UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
__________________________________________________________________
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
_______ SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
_______ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
______________________________________________________________________________
Commission File Number: 0-6334
AURIC METALS CORPORATION
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(Exact Name of small business issuer as specified in its charter)
Nevada 87-0281240
- ------------------------- ----------------------
(State of Incorporation) (IRS Employer ID Number)
1475 Terminal Way, Suite E, Reno, Nevada 89502
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(Address of principal executive offices)
(318) 343-4448
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(Issuer's telephone number)
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 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 XX NO ___
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
983,489 shares as of December 31, 1998, not including a total of 16,511
shares held in treasury.
Transitional Small Business Disclosure Format (check one): YES_____ NO XX
AURIC METALS CORPORATION
Form 10-QSB for the Quarter ended December 31, 1998
Table of Contents
Part I - Financial Information Page
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 11
Part II - Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
AURIC METALS CORPORATION AND SUBSIDIARY
BALANCE SHEETS
December 31, 1998 and March 31, 1998
Unaudited Audited
Dec. 31, March 31
1998 1998
------------- -------------
ASSETS
-------
CURRENT ASSETS:
Cash and cash equivalents $ 179,329 $ 264,819
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Total Current Assets 179,329 264,819
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INVESTMENTS:
Marketable equity securities (Notes 3) 129,953 99,500
Other investments (Note 3) 129,224 129,224
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259,177 228,724
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PROPERTY AND EQUIPMENT AT COST
Equipment 5,378 1,573
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5,378 1,573
Accumulated depreciation ( 2,124) ( 1,494)
------------- -------------
3,254 79
------------- -------------
$ 441,760 $ 493,622
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accrued liabilities $ - $ 1,028
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Total current liabilities - 1,028
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STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value;
Authorized: 25,000,000 shares
Issued: 1,000,000 shares
(including treasury stock) 10,000 10,000
Additional paid-in capital 342,847 342,847
Unrealized loss on securities
available for sale (Note 3) ( 89,000) ( 56,751)
Accumulated earnings 188,938 206,473
Common stock in treasury at cost
16,511 shares 1998, 15,511 1997 ( 11,025) ( 9,975)
------------- -------------
441,760 492,594
------------- -------------
$ 441,760 $ 493,622
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
3
AURIC METALS CORPORATION AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
For the Three Months Ended December 31, 1998 and 1997
For the Nine Months Ended December 31, 1998 and 1997
Three Three Nine Nine
Months Months Months Months
1998 1997 1998 1997
------------ ------------ ------------ ------------
REVENUES:
Oil and gas sales $ - $ - $ 323 $ 407
Mineral royalty - 25,000 - 25,000
Interest income 3,081 1,002 6,786 3,006
Dividends - 10,000 20,000 10,000
------------ ------------ ------------ ------------
3,081 36,002 27,109 38,413
------------ ------------ ------------ ------------
EXPENSES:
Mineral exploration - - 284 -
Mineral claims leasing - - 6,467 6,639
Depreciation 210 79 629 236
Legal and accounting 1,616 540 7,100 5,887
Travel and lodging - - 7,638 8,029
Directors' fees - - 2,995 1,797
Office expense (Note 5) 2,000 4,000 11,000 6,000
General and administrative 643 2,886 8,532 8,200
------------ ------------ ------------ ------------
4,469 7,505 44,645 36,788
------------ ------------ ------------ ------------
OTHER INCOME
Gain on sale of
securities - - - 214,869
Provision for taxes
on income - - - 69,423
Tax benefit from loss
carryover - - - ( 69,423)
------------ ------------ ------------ ------------
INCOME (LOSS) ( 1,388) (28,497) ( 17,536) 216,494
============ ============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE $ - $ ( .03) $ ( .02) $ .22
============ ============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE- ASSUMING
DILUTION $ - $ - $ - $ .22
============ ============ ============ ============
Weighted average number of
shares outstanding
(excluding treasury stock) 983,489 984,489 983,820 984,489
============ ============ ============ ============
Weighted average number of
shares 983,489 984,489 983,820 984,489
Dilutive effect of options - - - 13,442
------------ ------------ ------------ ------------
Diluted average number
of shares 984,489 984,489 983,489 997,931
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated
financial statements
4
AURIC METALS CORPORATION AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
Nine Months Ended December 31, 1998 and 1997
Dec. 31, Dec. 31,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ ( 17,536) $ 216,494
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, amortization
and valuation allowance 629 236
(Gain on sale of investment securities - 214,869
Increase (decrease) in accrued liabilities ( 1,028) ( 649)
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Total adjustments ( 399) (215,282)
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Net cash provided (used) by operating activities ( 17,935) 1,212
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment securities - 234,000
Purchase of securities and other investments ( 62,703) -
Purchase of office equipment ( 3,802) -
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Net cash provided (used) by investing activities ( 66,505) 234,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock ( 1,050) -
------------- -------------
Net cash (used) by financing activities ( 1,050) -
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NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ( 85,490) 235,212
Cash and equivalents, beginning of period 264,819 26,103
------------- -------------
Cash and equivalents, end of period $ 179,329 $ 261,315
============= =============
The accompanying notes are an integral part of these
consolidated financial statements
5
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(1) Operations:
Auric Metals Corporation (the "Company") was incorporated in Utah in May
of 1969 to engage in mineral exploration. In 1985, the Company became a Nevada
corporation by merging with a wholly-owned Nevada corporation created solely
for the purpose of changing the Company's state of domicile. In subsequent
years, the Company has also engaged in oil and gas exploration, development
and production activities. The Company holds working interests in various
patented and unpatented mining claims in the Tintic Mining District of Utah.
The Company leases mining claims near Elko, Nevada from Hillcrest Mining
Company of Denver and has subleased the claims to United States Steel
Corporation. The Company presently holds a working interest in one oil and gas
well near Oklahoma City, Oklahoma which provides nominal revenue.
(2) Significant Accounting Policies:
Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months to be
cash equivalents.
Principles of consolidation:
The consolidated financial statements include the accounts of Auric
Minerals Corporation. Intercompany accounts and transactions have been
eliminated in consolidation.
Investment securities
Management determines the appropriate classification of investment
securities at the time they are acquired and evaluates the appropriateness of
such classification at each balance sheet date. Available-for-sale securities
consist of marketable equity securities not classified as trading securities.
Available-for-sale securities are stated at fair value, and unrealized holding
gains and losses, net of the related deferred tax effect, are reported as a
separate component of stockholders; equity.
Investment in unconsolidated affiliates:
Investments in affiliated companies in which ownership is 20% or more are
carried at the Company's original cost plus equity in earnings since date of
acquisition.
Investments in less than 20% owned affiliates are carried at cost or
estimated net realizable amounts, whichever is lower.
Mining:
Exploration and development expenditures are generally charged to
expenses as incurred until a decision is made to develop a mineral reserve.
Expenditures to bring new properties into production and major expenditures of
a nonrecurring nature are deferred and amortized ratable over production
benefitted. Expenditures for continuing development required to maintain
production are charged to expenses as incurred.
6
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Depreciation:
Equipment is recorded at cost and depreciated on a straight-line method
over a five year estimated useful life.
(3) Investments consist of the following at December 31, 1998 and March
31, 1998:
Robbie claims investment
The Company acquired a 25% interest in the "Robbie" gold prospect claims
owned by Hi-Tech Exploration at a cost of $3,567. The Company's President,
Mr. James F. Fouts is also an owner of a 25% interest in these claims.
LaFonda investment
The Company owned, as of December 31, 1998, 10,000 shares of the common
stock of Corporacion De La Fonda, Inc., or approximately 10% of that company's
outstanding shares. De La Fonda, Inc. is a New Mexico hotel operation. Prior
to 1984, the Company owned more than 20% of De La Fonda and accounted for its
investment by the equity method. Since 1983, the Company's investment has
been less than 20% and the cost method of accounting has been used. The
carrying value of the investment includes $102,648 of cumulative undistributed
earnings of La Fonda added to the investment under the equity method. Income
taxes have been recognized under the assumption that undistributed earnings
would eventually be distributed as dividends, thereby qualifying for
dividends-received deductions. If the undistributed earnings are eventually
received in taxable transactions other than as dividends, an unrecognized tax
of approximately $34,900 under current rates could result.
The Company's equity in the underlying net assets of La Fonda exceeds the
carrying value of the investment. Since the Company's President, Mr. James F.
Fouts, has positions, interests or shareholdings, in La Fonda, any transaction
between the Company and this entity cannot be deemed to be at arm's length.
December 31, 1998 March 31, 1998
----------------- ---------------
Robbie claims investment $ 3,567 $ 3,567
LaFonda investment 125,657 150,789
----------------- ---------------
Other investments $ 129,224 $ 154,356
================= ===============
7
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Dynamic Oil Ltd.
Effective April 1, 1994, the Company adopted SFAS No. 115 on accounting
for certain investments in debt and equity securities. This new standard
requires that available-for-sale investments in securities that have readily
determinable fair values be measured at fair value in the balance sheet and
that unrealized holding gains and losses for these investments be reported in
a separate component of stockholders' equity until realized. At December 31,
1998 and March 31, 1998 marketable investments classified as available for
sale included the following:
December 31, 1998 March 31, 1998
----------------- -----------------
Dynamic Oil Ltd. shares at cost $ 218,953 $ 156,251
Gross unrealized holding loss 89,000 56,751
----------------- -----------------
Dynamic Oil Ltd. at fair value $ 129,953 $ 99,500
================= =================
No sales of Dynamic Oil were made in 1998.
(4) Stock options:
Following is a summary of activity under all stock option plans for the
three-year period ended December 31, 1998:
Option Price
---------------------
Number of Per
Shares Share Total
------------- -------- ------------
Balance at April 1, 1995 48,000 $ 0.60 $ 28,800
No Activity - -
------------- ------------
Balance at March 31, 1996 48,000 28,800
Expired (48,000) (28,800)
------------- ------------
Balance at March 31, 1997 - -
Granted 60,000 0.65 39,000
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Balance at March 31, 1998 60,000 0.65 39,000
No activity - -
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Balance at December, 1998 60,000 0.65 $ 39,000
============= ============
The Company has adopted FASB statement No. 123, "accounting for Stock-Based
Compensation" as of April 1, 1996. Statement 123 allows for the Company to
account for its stock option plans
8
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
in accordance with APB Opinion NO. 25, "Accounting for Stock Issued to
Employees" using the intrinsic value method. In September 1997 the Company
granted options to officers and directors permitting each to purchase 15,000
shares at $.65 per share. Options expire in September 1999.Had compensation
cost for the Company's stock-based compensation plan (60,000 options granted
to officers and directors in 1997) been determined based on the fair value at
the grant date consistent with the method of FASB Statement 123, the Company's
net income and earnings per share would have been reduced to the proforma
amounts indicated below:
Nine Months Ended
December 31, 1998
-----------------
Net Income As reported $ 216,494
Pro forma 186,388
Primary earnings
per share As reported $ 0.22
Pro forma $ 0.19
Fully diluted
earnings per Share As reported $ 0.22
Pro forma $ 0.19
The fair value of each option grant is estimated on the date using the
Black-Scholes option-pricing model, with the following weighted average
assumptions used for grants in fiscal year 1998: dividend yield of 0.0%,
expected average annual volatility of 102%, average annual risk-free interest
rate of 6.0%, and expected lives of three years.
(5) Related party transactions:
The amounts paid to officers and directors have not been, in any sense,
negotiated at arm's length. Payments of $11,000 were made during the nine
months ended December 31, 1998 to The Fremont Corp., a corporation in which
the Company's president is principal shareholder. These payments are for
office use, bookkeeping and clerical services. Refer to Note (3) for
additional related party transactions related to the Robbie claims investment
and the LaFonda investment.
(6) Federal and state income tax:
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The cumulative
effect of the change in accounting principle is immaterial. At March 31,
1998, the Company had, for federal tax reporting purposes, an operating loss
carryforward of approximately $42,000. This carryforward begins to expire in
2010. No benefit has been reported in the financial statements, however,
because the Company believes there is at least a 50% chance that the
carryforward will expire unused. Accordingly, the tax benefit of the loss
carryforward has been offset by a valuation allowance of the same amount.
9
AURIC METALS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(7) Commitments and contingencies:
The Company is required to pay the Bureau of Land Management $100
annually on 29 leased mining claims for $2,900. Additionally the Company pays
Hi-Tech Exploration $3,567 annually for its 1/3 share of 107 leased BLM mining
claims. Rates are subject to change and failure to pay results in loss of
mining rights. The payments to BLM are in lieu of assessment work which was
required previously. The leases are cancelable annually upon notice to
lessor.
(8) Fair values of financial instruments:
The amount reported in the financial statements for cash and cash
equivalents, marketable securities, and accrued liabilities approximates fair
market value. Fair market value of marketable securities was estimated using
quoted market prices. For the investment without quoted market prices, it was
not possible to estimate fair value without incurring significant costs.
Additional information is included in the footnote for the investment without
fair value disclosure.
December 31, 1998 March 31, 1998
------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
Assets:
Cash and cash
equivalents $ 203,489 $ 203,489 $ 264,819 $ 264,819
Marketable
securities 137,376 137,376 99,500 99,500
Other investments:
Investment for
which it is not
practicable to
determine fair
market value 125,657 - 125,657 -
Other investment 3,567 3,567 3,567 3,567
Liabilities:
Accrued liabilities 490 490 1,028 1,028
The carrying amounts reported in the summary table, above, are shown in the
balance sheets using the same account titles and carrying amounts.
The fair value of a ten percent investment in common stock on an untraded
company (Corporacion De La Fonda, Inc.) is not disclosed, because it was not
practicable to estimate the fair value. The untraded company had net earnings
for the fiscal year ended October 31, 1998 of $1,530,036 and stockholder's
equity as of October 31, 1998 of $11,008,007. The Company has received
dividends averaging $1.16 per share over the last five years.
10
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the
Company or management as well as assumptions made by and information currently
available to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view
of the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered
in light of the accompanying meaningful cautionary statements herein.
(2) Results of Operations
Auric Metals Corporation (the "Company") is a Nevada Corporation, which
holds interests in certain natural resource properties, and a minority
interest in a corporation which owns a hotel operation in Santa Fe, New
Mexico. Over the past several years, the Company has principally been engaged
in the acquisition, exploration and development of interests in various
natural resource properties, primarily through participation with other
parties in natural resource joint ventures or other arrangements. The
Company's involvement in natural resource projects over the past few years has
decreased, and the Company does not currently have any active natural resource
projects.
The Company is not aware of any trends that have or are reasonably likely
to have a material impact on its liquidity, net sales, revenues, or income
from continuing operations. There have been no events which have caused
material changes from period to period in one or more line items of the
financial statements or any seasonal aspects that have had a material effect
on the financial condition or results of operation.
During the preceding year, the Company has not experienced any material
changes in results of operation. For the three months ended December 31, 1998
and 1997, the Company had revenues of $3,081 and $36,002, respectively,
expenses of $4,469 and $7,505, respectively, resulting in a net loss of $1,388
and $28,497, respectively. For the nine months ended December 31, 1998, the
Company had revenues of $27,109, and expenses of $44,645, resulting in a net
loss of $17,536.
(3) Liquidity and Capital Resources
The Company has not experienced a material change in financial condition
over the past year. At December 31, 1998, the Company had total assets of
$441,760, no current liabilities, and stockholders' equity of $441,760. As
of the year ended March 31, 1998, the Company had total assets of $493,622,
total current liabilities of $1,028, and stockholders' equity of $492,594.
Current assets as of December 31, 1998, consist of cash and cash equivalents
in the amount of $179,329; marketable equity securities and other investments
in the amount of $259,177; and equipment in the amount of $3,254.
The Company is currently seeking a suitable opportunity or opportunities
in the natural resource areas, or some other industry. As indicated, the
Company believes it has adequate capital and liquidity at the present time,
unless the Company should enter into a transaction requiring substantial
capital.
11
Part II - Other Information
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
None.
Item 3 - Defaults on Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1998, the Company held no regularly
scheduled, called or special meetings of shareholders during the reporting
period, nor were any matters submitted to a vote of this Company's security
holders.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
None.
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AURIC METALS CORPORATION
December 3, 1999 /s/ James F. Fouts
----------------------
James F. Fouts
President and Principal Executive Officer
AURIC METALS CORPORATION
December 3, 1999 /s/ Elizabeth B. Fouts
-----------------------
Elizabeth B. Fouts
Secretary/Treasurer