<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, 1999
[ ] 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 Number)
1010 Ironwood Drive
Suite 105
Coeur d'Alene, Idaho 83814
(Address of Principal Executive Offices, including Zip Code.)
(208) 769-7340
(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, 1999: 19,432,565 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 3-36. 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, 1999 and September
30, 1998, and the results of operations, stockholders' equity and cash
flows for the six months and three months ended March 31, 1999, and
1998, and from inception on February 17, 1994 through March 31,1999, 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
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, 1999, and the
related statements of operations, stockholders' equity, and cash flows
for the six months ended March 31, 1999, and for the period from
February 17, 1994 (inception) through March 31, 1999. 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, 1998 was audited by
us and we expressed an unqualified opinion on it in our report dated
December 21, 1998. We have not performed any auditing procedures since
that date.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 21
to the financial statements, the Company's significant operating losses
raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
May 10, 1999
F-1
<PAGE> 4
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
ASSETS (Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 35,048 $ 3,147
Note receivable - 350,000
Interest receivable - 17,106
Prepaid expenses 415 2,162
----------- -----------
TOTAL CURRENT ASSETS 35,463 372,415
----------- -----------
MINERAL PROPERTIES 2,274,411 2,229,411
----------- -----------
PROPERTY AND EQUIPMENT
Mining equipment 183,889 83,889
Furniture and equipment 12,761 12,761
Less accumulated depreciation (32,434) (19,868)
----------- -----------
TOTAL PROPERTY AND EQUIPMENT 164,216 76,782
----------- -----------
OTHER ASSETS
Investments 1,273,502 1,298,750
Organization costs, net 3,501 5,234
----------- -----------
TOTAL OTHER ASSETS 1,277,003 1,303,984
----------- -----------
TOTAL ASSETS $ 3,751,093 $ 3,982,592
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-2
<PAGE> 5
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 70,615 $ 65,815
Accrued expenses 500 3,000
----------- -----------
TOTAL CURRENT LIABILITIES 71,115 68,815
----------- -----------
LONG TERM DEBT - -
----------- -----------
COMMITMENTS AND CONTINGENCIES - -
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value;
40,000,000 shares authorized,
19,432,565 and 19,003,565
shares issued and outstanding,
respectively 194,325 190,035
Additional paid-in capital 11,363,655 11,889,838
Stock subscriptions
receivable (30,000) (700,000)
Deficit accumulated during
development stage (7,848,002) (7,466,096)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,679,978 3,913,777
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,751,093 $ 3,982,592
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-3
<PAGE> 6
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31, March 31,
1998 1999 1998
<S> <C> <C> <C>
REVENUES $ - $ - $ -
----------- ------------ -----------
GENERAL AND ADMINISTRATIVE EXPENSES
Mineral property
expense 193,697 0 193,697
Depreciation and
amortization 13,890 10,200 27,666
Officers' and directors'
compensation 8,236 2,000 105,277
General and
administrative 21,090 51,562 300,890
----------- ------------ -----------
TOTAL EXPENSES 236,913 63,762 627,530
----------- ------------ -----------
OPERATING LOSS (236,913) (63,762) (627,530)
----------- ------------ -----------
OTHER INCOME (EXPENSES)
Interest income 5,611 - 11,582
Interest expense - - -
Gain on property
interest sold 2,010,313 - 2,010,313
Loss on disposition
and impairment
of assets (116,396) (247,111) (115,051)
----------- ----------- -----------
Total other income
(expense) 1,899,528 (247,111) 1,906,844
----------- ----------- -----------
NET INCOME (LOSS) $ 1,662,615 $ (310,873) $ 1,279,314
=========== =========== ===========
NET INCOME (LOSS) PER
COMMON SHARE $ 0.11 $ (0.02) $ 0.09
=========== =========== ===========
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 14,620,121 19,833,121 14,120,676
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4a
<PAGE> 7
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, 1999 March 31, 1999
<S> <C> <C>
REVENUES $ - $ -
------------ -----------
GENERAL AND ADMINISTRATIVE EXPENSES
Mineral property
expense - 555,706
Depreciation and
amortization 15,047 210,728
Officers' and directors'
compensation 59,540 1,412,800
General and
administrative 67,266 3,465,031
------------ -----------
TOTAL EXPENSES 141,853 5,644,265
------------ -----------
OPERATING LOSS (141,853) (5,644,265)
------------ -----------
OTHER INCOME (EXPENSES)
Interest income 7,058 65,665
Interest expense - (74,348)
Gain on property
interest sold - 1,875,281
Loss on disposition
and impairment
of assets (247,112) (4,070,335)
------------ -----------
Total other income
(expense) (240,054) (2,203,737)
------------ -----------
NET INCOME (LOSS) $ (381,907) $(7,848,002)
============ ===========
NET INCOME (LOSS) PER
COMMON SHARE $ (0.02) $ (0.70)
============ ===========
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 19,260,323 11,174,576
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4b<PAGE> 8
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
<S> <C> <C>
Balance, 02/17/94 - $ -
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, 11/30/94 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 - -
Issuance of shares to acquire
Consolidated Royal Mines, Inc.
at $.15 per share 2,434,563 24,346
--------- --------
Balance forward 6,578,313 $ 65,784
--------- --------
The accompanying notes are an integral part of these financial
statements.
F-5a
<PAGE> 9 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
<S> <C> <C> <C>
Balance, 02/17/94 $ - $ - $ -
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, 11/30/94 453,616 (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)
Issuance of shares to
acquired Consolidated
Royal Mines, Inc. at
$.15 per share 335,750 - 360,096
---------- --------- ---------
Balance forward $1,015,601 $(211,796) $ 869,589
---------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5b
<PAGE> 10
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
<S> <C> <C>
Balance forward 6,578,313 $ 65,784
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
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 at $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 - -
--------- --------
Balance Forward 9,712,645 $ 97,127
_________ ________
The accompanying notes are an integral part of these financial
statements.
F-6a
<PAGE> 11 ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
<S> <C> <C> <C>
Balance forward $ 1,015,601 $ (211,796) $ 869,598
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
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 09/30/95 - (750,939) (750,939)
----------- ---------- -----------
Balance, 09/30/95 $ 4,120,540 $ (962,735) $ 3,235,376
Issuance of shares for
cash-$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
----------- ---------- -----------
Balance Forward $ 7,180,956 $ (962,735) $ 6,315,348
----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-6b
<PAGE> 12
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
<S> <C> <C>
Balance forward 9,712,645 $ 97,127
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
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
---------- --------
Balance forward 10,649,854 $106,499
---------- --------
The accompanying notes are an integral part of these financial
statements.
F-7a<PAGE> 13
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
<S> <C> <C> <C>
Balance forward $ 7,180,956 $ (962,735) $ 6,315,348
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
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
----------- ---------- -----------
Balance forward $ 8,451,808 $(1,012,735) $ 7,545,572
----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-7b
<PAGE> 14
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount
<S> <C> <C>
Balance forward 10,649,854 $ 106,499
Stock issuance costs - -
Net loss for the year
ended September 30, 1996 - -
---------- ---------
Balance, 09/30/96 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 $1.75 per share 25,000 250
Issuance of shares for services
at $1.25 per share 98,250 982
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-8a
<PAGE> 15
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
<S> <C> <C> <C>
Balance forward $ 8,451,808 $(1,012,735) $ 7,545,572
Stock issuance costs (15,000) - (15,000)
Net loss for the year
ended 09/30/96 - (2,045,082) (2,045,082)
----------- ----------- -----------
Balance, 09/30/96 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 $1.75 per share 18,500 - 18,750
Issuance of shares for services
at $1.25 per share 121,829 - 122,811
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 - 25,550
at $0.75 per share 34,875 - 35,346
Payment for extension of warrants
for one year 5,500 - 5,500
Net loss for the year ended
September 30, 1997 - (1,770,771) (1,770,711)
---------- ----------- -----------
Balance, 09/30/97 $10,543,892 $(4,828,528) $ 5,850,186
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-8b
<PAGE> 16
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
Number Paid-in
of Shares Amount Capital
<S> <C> <C> <C>
Balance forward 13,482,232 $ 134,822 $ 10,543,892
Issuance of shares for
cash at $0.75 per share 10,000 100 7,400
Issuance of shares to directors
consultants and employees
for services at prices varying
from $0.34 per shares to
$0.91 per share 398,000 3,980 202,680
Issuance of shares for
mining property at
$0.75 per share 200,000 2,000 148,000
Issuance of shares for
cash at $0.15 per share 1,913,333 19,133 267,866
Issuance of shares in
exchange for cash and
note at $0.25 per share 3,000,000 30,000 720,000
Net loss for year ended
September 30, 1998 - - -
---------- --------- ------------
Balance at 09/30/98 19,003,565 $ 190,035 $ 11,889,838
Issuance of shares to
directors for services
at $0.06 per share 959,000 9,590 47,950
Issuance of shares for
cash investment and
receivable 970,000 9,700 47,500
Shares returned to treasury
for cancellation
of receivable (2,000,000) (20,000) (680,000)
Stock issuance costs - - (133)
Issuance of shares for
cash at $0.04 per share 1,500,000 15,000 45,000
Issuance of shares for
consulting services at
$0.04 per share 400,000 4,000 12,000
Issuance of shares to
directors or services
at $0.04 per share 50,000 500 1,500
Shares returned to
treasury for cancellation
of receivable and
exchange of investment (1,450,000) (14,500) -
Net loss for six months
ended 03/31/99 - - -
---------- --------- ------------
Balance at 12/31/98 18,932,565 $ 189,325 $ 11,305,155
========== ========= ============
F-9a
<PAGE> 17
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
Total
Subscription Accumulated Stockholders'
Receivable Deficit Equity
<S> <C> <C> <C>
Balance forward $ - $ (4,828,528) $ 5,850,186
Issuance of shares for
cash at $0.75 per share - - 7,500
Issuance of shares to
directors, consultants
and employees for services
at prices varying from
$0.34 per shares to
$0.91 per share - - 206,660
Issuance of shares for
mining property at
$0.75 per share - - 150,000
Issuance of shares for
cash at $0.15 per share - - 286,999
Issuance of shares in
exchange for cash and
note at $0.25 per share (700,000) - 50,000
Net loss for year ended
September 30, 1998 - (2,637,568) (2,637,568)
---------- ------------ ------------
Balance at 09/30/98 $ (700,000) $ (7,466,096) $ 3,913,777
Issuance of shares to
directors for services
at $0.06 per share - - 57,540
Issuance of shares for
cash investment and
receivable (30,000) - 27,200
Shares returned to treasury
for cancellation
of receivable 700,000 - -
Stock issuance costs - - (133)
Issuance of shares for
cash at $0.04 per share - - 60,000
Issuance of shares for
consulting services at
$0.04 per share - - 16,000
Issuance of shares to
directors or services
at $0.04 per share - - 2,000
Shares returned to
treasury for cancellation
of receivable and
exchange of investment - - (14,500)
Net loss for quarter ended
December 31, 1998 - (381,906) (381,906)
---------- ------------ ------------
Balance at 12/31/98 $ (30,000) $ (7,848,002) $ 3,679,978
========== ============ ============
</TABLE>
<PAGE> 18
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
From February
17, 1994
Six months ended (Inception)
March 31, March 31, Through
1999 1998 March 31, 1999
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (381,907) $ 1,279,314 $ (7,848,002)
Adjustments to reconcile
net income (loss) to net
cash provided (used) by
operating activities:
Loss on sale of equipment - - 12,585
Depreciation and
amortization 15,047 27,666 205,937
Issuance of common stock
for services 75,540 85,608 1,344,256
Write-off of option costs - 114,341 517,871
Write-off of joint venture
costs - - 160,000
Write-off of mineral
properties - - 1,097,737
Loss on devaluation
of investments - - 1,997,813
Changes in assets and liabilities:
Note receivable 350,000 (350,000) 350,000
Accounts receivable - (620) -
Prepaid expenses 1,747 (8,121) (28,853)
Other assets - - (9,801)
Interest receivable 17,106 (6,319) -
Mineral properties - (4,674) (4,674)
Accounts payable 4,800 (9,038) 70,615
Accrued expenses (2,500) (3,941) (312)
---------- ----------- ------------
Net cash provided (used) in
operating activities 79,833 1,124,216 (2,134,828)
---------- ----------- ------------
Cash flows from investing activities:
Sale of assets - 2,685 5,685
Sale of investment 100,533 70,000 170,533
Sale of mineral properties - 1,093,750 1,093,750
Purchase of investments (83,333) (2,924,062) (3,087,395)
Purchase and development
of mineral properties (45,000) (160,290) (1,986,690)
Purchase of fixed assets (100,000) (1,513) (313,187)
---------- ----------- ------------
Net cash provided (used)
in investing activities (127,800) (1,919,430) (4,117,304)
---------- ----------- ------------
The accompanying notes are an integral part of these financial statements.
F-10a
<PAGE> 19
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
From February
17, 1994
Six months ended (Inception)
March 31, March 31, Through
1999 1998 March 31, 1999
<S> <C> <C> <C>
Net cash provided (used)
in investing activities
(Balance forward) (127,800) (1,919,430) (4,117,304)
---------- ----------- ------------
Cash flows from financing activities:
Stock issuance and
offering costs 19,868 - (154,967)
Proceeds received on
long-term debt - - 675,000
Payments made on notes
payable - - (174,206)
Issuance of common stock
for cash 60,000 257,000 5,932,564
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)
Issuance of warrants for
cash - - 46,568
---------- ----------- ------------
Net cash provided by
financing activities 79,868 257,000 6,287,180
---------- ----------- ------------
Net increase (decrease)
in cash $ 31,901 $ (538,214) $ 35,048
---------- ----------- ------------
</TABLE>
These accompanying notes are an integral part of these financial
statements.
F-10b
<PAGE> 20
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
From February
17, 1994
Six months ended (Inception)
March 31, March 31, Through
1999 1998 March 31, 1999
<S> <C> <C> <C>
Net increase (decrease)
in cash (balance forward) $ 31,901 $ (538,214) $ 35,048
-------- ---------- -----------
Cash, beginning of period 3,147 594,577 -
-------- ---------- -----------
Cash, end of period $ 35,048 $ 56,363 $ 35,048
======== ========== ===========
Supplemental cash flow disclosure:
Income taxes $ - $ - $ 350
Interest $ - $ - $ 25,655
Non-cash financing activities:
Common stock issued for
services rendered $ 75,540 $ 85,608 $ 1,344,256
Common stock issued for
mineral properties $ - $ - $ -
Common stock issued in
exchange for debt $ - $ - $ 952,950
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
Common stock issued in
exchange for investments $ 7,200 $ - $ 7,200
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 21
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
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 $2,274,411 cost of mineral properties included in the accompanying
balance sheet as of March 31, 1999 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
F-12
<PAGE> 22
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS . . . continued
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.
The Company is 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 weighting them by the amount of time they were
outstanding.
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.
Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
F-13
<PAGE> 23
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES . . . continued
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 state, 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 charges to operations at the
time of impairment.
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 Spokane, Washington. Accounts are guaranteed by the Federal
Deposit Insurance Corporation (FDIC) up to $100,000.
Provision For Taxes
At March 31, 1999, the Company had net operating loss carryforwards of
approximately $7,400,000 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 carryforwards will expire unused. Accordingly, the
potential tax benefits of the net operating loss carryforwards 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, 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. Because of substantial write-downs and write-offs
taken in the fourth quarter of fiscal 1998, the Company does not
believe any adjustments are needed to the carrying value of its assets
at March 31, 1999.
F-14
<PAGE> 24
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
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 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 inter-company 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
acquire 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, 1999, no further funds towards the joint venture have been
expended by Celebration, which owns an undivided 25% interest in the
property. See Note 16 on related litigation.
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-15
<PAGE> 25
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
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. In the fourth quarter of 1998, the Company disposed of
additional Idaho properties. See Note 4.
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 Idaho 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. See Note 16 on litigation regarding this lease.
Other Domestic Properties
In February 1999 in connection with the settlement agreement with Grand
Central (described in Note 19), the Company received a number of
patented mining claims in Utah and a number of unpatented mining claims
in Idaho. In aggregate, these mining claims were recorded at $45,000.
* * *
F-16
<PAGE> 26
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 3 - MINERAL PROPERTIES . . . continued
Other Domestic Properties . . . continued
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 Company's
mineral properties are valued at the lower of cost or net realizable
value.
NOTE 4 - MINERAL PROPERTY DISPOSITIONS
Chilean Properties
During 1997, the Company acquired options on a minerals concession and
adjacent property in northern Chile. During the third quarter of
fiscal 1998, following a decision by Teck Exploration Ltd. not to
pursue its joint venture option, the Company elected to drop its
options on the Chilean properties and recorded a loss of $403,530 on
its Chilean investments.
Argentina Properties
On February 10, 1997 the Company negotiated an option to buy 12
different potential mine sites in Argentina. During the second quarter
of fiscal 1998, the Company elected to drop the option, returned the
properties to their owner, and recorded a loss of $114,341.
Mexico Properties
On January 20, 1997, the Company executed an agreement to acquire four
mining properties in Nayarit, Mexico with stipulated annual payments to
be applied against a purchase price of $5,000,000. In the fourth
quarter of fiscal 1998, the Company elected to forfeit its interest in
the aforementioned Mexican properties and, resultantly, recorded a loss
of $74,194.
On February 19, 1998, the Company sold a working interest in a Mexican
joint venture that resulted in a gain of $1,454,062.
Conjecture Mine and Liberal King Mine (in U.S.)
On June 26, 1998, the Company traded six patented mining claims (known
as the Liberal King Mine) located in Shoshone County, Idaho for 50,000
shares of SynFuels Technology, Inc. valued at $8.00 per share. No gain
or loss was recognized on this transaction.
F-17
<PAGE> 27
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 4 - MINERAL PROPERTY DISPOSITIONS . . . continued
Conjecture Mine and Liberal King Mine (in U.S.)
In 1995, the Company issued 280,000 shares of its common stock to
acquire the Conjecture Mine, a silver-bearing property in the state of
Idaho. During the fourth quarter of fiscal 1998, the Company traded
the Conjecture Mine property for 10,000 shares of common stock in
SynFuels Technology, Inc., (subsequently renamed Rigid Airship) valued
at $8.00 per share. This transaction resulted in a recorded loss on
disposition of $830,700.
NOTE 5 - 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 6 - 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 represented
approximately 5.7% of the total outstanding stock in Metalline Mining
at the time of purchase. This stock was valued at cost, which is
substantially less than market value.
On January 12, 1998, this stock plus $100,000 cash was transferred to
Dakota Mining Corporation 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 20.
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.
F-18
<PAGE> 28
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 6 - INVESTMENTS . . . continued
Grand Central Silver Mines, Inc. . . . continued
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 $1,454,062 was realized on
this transaction. See Note 15.
At September 30, 1998, the Company owned 1,235,000 shares of Grand
Central Silver Mines, Inc. common stock, which was then approximately
12% of the total outstanding shares. Because the market value of the
Company's investment in Grand Central had dropped to $926,250 ($0.75 per
share), the Company recorded a loss on its investment of $1,997,812 at
September 30, 1998. In February 1999, the Company transferred 154,375
shares of its holdings to Grand Central in connection with a settlement
agreement. See Note 19.
SynFuels Technology, Inc.
On June 26, 1998, the Company traded six patented mining claims
acquired in Shoshone County Idaho in 1995 for 50,000 shares of SynFuels
Technology, Inc. which was then trading at $8.00 per share. The
Company acquired an additional 10,000 shares of SynFuels Technology,
Inc. common stock in September 1998 in exchange for another mining
property. (See Note 4). The Company's cost of $392,000 is the recorded
value of this investment at September 30, 1998. SynFuels Technology,
Inc. changed its name to Rigid Airship in November 1998.
Summit Silver, Inc.
In July, 1998, the Company acquired 400,000 shares of Summit Silver,
Inc. common stock valued at $0.15 per share in exchange for
transferring mining equipment with an original cost of $98,767. This
transaction resulted in a loss of $11,233. As part of a settlement
agreement in February 1999, the Company received an additional 333,333
shares of Summit Silver Stock. See Note 19.
Ashington Mining Corportion
In November 1998, the Company acquired 100,000 shares of Ashington
Mining Corporation in exchange for 120,000 shares of its common stock,
which was then trading at $0.06 per share. The Company recorded the
Ashington stock at $7,200.
F-19
<PAGE> 29
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 7 - 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:
Description
Useful Life
Deferred debt issuance costs 1 year
Organization costs 5 years
NOTE 8 - 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 11). The Company also issued 277,500 shares in
connection with the issuance of notes payable (See Note 11). (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 share
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. The stock
issued was valued at $1.50 per share, which is the fair market value of
the shares at the date of issuance.
F-20
<PAGE> 30
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 8 - COMMON STOCK . . . Continued
In the same twelve-month period, the Company also issued 406,050 shares
of its common stock in payment 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 $1.50 each, which was
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 was 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 year ended September 30, 1998, the Company issued 398,000
shares of common stock for services received. The shares were valued
at their fair market value at the date of issuance which ranged from
$0.34 to $0.91 per share. Also during the same twelve months, the
Company sold 4,923,333 shares of its common stock for $344,500 in cash
and $700,000 in stock subscriptions receivable.
In May 1998, the Company sold 3,000,000 shares of its common stock at
$0.25 per share in exchange for $50,000 in cash and a short-term note
in the amount of $700,000. Because of a subsequent decrease in the
market value of the Company's stock, the Company and shareholder
renegotiated the transaction. In November 1998, the aforementioned
shareholder returned 2,000,000 shares of stock to the Company for
cancellation and in return the Company rescinded the $700,000 note,
which was recorded as stock subscriptions receivable at September 30,
1998. The net effect of the renegotiated stock transaction was a sale
of common stock at $0.05 per share for cash only.
In November 1998, the Company sold 220,000 shares of its common stock
at $0.06 per share to Ashington Mining for a short-term note in the
amount of $5,000 and 100,000 shares of Ashington Mining stock valued at
$7,200 (Note 6). An additional 1,500,000 shares of common stock were
sold in January 1999 at $0.04 per share.
During the first and second quarters of fiscal 1999, the Company issued
1,409,000 shares of common stock for services received. The shares
were valued at their fair market value at the date of issuance which
ranged from $0.04 to $0.06.
F-21
<PAGE> 31
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 8 - COMMON STOCK . . . continued
As part of a settlement agreement with Grand Central Silver Mines, Inc.
and other parties, Royal received 1,450,000 shares of Royal Silver
Mines, Inc. stock which was returned to treasury and cancelled.
NOTE 9 - 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, 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 that 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, 1999, 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. These warrants expired unused.
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 expired unexercised on September 30, 1998. 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 expired unexercised on April 12, 1998.
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. As of March 31, 1999, none of the warrants had been
exercised.
F-22
<PAGE> 32
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 10 - 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, 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 and 179,000 shares at values ranging from $0.34 to
$0.91 per share were issued to employees and directors during the
twelve months ended September 30, 1998. No shares were granted
during the six-month period ended March 31, 1999.
NOTE 11 - ADDITIONAL PAID-IN CAPITAL
The following is a summary of additional paid in capital at March 31,
1999 and September 30, 1998:
March 31, September 30,
1999 1998
Applicable to:
Common stock $ 11,317,087 $ 11,843,270
Stock Warrants 46,568 46,568
------------ ------------
$ 11,363,655 $ 11,889,838
============ ============
NOTE 12 - OPTIONS INVOLVING MINERAL 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 silver-
lead-zinc mine in Shoshone County, Idaho. After issuing 100,000
shares valued at $1.50 per share and spending a nonrefundable $50,000
on the 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
F-23
<PAGE> 33
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 12 - OPTIONS INVOLVING MINERAL PROPERTIES . . .continued
Option with Placer Mining . . . continued
pay Placer a 2 3/4% net smelter return royalty in perpetuity with
stipulated annual advance minimum royalty payments to Placer ranging
from $100,000 (in 1999) to $250,000 (in year 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 for Joint Venture
On June 19, 1998, the Company executed an option agreement with
Eastfield Resources (USA) Inc. and Prism Resources Inc. Under the
terms of the three month agreement expiring September 30, 1998,
Eastfield and Prism granted an option to the Company to enter into a
joint venture arrangement with these two firms for the exploration and
development of certain mining properties within the Three Hills project
in the Tonopah mining district of Nevada. At the end of the option
period, the Company dropped its option to acquire a 50% interest in the
joint venture and recorded a loss of $10,000 on its option deposit.
NOTE 13 - 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, 1999, no shares were acquired from Centurion under this
option agreement. See Note 15.
F-24
<PAGE> 34
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 14 - LETTER OF INTENT WITH TECK EXPLORATION LTD.
In October, 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 contemplated initial drilling program
funded by Teck.
In July 1998, the Company and Teck mutually agreed to terminate their
option agreement. See Note 4 for related disclosures on Chilean
options.
NOTE 15 - 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 (subsequently renamed Grand Central Silver Mines,
Inc.) is a significant owner of gold, silver, and copper mining
properties in Utah.
As a first stage in the combination of the companies, Centurion
purchased certain Coeur d'Alene, Idaho silver properties plus other
patented mining properties owned by Royal in exchange for Centurion
shares then valued at $1,500,000. See Note 6.
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. The two companies shared one common
director and a common officer until February 1999, at which time mutual
differences changed this arrangement. See Note 19.
NOTE 16 - 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 was a defendant in a lawsuit alleging that the Company
failed to transfer common stock in exchange for a mining property
interest. While this lawsuit was dismissed, the Company 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.
F-25
<PAGE> 35
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 16 - COMMITMENTS AND CONTINGENCIES . . . continued
In July 1998, the Company filed an action in federal court in Boise,
Idaho for declaratory judgment regarding the validity of its Crescent
Mine mineral lease. Defendants in the action include the U.S.
Environmental Protection Agency, Shoshone County, and Fawcett
International. Management believes that there is a good likelihood of
prevailing in this matter.
NOTE 17 - 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, and 200,000 shares of Royal Silver common
stock. Dakota retained a net smelter return royalty on future
production from the project. See Note 6.
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 4). A total gain of $1,454,062 was recognized on this
transaction.
NOTE 18 - NOTE RECEIVABLE
At September 30, 1998, the Company's note receivable consisted primarily
of a $350,000 receivable from Grand Central Silver Mines, Inc. This
note, bearing interest at 8%, and uncollateralized, was exchanged for
equipment and mining claims in February 1999. See Note 19.
F-26
<PAGE> 36
ROYAL SILVER MINES, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
March 31, 1999
NOTE 19 - SETTLEMENT AGREEMENT
In February 1999, the Company entered into a settlement arrangement
wherein Grand Central Silver Mines, Inc. (hereinafter "Grand")
transferred equipment, mining claims, and securities (including 450,000
shares of Royal Silver Mines, Inc. stock) to Royal in full settlement
of the $350,000 promissory note (and accrued interest) owed by Grand to
Royal. In connection with the same transaction, the Company
transferred to an individual 154,375 shares of Grand Central common
stock (previously held by Royal) and in turn received from this same
individual 1,000,000 shares of Royal Silver Mines, Inc. common stock
and 333,333 shares of Summit Silver, Inc. common stock. While this
settlement agreement involved mutual releases of liability for all
parties affected, the net effect of the settlement was the Company's
recording a loss of $247,112 from assets disposed. See Note 6, Note
15, and Note 18.
NOTE 20 - LICENSING AGREEMENT
In January 1999, the Company entered into a technology licensing
agreement with Integrated Environmental Technologies, LLC (IET), a New
York limited liability company, to acquire, develop and exploit mineral
deposits using IET technology. IET technology involves high
temperature systems that utilize plasma technology for processing
materials and includes trade secrets, inventions (whether patented or
unpatented), information, data and experience. Upon completion of
agreed upon conditions, the Company will be granted a world wide
exclusive license to practice IET technologies necessary for the
extraction and recovery of copper from enargite ores and gold and
silver from arsenic rich ores or residual process streams from milling
and smelting operations not to include certain properties in and around
the Yuma, Arizona region.
NOTE 21 - GOING CONCERN
As shown in the financial statements, the Company incurred a net loss
of $310,873 for the quarter ending March 31, 1999 and an accumulated
deficit of $7,848,002 since inception.
These factors indicate that the Company may be unable to continue in
existence. The financial statements do not include any adjustments
related to the recoverability and classification of recorded assets, or
the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue existence. The Company's
management has strong beliefs that significant and imminent private
placements will generate sufficient cash for the Company to operate for
the next few years.
F-27
<PAGE> 37
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 March 31, 1999, the Company accumulated a
deficit of $7,848,002.
At March 31, 1999, $2,274,411 of the Company's total assets of
$3,751,093 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. Because it has sustained recurring 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 March 31, 1999, the Company had negative working capital of $35,652.
This amount represents a substantial deterioration in liquidity and
capital resources from its working capital position of $303,600 at
September 30, 1998 and represents more deterioration from working
capital of $357,646 at September 30, 1997. While the largest single
element of working capital at September 30, 1998 and December 31, 1998
<PAGE> 38
was a promissory note of $350,000 (from Grand Central Silver Mines,
Inc.), this note was redeemed in February 1999 at a loss in exchange
for mining properties and other investments. This transaction greatly
reduced the Company's current assets and liquidity. While sales of the
Company's stock have traditionally constituted its primary source of
cash generation, depressed metals prices in 1998 and 1999 have lessened
the Company's recent ability to obtain cash from sales of its stock.
Company sales of its stock generated the following cash amounts:
$60,000 in the quarter ending March 31, 1999, $303,600 in the year
ending September 30, 1998; and $1,843,750 in the year ending September
30, 1997. In adjusting to smaller cash resources, the Company has
substantially decreased its expenses for office, personnel and
compensation, and consulting expenses.
In the first six months of fiscal 1999, the Company increased its
accounts payable while accrued expenses dropped slightly. Accordingly,
the Company's current liabilities moved from $68,815 at September 30,
1998 to $71,115 at March 31, 1999. The Company had no long-term debt
at September 30, 1998 or at March 31, 1999.
The Company has estimated that it will need minimal capital
resources of approximately $20,000-25,000 per month to meet its
estimated expenditures for fiscal 1999. In recent years, several key
members of management, met with experienced financial and investment
firms throughout Europe and North America and negotiated preliminary
terms and arrangements for 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) and
during the fiscal year ending September 30, 1998, the Company raised
$344,500 in funds from private placement of its 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.
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
<PAGE> 39
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, 1998 AND MARCH 31, 1999,
RESPECTIVELY.
General and administrative expenses plummeted from $627,530 during
the two quarters of fiscal 1998 to $141,853 during the first half of
fiscal 1999. This decrease is principally due to greatly reduced
consulting expenses and compensation to officers and directors. As a
result, during the first half of fiscal 1998 compared to the first half
of 1999, the Company's loss from operations decreased correspondingly.
In the first six months of 1998, the Company experienced a gain of
$2,010,313 on property sold, which had the effect of giving the Company
net income of $1,279,314 (or $0.09 per share) for the first half of
1998. Without this favorable gain in 1999 and with an unfavorable
negotiated settlement of a promissory note which resulted in a loss of
$247,112 on this transaction in the second quarter of fiscal 1999, the
Company experienced a net loss of $381,907 (or $0.02 per share) for the
first six months of 1999.
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.
<PAGE> 40
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. Further,
the Officers and Directors know of no threatened or contemplated legal
proceedings or litigation with the exception of the following:
1. 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 to August 1997. The
Company believes that this lawsuit is completely without merit. The
Company is not aware of any similar action(s) contemplated or
instituted by governmental authorities. The trial court sustained the
Company's motion for summary judgment dismissing claims against it for
omissions of material fact.
2. 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 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.
3. In July 1998, the Company filed an action in federal court
in Boise, Idaho for declaratory judgment regarding the validity of
its Crescent Mine mineral lease. Defendants in the action include
the U.S. Environmental Protection Agency, Shoshone County, and
Fawcett International. Management believes that there is a good
likelihood of prevailing in this matter.
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 of corporate
office. To the best 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.
<PAGE> 41
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.
(a) Exhibits
EXHIBIT INDEX
Exhibit
Number Description
27 Financial Data Schedule
<PAGE> 42
- - - - - - - - - - - - - ---------------------------------------------------------------------
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 10th day of May, 1999.
ROYAL SILVER MINES, INC.
BY: /s/ Howard Crosby
Howard Crosby, President, Treasurer
Chief Financial Officer and a member
of the Board of Directors
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at March 31, 1999 (Unaudited)
and the Consolidated Statement of Income for the six months ended March 31,
1999 (Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 35,408
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,463
<PP&E> 196,650
<DEPRECIATION> (32,434)
<TOTAL-ASSETS> 3,751,093
<CURRENT-LIABILITIES> 71,115
<BONDS> 0
0
0
<COMMON> 194,325
<OTHER-SE> 3,485,653
<TOTAL-LIABILITY-AND-EQUITY> 3,751,093
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 141,853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (381,907)
<INCOME-TAX> 0
<INCOME-CONTINUING> (381,907)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (381,907)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
