term loan payments - ( 5,000) (13,000)
------------- ------------- ------------
Net cash (used) by financing
activities ( 1,050) - -
------------- ------------- ------------
NET INCREASE (DECREASE) IN CASH
AND EQUIVALENTS ( 61,330) 238,716 ( 3,158)
Cash and equivalents, beginning
of period 264,819 26,103 29,261
------------- ------------- ------------
Cash and equivalents, end of period $ 203,489 $ 264,819 $ 26,103
============= ============= ============
The accompanying notes are an integral part of these consolidated
financial statements
F-5
<PAGE>
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
(1) Operations:
-----------
Auric Metals Corporation (the "Company") was incorporated in Utah in May of
1969 to engage in mineral exploration. In 1985, the Company became a Nevada
corporation by merging with a wholly-owned Nevada corporation created solely
for the purpose of changing the Company's state of domicile. In subsequent
years, the Company has also engaged in oil and gas exploration, development
and production activities. The Company holds working interests in various
patented and unpatented mining claims in the Tintic Mining District of Utah.
The Company leases mining claims near Elko, Nevada from Hillcrest Mining
Company of Denver and has subleased the claims to United States Steel
Corporation. The Company presently holds a working interest in one oil and gas
well near Oklahoma City, Oklahoma which provides nominal revenue.
(2) Significant Accounting Policies:
-------------------------------
Cash Equivalents:
- ------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months to be cash
equivalents.
Principles of consolidation:
- ---------------------------
The consolidated financial statements include the accounts of Auric Minerals
Corporation. Intercompany accounts and transactions have been eliminated in
consolidation.
Investment securities
- ---------------------
Management determines the appropriate classification of investment securities
at the time they are acquired and evaluates the appropriateness of such
classification at each balance sheet date. Available-for-sale securities
consist of marketable equity securities not classified as trading securities.
Available-for-sale securities are stated at fair value, and unrealized holding
gains and losses, net of the related deferred tax effect, are reported as a
separate component of stockholders; equity.
Investment in unconsolidated affiliates:
- ----------------------------------------
Investments in affiliated companies in which ownership is 20% or more are
carried at the Company's original cost plus equity in earnings since date of
acquisition.
Investments in less than 20% owned affiliates are carried at cost or estimated
net realizable amounts, whichever is lower.
F-6
<PAGE>
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
(2) Significant Accounting Policies - continued:
--------------------------------------------
Mining:
- ------
Exploration and development expenditures are generally charged to expenses as
incurred until a decision is made to develop a mineral reserve. Expenditures
to bring new properties into production and major expenditures of a
nonrecurring nature are deferred and amortized ratable over production
benefitted. Expenditures for continuing development required to maintain
production are charged to expenses as incurred.
Depreciation:
- ------------
Equipment is recorded at cost and depreciated on a straight-line method and
declining balance method over a five year estimated useful life.
(3) Investments consist of the following at March 31, 1999 and 1998:
----------------------------------------------------------------
Robbie claims investment
- ------------------------
The Company acquired a 25% interest in the "Robbie" gold prospect claims owned
by Hi-Tech Exploration at a cost of $3,567. The Company's President, Mr.
James F. Fouts is also an owner of a 25% interest in these claims.
LaFonda investment
- ------------------
The Company owned, as of March 31, 1999, 10,000 shares of the common stock of
Corporacion De La Fonda, Inc., or approximately 10% of that company's
outstanding shares. De La Fonda, Inc. is a New Mexico hotel operation. Prior
to 1984, the Company owned more than 20% of De La Fonda and accounted for its
investment by the equity method. Since 1983, the Company's investment has
been less than 20% and the cost method of accounting has been used. The
carrying value of the investment includes $102,648 of cumulative undistributed
earnings of La Fonda added to the investment under the equity method. Income
taxes have been recognized under the assumption that undistributed earnings
would eventually be distributed as dividends, thereby qualifying for
dividends-received deductions. If the undistributed earnings are eventually
received in taxable transactions other than as dividends, an unrecognized tax
of approximately $34,900 under current rates could result.
The Company's equity in the underlying net assets of La Fonda exceeds the
carrying value of the investment. Since the Company's President, Mr. James F.
Fouts, has positions, interests or shareholdings, in La Fonda, any transaction
between the Company and this entity cannot be deemed to be at arm's length.
F-7
<PAGE>
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
(3) Investments - continued:
------------------------
1999 1998
-------- --------
Robbie claims investment $ 3,567 $ 3,567
LaFonda investment 125,657 125,657
-------- --------
Other investments $129,224 $129,224
======== ========
Dynamic Oil Ltd.
- ----------------
Effective April 1, 1994, the Company adopted SFAS No. 115 on accounting for
certain investments in debt and equity securities. This new standard requires
that available-for-sale investments in securities that have readily
determinable fair values be measured at fair value in the balance sheet and
that unrealized holding gains and losses for these investments be reported in
a separate component of stockholders' equity until realized. At March 31,
1999 and 1998 marketable investments classified as available for sale included
the following:
1999 1998
-------- --------
Dynamic Oil Ltd. shares at cost $218,953 $156,251
Gross unrealized holding loss 81,577 56,751
-------- --------
Dynamic Oil Ltd. at fair value $137,376 $ 99,500
======== ========
No sales of Dynamic Oil were made in 1999 or 1998.
(4) Stock options:
--------------
Following is a summary of activity under all stock option plans for the
three-year period ended March 31, 1999:
Option Price
---------------
Number of Per
Shares Share Total
------------ --------- ---------
Balance at April 1, 1996 48,000 $ .60 $ 28,800
Expired (48,000) (28,800)
------------ --------- ---------
Balance at March 31, 1997 - -
Granted 60,000 .65 39,000
------------ --------- ---------
Balance at March 31, 1998 60,000 .65 39,000
No activity - -
------------ --------- ---------
Balance at March 31, 1999 60,000 .65 $ 39,000
============ ========= =========
F-8
<PAGE>
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
(4) Stock options - continued:
-------------------------
The Company has adopted FASB statement No. 123, "accounting for Stock-Based
Compensation" as of April 1, 1996. Statement 123 allows for the Company to
account for its stock option plans in accordance with APB Opinion NO. 25,
"Accounting for Stock Issued to Employees" using the intrinsic value method.
In September 1997 the Company granted options to officers and directors
permitting each to purchase 15,000 shares at $.65 per share. Options expire in
September 1999.Had compensation cost for the Company's stock-based
compensation plan (60,000 options granted to officers and directors in 1997)
been determined based on the fair value at the grant date consistent with the
method of FASB Statement 123, the Company's net income and earnings per share
would have been reduced to the proforma amounts indicated below:
1998
-------------
Net income As reported $ 212,892
Pro forma $ 182,786
Primary earnings per share As reported $ .22
Pro forma $ .19
Fully diluted earnings per Share As reported $ .21
Pro forma $ .18
The fair value of each option grant is estimated on the date using the
Black-Scholes option-pricing model, with the following weighted average
assumptions used for grants in fiscal year 1998: dividend yield of 0.0%,
expected average annual volatility of 102%, average annual risk-free interest
rate of 6.0%, and expected lives of three years.
(5) Related party transactions:
--------------------------
The amounts paid to officers and directors have not been, in any sense,
negotiated at arm's length. Payments of $15,000 were made during the current
fiscal year to The Fremont Corp., a corporation in which the Company's
president is principal shareholder. These payments are for office use,
bookkeeping and clerical services. Refer to Note (3) for additional related
party transactions related to the Robbie claims investment and the LaFonda
investment.
F-9
<PAGE>
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
(6) Federal and state income tax:
------------------------------
Effective April 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. The cumulative effect of the
change in accounting principle is immaterial. At March 31, 1999, the Company
had, for federal tax reporting purposes, an operating loss carryforward of
approximately $50,363. This carryforward begins to expire in 2011. No benefit
has been reported in the financial statements, however, because the Company
believes there is at least a 50% chance that the carryforward will expire
unused. Accordingly, the tax benefit of the loss carryforward has been offset
by a valuation allowance of the same amount.
(7) Commitments and contingencies:
-----------------------------
The Company is required to pay the Bureau of Land Management $100 annually on
29 leased mining claims for $2,900. Additionally the Company pays Hi-Tech
Exploration $3,567 annually for its 1/3 share of 107 leased BLM mining claims.
Rates are subject to change and failure to pay results in loss of mining
rights. The payments to BLM are in lieu of assessment work which was required
previously. The leases are cancelable annually upon notice to lessor.
(8) Fair values of financial instruments:
-------------------------------------
The Company estimates that the fair value of all financial instruments at
March 31, 1999 and 1998 does not differ materially from the aggregate carrying
values of its financial instruments recorded in the accompanying balance
sheets.
F-10
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 203,489
<SECURITIES> 137,376
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 203,489
<PP&E> 5,375
<DEPRECIATION> 2,333
<TOTAL-ASSETS> 473,131
<CURRENT-LIABILITIES> 490
<BONDS> 0
0
0
<COMMON> 10,000
<OTHER-SE> 472,641
<TOTAL-LIABILITY-AND-EQUITY> 473,131
<SALES> 333
<TOTAL-REVENUES> 55,478
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 49,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,923
<INCOME-TAX> 5,923
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,923
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
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