<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: March 31, 1998
[ ] 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 (IRS Employer
Incorporation or organization) Identification Number)
10220 North 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 March 31, 1998: 15,284,565
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 8 to 46. In management's opinion,
these financial statements present fairly in all material
respects Registrant's financial condition and changes in
condition as of March 31, 1998 and September 30, 1997, and the
results of operations, stockholders' equity and cash flows for
the six months ended March 31, 1998 and 1997, and from inception
on February 17, 1994 through March 31,1998, 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 mineable
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 March 31,
1998, the Company accumulated a deficit of $3,549,214.
At March 31, 1998, $3,867,778 of the Company's total assets of
$7,500,469 were investments in mineral properties and $2,924,062
of the Company's assets is an investment in Grand Central Silver
Mines, Inc., a minerals exploration company traded on NASDAQ.
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 but, 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
<PAGE> 4
able to fully carry out its plans as budgeted without additional
operating capital. At March 31, 1998, the Company had working
capital of $507,826. This amount is a significant improvement in
liquidity and capital resources from its working capital position
of $357,646 at December 31, 1997 but represents some
deterioration from the working capital of $671,355 at September
30, 1997. In the three months ending March 31, 1998, the
Company's working capital has increased by $150,180 primarily
because of notes receivable acquired of $350,000 from the sale of
a working interest in a joint venture. During the same three-
month period, the Company's cash decreased from $257,380 to
$56,363 while the Company's notes receivable and investments both
increased substantially.
In the second quarter of fiscal 1998, the Company's current
liabilities increased by $5,818 as accrued expenses and accounts
payable both increased slightly from their December 31, 1997
levels. The Company's current liabilities of $28,362 at March
31, 1998 represents a favorable reduction from the Company's
current liabilities of $41,341 at September 30, 1997. The
Company has no long-term debt.
The Company has estimated that it will need minimal capital
resources of approximately $20,000 per month to meet its
estimated expenditures for fiscal 1998. In 1996 and in 1997,
acting on instructions from the Board, 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.
In the second fiscal quarter of 1998, the Company raised $249,499
in funds, primarily through the private placement of shares. 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.
<PAGE> 5
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
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 March 31, 1997 and March 31,
1998, Respectively.
General and administrative expenses decreased from $570,271
during the first half of fiscal 1997 to $300,890 during the first
and second quarters of fiscal 1998. This decrease is principally
due to a decrease in the cost of fundraising associated with the
Company's recent private placements of its stock. Also, during
the first six months of fiscal 1997, the Company incurred
officers/directors compensation of $244,412 while such
compensation expenses were reduced to $105,277 in the first six
months of fiscal 1998. As a principal result of the Company's
cost reduction efforts in fundraising and compensation, total
expenses of $1,071,742 for the first six months of fiscal 1997
decreased to $627,530 (total expenses) in the first six months of
fiscal 1998.
In the second quarter of fiscal 1998, the Company sold some
patented mining properties for common stock valued at $1,500,000,
which resulted in a gain of $406,250. In this same quarter the
Company sold a 35% working interest in a minerals exploration
joint venture in exchange for stock valued at $1,424,062 and a
promissory note for $350,000. The transaction resulted in a gain
of $1,604,063, which was the principal contributor to the
<PAGE> 6
Company's net income of $1,662,615 for the quarter and net income
of $1,279,314 for the six months ended March 31, 1998. There
were no comparable transactions in the prior year, which posted a
loss of $1,071,768 for the six months ended March 31, 1997.
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 Company is a defendant in a lawsuit filed by some of its
shareholders for alleged violations of securities laws. The suit
was filed in the U.S. District Court in Denver on January 22,
1998 with Rounds et al as plaintiffs vs. Royal Silver Mines, Inc.
et al as defendants. Plaintiffs seek damages and attorneys' fees
in their lawsuit, which alleges that defendants made
false/misleading statements and omitted material disclosures in
connection with public trading of Royal's common stock during the
period May 1996 through August 1997. The Company believes that
this lawsuit is completely without merit. The Company is not
aware of any similar actions(s) contemplated or instituted by
governmental authorities.
The Company is also a defendant in a lawsuit filed by Thomas
F. Miller (et al.), in the First Judicial Court in and for Box
Elder County, State of Utah. The suit, which alleges that the
Company failed to transfer common stock in exchange for a mining
interest, asks for actual and punitive damages. The Company
<PAGE> 7
believes that this lawsuit is 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.
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.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
EXHIBIT INDEX
Number Description
27 Financial Data Schedule
________________________________________________________________
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 13th day of May, 1998.
ROYAL SILVER MINES, INC.
/s/ Howard Crosby
By: Howard Crosby
Its: Chief Executive Officer
<PAGE> 8
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Financial Statements
March 31, 1998 and September 30, 1997
C O N T E N T S
Accountant's Review Report
Financial Statements
Balance Sheets
Statements of Operations
Statements of Cash Flows
Statements of Stockholders' Equity
Notes to the Financial Statements
<PAGE> 9
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 March 31, 1998,
and the related statements of operations, shareholders' equity,
and cash flows for the six months ended March 31, 1998 and 1997,
and for the period from February 17, 1994 (inception) through
March 31, 1998. 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
April 19, 1998
<PAGE> 10
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
(Unaudited) (Audited)
----------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 56,363 $ 594,577
Accounts receivable 620 -
Note receivable 450,000 100,000
Interest receivable 13,902 7,583
Prepaid expenses 15,302 10,536
------------- ------------
TOTAL CURRENT ASSETS 536,187 712,696
------------- ------------
MINERAL PROPERTIES 3,867,778 4,915,579
------------- ------------
PROPERTY AND EQUIPMENT
Mining equipment 188,888 188,888
Furniture and equipment 10,120 15,185
Less - accumulated
depreciation (32,117) (17,005)
------------- ------------
TOTAL PROPERTY
AND EQUIPMENT 166,891 187,068
------------- ------------
OTHER ASSETS
Investments 2,924,062 70,000
Organization costs, net 5,551 6,184
------------ ------------
TOTAL OTHER ASSETS 2,929,613 76,184
------------ ------------
TOTAL ASSETS $ 7,500,469 $ 5,891,527
============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 11
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 11,317 $ 20,355
Accrued expense 17,045 20,986
----------- ------------
TOTAL CURRENT LIABILITIES 28,362 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 152,845 134,822
Additional paid-in capital 10,868,476 10,543,892
Deficit accumulated during
development stage (3,549,214) (4,828,528)
----------- ------------
TOTAL SHAREHOLDERS' EQUITY 7,472,107 5,850,186
----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 7,500,469 $ 5,891,527
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 12
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
1998 1997
<S> <C> <C>
REVENUES $ - $ -
---------- ----------
GENERAL AND ADMINISTRATIVE EXPENSES
Mineral property expense 193,697 238,887
Depreciation and amortization 13,890 8,585
Officers and
directors compensation 8,236 170,787
General and administrative 21,090 313,021
---------- ----------
Total expenses 236,913 731,280
---------- ----------
OPERATING (LOSS) (236,913) (731,280)
---------- ----------
OTHER INCOME (EXPENSES)
Interest income 5,611 167
Interest expense - (1,042)
Gain on property
interest sold 2,010,313 -
Loss on option costs (114,341) -
Loss on disposition of assets (2,055) -
---------- ----------
Total other income (expenses) 1,899,528 (875)
---------- ----------
NET LOSS $1,662,615 $ (732,155)
========== ==========
NET LOSS PER COMMON SHARE $ 0.11 $ (0.06)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,620,121 11,288,435
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 13
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Period from
February
17, 1994
(Inception)
Six months ended through
March 31, March 31, March 31,
1998 1997 1998
<S> <C> <C> <C>
REVENUES $ - $ - $ -
----------- ----------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES
Mineral property expense 193,697 238,887 472,927
Depreciation and amortization 27,666 18,172 170,927
Officers and directors
compensation 105,277 244,412 1,340,885
General and administrative 300,890 570,271 3,032,055
---------- ----------- -----------
Total expenses 627,530 1,071,742 5,016,227
---------- ----------- -----------
OPERATING (LOSS) (627,530) (1,071,742) (5,016,227)
---------- ----------- -----------
OTHER INCOME (EXPENSES)
Interest income 11,582 4,000 42,607
Interest expense - (2,257) (74,348)
Gain on property interest sold 2,010,313 - 2,010,313
Loss on option costs (114,341) - (114,341)
Loss on disposition of assets (710) (1,769) 349,907
---------- ----------- -----------
Total other income (expenses) 1,906,844 (26) 1,514,324
---------- ----------- -----------
NET LOSS $1,279,314 $(1,071,768) $(3,501,903)
========== =========== ===========
NET LOSS PER COMMON SHARE $ 0.09 $ (0.10) $ (0.43)
========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,120,676 10,995,030 8,226,536
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 14 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
March 31, March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,279,314 $ (1,071,768)
Adjustments to reconcile net loss to net cash
cash used by operating activities:
Loss on sale of equipment - 1,769
Depreciation and amortization 27,666 18,172
Issuance of common stock for services 5,608 202,811
Write-off of options costs 114,341 -
Write-off of joint venture costs - -
Changes in assets and liabilities:
Note receivable (350,000) -
Accounts receivable (620) -
Prepaid expenses (8,121) (11,243)
Other assets - -
Interest receivable (6,319) (4,000)
Mineral properties (4,674) 238,887
Accounts payable (9,038) (8,259)
Accrued expenses (3,941) (16,450)
Payable to related parties - (289)
----------- ------------
Net cash used in operating activities 1,124,216 (650,370)
----------- ------------
Cash flows from investing activities:
Sale of assets 2,685 500
Sale of investment 70,000 -
Sale of mineral properties 1,093,750 -
Purchase of investments (2,924,062) -
Purchase and development
of mineral properties (160,290) (87,142)
Purchase of fixed assets (1,513) (2,830)
----------- ------------
Net cash provided by (used) in
investing activities: (1,919,430) (89,472)
----------- ------------
Cash flows from financing activities:
Stock issuance and offering costs - (30,000)
Proceeds received on long-term debt - -
Payments made on notes payable - (60,000)
Issuance of common stock for cash 257,000 1,868,250
Payment for extension of warrants - 3,000
Payment for option to repurchase stock - -
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 financing activities: 257,000 1,781,250
----------- ------------
Net increase (decrease in cash) $ (538,214) $ 1,041,408
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 15 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From February 17, 1994
(Inception) Through
March 31, 1998
<S> <C>
Cash flows from operating activities:
Net income (loss) $ (3,501,903)
Adjustments to reconcile net loss to net
cash used by operating activities:
Loss on sale of equipment -
Depreciation and amortization 172,907
Issuance of common stock for services 1,147,666
Write-off of options costs 114,341
Write-off of joint venture costs 150,000
Changes in assets and liabilities:
Note receivable (450,000)
Accounts receivable (620)
Prepaid expenses (44,552)
Other assets (9,801)
Interest receivable (13,902)
Mineral properties (5,009)
Accounts payable 11,317
Accrued expenses 17,045
Payable to related parties 300,000
------------
Net cash used in operating activities (2,112,511)
------------
Cash flows from investing activities:
Sale of assets 3,185
Sale of investment -
Sale of mineral properties 1,093,750
Purchase of investments (2,924,062)
Purchase and development
of mineral properties (1,916,290)
Purchase of fixed assets (207,521)
------------
Net cash provided by (used)
in investing activities: (3,950,938)
------------
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 5,785,064
Payment for extension of warrants -
Payment for option to repurchase stock (50,000)
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)
Issuances of warrants for cash 46,568
------------
Net cash provided by (used) in financing
activities: 6,119,812
------------
Net increase (decrease in cash) $ 56,363
============
</TABLE>
<PAGE> 16
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
March 31, March 31,
1998 1997
<S> <C> <C>
Net increase in cash
(balance forward) $(538,214) $ 1,041,408
Cash, beginning of period 594,577 688,716
--------- -----------
Cash, end of period $ 56,363 $ 1,730,124
========= ===========
Supplemental cash flow disclosure:
Income taxes $ - $ -
Interest $ - $ 6,042
Non-cash financing activities:
Common stock issued
for services rendered $ 85,608 $ 202,811
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 $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 17
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From February 17, 1994
(Inception) Through
March 31, 1998
<S> <C>
Net increase in cash (balance forward) $ 56,363
Cash, beginning of period -
-----------
Cash, end of period $ 56,363
===========
Supplemental cash flow disclosure:
Income taxes $ 350
Interest $ 25,655
Non-cash financing activities:
Common stock issued for
services rendered $ 1,147,666
Common stock issued for
mineral properties $ 3,040,626
Common stock issued for
exchange for debt $ 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.
<PAGE> 18
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
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
--------- --------
[/TABLE]
The accompanying notes are an integral part of these financial
statements.
<PAGE> 19
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
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> 20
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
--------- --------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 21
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
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.
<PAGE> 22
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
---------- --------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 23
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
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.
<PAGE> 24
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
---------- --------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 25
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
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> 26
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
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
========== ========
[/TABLE]
The accompanying notes are an integral part of these financial
statements.
<PAGE> 27
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
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.
<PAGE> 28
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
Issuance of shares for cash
At $0.15 per share 1,663,333 16,633
Net income for six months
Ended March 31, 1998 - -
---------- ---------
Balance, March 31, 1998 15,284,565 $ 152,845
========== =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 29
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
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
Issuance of shares for cash
at $0.15 per share 232,866 - 249,499
Net income for six months
Ended March 31, 1998 - 1,279,314 1,279,314
----------- ----------- ----------
Balance, December 31, 1997 $10,868,476 $(3,549,214) $7,472,107
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 30 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
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 $3,867,778 cost of mineral properties included in the
accompanying balance sheet as of March 31, 1998 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.
<PAGE> 31 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
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.
<PAGE> 32 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. . .continued
Mineral Properties . . . 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. One
of the Company's cash accounts is a business checking account
with an overdraft balance of $(374) at March 31, 1998. The
remaining cash account is a "liquid asset account" in the amount
of $51,196, which is invested in a portfolio of U.S. Treasury
notes/bonds.
Provision For Taxes
At March 31, 1998, the Company had net operating loss carry
forwards of approximately $3,500,000 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.
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a
statement titled "Accounting for Impairment of Long-Lived
Assets." This 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 March 31, 1998.
<PAGE> 33 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. . .continued
Financial Accounting Standards
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 March 31, 1998, no further
funds toward the joint venture have been expended by Celebration,
which owns an undivided 25% interest in the property. See Note
18 on related litigation.
<PAGE> 34 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 3 - MINERAL PROPERTIES . . . continued
Shoshone County Idaho Mineral Lease (Crescent Mine)
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.
<PAGE> 35 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 3 - MINERAL PROPERTIES . . . continued
Washington and Idaho 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 had the right to 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.
During the second quarter of fiscal 1998, the decision was made
to drop the option (which was not exercised) and the properties
were then returned to their owner. See Note 14.
<PAGE> 36 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 3 - MINERAL PROPERTIES . . . continued
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.
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 3,501,268
----------
Total Mineral Properties $3,867,778
==========
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.
<PAGE> 37 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 5 - INVESTMENTS
Metalline Mining Company
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.
On January 12, 1998, this stock was transferred to Dakota Mining
Corporation plus $100,000 cash in exchange for a 35% working
interest in a joint venture with Metalline Mining Co. for
exploration and development of the Sierra Mojada District,
Coahuila, Mexico. No gain or loss was recognized on this
transaction. See information below and Note 19.
Grand Central Silver Mines, Inc.
In the quarter ended March 31, 1998, the Company finalized the
sale of certain patented mining properties to Centurion Mines
Corporation (subsequently renamed Grand Central Silver Mines,
Inc.) for 500,000 shares of Centurion's common stock then valued
at $1,500,000. This transaction resulted in a gain of $406,250.
During the quarter ended March 31, 1998, the Company sold a 35%
working interest in a joint venture (with Metalline Mining Co.)
engaged in exploration and development of the Sierra Mojada
District, Coahuila, Mexico. In connection with this transaction,
the Company acquired 735,000 shares of common stock (in Grand
Central Silver Mines, Inc.) which was valued at $1,424,062 and
also acquired a promissory note of $350,000 from Grand Central
which is uncollateralized, bears interest at 8%, and matures in
1999. A total gain of $1,604,062 was realized on this
transaction. See Note 17.
The Company currently owns 1,235,000 shares of Grand Central
Silver Mines, Inc. common stock, which is approximately 26% of
the total outstanding shares at March 31, 1998. The Company
expects to account for this recent investment under the equity
method.
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:
<PAGE> 38 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 6 - INTANGIBLE ASSETS . . . 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 outstanding debt (See Note 9). The Company also
issued 277,500 shares in connection with the issuance of notes
payable. (See Note 9). (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.
<PAGE> 39 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 7 - COMMON STOCK . . . continued
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.
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 six months ended March 31, 1998, 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
six months, the Company sold 1,673,333 shares of its common stock
for $257,000 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 March 31,
1998, 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 March 31, 1998, none of these
options have been exercised.
<PAGE> 40 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 8 - COMMON STOCK OPTIONS AND WARRANTS . . . continued
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.
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
March 31, 1998, 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 March 31, 1998, 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 March 31, 1998, 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 March
31, 1998 and September 30, 1997:
<PAGE> 41 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 10 - ADDITIONAL PAID-IN CAPITAL . . . continued
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
<S> <C> <C>
Applicable to:
Common stock $ 10,821,908 $ 10,497,324
Stock warrants 46,568 46,568
------------ -------------
$ 10,868,476 $ 10,543,892
============ =============
</TABLE>
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 March 31, 1998. See Note 14 regarding
Centurion.
NOTE 13 - FUTURE LEASE OBLIGATIONS
The Company is obligated under its lease arrangements to make
lease payments subsequent to September 30, 1997 as follows:
<PAGE> 42 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 13 - FUTURE LEASE OBLIGATIONS . . . continued
Year Ended
September 30, Amount
------------- ------
1998 $ 10,402
1999 262
2001 -
2001 and thereafter -
---------
Total $ 10,664
=========
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.
Option With Placer Mining (Continued)
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.
<PAGE> 43 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 14 - OPTIONS INVOLVING MINING PROPERTIES . . . continued
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 March 31, 1998, 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.
In addition to the aforementioned purchase cost, the Company is
obligated to spend $200,000 in work commitments before August 1,
2000. At March 31, 1998, 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 March 31, 1998, 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.
<PAGE> 44 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 14 - OPTIONS INVOLVING MINING PROPERTIES . . . continued
Option in La Rioja Province, Argentina . . . continued
At December 31, 1997, the Company had expended $114,341 in work
commitments on the optioned property. During the quarter ended
March 31, 1998, the Company dropped the option, returned the
optioned property to its owners, and recorded a loss of $114,341
on this option transaction.
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).
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 March 31, 1998, 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 (d.b.a. 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.
<PAGE> 45 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
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 owned by Royal in exchange
for Centurion shares then valued at $1,500,000. See Note 5.
As a result of differences in determining fair valuations, the
directors of the two companies have decided to postpone merger
plans for the foreseeable future; however, the two companies
continue to share two common directors and a common officer.
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 WORKING INTEREST IN JOINT VENTURE WITH METALLINE MINING
CO.
On January 15, 1998, the Company 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 retained a
net smelter return royalty on future production from the project.
<PAGE> 46 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to the Financial Statements
March 31, 1998
NOTE 19 WORKING INTEREST IN JOINT VENTURE WITH METALLINE MINING
CO. . . . continued
On February 19, 1998, the Company sold the 35% working interest
for exploration and development of the Sierra Mojada District,
Coahuila, Mexico to Grand Central Silver Mines (GSLM) in exchange
for a note receivable of $350,000, payable within one year and
bearing interest of 8% per annum, and 735,000 shares of GSLM
valued at $1,424,062. (See Note 3). A total gain of $1,604,062
was recognized on this transaction.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at March 31, 1998 (Unaudited) and the Statement of Operations
for the six months ended March 31, 1998 (Unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1998
<CASH> 56,363
<SECURITIES> 0
<RECEIVABLES> 464,522
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 536,187
<PP&E> 199,008
<DEPRECIATION> (32,117)
<TOTAL-ASSETS> 7,500,469
<CURRENT-LIABILITIES> 28,362
<BONDS> 0
0
0
<COMMON> 152,845
<OTHER-SE> 7,319,262
<TOTAL-LIABILITY-AND-EQUITY> 7,500,469
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 627,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,279,314
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,279,314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,279,314
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
