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, 2000
Commission File Number: 0-6334
AURIC METALS CORPORATION
(Exact name of Registrant as specified in its Charter)
NEVADA 87-0281240
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4243 Dunwoody Club Drive, Suite 200
Atlanta, Georgia 30305
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number including Area Code: (770) 239-7447
1475 Terminal Way, Suite E, Reno, Nevada 89502
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
------------------- ---------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01
(Title of Class)
Check 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 [ ]
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ X ]
The Registrant had revenues of $52,000 for its most recent fiscal year.
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 August 22, 2000, was approximately $5,972,000.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
As of August 22, 2000, the Registrant had outstanding approximately
954,000 shares of its common stock, par value $.01.
Transitional Small Business Issuer Disclosure format: Yes [ ] No [ X ]
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the Part of the Form 10-KSB (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.
TABLE OF CONTENTS
Page
Item Number and Caption Number
------------------------ --------
PART I
------
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
-------
Item 5. Market for Common Equity and Related Stockholder Matters 8
Item 6. Management's Discussion and Analysis or Plan of Operation 9
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Item 7. Financial Statements 10
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 10
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons 10
Item 10. Executive Compensation 11
Item 11. Security Ownership of Certain Beneficial Owners
and Management 12
Item 12. Certain Relationships and Related Transactions 13
PART IV
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Item 13. Exhibits and Reports on Form 8-K 15
Signatures 16
PART I
ITEM 1. BUSINESS
GENERAL
Auric Metals Corporation (the "Company"), has been involved in the
natural resource industry. In May, 2000, following a decision by management
to change the Company's business direction, the Company effectuated a change
in management, and redirected its business to developing, investing in,
acquiring or acquiring interests in, and operating, internet and technology
related companies. In connection with the decision to change the business
direction of the Company, in the end of May, 2000, management decided to sell
the interest of the Company in a corporation which owns a hotel operation in
Santa Fe, New Mexico, which resulted in a sales price of $1,304,000 in cash.
The Company also sold to its former president, a minority interest it held in
a mining property, and restricted stock in a natural resource company, for the
sum of $26,000, which was the Company's original cost. (See "ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.") While the Company still
holds some minor interests in natural resource companies, described below, it
does not presently contemplate any future natural resource activities.
Since May, 2000, the Company has changed its investment strategy and is
planning to develop, invest in, and operate internet and other technology
related companies. Over the past
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several weeks, the Company has acquired minority interests in two closely-held
companies. The Company anticipates that its business activities will be
focused primarily on companies based in or with operations in the Southeastern
United States with a strong preference in the Atlanta metropolitan area. The
Company may also pursue some higher quality investment opportunities from
outside of this geographic region, to attempt to profit from what management
believes to be the Company's unique advantage among Atlanta and Southeastern
venture capital firms in having access to these opportunities. Management
believes the value of this strategic advantage will be achieved via
syndication of these investments among Atlanta and Southeastern venture
capital firms who wish to diversify the geographic exposure of their
portfolios but would otherwise not have access to these investments.
HISTORY
The Company is a Nevada corporation, organized in 1969, which has held
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 does not currently have any active
natural resource projects. As indicated above, in May, 2000, the Company
determined it would change its business direction, and it does not presently
contemplate any natural resource activities in the future.
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, and Oklahoma. 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 subleases
forty-five (45) mining claims to USX, formerly United
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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 also terminated its interest in the 11
unpatented claims.
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 August 10, 2000, the market value of shares of Dynamic held by the
Company, was approximately $150,757.
In addition to its natural resource investments, described above, as of
the fiscal year ended March 31, 2000, and until the sale completed in the end
of May, 2000, described below, the Company's subsidiary was a shareholder of
Corporacion de La Fonda, Inc. ("La Fonda"), a closely-held 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. The
Company realized dividend income from this investment in the amount of $21,000
during the past fiscal year, and dividend income of $20,000, for the fiscal
year ended March 31, 1999. During the fiscal year ended March 31, 2000, the
Company sold to principals of La Fonda, a total of 800 shares of La Fonda, at
a price of $141 per share, resulting in a net gain pre-tax gain of $103,000.
In May, 2000, following management's decision to change the direction of
the Company, the Company sold to La Fonda, its remaining 9,200 shares, for a
total of $1,304,000 in cash. Under the terms of this transaction, the Company
received an initial sum of $104,000, and a promissory note for the balance of
the cash purchase price, which was paid in full within fifteen (15) days of
the transaction. The Company has realized a gain of approximately $1,188,000
from the transaction. The purpose of this transaction was to create liquidity
for the Company, in order to provide it with capital to pursue its new
business direction. The terms of this transaction are believed to be fair and
reasonable based on all relevant considerations. La Fonda is a closely-held
corporation with small annual dividends, and a relatively illiquid market for
its minority holders. Prior to entering into the transaction, the Company
determined that La Fonda had recently purchased shares of its common stock
from a shareholder, at a price of $141.69 per share. All previous purchases
of stock have been at lower prices, and La Fonda recently granted options for
the purchase stock at a price of $149 per share. Given these circumstances,
and in view of the Company's new business direction, the Company concluded
that the transaction was fair and reasonable and in the best interests of the
Company.
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NATURAL RESOURCES 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 Exploration 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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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
drill sites 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.
Investment in Dynamic Oil Limited
At March 31, 2000, the Company held 129,600 shares of restricted common
stock of Dynamic Oil Limited, an unaffiliated publicly traded British Columbia
corporation ("Dynamic"), a company engaged in oil and gas exploration. As of
March 31, 2000, the market value of the common stock of Dynamic held by the
Company was approximately $150,757. The common stock of Dynamic is quoted on
NASDAQ under the symbol "DYOLF." In May, 2000, the Company sold 79,600 shares
for $107,000.
Acquisition and Disposition of Interest in Robbie Claims
In September, 1995, the Company entered into 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 were 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.
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.
Prior to the sale of its interest to James Fouts, the Company was entitled to
receive one-fourth of the annual payment and one-fourth of the net smelter
returns, if any. In May, 2000, the Company sold its interest in these claims
to its former President, James Fouts, at the Company's original investment
cost of $3,566.
EMPLOYEES
The Company has no regularly paid employees. The Company paid The
Fremont Corp., a corporation in which James Fouts is a principal shareholder,
a total of $18,000 during the fiscal year for secretarial services, office
space and clerical services. In addition, the Company has reimbursed James
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.
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The Company does not currently have any employment agreement or
arrangement with any officer or director of the Company, and is not currently
paying any compensation to officers and directors, except for options granted
to officers and directors and directors' fees as described under "ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
ITEM 2. 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: Natural Resources Business."
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.
PART II
ITEM 5. MARKET FOR 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 common stock. The
Company's shares 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
-------------- ---------- ----------
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
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2000 Fiscal Year:
June 30, 1999 $ 0.875 $ 0.875
September 30, 1999 1.031 1.031
December 31, 1999 1.500 1.500
March 31, 2000 1.750 1.750
On August 21, 2000, the high and low bid prices quoted by broker-dealer
firms effecting transactions in the Company's common stock, were $7.625 and
$7.375, 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 August 21, 2000, there were approximately 753 holders of record of
the Company's common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
The Company's current assets as of March 31, 2000, of $248,000,
represents an increase in current assets of $45,000, from current assets of
$203,000 in the prior year. Such increase is attributable largely to a sale
of 800 shares of La Fonda stock during the year for a net pre-tax gain of
$103,000. Total assets as of March 31, 2000, of $576,000, represent an
increase in total assets of approximately $103,000 from total assets of
$473,000 in the prior year. As a result, stockholders' equity of $569,000 at
March 31, 2000, represents an increase of approximately $96,000, from
stockholders' equity of $473,000 at March 31, 1999.
The Company continues to be very limited in its ability to finance any
major developments and is currently seeking additional capital. The Company
intends to research and analyze potential investment opportunities and
possible make investments in the next fiscal year, though there is no
guarantee that any investments will be made.
RESULTS OF OPERATIONS
In the fiscal year ended March 31, 2000, the Company had total revenues
of $52,000, and a $103,000 gain realized from the sale of La Fonda stock;
expenses of $62,000, including a provision for income taxes in the amount of
$7,000, resulting in net income of $93,000. In the fiscal year ended March
31, 1999, the Company had gross revenue of $55,000 and expenses of $49,000,
resulting in net income of approximately $6,000. The Company's revenue over
the past two years, exclusive of sales of La Fonda stock, has been modest and
fairly constant, consisting largely of mineral royalty income of $25,000 per
year, and dividend income from the Company's
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La Fonda shares, ranging from between $10,000 to $21,000. Similarly,
expenses over the past years, exclusive of extraordinary items and one-time
losses, have remained fairly consistent, of between $35,000 to $55,000.
During the fiscal years ended March 31, 2000 and 1999, operating revenue
from the Company's interest in an oil well in Oklahoma was nominal. The
Company received a net $25,000 advance royalty payment during the fiscal year
on its leased mining claims in Nevada. Dividend income of $21,000 from the
Company's investment in La Fonda during the year represents an increase of
$1,000 from the prior year.
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
The financial statements are included beginning at page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the fiscal year ended March 31, 2000, 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.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
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 Director
Name Age Position Since(1)(2)
----- ---- ----------- -----------------
Marc J. Schwartz 36 Vice President and
Secretary/Treasurer May 2000
Donald Ratajczak 57 President and Chairman May 2000
(1) These individuals were appointed in May, 2000. (See "ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.")
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(2) All directors and executive officers serve for a term of one year or
until their successors are chosen and qualified.
----------------
Set forth below is a brief biographical description of Messrs. Ratajczak
and Schwartz:
Donald Ratajczak has occupied the position of Director of the Economic
Forecasting Center, College of Business Administration, Georgia State
University since 1973. Prior to his current position, he was Director of
Research, Director of Forecasting Models and Associate Director University of
California at Los Angeles ("UCLA") Forecasting Project during 1973, 1969 to
1970 and 1969 to 1973, respectively. Dr. Ratajczak was also Assistant
Professor at UCLA Graduate School of Management, from 1969 to 1973. From 1966
to 1968, he was an Instructor at Massachusetts Institute of Technology, and
from 1966 to 1967, he was an Economist, Office of Postmaster General of the
United States in Washington, D.C. Dr. Ratajczak graduated in 1972 with a
Ph.D. degree in Economics from Massachusetts Institute of Technology. As
President and Chairman of the Board, Mr. Ratajczak will be responsible for the
administration of Company matters.
Marc J. Schwartz is a licensed security broker and has been a Vice
President of Dunwoody Brokerage Services Capital Group, a subsidiary of
Dunwoody Brokerage Services, Inc., since 1998. From 1992-1998, Mr. Schwartz
was a retail securities broker with Robinson Humphrey, Solomon Smith Barney
and Morgan Stanley Dean Witter. As Vice President and Secretary/Treasurer,
Mr. Schwartz will be responsible for directing Company strategy.
ITEM 10. EXECUTIVE COMPENSATION
REMUNERATION DURING FISCAL YEAR
During the fiscal year ended March 31, 2000, 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) $18,000*
* Consists of $18,000 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. Mr. Fouts was
Chairman of the Board and President of the Company until May, 2000,
when new officers and directors were elected.
The directors are compensated $500 per year for board membership, and are
paid $100 per meeting attended, plus expenses.
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The Company does not currently have any employment agreement or
arrangement with any current member of management.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table shows, as of August 22, 2000, 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:
Name of Person or Group Common Shares Options (1)
------------------------- --------------------- -----------------------
Percent if
Number Percent Number Exercised (2)
----------- ------- -------- -------------
Principal Shareholders:
----------------------
Donald Ratajczak (3)
1681 Lady Marian Lane
Atlanta, GA 30309 33,500 3.51 150,000 16.62
Marc J. Schwartz (3)
70 Old Ivy Road, #55
Atlanta, GA 30342 35,000 3.67 300,000 26.71
Gregory L. Hoover
2495 Wood Brook Court
Lawrenceville, GA 30043 89,208 9.35 5,000 9.82
Cede & Company
PO Box 222
Bowling Green Station
New York, NY 10274 178,926 18.75 n/a n/a
Officers and Directors:
----------------------
Donald Ratajczak ------------------See above -------------
Marc J. Schwartz ------------------See above -------------
All Officers and Directors
as a Group (2 persons): 68,500 7.18 450,000 36.93
(1) These figures represent options that are vested or will vest subject to
certain conditions (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").
(2) These figures represent the percentage of ownership of the outstanding
shares by the named individuals assuming each of them alone has exercised his
options, and percentage ownership of all officers and directors of a group
assuming all such purchase rights held by such individuals are exercised.
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(3) Messrs. Ratajczak and Schwartz are the officers and directors of the
Company.
There are no arrangements known to the Company, the operation of which
may at a subsequent date result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August, 1999, the Company purchased a total of 21,600 shares of
restricted common stock of Hillcrest Mining Company, a closely-held mining
company, at a price of $1.00 per share. In May, 2000, following the Company's
change in management and its decision to redirect its business, the Company
sold to James Fouts, all 21,600 shares of Hillcrest, at the Company's purchase
price. In connection with the same transaction, the Company sold to Mr.
Fouts, the Company's 25% undivided interest (along with Hillcrest, Fouts and a
third party) in 107 unpatented mining claims acquired in 1996, and known as
the "Robbie Claims," for $4,000 which is approximately the Company's original
investment in such claims. These transactions cannot be considered the result
of arms' length negotiations.
On April 11, 2000, the Company entered into a Consulting Agreement (the
"Consulting Agreement") with Marc J. Schwartz, who was then an independent
third party, under the terms of which Mr. Schwartz was retained as a
consultant to explore a possible new business direction of the Company.
Pursuant to the terms of the Consulting Agreement, the Company agreed to pay
Mr. Schwartz the sum of $120,000, and grant options to acquire shares of its
common stock as follows:
a) 100,000 shares exercisable at $1.125 per share;
b) 100,000 shares exercisable at $1.125 per share when the stock
price of the Company reaches and maintains for 10 days a price of $3.00 per
share; and
c) 100,000 shares exercisable at $1.125 per share when the stock
price of the Company reaches and maintains for 10 days a price of $5.00 per
share.
In April, 2000, prior to becoming officers and directors of the Company,
Messrs. Schwartz and Ratajczak, along with a number of other individuals,
acquired stock of the Company in private transactions, as reflected on a
Schedule 13D filing dated April 17, 2000. Mr. Schwartz acquired a total of
35,000 shares, and Mr. Ratajczak acquired a total of 33,500 shares of common
stock.
In April, 2000, in anticipation of the change in the Company's business
direction and the change in management described above, the board of directors
authorized the grant of options to Mr. Ratajczak, entitling him to purchase a
total of 150,000 shares of the Company's common stock, at a price of $3.00 per
share. The Company has also authorized the grant of options for up to an
additional 200,000 shares of common stock, to prospective employees, advisors
and others, at exercises prices of between $3.00 and $5.00 per share.
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In May, Dunwoody Brokerage Services, Inc. ("Dunwoody"), a broker-dealer
firm with which Mr. Schwartz is affiliated, agreed to assist James Fouts and
members of his family, in selling, in private transactions, shares of common
stock of the Company held by them, in exchange for which these sellers have
agreed to pay a fee of $0.07 per share. Dunwoody has earned a fee of
approximately $24,500, for assisting in finding private purchasers for the
purchase of a total of 350,000 shares of the Company's common stock held by
Elizabeth White, Alan Fouts, and Donovan Fouts. This stock was purchased from
these individuals subject to existing restrictions on the stock.
As a result of the Company decision to change its business direction, on
May 17, 2000, the Company effected a change in management, in order to enable
the Company the necessary management experience and expertise to implement the
Company's proposed new business endeavors. The Company's board of directors,
consisting of James Fouts, Chairman, Elizabeth White, and Dan Ligino,
resigned, seriatum, and Marc Schwartz and Donald Ratajczak, were elected as
the new members of the board of directors of the Company. In addition, James
Fouts and Betty Fouts, his wife, resigned as President and Secretary,
respectively, and Donald Ratajczak was appointed as President and Chairman of
the Board, and Marc Schwartz was appointed as the Vice President and
Secretary/Treasurer, of the Company. (See a biographical description of
Messrs. Ratajczak and Schwartz under "ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT.")
In order to facilitate the change in the Company's business described
above, the board of directors determined that it was in the best interest of
the Company, to dispose of its ownership interest (9,200 shares) in La Fonda,
on the best terms available. The Company considered a number of different
alternatives for the sale of the shares, at "fair market value" or the best
price available, including offering the shares to other La Fonda shareholders.
In May, 2000, La Fonda indicated an interest in purchasing the Company's
shares, at what it considers to be the reasonable or "fair" value for such
shares, which resulted in a stock purchase agreement between the Company and
La Fonda (the "Stock Purchase Agreement"). Under the terms of the Stock
Purchase Agreement, La Fonda agreed to purchase the shares at a price of
$141.69 per share, together with additional consideration described below, for
a total purchase price of approximately $1,303,548. In the weeks prior to the
transaction, La Fonda purchased shares of La Fonda stock from another La Fonda
shareholder at a price of $141.69 per share, and authorized the issuance of 5
year stock options at a price of $149 per share. All previous private
purchases of La Fonda shares have been at lower prices. Therefore, given
these circumstances, and the fact that La Fonda is a closely-held corporation
with small annual dividends and very limited liquidity in its stock, the
board of directors concluded that the terms of purchase of the La Fonda shares
are fair and reasonable. Pursuant to the Stock Purchase Agreement, La Fonda
has paid the sum of $103,548, and agreed to pay the balance of the cash
purchase price, of $1,200,000, within thirty (30) days, or on or before June
15, 2000. La Fonda paid the remaining sum of $1,200,000 in June, 2000.
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.
14
<PAGE>
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 expired in September 1999. The grant of these options cannot be
considered to be result of arms' length negotiations.
In June, 2000, the Company entered into an agreement with James Fouts,
former President, whereby Mr. Fouts agreed to return 50,000 shares of common
stock to the Company for cancellation. In addition, he has agreed to provide
certain limited administrative support to the Company. As of the date of this
Form 10-KSB, 3,600 shares have not been received by the Company.
PART IV
ITEM 13. EXHIBITS 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
F-1.
B. EXHIBITS:
Exhibit SEC Ref.
No. No. Title of Document Location
------- --------- ----------------- --------
1 10 Consulting Agreement with Marc J. Schwartz *
2 10 Agreement between Auric Minerals Corporation
and Corporacion de La Fonda **
3 27 Financial Data Schedules ***
*This exhibit was previously filed as an exhibit to the Schedule 13D filed on
or about April 17, 2000, and incorporated herein by reference.
**This exhibit was previously filed as an exhibit to a Form 8-K filed on or
about May 17, 2000, and incorporated herein by reference.
***The Financial Data Schedule is included only in the electronic filing of
this report with the Securities and Exchange Commission.
C. REPORTS ON FORM 8-K
The Registrant did not file any reports on Form 8-K during the fiscal
year ended March 31, 2000. On or about May 23, 2000, a report on Form 8-K was
filed by the Company, reporting a change in control of management. A
subsequent report on Form 8-K was filed on or about July 17, 2000, reporting a
change in the Company's auditors.
15
<PAGE>
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
Date: August 22, 2000 By: /s/ Donald Ratajczak
_________________________________
Donald Ratajczak, President
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/ Donald Ratajczak President, Chairman Date: August 22, 2000
______________________ and Director
Donald Ratajczak
/s/ Marc J. Schwartz Vice President, Date: August 22, 2000
_______________________ Secretary/Treasurer
Marc J. Schwartz and Director
16
<PAGE>
AURIC METALS CORPORATION AND SUBSIDIARY
Contents
Page
-----
Consolidated Financial Statements
Independent auditors' report March 31, 2000 F-2
Independent auditors' report March 31, 1999 F-3
Balance sheet as of March 31, 2000 F-4
Statements of income for the years ended
March 31, 2000 and 1999 F-5
Statements of comprehensive income for the years ended
March 31, 2000 and 1999 F-5
Statements of stockholders' equity for the years ended
March 31, 2000 and 1999 F-6
Statements of cash flows for the years ended
March 31, 2000 and 1999 F-7
Notes to financial statements F-8
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Auric Metals Corporation
We have audited the accompanying consolidated balance sheet of Auric Metals
Corporation and subsidiary as of March 31, 2000, and the related consolidated
statements of income, comprehensive income, stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit 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 well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements enumerated above present
fairly, in all material respects, the financial position of Auric Metals
Corporation and subsidiary as of March 31, 2000, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/S/ Richard A. Eisner & Company, LLP
Richard A. Eisner & Company, LLP
New York, New York
July 26, 2000
F-2
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Auric Metals Corporation
We have audited the consolidated statements of income, comprehensive income,
stockholders' equity and cash flows for the year ended March 31, 1999 of Auric
Metals Corporation and subsidiary. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit 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 well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Auric Metals Corporation and subsidiary for the year ended March 31,
1999, in conformity with generally accepted accounting principles.
/s/ Andersen Andersen & Strong
Andersen Andersen & Strong
Salt Lake City, Utah
June 24, 1999
F-3
<PAGE> 19
AURIC METALS CORPORATION AND SUBSIDIARY
Consolidated Balance Sheet
March 31, 2000
Assets
Current assets:
Cash and cash equivalents $ 248,000
Investments 328,000
-------------
$ 576,000
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities $ 7,000
-------------
Stockholders' equity:
Common stock - $0.01 par value; authorized 25,000,000 shares;
issued 1,000,000 shares, outstanding 995,000 shares 10,000
Additional paid-in capital 335,000
Accumulated other comprehensive loss (77,000)
Treasury stock at cost, 5,000 shares (4,000)
Retained earnings 305,000
-------------
569,000
-------------
$ 576,000
=============
See notes to financial statements F-4
<PAGE> 20
AURIC METALS CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
March 31,
---------------------------
2000 1999
------------- -------------
Mineral royalty, net $ 25,000 $ 25,000
Dividends 21,000 20,000
Interest 6,000 10,000
------------- -------------
52,000 55,000
------------- -------------
Lease expense 3,000 6,000
General and administrative expense 52,000 43,000
------------- -------------
55,000 49,000
------------- -------------
Gain on sale of securities to related party 103,000
-------------
Income before income taxes 100,000 6,000
Provision for income taxes 7,000
------------- -------------
Net income $ 93,000 $ 6,000
============= =============
Net income per common share - basic and diluted $ .09 $ .01
============= =============
Weighted average number of shares outstanding
- basic and diluted 995,000 996,000
============= =============
Consolidated Statements of Comprehensive Income
Net income $ 93,000 $ 6,000
Other comprehensive income (loss):
Unrealized gain/(loss) on marketable securities
available for sale 5,000 (25,000)
------------- -------------
Total comprehensive income (loss) $ 98,000 $ (19,000)
============= =============
See notes to financial statements F-5
<PAGE> 21
<TABLE>
<CAPTION>
AURIC METALS CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Accumulated
Other
Common Stock Treasury Stock Comprehensive
-------------------- Paid-in Retained -------------------- Income/
Shares Amount Capital Earnings Shares Amount (Loss) Total
---------- ---------- ------------ ----------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - April 1, 1998
as previously reported 1,000,000 $ 10,000 $ 343,000 $ 206,000 16,000 $ (10,000) $ (57,000) $ 492,000
Adjustment to correct
treasury stock (Note C) (8,000) (13,000) 8,000 0
---------- ---------- ------------ ----------- ---------- ---------- ------------- ------------
Balance - April 1, 1998
as adjusted 1,000,000 10,000 335,000 206,000 3,000 (2,000) (57,000) 492,000
Net income, year ended
March 31, 1999 6,000 6,000
Purchase treasury stock 1,000 (1,000) (1,000)
Net change in unrealized
loss on securities
available for sale (25,000) (25,000)
---------- ---------- ------------ ----------- ---------- ---------- ------------- ------------
Balance - March 31, 1999 1,000,000 10,000 335,000 212,000 4,000 (3,000) (82,000) 472,000
Net income, year ended
March 31, 2000 93,000 93,000
Purchase treasury stock 1,000 (1,000) (1,000)
Net change in unrealized
loss on securities
available for sale 5,000 5,000
---------- ---------- ------------ ----------- ---------- ---------- ------------- ------------
Balance - March 31, 2000 1,000,000 $ 10,000 $ 335,000 $ 305,000 5,000 $ (4,000) $ (77,000) $ 569,000
========== ========== ============ =========== ========== ========== ============= ============
See notes for financial statements F-6
</TABLE>
<PAGE> 22
AURIC METALS CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
March 31,
---------------------------
2000 1999
------------- -------------
Cash flows from operating activities:
Net income $ 93,000 $ 6,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,000 1,000
Gain on sale of investment securities (103,000)
Increase (decrease) in accrued liabilities 7,000 (1,000)
Loss on write-off of office equipment 2,000
------------- -------------
Net cash provided by operating activities 0 6,000
------------- -------------
Cash flows from investing activities:
Purchase of investments (67,000) (63,000)
Proceeds for sale of investments 113,000
Purchase of office equipment (4,000)
------------- -------------
Net cash provided by (used in)
investing activities 46,000 (67,000)
------------- -------------
Cash flows from financing activities:
Purchase of treasury stock (1,000) (1,000)
------------- -------------
Net increase(decrease) in cash and cash equivalents 45,000 (62,000)
Cash and cash equivalents, beginning of period 203,000 265,000
------------- -------------
Cash and cash equivalents, end of period $ 248,000 $ 203,000
============= =============
See notes to financial statements F-7
<PAGE> 23
AURIC METALS CORPORATION AND SUBSIDIARY
Notes to Financial Statements
March 31, 2000 and 1999
Note A - The Company and Basis of Presentation
Auric Metals Corporation and subsidiary (the "Company"), is a Nevada
corporation. During the year ended March 31, 2000 the Company was engaged in
oil and gas exploration, development and production activities. The Company
has interests in mining claims in Nevada and has leased out these claims, and
a working interest in one oil and gas well near Oklahoma City, Oklahoma which
provides nominal revenue.
In May 2000, with the election of new officers and directors, the business
strategy of the Company was changed to developing, investing in, and operating
internet and other technology related companies (see Note I).
The consolidated financial statements include the accounts of its wholly owned
subsidiary, Auric Minerals Corporation. All intercompany balances and
transactions have been eliminated.
Note B - Significant Accounting Policies
[1] Cash equivalents:
The Company considers all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents.
[2] Investment securities:
Investments are comprised of equity securities classified as available for
sale and a 25% interest in a partnership. Marketable equity securities
which are publicly traded are carried at fair market value based on quoted
market prices, with unrealized gains and losses reported as a separate
component of stockholders' equity. Declines in fair value that are
determined to be other than temporary are charged to earnings. Realized
gains and losses on sales of investments are included in earnings and are
determined on the specific identification method.
The 25% partnership interest and securities which are not publicly traded
are carried at cost (see Notes D and I).
[3] Mineral royalty:
Mineral royalty income is recognized when earned.
[4] Stock-based compensation:
The Company has adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS No. 123"). The
provisions of SFAS No. 123 allow companies to either expense the estimated
fair value of employee stock options or to continue to follow the
intrinsic value method set forth in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), but
disclose the pro forma effects on net income had the fair value of the
options been expensed. The Company has elected to continue to apply APB
25 in accounting for its employee stock option grants.
[5] Net earnings per share:
Basic earning per common share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings
per common share is based only on the weighted average number of common
share outstanding during the period as the inclusion of stock options
would have been antidilutive.
<PAGE> 24 F-8
AURIC METALS CORPORATION AND SUBSIDIARY
Notes to Financial Statements
March 31, 2000 and 1999
Note B - Significant Accounting Policies (continued)
[6] Use of estimates in the preparation of financial statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Note C - Adjustment of Previously issued Financial Statements
The previously issued financial statements erroneously over stated treasury
stock by approximately 13,000 shares. The financial statements give
retro-active effect to this adjustment.
Note D - Investments
The cost and fair value of investments are as follows:
Marketable equity securities at cost $ 264,000
Non-marketable equity securities 137,000
Partnership interest 4,000
---------
405,000
Unrealized losses (77,000)
---------
Fair value $ 328,000
=========
In September 1995, the Company acquired for $4,000 a 25% interest in a
partnership which held an interest in certain gold prospect claims known as
"Robbie claims". The Company's former President has a 25% interest in this
partnership.
Nonmarketable equity securities include 9,200 shares (approximately 9% of the
outstanding shares) of Corporacion de La Fonda, Inc. ("La Fonda"), a New
Mexico hotel operation (see Note I). The Company's former President had an
equity interest in and is a Director of La Fonda.
Note E - Stock Options
In September 1997, the Company granted fully vested options to purchase an
aggregate of 60,000 shares of the Company's common stock at $0.65 to its
officers and directors. These options expired in September 1999.
F-9
<PAGE> 25
AURIC METALS CORPORATION AND SUBSIDIARY
Notes to Financial Statements
March 31, 2000 and 1999
Note E - Stock Options (continued)
The Company applies APB 25 in accounting for stock options and, accordingly,
recognizes compensation expense for the difference between the fair value of
the underlying common stock and the exercise price of the option at the date
of grant. The effect of applying SFAS No. 123 on pro forma net loss is not
necessarily representative of the effects on reported net income or loss for
future years due to, among other things, (i) the vesting period of the stock
options and (ii) the fair value of additional stock options in future years.
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------------------------------------------------------
2000 1999
---------------------------------------- -----------------------------------------
Weighted Weighted
Weighted Average Weighted Average
Average Remaining Average Remaining
Price Exercise Contractual Price Exercise Contractual
Per Share Shares Price Life Per Share Shares Price Life
---------- --------- -------- ----------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options
outstanding
at beginning
of year $ 0.65 60,000 $ 0.65 0.5 years $ 0.65 60,000 $ 0.65 1.5 years
Options
expired 0.65 (60,000) 0.65
--------- ---------
Options
outstanding
at end of
year 0 60,000 $ 0.65 0.5 years
========= =========
Note F - Related Party Transactions
During the years ended March 31, 2000 and 1999, the Company paid $18,000 and
$15,000 respectively for administrative services to the Fremont Corp., an
entity in which the Company's former President is a principal stockholder (see
Note D with respect to related party investments).
Note G - Income Taxes
For the year ended March 31, 2000, provision for income taxes represents
federal income taxes currently payable. At March 31, 1999, the Company had a
net operating loss carryforward which was utilized to reduce taxable income.
Reconciliation of the expected federal statutory tax rate to the Company's
effective rate, is as follows:
2000 1999
------------- ------------
Federal statutory rate 34 % 15 %
Net operating loss carryforward (17) (15)
Effect of graduated rates (8)
Dividends received (5)
Other 3
------------- ------------
Effective tax rate 7 % 0 %
============= ============
F-10
<PAGE> 26
AURIC METALS CORPORATION AND SUBSIDIARY
Notes to Financial Statements
March 31, 2000 and 1999
Note H - Fair Values of Financial Instruments
The amount reported in the financial statements for cash and cash equivalents,
marketable securities, and accrued liabilities approximates fair market value.
Fair market value of marketable securities was estimated using quoted market
prices. For equity securities and the partnership interest where there are no
quoted market prices, it was not possible to estimate fair value without
incurring significant costs.
Carrying Fair
Amount Value
----------- -----------
Assets
------
Cash and cash equivalents $ 248,000 $ 248,000
Marketable equity securities 187,000 187,000
Nonmarketable equity securities
and partnership interest 141,000 *
Liabilities
-----------
Accrued liabilities 7,000 7,000
*See Note I below.
Note I - Subsequent events
In May 2000, the Company sold its partnership interest and certain
nonmarketable equity securities to its former President for approximately
$26,000.
In May 2000, the Company sold its remaining investment in La Fonda of 9,200
shares to La Fonda for approximately $1,304,000, resulting in a realized gain
of approximately $1,188,000. The Company received $104,000 in cash at the
closing and a noninterest bearing promissory note for $1,200,000 which has
been collected.
In April 2000, the Company entered into an agreement with an outside
consultant, who in May 2000 became an officer/director of the Company, the
terms of which provided for fees of $120,000 and options to purchase 300,000
shares of the Company's common stock, exercisable at $1.125 per share of which
200,000 options vest on achieving certain milestones which were met in May
2000. The options were valued at approximately $1,234,000 and charged to
operations in the period vested. Further, in April 2000, the Company granted
to a nonemployee, who in May 2000, became the Chairman and President, an
option to purchase 150,000 shares of the Company's common stock exercisable at
$3.00 per share. The option was valued at approximately $352,000 on the date
of grant and subsequently revalued to $548,000 when he became an employee of
the Company. The Company also granted to outside advisors, options to
purchase an aggregate of 101,000 shares at exercise prices ranging from $3.90
to $4.81 per share. The options were valued at approximately $411,000 at the
date of grant. The cost to be recognized for these options will be measured
upon their vesting. The options were valued using the Black Scholes pricing
model with the following weighted average assumptions: dividend yield 0%,
volatility 176%, risk free interest rate of 6.42% and an expected life of five
years, and will be amortized over the venting period.
In June 2000, the Company entered into an agreement with its former
stockholder/President whereby he agreed to return 50,000 shares of common
stock. In addition, he has agreed to provide certain limited administrative
support to the Company. Currently, 3,600 shares have not been received.
F-11
</TABLE>
