<PAGE> 1
_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM:
__________________________________
Commission File Number: 0-25170
__________________________________
ROYAL SILVER MINES, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0306609
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification #)
10220 N. Nevada, Suite 230, Spokane, Washington 99218
(Address of Principal Executive Offices, including Zip Code)
(509) 466-3144
(Registrant's telephone number, including area code)
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 number of shares outstanding at December 31, 1997: 13,621,232
shares
_________________________________________________________________
_________________________________________________________________
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS OF ROYAL SILVER MINES, INC.
(Hereinafter referred to as Registrant or Company)
Condensed financial statements, and an accompanying independent
accountants' report, are filed as part of this Quarterly Report at
pages. In management's opinion, these financial statements present
fairly in all material respects Registrant's financial condition and
changes in condition as of December 31, 1997 and September 30, 1997,
and the results of operations, stockholders' equity and cash flows
for the three months ended December 31, 1997, 1996, 1995, and from
inception on February 17, 1994 through December 31, 1997, in
conformance with generally accepted accounting principles.
The accompanying financial statements consolidate the financial
statements of Celebration Mining Company and Royal Silver Mines, Inc.
due to the Reorganization discussed in Note 1 of the financial
statements following this Report. All significant intercompany
accounts and transactions have been eliminated. Also, the
consolidation required a change in fiscal year-end, from November 30
(Celebration) to September 30 (Royal). The financial statements
account for the Reorganization using the purchase method of
accounting (see Note 1 to the financial statements). Celebration is
treated as the acquiring company for financial reporting purposes
because its shareholders constitute greater than 50 percent of the
combined shareholder group. In conformity with generally accepted
accounting principles and the Company's accounting policy,
Celebration is recognized as the predecessor entity. Consequently,
Celebration's assets and liabilities were not adjusted in the
accompanying financial statements. The financial statements for the
period from the inception of Celebration on February 17, 1994 to
November 30, 1994 ("Fiscal 1994") do not include the balance sheet
data or results of operations of Consolidated Royal Mines, Inc. The
accompanying financial statements represent the activities of Royal
Silver Mines and Celebration, but are not considered consolidated
financial statements since Royal Silver is the successor to
Celebration.
As discussed in greater detail under Item 2 below, a substantial
portion of Registrant's assets consist of investments in mineral
properties for which additional exploration is required to determine
if they contain ore reserves that are economically recoverable. The
realization of these investments is contingent to large extent upon
the success of Registrant's property transactions as a whole, the
existence of economically recoverable reserves, the ability of the
Company to obtain financing or make other arrangements for
development, and upon future profitable production. Accordingly, the
accompanying financial statements make no provision for any asset
impairment or other adjustment that might result from the outcome of
this uncertainty.
<PAGE> 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES. There is
considerable risk in any mining venture, and there can be no
assurance that the Company's operations will be successful or
profitable. Exploration for commercially minable ore deposits is
highly speculative and involves risks greater than those involved in
the discovery of mineralization. Mining companies use the evaluation
work of professional geologists, geophysicists, and engineers in
determining whether to acquire an interest in a specific property, or
whether or not to commence exploration or development work. These
estimates are not always scientifically exact, and in some instances
result in the expenditure of substantial amount of money on a
property before it is possible to make a final determination as to
whether or not the property contains economically minable ore bodies.
The economic viability of a property cannot be finally determined
until extensive exploration and development work, plus a detailed
economic feasibility study, has been performed. Also, the market
prices for mineralization produced are subject to fluctuation and
uncertainty, which may negatively affect the economic viability of
properties on which expenditures have been made. During the
development stage of the Company, from inception to December 31,
1997, the Company accumulated a deficit of $5,214,518.
At December 31, 1997, $4,949,869 of the Company's total assets of
$5,579,847 were investments in mineral properties. Additional
exploration is required to substantiate or determine whether these
mineral properties contain ore reserves that are economically
recoverable. The realization of these investments is dependent upon
the success of future property sales, the existence of economically
recoverable reserves, the ability of the Company to obtain financing,
the Company's success in carrying out its present plans or making
other arrangements for development, and upon future profitable
production. The ultimate outcome of these investments cannot be
determined at this time; accordingly, no provision for any asset
impairment that may result, in the event the Company is not
successful in developing or selling these properties, has been made
in the Company's financial statements.
LIQUIDITY AND CAPITAL RESOURCES. The Company currently has no
revenues and, as explained above, has an accumulated deficit.
Although it has recurring losses from operations, the Company has
increased its operating capital and improved its financial condition
and ability. Regarding its losses from operations, the Company
cannot assure that it will be able to fully carry out its plans as
budgeted without additional operating capital. At December 31, 1997,
the Company had working capital of $357,646. This amount is a
significant improvement in liquidity and capital resources from its
position of negative working capital of ($3,068) at December 31, 1995
and is reasonably consistent with its working capital position of
$390,852 at December 31, 1996. In the three months ending December
31, 1997, the Company's working capital has decreased by $313,709
<PAGE> 4
(from $671,355 at September 30) because of the absence of significant
cash stock sales in this quarter and the presence of ongoing
administrative expenses being funded by diminishing cash resources.
During the same three-month period, the Company's cash decreased from
$594,577 to $257,380.
In the first quarter of fiscal 1998, the Company reduced its accrued
expenses and accounts payable. Accordingly, the Company's current
liabilities shrank from $41,341 at September 30, 1997 to $22,253 at
December 31, 1997. The Company had no long-term debt at September
30, 1997 or at December 31, 1997.
The Company has estimated that it will need minimal capital resources
of approximately $40,000-50,000 per month to meet its estimated
expenditures for fiscal 1998. In 1996 and in 1997, several key
members of management, in particular the CEO of the Company, met with
experienced financial and investment firms throughout Europe and
North America and negotiated preliminary terms and arrangements for
such capital fund raising. During the fiscal year ending September
30, 1997, the Company raised $1,843,750 in funds, primarily through
the private placement of shares and warrants. The Company is
continuing with the previously described negotiations and various
alternatives to raise capital.
The Board of Directors reasonably believes that the Company is able
to engage in nearly any size operation or scope of mining activity
depending on the circumstances and merits of each proposed operation
or mining activity. Accordingly, the Board has not limited the size
of operation or scope of project which it believes is reasonable for
management to consider in achieving the Company's business plan.
Therefore, management has been authorized to consider and review
numerous proposals and, upon satisfactory assessment, to then make a
specific determination as to an estimated range of funding amounts
that each such proposal reasonably might require.
Inasmuch as the Company has not yet determined in detail the
specifications of the project, operation or mining activity that it
intends to undertake, management is not able at this time to provide
a detailed listing or exact range of operation costs, including
increases in general and administrative expense, if any. However,
the Company plans to fund any increases in general and administrative
expense principally from joint venture revenues or funds it may
receive or savings it may realize through corporate restructuring or
business combination arrangements. Funds required to finance the
Company's exploration and development of mineral properties are
expected to come primarily from the contributions of its joint
venture participants, and from the funds generated from such joint
ventures and other lease or royalty arrangements.
The Company consistently has made full and timely payment of its
expenses, in particular to the various governmental payees it
interacts with, and has met its obligations to the entities which
provide its personnel, office space, and equipment needs. The
Company currently is seeking alternate sources of working capital
<PAGE> 5
sufficient to increase the funding of additional general and
administrative expenses that may become necessary as the Company's
business plan develops, and to continue meeting its ongoing payment
obligations for its leases to governmental entities.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1996 AND DECEMBER 31,
1997, RESPECTIVELY. General and administrative expenses increased
from $340,462 during the first quarter of fiscal 1997 to $390,616
during the first quarter of fiscal 1998. This increase is
principally due to additional consulting expenses and compensation to
officers and directors. As a result, during the first quarter of
fiscal 1997 compared to the first quarter of 1998, the net loss
increased from $339,613 to $390,616 while the net loss per share held
at $0.03.
The Company is unable to fully determine the impact of future
transactions on its operating capital. Hence, the Company has
determined not to incur and does not have any commitments or plans
for material capital expenditures during the remainder of its current
fiscal year for which it does not have a reasonably available source
of payment. It is uncertain what effect this decision may have with
respect to restricting capital expenditures.
On the one hand, if the Company were to continue such restriction,
the likely effect might be adverse to the preservation of its assets
and capital base, thereby narrowing the scope of plans for future
operations and constricting liquidity. On the other hand, if the
Company were to discontinue such restriction without an increase in
sustained cash flow, the likely effect of that might be an increase
in accumulated deficits which could be adverse to the Company's
financial condition with respect to liabilities and stockholders'
equity.
Therefore, while the Company continues to seek a joint venture
participant and additional sources of capital for financing
operations during the remainder of its current fiscal year, the
Company will continue to carefully monitor its capital expenditures.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Officers and Directors of the Company certify that to the
best of their knowledge, neither the Company nor any of its Officers
and Directors are parties to any legal proceeding or litigation other
than as set forth below. Further, the Officers and Directors know of
no threatened or contemplated legal proceedings or litigation with
the exception of the following:
<PAGE> 6
1. On January 20, 1998, Thomas F. Miller, James Kontes and
United Silver Mines, Inc., ("Plaintiffs") filed suit against the
Company, Celebration Mining Company, Howard Crosby, the Company's
President, and John Does 1 through 50 (the "Defendants") in the First
Judicial District Court in and for Box Elder County, State of Utah,
Case No. 980100049 to recover the Vipont Mine together with
incidental and consequential damages or in the alternative,
consequential, incidental and compensatory damages together with
punitive damages, costs and attorney's fees. Messrs. Miller and
Kontes and United Silver Mines allege that the Company did not issue
2,000,000 shares of its common stock which were due United Silver
Mines and James Kontes as part of the consideration for the
acquisition of the Vipont Mines. The Company believes the foregoing
is totally without merit and the Company intends to defend the
foregoing action vigorously.
2. On January 22, 1998, Joan G. Rounds, individually and as
custodian for Justin Rounds and Kelly Rounds, and as trustee for John
N. Gromer, JGR Ventures, a Colorado partnership, Norman P. Rounds for
his individual retirement account, Standord Square, LLLP, Oversight
Management Company, Christine M. Fenimore, Michael Fleming, R. David
Preston, and Patricia Brooks ("Plaintiffs") filed suit against Royal
Silver Mines, Inc., Metalline Mining Company, Crosby Enterprises,
Inc., Howard Crosby, Robert E. Jorgensen, John Ryan, Merlin Bingham,
and Daniel Gorski ("Defendants") in the United States District Court
for the District of Colorado, Case No. 98-WY-122. The plaintiffs'
seek to recover the dollar amount of their investments, together with
interest, attorney's fees and costs, as a result of the defendants'
failure to disclose material information and in making misleading
statements in connection with public trading of the Company's common
stock during the period May 1996 through August 1997. The Company
and its officers and directors deny the foregoing allegations and
intend to defend the foregoing action vigorously.
None of the Officers and Directors have been convicted of a
felony or none have been convicted of any criminal offense, felony
and misdemeanor relating to securities or performance in corporate
office. To the best of the knowledge of the Officers and Directors,
no investigations of felonies, misfeasance in office or securities
investigations are either pending or threatened at the present time.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE> 7
Item 5. Other Information.
On December 24, 1997, Robert Jorgensen resigned as an officer
and director of the Company. Mr Jorgensen did not have any
disagreement with the Company on any matter relating to the
registrant's operations, policies or practices.
Item 6. Exhibits and Reports on Form 8-K.
None.
_____________________________________________________________________
SIGNATURES
_____________________________________________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated this 12th day of February, 1998.
ROYAL SILVER MINES, INC.
BY: /s/ Howard Crosby, President and a
Member of the Board of Directors
BY: /s/ John Ryan, Vice President of
Corporate Development, Treasurer,
Chief Financial Officer and a
Member of the Board of Directors
<PAGE> 8
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Financial Statements
December 31, 1997
<PAGE> 9
C O N T E N T S
Accountant's Review Report F-1
Balance Sheets F-2 - F-3
Statements of Operations F-4
Statements of Stockholders' Equity F-5 - F-10
Statements of Cash Flows F-11 - F-12
Notes to the Financial Statements F-13 - F-27
<PAGE> 10
The Board of Directors
Royal Silver Mines, Inc.
(A Development Stage Company)
Spokane, Washington
ACCOUNTANT'S REVIEW REPORT
We have reviewed the accompanying balance sheet of Royal Silver
Mines, Inc. (a development stage company) as of December 31, 1997,
and the related statements of operations, shareholders' equity, and
cash flows for the three months ended December 31, 1997, 1996, 1995,
and for the period from February 17, 1994 (inception) through
December 31, 1997. The review was conducted in accordance with
Statements on Standards for Accounting and Review Services issued by
the American Institute of Certified Public Accountants. All
information included in these financial statements is the
representation of the management of Royal Silver Mines, Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially
less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order
for them to be in conformity with generally accepted accounting
principles.
The balance sheet for the year ended September 30, 1997 was audited
by us and we expressed an unqualified opinion on it in our report
dated December 15, 1997. We have not performed any auditing
procedures since that date.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
January 20, 1998
F-1
<PAGE> 11
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
(Unaudited) (Audited)
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 257,380 $ 594,577
Note receivable 100,000 100,000
Interest receivable 9,208 7,583
Prepaid expenses 13,601 10,536
------------- ------------
TOTAL CURRENT ASSETS 380,189 712,696
------------- ------------
MINERAL PROPERTIES 4,949,869 4,915,579
------------- ------------
PROPERTY AND EQUIPMENT
Mining equipment 188,888 188,888
Furniture and equipment 8,609 15,185
Less - accumulated
depreciation (23,575) (17,005)
------------- ------------
TOTAL PROPERTY AND EQUIPMENT 173,922 187,068
------------- ------------
OTHER ASSETS
Investments 70,000 70,000
Organization costs, net 5,867 6,184
------------- ------------
TOTAL OTHER ASSETS 75,867 76,184
------------- ------------
TOTAL ASSETS $ 5,579,847 $ 5,891,527
============= ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 12
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,210 $ 20,355
Accrued expenses 16,333 20,986
----------- ----------
TOTAL CURRENT LIABILITIES 22,543 41,341
----------- ----------
LONG-TERM DEBT - -
----------- ----------
COMMITMENTS AND CONTINGENCIES - -
----------- ----------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value;
40,000,000 shares authorized,
13,621,232 and 13,482,232
shares issued and outstanding,
respectively 136,212 134,822
Additional paid-in capital 10,635,610 10,543,892
Deficit accumulated
during development stage (5,214,518) (4,828,528)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 5,557,304 5,850,186
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,579,847 $5,891,527
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 13
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Operations
have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
-----------------------------------------
December 31, December 31, December 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
---------- ---------- ---------
GENERAL AND ADMINISTRATIVE EXPENSES
Mineral leases - - 2,270
Depreciation and
amortization 13,776 9,587 20,448
Officers and directors
compensation 97,041 73,625 42,600
General and
administrative 279,799 267,250 298,041
---------- ---------- ---------
Total expenses 390,616 340,462 363,359
---------- ---------- ---------
OPERATING (LOSS) (390,616) (340,462) (363,359)
---------- ---------- ---------
OTHER INCOME (EXPENSES)
Interest income 5,971 3,833 -
Interest expense - (1,215) (2,750)
Loss on disposition
of assets (1,345) (1,769) -
---------- ---------- ---------
Total other income
(expenses) 4,626 849 (2,750)
---------- ---------- ---------
NET LOSS $ (385,990) $ (339,613) $(366,109)
---------- ---------- ---------
NET LOSS PER
COMMON SHARE $ (0.03) $ (0.03) $ (0.05)
========== ========== =========
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 13,565,232 10,701,742 8,009,916
========== ========== =========
The accompanying notes are an integral part of these financial
statements.
F-4a
<PAGE> 14
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Operations
have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Period from
February 17,
1994 (Inception)
Through
December 31, 1997
---------------
<S> <C>
REVENUES $ -
-----------
GENERAL AND ADMINISTRATIVE EXPENSES
Mineral leases 279,230
Depreciation and amortization 156,470
Officers and directors compensation 1,332,649
General and administrative 3,010,965
-----------
Total expenses 4,779,314
-----------
OPERATING (LOSS) (4,779,314)
-----------
OTHER INCOME (EXPENSES)
Interest income 36,996
Interest expense (74,348)
Loss on disposition of assets (347,852)
-----------
Total other income (expenses) (385,204)
-----------
NET LOSS $(5,164,518)
-----------
NET LOSS PER COMMON SHARE $ (0.66)
===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING $ 7,818,438
===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4b
<PAGE> 15
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
----------- ------------
<S> <C> <C>
Balance February 17, 1994 - $ -
Issuance in May 1994 of
shares at $.002 per share
to officers and directors in
exchange for assignment
of mining property option 2,250,000 22,500
Issuance in July 1994 of
shares for cash at $.402
in private placement, net
of costs 1,050,000 10,500
Issuance in August 1994 of
shares to a director in
exchange for services,
valued at $.417 per share 150,000 1,500
Net loss for the year ended
November 30, 1994 - -
---------- --------
Balance,
November 30, 1994 3,450,000 34,500
Issuance of shares in debt
offering at $.03 per share 416,250 4,163
Issuance of shares for
mineral properties valued
at $1.00 per share 262,500 2,625
Issuance of shares for cash
at $1.00 per share 15,000 150
Stock issuance costs - -
---------- --------
Balance forward 4,143,750 $ 41,438
---------- --------
The accompanying notes are an integral part of these financial
statements.
F-5a
<PAGE> 16
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
---------- ------------ -------------
<S> <C> <C> <C>
Balance
February 17, 1994 $ - $ - $ -
Issuance in May 1994 of shares
at $0.002 per share to officers
and directors in exchange
for assignment of
mining property option (18,500) - 4,000
Issuance in August 1994
of shares for cash at $0.402
in private placement,
net of costs 411,116 - 421,616
Issuance in August 1994 of shares
to a director in exchange for
services, valued at $0.417
per share 61,000 - 62,500
Net loss for the year ended
November 30, 1994 - (211,796) (211,796)
---------- ------------ -----------
Balance,
November 30, 1994 453,616 (211,796) 276,320
Issuance of shares in
debt offering at $0.03
per share 9,712 - 13,875
Issuance of shares for
mineral properties valued
at $1.00 per share 259,875 - 262,500
Issuance of shares for cash
at $1.00 per share 14,850 - 15,000
Stock issuance costs (58,202) - (58,202)
---------- ------------ -----------
Balance forward $ 679,851 $ (211,796) $ 509,493
---------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 17
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
--------- ------
<S> <C> <C>
Balance forward 4,143,750 $ 41,438
Issuance of shares to
acquire Consolidated
Royal Mines, Inc. at
$.15 per share 2,434,563 24,346
Issuance of shares to
directors and employees
for services at prices
ranging from $2.00 to $2.50
per share 12,750 127
Issuance of shares in
exchange for mineral
properties at prices
ranging from $3.13
to $3.25 per share 800,000 8,000
Issuance of shares for cash
at prices ranging from $1.50
to $2.00 per share 166,000 1,660
Issuance of shares in exchange
for debt at $1.50 per share 200,000 2,000
Net loss for the ten months
ended September 30, 1995 - -
--------- ---------
Balance,
September 30, 1995 7,757,063 $ 77,571
--------- ---------
The accompanying notes are an integral part of these financial
statements.
F-6a
<PAGE> 18
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
---------- ----------- ------------
<S> <C> <C> <C>
Balance forward $ 679,851 $ (211,796) $ 509,493
Issuance of shares to
acquire Consolidated
Royal Mines, Inc. at
$.15 per share 335,750 - 360,096
Issuance of shares to
directors and employees
for services at prices
ranging from $2.00 to $2.50
per share 29,473 - 29,600
Issuance of shares in
exchange for mineral
properties at prices
ranging from $3.13
to $3.25 per share 2,530,126 - 2,538,126
Issuance of shares for cash
at prices ranging from $1.50
to $2.00 per share 247,340 - 249,000
Issuance of shares in
exchange for debt at
$1.50 per share 298,000 - 300,000
Net loss for the ten
months ended
September 30, 1995 - (750,939) (750,939)
----------- ---------- -----------
Balance,
September 30, 1995 $ 4,120,540 $ (962,735) $ 3,235,376
----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-6b
<PAGE> 19
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
--------- ------
<S> <C> <C>
Balance forward 7,757,063 $ 77,571
Issuance of shares for
cash at $1.50 per share 1,176,832 11,769
Issuance of shares to
directors and employees
for services at $1.50
per share 222,700 2,227
Issuance of shares in
exchange for debt @ $1.50
per share 406,050 4,060
Issuance of shares for cash
at $2.20 per share 150,000 1,500
Issuance of warrants for cash
at $.05 per warrant - -
Issuance of shares for cash
at $1.62 per share 65,000 650
Issuance of shares for cash to
directors and employees at
prices ranging from $1.62 to
$2.08 per share 107,500 1,075
Issuance of shares for cash at
$0.75 per share 200,000 2,000
Issuance of shares for cash at
$1.70 per share 250,000 2,500
---------- ---------
Balance forward 10,335,145 $ 103,352
---------- ---------
The accompanying notes are an integral part of these financial
statements.
F-7a
<PAGE> 20
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
---------- ----------- ------------
<S> <C> <C> <C>
Balance forward $ 4,120,540 $ (962,735) $ 3,235,376
Issuance of shares for cash
at $1.50 per share 1,754,010 - 1,765,779
Issuance of shares to
directors and employees
for services at $1.50
per share 331,823 - 334,050
Issuance of shares in
exchange for debt at
$1.50 per share 605,015 - 609,075
Issuance of shares for cash
at $2.20 per share 328,500 - 330,000
Issuance of warrants for cash
at $.05 per warrant 41,068 - 41,068
Issuance of shares for cash
at $1.62 per share 104,650 - 105,300
Issuance of shares for cash to
directors and employees at
prices ranging from $1.62 to
$2.08 per share 181,175 - 182,250
Issuance of shares for cash at
$0.75 per share 147,985 - 149,985
Issuance of shares for cash at
$1.70 per share 422,500 - 425,000
----------- ---------- -----------
Balance forward $ 8,037,266 $ (962,735) $ 7,177,883
----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-7b
<PAGE> 21
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
--------- ------
<S> <C> <C>
Balance forward 10,335,145 $ 103,352
Cancellation of 35,000 shares
received in exchange for
return of mining property (35,000) (350)
Payment to Centurion Mines
for option to repurchase
stock - -
Issuance of shares for joint
venture in mining property
at $1.50 per share 100,000 1,000
Repurchase of 25,000 shares
issued for joint venture at
$1.40 per share (25,000) (250)
Issuance of shares for
mining property at
$1.50 per share 20,000 200
Issuance of shares to
noteholders for
extension of notes at
$1.50 per share 39,375 394
Issuance of shares for
services at $1.50 per share 215,334 2,153
Stock issuance costs - -
Net loss for the year
ended September 30, 1996 - -
---------- ---------
Balance,
September 30, 1996 10,649,854 $ 106,499
---------- ---------
The accompanying notes are an integral part of these financial
statements.
F-8a
<PAGE> 22
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
---------- ----------- ------------
<S> <C> <C> <C>
Balance forward $ 8,037,266 $ (962,735) $ 7,177,883
Cancellation of 35,000
shares received in exchange
for return of mining
property (109,025) - (109,375)
Payment to Centurion Mines
for option to repurchase
stock - (50,000) (50,000)
Issuance of shares for joint
venture in mining property
at $1.50 per share 149,000 - 150,000
Repurchase of 25,000 shares
issued for joint venture at
$1.40 per share (34,750) - (35,000)
Issuance of shares for
mining property at
$1.50 per share 29,800 - 30,000
Issuance of shares to
noteholders for
extension of notes at
$1.50 per share 58,669 - 59,063
Issuance of shares for
services at $1.50
per share 320,848 - 323,001
Stock issuance costs (15,000) - (15,000)
Net loss for the year ended
September 30, 1996 - (2,045,082) (2,045,082)
----------- ------------ -----------
Balance,
September 30, 1996 $ 8,436,808 $ (3,057,817) $ 5,485,490
----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 23
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
--------- ------
<S> <C> <C>
Balance forward 10,649,854 $ 106,499
Issuance of shares for
cash at $0.75 per share 2,491,000 24,910
Stock issuance costs - -
Issuance of shares to directors
and employees for services:
at $1.00 per share 110,500 1,105
at $0.75 per share 25,000 250
Issuance of shares for services
at $1.25 per share 98,250 982
Payment for extension of warrants
for one year - -
Issuance of shares for mining
property at $1.00 per share 60,000 600
Cancellation of 25,000 shares
received in exchange for
return of mining property (25,000) (250)
Issuance of shares for services:
at $1.00 per share 25,500 255
at $0.75 per share 47,128 471
Payment for extension of warrants
for one year - -
Net loss for the year ended
September 30, 1997 - -
--------- ---------
Balance, September 30, 1997 13,482,232 $ 134,822
========== =========
The accompanying notes are an integral part of these financial
statements.
F-9a
<PAGE> 24
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
---------- ----------- ------------
<S> <C> <C> <C>
Balance forward $ 8,436,808 $ (3,057,817) $ 5,485,490
Issuance of shares for cash
at $0.75 per share 1,843,340 - 1,868,250
Stock issuance costs (30,000) - (30,000)
Issuance of shares to directors
And employees for services:
at $1.00 per share 109,395 - 110,500
at $0.75 per share 18,500 - 18,750
Issuance of shares for services
at $1.25 per share 121,829 - 122,811
Payment for extension of warrants
for one year 3,000 - 3,000
Issuance of shares for
mining property at $1.00
per share 59,400 - 60,000
Cancellation of 25,000 shares
received in exchange for return
of mining property (81,000) - (81,250)
Issuance of shares for services:
at $1.00 per share 25,245 - 25,500
at $0.75 per share 34,875 - 35,346
Payment for extension of warrants
for one year 2,500 - 2,500
Net loss for the year ended
September 30, 1997 - (1,770,711) (1,770,711)
------------ ------------ -----------
Balance,
September 30, 1997 $10,543,892 $ (4,828,528) $ 5,850,186
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-9b
<PAGE> 25
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
--------- ------
<S> <C> <C>
Balance forward 13,482,232 $ 134,822
Issuance of shares for
cash at $0.75 per share 10,000 100
Issuance of shares to directors
and employees for services:
at $0.91 per share 2,000 20
at $0.75 per share 50,000 500
at $0.625 per share 19,000 190
at $0.50 per share 37,500 375
Issuance of shares for services:
at $0.91 per share 10,000 100
at $0.75 per share 3,500 35
at $0.625 per share 3,500 35
at $0.50 per share 3,500 35
Net loss for three months
Ended December 31, 1997 - -
---------- ---------
Balance, December 31, 1997 13,621,232 $ 136,212
========== =========
The accompanying notes are an integral part of these financial
statements.
F-10a
<PAGE> 26
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Shareholder's
Equity have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
---------- ----------- ------------
<S> <C> <C> <C>
Balance forward $ 10,543,892 $ (4,828,528) $ 5,850,186
Issuance of shares for cash
at $0.75 per share 7,400 - 7,500
Issuance of shares to directors
and employees for services:
at $0.91 per share 1,800 - 1,820
at $0.75 per share 37,000 - 37,500
at $0.625 per share 11,685 - 11,875
at $0.50 per share 18,375 - 18,750
Issuance of shares for services:
at $0.91 per share 9,000 - 9,100
at $0.75 per share 2,590 - 2,625
at $0.625 per share 2,153 - 2,188
at $0.50 per share 1,715 - 1,750
Net loss for three months ended
December 31, 1997 - (385,990) (385,990)
------------ ------------ -----------
Balance,
December 31, 1997 $ 10,635,610 $ (5,214,518) $ 5,557,304
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-10b
<PAGE> 27 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
December 31, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (385,990) $ (339,613)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 13,776 11,356
Issuance of common stock
for services 85,608 89,061
Write-off of joint venture costs - -
Changes in assets and liabilities:
Note receivable - -
Interest receivable (1,625) (3,833)
Prepaid expenses (6,295) (11,241)
Other assets 317 -
Accounts payable (14,145) (10,053)
Accrued expenses (4,653) (3,282)
Payable to related parties - -
---------- ----------
Net cash used in operating activities (313,007) (267,605)
Cash flows from investing activities:
Purchase of investments - -
Sale of assets 2,600 500
Purchase and development of
mineral properties (34,290) (16,276)
Purchase of fixed assets - (2,830)
Net cash provided by (used in) ---------- ----------
investing activities: (31,690) (18,606)
---------- ----------
Cash flows from financing activities:
Stock issuance and offering costs - (30,000)
Proceeds received on long-term debt - -
Payments made on notes payable - (25,000)
Issuance of common stock for cash 7,500 -
Issuance of common stock for
accrued interest - -
Issuance of common stock for extension of
notes payable maturation - -
Payment for return of stock issued for
mining property interest - -
Payment of joint venture costs - -
Issuances of warrants for cash - -
Net cash provided by (used in) ---------- ----------
financing activities: 7,500 (55,000)
---------- ----------
Net increase (decrease in cash) $ (337,197) $ (341,211)
========== ==========
The accompanying notes are an integral part of these financial
statements.
<PAGE> 28 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
From
Three February 17, 1994
Months ended (Inception)
December 31, Through
1995 December 31, 1997
------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (366,109) $ (5,214,518)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 20,448 159,017
Issuance of common stock
for services 78,600 1,147,666
Write-off of joint venture costs - 150,000
Changes in assets and liabilities:
Note receivable - (100,000)
Interest receivable - (9,208)
Prepaid expenses (3,195) (42,726)
Other assets - (9,484)
Accounts payable 30,748 6,210
Accrued expenses 10,092 16,333
Payable to related parties - 300,000
Net cash used in operating ---------- ------------
activities (229,416) (3,596,710)
========== ============
Cash flows from investing activities:
Purchase of investments - (70,000)
Sale of assets - 3,100
Purchase and development
of mineral properties (237,191) 1,790,290
Purchase of fixed assets (2,117) 209,032
Net cash provided by (used in) ---------- ------------
investing activities: (239,308) 1,932,422
---------- ------------
Cash flows from financing activities:
Stock issuance and offering costs - (174,835)
Proceeds received on long-term debt - 675,000
Payments made on notes payable - 174,206
Issuance of common stock for cash 559,500 5,535,564
Issuance of common stock for
accrued interest - 38,158
Issuance of common stock for extension of
notes payable maturation - 59,063
Payment for return of stock issued for
mining property interest - (35,000)
Payment of joint venture costs - (50,000)
Issuance of warrants for cash - 46,568
Net cash provided by (used in) ---------- ------------
investing activities 559,500 6,368,724
---------- ------------
Net increase (decrease) in cash $ 90,776 $ 257,380
========== ============
</TABLE>
<PAGE> 29
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Cash Flows
have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Net increase in cash
(balance forward) $ (337,197) $ (341,211)
Cash, beginning of period 594,577 688,716
---------- ----------
Cash, end of period $ 257,380 $ 347,505
========== ==========
Supplemental cash flow disclosure:
Income taxes $ - $ -
Interest $ - $ 5,000
Non-cash financing activities:
Common stock issued for
services rendered $ 85,608 $ 89,061
Common stock issued for
mineral properties $ - $ -
Common stock issued for
exchange for debt $ - $ -
Common stock issued in
acquisition of Consolidated
Royal Mines, Inc. $ - $ -
Option rights acquired in
exchange for a payable $ - $ -
Common stock issued for
assignment of mining
property options $ - $ -
The accompanying notes are an integral part of these financial
statements.
F-12a
<PAGE> 30
(In order to transmit these documents to the SEC via EDGAR, the
Company, a development stage enterprise, Statements of Cash Flows
have been formatted to fit across two pages.)
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
From
Three February 17, 1994
Months ended (Inception)
December 31, Through
1995 December 31, 1997
------------ -----------------
<S> <C> <C>
Net increase in cash
(balance forward) $ 90,776 $ 257,380
Cash, beginning of period 151,698 -
--------- -----------
Cash, end of period $ 242,474 $ 257,380
========= ===========
Supplemental cash flow disclosure:
Income taxes $ - $ 350
Interest $ - $ 25,655
Non-cash financing activities:
Common stock issued for
services rendered $ 78,600 $ 1,147,666
Common stock issued for
mineral properties $ - $ 3,040,626
Common stock issued for
exchange for debt $ 609,075 $ 922,950
Common stock issued in
acquisition of Consolidated
Royal Mines, Inc. $ - $ 360,096
Option rights acquired in
exchange for a payable $ - $ 79,000
Common stock issued for
assignment of mining
property options $ - $ 4,000
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-12b
<PAGE> 31
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Royal Silver Mines, Inc. (Royal) was incorporated in April of 1969
under the laws of the State of Utah primarily for the purpose of
acquiring and developing mineral properties. Royal conducts its
business as a "junior" natural resource company, meaning that it
intends to receive income from property sales or joint ventures with
larger companies.
Celebration Mining Company (Celebration), currently a wholly-owned
subsidiary of Royal, was incorporated for the purpose of identifying,
acquiring, exploring, and developing mining properties. Celebration
was organized on February 17, 1994 as a Washington corporation.
Celebration has not yet realized any revenues from its planned
operations.
On August 8, 1995, Royal and Celebration completed an Agreement and
Plan of Reorganization whereby the Company issued 4,143,750 shares of
its common stock and 1,455,000 warrants in exchange for all of the
outstanding common stock of Celebration. Pursuant to the
reorganization the name of the Company was changed to Royal Silver
Mines, Inc. Immediately prior to the Agreement and Plan of
Reorganization, the Company had 2,375,463 common shares issued and
outstanding.
The acquisition was accounted for as a purchase by Celebration of
Royal, because the shareholders of Celebration control the company
after the acquisition. Therefore, Celebration is treated as the
acquiring entity. There was no adjustment to the carrying value of
the assets or liabilities of Royal in the exchange as the market
value approximated the net carrying value. Royal is the acquiring
entity for legal purposes and Celebration is the surviving entity for
accounting purposes.
The $4,949,869 cost of mineral properties included in the
accompanying balance sheet as of December 31, 1997 is related to
exploration properties. The Company has not determined whether the
exploration properties contain ore reserves that are economically
recoverable. The ultimate realization of the Company's investment in
exploration properties is dependent upon the success of future
property sales, the existence of economically recoverable reserves,
the ability of the Company to obtain financing or make other
arrangements for development and upon future profitable production.
The ultimate realization of the Company's investment in exploration
properties cannot be determined at this time and, accordingly, no
provision for any asset impairment that may result, in the event the
Company is not successful in developing or selling these properties,
has been made in the accompanying financial statements.
F-13
<PAGE> 32
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 1- ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)
The Company is actively seeking additional capital and management
believes the properties can ultimately be sold or developed to enable
the Company to continue its operations. However, there are inherent
uncertainties in mining operations and management cannot provide
assurances that it will be successful in this endeavor. Furthermore,
the Company is in the development stage as it has not realized any
significant revenues from its planned operations.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
- - -----------------
The Company's financial statements are prepared using the accrual
method of accounting.
Loss Per Share
- - --------------
Loss per share was computed by dividing the net loss by the weighted
average number of shares outstanding during the year. The weighted
average number of shares was calculated by taking the number of
shares outstanding and weighing them by the amount of time they were
outstanding.
The outstanding warrants were not included in the computation of loss
per share because the exercise price of the outstanding warrants is
higher than the market price of the stock, thereby causing the
warrants to be antidilutive.
Cash Equivalents
- - ----------------
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
Mineral Properties
- - ------------------
Costs of acquiring, exploring, and developing mineral properties are
capitalized by project area. Costs to maintain the mineral rights and
leases are expensed as incurred. When a property reaches the
production stage, the related capitalized costs will be amortized,
using the units of production method on the basis of periodic
estimates of ore reserves. Mineral properties are periodically
assessed for impairment of value and any losses are charged to
operations at the time of impairment.
F-14
<PAGE> 33
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Should a property be abandoned, its capitalized costs are charged to
operations. The Company charges to operations the allocable portion
of capitalized costs attributable to properties sold. Capitalized
costs are allocated to properties sold based on the proportion of
claims sold to the claims remaining within the project area.
Concentration of Risk
- - ---------------------
The Company maintains its cash accounts in primarily one commercial
bank in Washington. Accounts are guaranteed by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000. The Company's cash
balance exceeds that amount by $157,380 at December 31, 1997.
Investments
- - -----------
Investments consist of shares of Metalline Mining Company and are
stated at cost that does not exceed estimated net realizable value.
Provision For Taxes
- - -------------------
At December 31, 1997, the Company had net operating loss carry
forwards of approximately $5,100,000 that may be offset against
future taxable income through 2012. No tax benefit has been reported
in the financial statements as the Company believes there is a 50% or
greater chance the net operating loss carry forwards will expire
unused. Accordingly, the potential tax benefits of the net operating
loss carry forwards are offset by a valuation allowance of the same
amount.
Related Accounting Standards
- - ----------------------------
In March 1995, the Financial Accounting Standards Board issued a
statement titled "Accounting for Impairment of Long-Lived Assets."
This new standard is effective for years beginning after December 15,
1995. In complying with this standard, the Company reviews its long-
lived assets quarterly to determine if any events or changes in
circumstances have transpired which indicate that the carrying value
of its assets may not be recoverable. The Company does not believe
that any adjustment is needed to the carrying value of its assets at
December 31, 1997.
F-15
<PAGE> 34
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In October 1995, the Financial Accounting Standards Board issued a
statement titled accounting for Stock-Based Compensation " (FAS 123).
The new statement is effective for fiscal years beginning after
December 15, 1995. FAS 123 encourages, but does not require,
companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments to employees based on
fair value. The Company has adopted the fair value accounting rules
to record all transactions in equity instruments for goods or
services.
Principles of Consolidation
- - ---------------------------
The financial statements include those of Royal Silver Mines, Inc.
and Celebration Mining Company. All significant intercompany accounts
and transactions have been eliminated. The financial statements are
not considered consolidated statements since Royal Silver Mines, Inc.
was the successor by merger to Celebration Mining Company.
NOTE 3 - MINERAL PROPERTIES
Utah Mining Property Joint Venture
- - ----------------------------------
In October 1994, Celebration and United Silver Mine, Inc., (United )
entered into a joint venture agreement, whereby Celebration could
have acquired up to an 80% interest in a mining property located in
the State of Utah. Under the terms of the agreement, United was to
contribute real properties for an initial 75% interest in the joint
venture, and Celebration was to remove all liens associated with the
real properties by paying $175,000 to a bank which was the primary
lien holder for its initial 25% interest in the venture.
Celebration expended $175,000 to purchase the aforementioned
promissory note. The property was auctioned in a public auction in
May, 1995 and by virtue of Celebration's first position lien,
Celebration was able to successfully bid the full amount of the
underlying promissory note. Although additional expenditures have
been made on the property through September 30, 1997, no further
funds toward the joint venture have been expended by Celebration,
which owns an undivided 25% interest in the property.
F-16
<PAGE> 35
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 3 - MINERAL PROPERTIES (Continued)
Shoshone County Idaho Mineral Lease
- - -----------------------------------
In February 1995, Celebration entered into an agreement to acquire a
fifty year renewable mineral lease on a property in Shoshone County,
Idaho. The mining property consists of twelve patented claims and
associated unpatented claims. In connection with this lease,
Celebration has paid $50,000 and issued 175,000 shares of common
stock. In addition, 10,000 shares were issued to a new director for
his assistance in obtaining this lease. Celebration was originally
obligated to pay $950,000 by September 1, 1995, as "an advance
royalty". The original due date was extended and the Company paid the
aforementioned $950,000 and has the option of extending its lease for
an additional forty-nine years. When, and if, the property achieves
gross sales of $40,000,000, Celebration will be obligated to pay an
additional 0.5% royalty on future sales. Furthermore, beginning after
September 1, 1995, and at such time as the average price of silver
has reached $6.00 per ounce for a 30-day period, Celebration is
obligated to spend not less than $2,000,000 during the subsequent 36
months to de-water and repair the mine. Thereafter, Celebration will
be required to maintain the mine in a condition to allow it to be put
into production within sixty days. There are certain claims by the
U.S. Environmental Protection Agency and the County on this property
for which the lessor is obligated to pay. In the event these claims
are not satisfactorily resolved, they may effect Celebration's rights
to the property. At December 31, 1997, due to silver prices not yet
reaching the threshold price of $6.00 per ounce, the Company had not
expended any funds on mine renovation.
Australian Mineral Property Joint Venture
- - -----------------------------------------
In March 1995, Celebration entered into a joint venture agreement
with an Australian company for exploration of a certain mineral
property in Australia. Under the original terms of the joint venture
agreement, Celebration could acquire up to a 10% interest by paying
$100,000 in April 1995. No additional funds were paid or required to
be paid subsequent to the initial payment.
Washington and Idaho Mineral Properties
- - ---------------------------------------
During the year ended September 30, 1995, Celebration purchased
through the issuance of 800,000 shares of its common stock, various
mineral properties located in the States of Washington and Idaho. The
mineral properties were recorded at the fair market value of the
shares paid on the date of issuance ranging from $3.13 to $3.25 per
share for a total purchase price of $2,538,126.
F-17
<PAGE> 36 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 3 - MINERAL PROPERTIES (Continued)
In May 1996, the Company sold back the Frisco Standard Silver Mine to
its original seller in exchange for the same price (35,000 shares of
Royal Stock) received by the seller when the mine was purchased. The
shares received were canceled and no gain or loss was recorded on the
transaction.
Chilean Properties
- - ------------------
During the quarter ended June 30, 1997, the Company acquired options
on a 100-square mile concession in northern Chile known as Mocha. The
Mocha prospect is a large porphyry copper system at the northern end
of one of the world's most prolific copper belts.
Under the terms of the first of the option agreements, the Company
can acquire a 100% interest in the concession by cash payments of
$371,000 and work commitments of $200,000 on or before August 1,
2000.
In another agreement on an adjoining privately owned property, which
covers the bulk of the known resource at Mocha, Royal Silver has the
option to acquire a 100% interest in the property, less a 2% retained
net smelter return royalty, for cash payments of $5,000,000 in a
series of payments ending June 23, 2002. See Note 14 for related
information on options with OCEM and Escala.
Argentina Properties
- - --------------------
On February 10, 1997 the Company announced that it had negotiated an
option to buy 12 different potential mine sites in Argentina. Under
the agreement, the Company can buy the properties on or before March
1, 2000, by paying $4,500,000 in cash or $5,500,000 in Royal Silver
common stock, subject to certain conditions including the Seller's
retention of a 1.95% net smelter royalty on the mines. To date, none
of the properties have been acquired. See Note 14 for additional
information on the underlying option.
Mexico Properties
- - -----------------
On January 20, 1997, the Company executed an agreement to acquire
four mining concessions in Nayarit, Mexico. The agreement calls for a
purchase price of $5,000,000 to be paid at the rate of 10% of pre-tax
net profits from production. Under the agreement, the Company is
obligated to pay the property owner $50,000 per year or,
alternatively, to spend $250,000 on exploration and development
annually until the properties are brought into production or
forfeited.
F-18
<PAGE> 37
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 3 - MINERAL PROPERTIES (Continued)
At December 31, 1997, a total of $74,194 had been expended to explore
and develop the aforementioned Mexican properties.
The Company's proposed future mining activities will be subject to
laws and regulations controlling not only the exploration and mining
of mineral properties, but also the effect of such activities on the
environment. Compliance with such laws and regulations may
necessitate additional capital outlays, affect the economics of a
project, and cause changes or delays in the Company's activities. The
total mineral properties at December 31, 1997 are classified as
follows:
Mineral properties under joint ventures $ 366,510
Other mineral properties 4,583,359
---------
Total Mineral Properties $4,949,869
=========
The Company's mineral properties are valued at the lower of cost or
net realizable value.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and
improvements are capitalized. Minor replacements, maintenance, and
repairs that do not increase the useful life of the assets are
expensed as incurred. Depreciation of property and equipment is
determined using the straight-line method over the expected useful
lives of the assets of five years.
NOTE 5 - INVESTMENTS
During the quarter ended June 30, 1997, the Company invested $70,000
in 200,000 shares of Metalline Mining stock. This investment
represents approximately 5.7% of the total outstanding stock in
Metalline Mining at the time of purchase. This stock is being valued
at cost, which is substantially less than the market value of $1.68
per share at December 31, 1997.
NOTE 6 - INTANGIBLE ASSETS
Deferred debt issuance costs and organization costs are recorded at
cost. Amortization of these intangible assets is determined using the
straight-line method over the expected useful lives of the assets as
follows:
F-19
<PAGE> 38 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 4 - PROPERTY AND EQUIPMENT (Continued)
Description Useful Lives
- - ----------------------------- ------------
Deferred debt issuance costs 1 year
Organization costs 5 years
NOTE 7 - COMMON STOCK
During the year ended November 30, 1994, Celebration issued 1,500,000
shares of common stock to directors for services rendered, valued at
$.003 to $.625 per share, which is the fair market value of the
shares on the date of issuance.
During the year ended September 30, 1995, the Company issued 12,750
shares of common stock to directors and employees for services
rendered, valued at prices ranging from $2.00 to $2.50 per share,
which is the fair market value of the shares on the date of issuance.
During the year ended September 30, 1995, Celebration issued 975,000
shares of common stock in exchange for mineral properties (See Note
3) and sold 176,000 shares of common stock for $264,000 cash.
The Company issued 200,000 shares of its common stock during the year
ended September 30, 1995 in lieu of outstanding debt that was owed to
Centurion Mines Corporation (Centurion), a related entity. The stock
was issued at $1.50 per share in payment of $300,000 of the then
outstanding debt (See Note 11). The Company also issued 277,500
shares in connection with the issuance of notes payable. (See Note
8.) (See also the disclosure in Note 1.)
During the year ended September 30, 1996, the Company sold 1,949,332
shares of its common stock for $2,958,314 in cash. The Company also
issued 222,700 shares to directors and employees for services
rendered valued at $1.50 per share, which is the fair market value of
the shares on the date of issuance.
Also during the year ended September 30, 1996, the Company issued
100,000 shares of its common stock for a joint venture in a mining
property and 20,000 common shares for a mining property. (See Note
14). The stock issued was valued at $1.50 per share, which is the
fair market value of the shares at the date of issuance.
In the same twelve-month period, the Company also issued 406,050
shares of its common stock in lieu of outstanding debt of $570,917
and accrued interest of $38,158. The stock was issued at $1.50 per
share for a total value of $609,075. In addition, the Company issued
39,375 shares of common stock to noteholders for extending the
maturity date of their loans. Again, the shares were valued at $l.50
each, which is the fair market value of the shares when issued.
F-20
<PAGE> 39
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 7 - COMMON STOCK (Continued)
Also during the year ended September 30, 1996, the Company issued
215,334 shares of its common stock for services received. The shares
were valued at $1.50 per share, which is the fair market value of the
shares at the date of issuance. In the year ended September 30, 1997,
the Company issued 306,378 shares of its common stock for services
received. The shares were valued at their fair market value at the
dates of issuance which ranged from $0.75 to $1.25 per share.
During the three months ended December 31, 1997, the Company issued
129,000 shares of common stock for services received. The shares were
valued at their fair market value at the date of issuance which
ranged from $0.50 to $0.91 per share. Also during the same quarter,
the Company sold 10,000 shares of its common stock for $7,500 in
cash.
NOTE 8 - COMMON STOCK OPTIONS AND WARRANTS
In January 1992, the shareholders of Royal approved a 1992 Stock
Option and Stock Award Plan under which up to ten percent of the
issued and outstanding shares of the Company's common stock could be
awarded based on merit of work performed. As of December 31, 1997,
12,750 shares of common stock have been awarded under the Plan.
Celebration, prior to the exchange agreement with Royal, had granted
securities to certain shareholders which represented rights to
purchase or receive shares of Celebration's common stock. These
options were assumed by the Company after the merger at a rate of 1.5
shares for each option still outstanding. Thus, the Company has
granted options, with varying conditions and requirements, to
purchase a total of 1,455,000 shares of its common stock. There are
255,000 of the stock options exercisable at $1 .50 per share which
expire March 21, 2000. The remaining 1,200,000 stock options are
exercisable at $0.93 per share and expire on August 31, 2001. As of
December 31, 1997, none of these options have been exercised.
On January 9, 1996, the Board of Directors approved the issuance of
warrants to two of its officers to purchase a total of 300,000 shares
for a purchase price of $2.50 per share, exercisable from the date of
issuance until January 9, 1999.
On March 22, 1996, the Board of Directors approved the issuance of
warrants to purchase 625,000 shares of common stock of the Company to
an investor in partial completion of a private placement of stock.
These warrants are exercisable until September 30, 1998, at a price
of $1.50 per share, which is 67% of the closing price on March 22,
1996.
F-21
<PAGE> 40
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 8 - COMMON STOCK OPTIONS AND WARRANTS (Continued)
On April 10, 1996, following the close of the second quarter of
fiscal 1996, the Board of Directors authorized the issuance of
420,666 warrants to unaffiliated investors as part of the private
placement of stock. These warrants are exercisable until April 12,
1998 at prices ranging from $2.50 to $2.625 per share. As of December
31, 1997, 320,666 warrants have been issued (but not exercised) for a
total amount of $46,568
In the quarter ending March 31, 1997, the Company sold 2,491,000
"units" to unaffiliated investors as part of a private placement of
stock. Each unit consisted of a share of the Company's common stock
and one warrant enabling the investor to purchase one additional
share of common stock for a purchase price of $1.25 per share during
the next two years. At December 31, 1997, none of the warrants had
been exercised.
NOTE 9 - COMPANY STOCK OPTION AND AWARD PLAN
The Company has a stock-based compensation plan whereby the Company's
board of directors may grant common stock to its employees and
directors. At December 31, 1997, no options have been granted under
the plan. Of the total of 1,064,650 common stock shares authorized
for issuance under the plan, 110,500 shares valued at $1.00 per share
were issued to employees and directors during the twelve months ended
September 30, 1997.
NOTE 10 - ADDITIONAL PAID-IN CAPITAL
The following is a summary of additional paid-in capital at December
31, 1997 and September 30, 1997:
December 31, September 30,
1997 1997
------------ -------------
Applicable to:
Common stock $ 10,589,042 $ 10,497,324
Stock warrants 46,568 46,568
------------ -------------
$ 10,635,610 $ 10,543,892
============ =============
F-22
<PAGE> 41
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 11 - NOTES PAYABLE
In February 1995, Celebration raised $555,000 through the issuance of
promissory notes. During the second quarter ended March 31, 1996,
$470,000 of the total amount plus accrued interest of $29,265 was
converted into 332,800 shares of the Company's common stock, leaving
an amount owing of $85,000. This amount was paid off in the quarter
ending March 31, 1997. The note holders also received 277,500 shares
of Celebration's common stock. A 10% commission was charged by an
underwriter on the sale of almost all of the notes.
In April 1995, Celebration raised $120,000 in 10% convertible
debentures. In late 1995, $105,000 of the total amount plus accrued
interest of $4,810 was converted into 73,250 shares of the Company's
common stock, leaving an amount owing of $15,000. During the fourth
quarter ended September 30, 1996, this remaining $15,000 plus accrued
interest was paid.
NOTE 12 - RELATED PARTY TRANSACTIONS
After receiving advances from a related party for payment of
operating expenses, the Company approved the issuance of 200,000
shares of common stock in payment of $300,000 of the then outstanding
balance (See Note 7). The balance outstanding was $0 at September 30,
1997 and December 31, 1997.
NOTE 13 - FUTURE LEASE OBLIGATIONS
The Company is obligated under its lease arrangements to make lease
payments subsequent to September 30, 1997 as follows:
Year Ended
September 30, Amount
--------------------- ---------
1998 $ 10,402
1999 262
2001 -
2001 and thereafter -
---------
Total $ 10,664
=========
F-23
<PAGE> 42
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 14 - OPTIONS INVOLVING MINING PROPERTIES
Option With Placer Mining
- - -------------------------
In April 1996, the Company entered into an option with Placer Mining
Corporation ("Placer") of Kellogg, Idaho whereby the Company could
acquire a joint venture interest in the Bunker Hill Mine, a sliver-
lead-zinc mine in Shoshone County, Idaho. After issuing 100,000
shares valued at $1.50 per share and spending a non-refundable
$50,000 on this option, the Company elected to renegotiate this
option agreement and entered into a second option agreement with
Placer on September 18, 1996 for the nonassignable option of
acquiring a 100% interest in The Bunker Hill Mine. In the second
agreement, the Company paid $100,000 in September 1996 for the
nonassignable option of acquiring a 100% interest in the Bunker Hill
Mine. In order to exercise this option, the Company must issue
500,000 shares of its common stock to Placer by May 10, 1997 and pay
Placer either $7,000,000 by that date or $4,000,000 by that date and
$3,500,000 by May 10, 1998. Under the terms of this agreement, the
Company will pay Placer a 2 3/4% net smelter return royalty in
perpetuity with stipulated annual advance minimum royalty payments to
Placer ranging form $100,000 (in 1999) to $250,000 (in years 2002
through 2010). All advance minimum royalties paid are to be credited
against actual production royalties.
Subsequent to March 31, 1997, due to regional environmental concerns
and the prospect of related litigation, the Company concluded that it
would not exercise its option on the Bunker Hill Mine. Accordingly,
the $238,887 in option costs and related expenses toward the purchase
of this property were written off during the quarter ended March 31,
1997.
Option with Oregon and Chilean Exploration Mining Company, LTDA
- - ---------------------------------------------------------------
In June 1997, the Company executed an agreement with Oregon and
Chilean Exploration Mining Company, LTDA (hereinafter "OCEM") whereby
the Company acquired an option from OCEM to purchase a 100% interest
in 95 exploration claims totaling 28,300 hectares surrounding the
known Mocha District claims of the Escala family. The option
agreement calls for stipulated, sequential cash option payments over
an eight-year time frame. At December 31, 1997, the Company has
expended $50,000 of the total $3,356,000 option purchase cost.
Remaining option payments are as follows: six successive quarterly
payments of $25,000 each by April 30, 1999; $156,000 in July 2000;
$500,000 in July 2002; $1,000,000 in July 2003 and again in July
2004; and $1,500,000 in July 2005.
F-24
<PAGE> 43 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 14 - OPTIONS INVOLVING MINING PROPERTIES (Continued)
In addition to the aforementioned purchase cost, the Company is
obligated to spend $200,000 in work commitments before August 1,
2000. At September 30, 1997, the Company had expended $ 10,000 in
work commitments on this optioned property.
Option With Escala Family
- - -------------------------
In July 1997, the Company executed an agreement with the Escala
family of Santiago, Chile whereby the Company acquired an option from
the Escalas to purchase a 100% interest (less a 2% net smelter return
royalty) in a mining property in the Mocha District in northern
Chile. The option agreement calls for stipulated, sequential cash
option payments over a five-year time frame. At December 31, 1997,
the Company has expended $50,000 of the total $5,000,000 option
purchase price.
Remaining option payments are as follows: $100,000 in January 1998;
$160,000 in July 1998; $300,000 in January 1999 and again in July
1999; $500,000 in January 2000; $800,000 in July 2000; $1,395,000 in
July 2001 and again in July 2002.
Option in La Rioja Province, Argentina
- - --------------------------------------
In January of 1997, the Company acquired an option to purchase twelve
separate mine claims in La Rioja Province, Argentina. Under the terms
of the option agreement, the Company can purchase the properties on
or before March 1, 2000 by the payment of $4,500,000 in cash or
$5,500,000 of the Company's shares of common stock. The original
owners are to retain a 1.95% net smelter return royalty on future
production.
In addition to the aforementioned purchase cost, the Company is
obligated to spend the following funds as work commitments on the
optioned property: $200,000 prior to May 1, 1998; $300,000 prior to
March 1, 1999; and $400,000 prior to March 1, 2000. At September 30,
1997, the Company had expended $114,341 in work commitments on the
optioned property.
NOTE 15 - STOCK OPTION AGREEMENT WITH CENTURION MINES
CORPORATION
In September 1996, the Company executed an agreement with Centurion
Mines Corporation ("Centurion") whereby the Company acquired an
option from Centurion to purchase up to 800,000 shares of its common
stock held by Centurion for the exercise price of $1.75 per share
during the two-year period ending September 30, 1998. The cost of
this two-year stock purchase option was $50,000 which was paid by the
Company and charged to stockholders' equity (accumulated deficit).
F-25
<PAGE> 44 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 15 - STOCK OPTION AGREEMENT WITH CENTURION MINES
CORPORATION (Continued)
Effective April 15, 1997, the aforementioned stock option agreement
was renegotiated (at no cost to the Company) and amended to extend
the exercise period until September 30, 1999 and to revise the
exercise price to $ 1.50 per share during this same period.
At December 31, 1997, no shares were acquired from Centurion under
this option agreement.
NOTE 16 - LETTER OF INTENT WITH TECK EXPLORATION LTD.
On October 27, 1997, the Company signed a letter of intent with Teck
Corporation (dba Teck Exploration Ltd.) of Vancouver, B.C. to jointly
explore and develop the Mocha porphyry copper prospect in region I of
northern Chile. The agreement contemplates an initial drilling
program funded by Teck.
The agreement also contemplates that Teck will receive the option to
purchase 1,200,000 "units" from Royal at a price of $.75 per unit.
Each unit will consist of: (a) one share of Royal's common stock; (b)
one A warrant exercisable at a price of $1.50 within twelve months;
and (c) one B warrant exercisable within two years at market price
less allowable discounts.
The agreement further provides that 85% of the proceeds from the
units will be used to explore the aforementioned Mocha property and
that Teck may earn a 60% interest in the property.
NOTE 17 - PROSPECTIVE COMBINATION (MERGER) WITH CENTURION MINES
CORPORATION
On November 24, 1997, Royal and Centurion Mines Corporation,
headquartered in Salt Lake City, announced plans to combine the two
companies. Centurion is a significant owner of gold, silver, and
copper mining properties in Utah.
As a first stage in the combination of the companies, Centurion will
quickly purchase certain Coeur d'Alene silver properties plus other
patented mining properties presently owned by Royal for Centurion
shares presently valued at $1,500,000.
The companies will retain an investment banker to provide valuation
of the assets of the two companies and to prepare a fairness opinion
as a basis for the specific share exchange ratio.
F-26
<PAGE> 45 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
December 31, 1997
NOTE 18 COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a lawsuit filed by some of its
shareholders for alleged violations of securities laws. The suit
asks for actual damages. The Company believes the suit is completely
without merit and intends to vigorously defend its position.
The Company is also a defendant in a lawsuit alleging that the
Company failed to transfer common stock in exchange for a mining
property interest. The suit asks for actual and punitive damages.
The Company believes the suit is completely without merit and has
filed a countersuit alleging fraudulent misrepresentation. The
Company is seeking both full title to the aforementioned mineral
property and punitive damages, and believes its countersuit will
prevail.
NOTE 19 - RESIGNATION OF OFFICER
On December 24, 1997, Mr. Robert Jorgensen resigned as a director and
executive vice president of the Company to pursue other interests.
Mr. Jorgensen has agreed to assist the Company in an ongoing
consulting capacity and is working on the prospective transaction
with Centurion Mines Corporation.
NOTE 20 - SUBSEQUENT EVENT
On January 15, 1998, the Company announced that it had acquired a 35%
working interest in a joint venture with Metalline Mining Co. for
exploration and development of the Sierra Mojada District, Coahuila,
Mexico.
The project was formerly a joint venture between Metalline and Dakota
Mining Corp. Royal acquired the interest from Dakota in exchange for
$100,000 cash, 200,000 shares of Metalline common stock which Royal
carried on its books as an investment (See Note 5), and 200,000
shares of Royal Silver common stock. Dakota will retain a net
smelter return royalty on future production from the project.
F-27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at December 31, 1997 (Unaudited) and the
Statement of Income for the three months ended December 31, 1997 (Unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 257,380
<SECURITIES> 0
<RECEIVABLES> 109,208
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 380,189
<PP&E> 197,497
<DEPRECIATION> 23,575
<TOTAL-ASSETS> 5,579,847
<CURRENT-LIABILITIES> 22,543
<BONDS> 0
0
0
<COMMON> 136,212
<OTHER-SE> 5,421,092
<TOTAL-LIABILITY-AND-EQUITY> 5,579,847
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 390,616
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (385,990)
<INCOME-TAX> 0
<INCOME-CONTINUING> (385,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (385,990)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
