FORM 10-QSB/A-1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-24610
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GOLD CAPITAL CORPORATION
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-1251798
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5525 Erindale Drive, Suite 201
Colorado Springs, Colorado 80918
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(Address of principal executive offices)
(719) 260-8509
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since lastreport)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding as of August 11, 1997
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Common Stock, $0.0001 par value 9,073,653
GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheet
June 30, 1997 (unaudited)
ASSETS
CURRENT ASSETS, Cash $ 48,647
PROPERTY, PLANT AND EQUIPMENT
Milling, plant and production equipment 7,234,110
Buildings 2,232,963
Vehicles and trailers, net of depreciation 145,005
Property development and mineral claim costs 3,202,727
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12,814,805
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OTHER ASSETS
Prepaid royalties 694,604
Deposits 42,541
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737,145
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$ 13,600,597
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 560,507
Accrued interest-TSVLP 52,246
Note payable-TSVLP, current portion 550,000
Advances payable-Royalstar Resources 893,474
Note payable-Globex 1,198,248
Other obligations, net 140,295
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3,394,770
NOTE PAYABLE-TSVLP, LONG-TERM 639,644
RECLAMATION RESERVE 1,469,900
MINORITY INTEREST IN JOINT VENTURE 2,435,178
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7,939,492
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STOCKHOLDERS' EQUITY
Common stock $.0001 par value; 25,000,000 shares
authorized; 9,073,653 shares issued and
outstanding 922
Additional paid-in capital 9,973,741
Deficit accumulated during development stage (4,313,558)
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5,661,105
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$ 13,600,597
============
See accompanying notes to consolidated financial statements.
2
GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Operations for the Three and Six Month Periods Ended
June 30, 1997 and 1996, and December 10, 1993 (inception) to June 30, 1997
(unaudited)
For the
Period from
December
Three Months Ended Six Months Ended 10, 1993 to
June 30, June 30, June 30, June 30, June 30,
1997 1996 1997 1996 1997
---------- ----------- ---------- ---------- ----------
Costs and expenses:
General and
administrative $ 99,855 $ 168,927 $ 168,877 $ 280,630 $1,696,985
Property maintenance 93,287 177,354 200,538 389,426 1,654,095
Write off of mineral
claims -- -- -- -- 167,077
Interest expense, net 74,567 68,351 142,621 124,709 795,401
---------- ---------- ---------- ---------- ----------
Net loss $ 267,709 $ 414,632 $ 512,036 $ 794,765 $4,313,558
========== ========== ========== ========== ==========
Preferred stock dividend -- -- -- -- 517,500
---------- ---------- ---------- ---------- ----------
Net loss applicable to
common shareholders $ 267,709 $ 414,632 $ 512,036 $ 794,765 $4,831,058
========== ========== ========== ========== ==========
Net loss per common
share $ 0.03 $ 0.09 $ 0.06 $ 0.16
========== ========== ========== ==========
Weighted average of
common shares
outstanding 9,073,653 5,042,514 9,073,653 5,042,514
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
3
GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From December 10, 1993 (Inception) to June 30, 1997 (unaudited)
Deficit
Accumulated
Common Stock Subscribed Preferred Stock Common Stock Additional During
----------------------- ----------------- ---------------- Paid-In Development
Shares Amount Shares Amount Shares Amount Capital Stage
------- ------- ------ ------ ------ ------ ------- ------
December 10, 1993
(Inception) -- $ -- -- $ -- -- $ -- $ -- $ --
Issuance of stock to
officers for cash,
December 22, 1993,
$.04/share -- -- -- -- 300,000 30 11,970 --
Issuance of Series A
Convertible Preferred
Stock for mining
properties, at
$10.00/share -- -- 300,000 3,000 -- -- 2,997,000 --
Common stock subscribed
by officers and
affiliates, $1.00/share 200,000 20 -- -- -- -- 199,980 --
----------- -------- ----------- --------- ----------- -------- ----------- -----------
December 31, 1993 200,000 $ 20 300,000 $ 3,000 300,000 $ 30 $ 3,208,950 $ 0
Issuance of stock
for cash, $1.00/share (200,000) (20) -- -- 1,350,000 135 1,134,285 --
Issuance of stock
for cash, $2.00/share -- -- -- -- 248,396 25 483,499 --
Issuance of stock as
dividend on Series A
Convertible Preferred
Stock, $2.11/share -- -- -- -- 127,702 13 (13) --
Net loss -- -- -- -- -- -- -- (556,360)
----------- -------- ----------- --------- ----------- -------- ----------- -----------
December 31, 1994 0 $ 0 300,000 $ 3,000 2,026,098 $ 203 $ 4,826,721 $ (556,360)
continued on next page
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GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From December 10, 1993 (Inception) to June 30, 1997, continued
Deficit
Accumulated
Common Stock Subscribed Preferred Stock Common Stock Additional During
------------------------ ------------------- ----------------- Paid-In Development
Shares Amount Shares Amount Shares Amount Capital Stage
------- ------- ------ ------ ------ ------ ------- ------
Balance, December 31, 1994 0 0 300,000 3,000 2,026,098 $ 203 $4,826,721 $(556,360)
Issuance of stock for cash,
$1.00/share (net of
issuance cost) -- -- -- -- 2,776,100 278 2,770,822 --
Issuance of stock to
short-term lender,
$1.00/share -- -- -- -- 2,500 -- 2,500 --
Exercise of stock option
for cash, $1.00/share -- -- -- -- 75,000 8 74,992 --
Issuance of stock for
legal fees, $1.00/share -- -- -- -- 15,000 1 14,999 --
Issuance of stock as
dividend on Series A
Convertible Preferred
Stock, $1.67/share -- -- -- -- 147,816 15 (15) --
Net loss -- -- -- -- -- -- -- (1,638,830)
-------- -------- ----------- ----------- ----------- ------- ----------- -----------
December 31, 1995 0 $ 0 300,000 $ 3,000 5,042,514 $ 505 $ 7,690,019 $(2,195,190)
Issuance of stock in
conversion of accounts
payable to affiliates,
$1.00/share -- -- -- -- 2,281,139 242 2,280,897 --
Conversion of Preferred
Stock into Common Stock,
$1.72/share -- -- (300,000) (3,000) 1,750,000 175 2,825 --
Net loss -- -- -- -- -- -- -- (1,606,332)
-------- -------- ----------- ----------- ----------- ------- ----------- -----------
December 31, 1996 -- $ 0 0 $ 0 9,073,653 $ 922 $ 9,973,741 $(3,801,522)
continued on next page
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GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From December 10, 1993 (Inception) to June 30, 1997, continued
Deficit
Accumulated
Common Stock Subscribed Preferred Stock Common Stock Additional During
----------------------- ------------------- ------------------- Paid-In Development
Shares Amount Shares Amount Shares Amount Capital Stage
------- ------- ------ ------ ------ ------ ------- ------
Balance, December 31, 1996 -- -- -- $ -- 9,073,653 $ 175 $ 9,973,741 $(3,801,522)
Net loss -- -- -- -- -- -- -- (512,036)
----- ------ ---------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1997 -- $ -- -- $ -- 9,073,653 $ 175 $ 9,973,741 $ 4,313,558
====== ====== ========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
6
GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows (unaudited)
For the Period from
For The Six For the Six December 10, 1993
Months Ended Months Ended (Inception) to
June 30, June 30, June 30,
1997 1996 1997
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Cash flows from operating activities:
Interest income $ 881 $ 543 $ 18,212
Cash paid to suppliers (808,437) (534,989) (3,057,685)
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Cash used in operating activities (807,556) (534,446) (3,039,473)
Cash flows from investing activities:
Capital expenditures (32,527) (304,533) (2,726,516)
Sale of surplus equipment, net -- -- 630,000
Investment in Argentina claims -- -- (167,077)
----------- ----------- ------------
Cash used in investing activities (32,527) (304,533) (2,263,593)
Cash flow from financing activities:
Net advances from Royalstar -- 991,669 2,494,583
Borrowings 1,198,248 -- 1,352,542
Funding of bank overdraft -- -- (138,000)
Cash received from sale of common stock -- -- 4,676,024
Obligations paid with common stock -- -- (423,080)
Principal payments on note payable (311,432) (76,844) (2,610,356)
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Cash provided by financing activities 886,816 914,825 5,351,713
Increase (decrease) in cash 46,733 75,846 48,647
Cash, beginning 1,914 11,028 --
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Cash, ending $ 48,647 $ 86,874 $ 48,647
=========== =========== ============
Reconciliation of net loss to cash used
in operating activities:
Net loss $ (512,035) $ (380,132) $(4,313,557)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization and depreciation 8,196 4,741 36,838
Interest expense 142,621 36,118 803,772
Expenses paid with common stock -- -- 514,293
Write-off of investment in mineral claims -- -- 70,789
(Increase) decrease in other assets (166,780) 2,251 (765,143)
Increase (decrease) in current liabilities 20,442 (699) 453,133
related to operations
Increase (decrease) in liabilities, long-term (300,000) (196,725) 160,402
----------- ----------- ------------
Net cash used in operating activities $ (807,556) $ (534,446) $(3,039,473)
=========== =========== ============
See accompanying notes to consolidated financial statements.
7
GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements (Unaudited)
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Gold Capital Corporation (the "Company") was incorporated under the laws of the
state of Colorado on December 10, 1993 to engage in development of gold mining
projects. The consolidated financial statements of the Company include the
accounts of the Company and 100% of the assets and liabilities of the Tonkin
Springs Project Joint Venture (the "Venture") of which the Company holds a 60%
interest and is the manager. The Company's activities have been primarily
limited to its formation, obtaining financing, acquisition of its interest in
the Tonkin Springs Project mining properties and management of the Venture. For
the period from inception to June 30, 1997, the Company had no revenue.
The balance sheet of the Company as of June 30, 1997, results of operations for
the three and six months ended June 30, 1997 and 1996, and the cash flows for
the six month periods ended June 30, 1997 and 1996, and inception to June 30,
1997, have not been examined by independent certified public accountants.
However, in the opinion of management, the accompanying unaudited financial
statements contain all necessary adjustments consisting only of normal accruals
in order to make the financial statements not misleading.
The results of operations for the three and six month periods ended June 30,
1997 are not necessarily indicative of the results to be expected for the full
year. These financial statements should be read in conjunction with the
Company's consolidated financial statements for the period ended December 31,
1996 included in the Company's annual report on Form 10-KSB filed with the
Securities and Exchange Commission, as these financial statements omit certain
information required by generally accepted accounting principles.
The preparation of the Company's consolidated financial statements in conformity
with generally accepted accounting principles requires the Company's management
to make estimates and assumptions that affect the amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NOTE B CONTINUED OPERATIONS AND RECOVERABILITY OF MINING PROPERTIES AND
- ------ ----------------------------------------------------------------
EQUIPMENT
- ---------
In connection with the merger agreement with Globex Mining Enterprises Inc.
("Globex"), a publicly traded corporation organized and existing under the laws
of the Province of Quebec, Canada, discussed further below, Globex has agreed to
fund the financial obligations of the Company pending completion of the Merger
(the "Globex Loan"). Subject to the terms and conditions of the Globex Loan
agreement between the parties, Globex has agreed to make advances to the Company
to maintain, preserve and protect the assets of the Tonkin Springs Project,
service the promissory note payable to U.S. Gold Corporation ("U.S. Gold") and
pay other necessary and proper obligations and commitments of the Company. The
Globex Loan accrues interest at 2% over prime, is secured by all the assets of
the Company and is due on or before August 30, 1997. Continued funding under the
Globex Loan is subject to the right of Globex to accept or reject each funding
request made by the Company, as well as the right of Globex to discontinue
funding altogether. In that event, the Company has the right to terminate the
Merger Agreement. Without continued funding from the Globex Loan or finding
other sources of funding, the Company is not able to meet its current
obligations nor to provide for development costs associated with future
obligations and operations relating to the Venture and other corporate
objectives. Through June 30, 1997, the balance of borrowings and accrued
interest under the Globex Loan is $1,198,248, including accrued interest of
$38,234. As of August 1, 1997, the principal and accrued interest balance of the
Globex Loan is approximately $1,414,800.
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Note C PROPOSED MERGER
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On December 20, 1996, the Company and Globex entered into an agreement in
principal regarding a conditional offer by Globex to finance the Company and
merge it with a subsidiary of Globex. Effective March 13, 1997, the Company and
Globex executed an agreement (the "Merger Agreement" or "Merger") to merge with
Globex. By virtue of the Merger, and subject to certain conditions, the Company
would become a wholly-owned subsidiary of Globex.
The Merger is part of two separate, but related, transactions pursuant to which
Globex proposes to acquire 100% of the Company's issued and outstanding Common
Stock. Pursuant to the terms of the Merger Agreement, GME Merger Corporation, a
Colorado corporation wholly owned by Globex, would be merged with and into the
Company (the "Surviving Corporation"), which corporation would survive the
Merger. The 4,654,543 shares of the Company's Common Stock issued and
outstanding prior to the Merger and not owned by Royalstar Resources Ltd.
("Royalstar") would be converted into the right to receive 1,285,067 shares of
Globex Common Stock. The shares proposed to be issued by Globex would be
registered under relevant provisions of the Securities Act of 1933, as amended,
and qualified under applicable state Blue Sky laws. The Common Stock owned by
Royalstar, the Company's single largest shareholder, would be acquired by Globex
in a separate transaction (the "Acquisition"), anticipated to be completed
contemporaneously with the Merger. When both transactions are completed, Globex
would own 100% of the issued and outstanding shares of Common Stock of the
Company.
Both the Merger and Acquisition are subject to certain conditions. Prior to
consummation of the Merger, the following conditions, among others, must be
satisfied: i) receipt of an effective date by Globex for a registration
statement covering its stock proposed to be issued in connection with the
Merger; ii) receipt of financing by Globex; iii) approval of the Merger by the
Company's shareholders; and (iv) approval of various regulatory agencies.
Effective on July 24, 1997, Globex reported that it had closed Cdn. $15,892,650
in a financing of 3,531,700 Special Warrants at a price of Cdn. $4.50 per
Special Warrant. Each Special Warrant will be exercisable into 1 common share of
Globex. The financing was arranged through Bunting Warberg Inc., acting as
agent. The funds were placed into escrow pending completion of the Merger. In
addition, Globex reported that it has amended certain terms of its agreement
with Royalstar whereby approximately Cdn. $2,100,000 of the original cash
obligations to Royalstar will be satisfied by the issuance of common shares of
Globex at a price of Cdn. $4.50 per common share. The consummation of the Merger
is subject to shareholder approval and other conditions precedent. The
respective Boards of Directors of the Company and Globex intend to proceed
promptly and use their reasonable best efforts to complete the Merger and
Acquisition.
NOTE D NOTE PAYABLE
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At June 30, 1997 the Company has a $1,189,644 amended note payable (the "Note)
to TSVLP as a result of its purchase of a 60% interest in the Tonkin Springs
Properties (the "Properties"). The Note is collateralized by the Company's 60%
interest in the Properties and the Venture and accrues interest at a fixed rate
of 7.5% on the unpaid principal balance. Accrued interest for 1996 of $129,569
was paid January 16, 1997. Interest expense accrued related to the Note for the
six months ended June 30, 1997 and 1996 were $52,607 and $71,853, respectively.
TSVLP has agreed in conjunction with the Globex Loan, that monthly note payments
commencing February 1, 1997 would continue at $50,000 per month until the
earlier of August 1, 1997, or the completion of the Globex Merger, after which
monthly payments under the Note would be subject to the existing terms of the
Note.
9
NOTE D NOTE PAYABLE, continued
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The principal balance of $1,189,644 is payable as follows:
(1) Monthly installments of $50,000 per month until the Company has raised an
aggregate of $4,000,000 in financing subsequent to June 22, 1995, or until the
Note is paid in full.
(2) Monthly installments of $75,000 subsequent to the Company raising an
aggregate of $4,000,000 in new financing (approximately $4.1 million in new
financing has been arranged through June 30, 1997).
The Company's obligations under the promissory note and certain of the Company's
obligations under the Venture agreement are subject to a Security Agreement in
favor of TSVLP, pursuant to which the Company has granted a security interest in
the assets constituting its interest in the Project. The Company is in technical
default in its performance as manager of the Venture. The inability of the
Company to satisfy the terms of the Note and the Venture agreement in the future
could, if not cured subsequent to written notice, cause the Company to forfeit
its interest in the Project.
The future annual minimum principal payments under the Note as of June 30, 1997
are as follows:
1997 $ 250,000
1998 600,000
1999 339,644
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$1,189,644
==========
Note E OTHER OBLIGATIONS
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On November 1, 1996, the Company received funds in the amount of $185,350
(Canadian $250,000) from Sea Gull Leasing Ltd., a private company (the "Sea Gull
Obligation"). This transaction with Sea Gull was arranged on behalf of the
Company by its former president and chief executive officer, Mr. John Young, who
resigned all his positions with the Company effective December 4, 1996. On
November 1, 1996, the Company disbursed $74,140 (Canadian $100,000) of the Sea
Gull proceeds directly to Attwood Gold Corporation ("Attwood"). In addition to
the funds directly received by the Company from Sea Gull, a payment of $20,284
by Sea Gull directly to a vendor of the Venture was made on behalf of the
Company. No note or other documentation exists related to the Sea Gull
Obligation. Sea Gull has initiated legal actions to recover $205,634 plus
interest and costs from the Company. Royalstar provided the Company a written
but conditional commitment of indemnity dated January 14, 1997, concerning and
related to the Sea Gull Obligation (the "Indemnity"). The Company has given
Royalstar notice that it intends to invoke the Indemnity with regard to the
legal action initiated by Sea Gull and has further requested Royalstar and
Attwood to resolve the claim. The Company is defending this action vigorously
but has included the Sea Gull Obligation, reduced by the claim of the Company
against Attwood, on the balance sheet as of June 30, 1997 in Other obligations,
net.
In addition, there are a number of creditors who are owed monies by the Company
which creditors could bring various legal actions against the Company and the
Tonkin Springs Project Joint Venture, some of which involve the filing of liens.
10
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the Company
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GOLD CAPITAL CORPORATION
August 15, 1997 By /s/ Bill M. Conrad
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Bill M. Conrad, President and Chief
Financial Officer
11