-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FCrUbisGl5X5F+6G4S64dAjm2ejQiKTYG8TMDeRxkvzPuzP6NXy8NOkMeP8zK66w 5EZSrffKDnHd+dBodoAVyw== 0001014909-04-000042.txt : 20040330 0001014909-04-000042.hdr.sgml : 20040330 20040329213409 ACCESSION NUMBER: 0001014909-04-000042 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S GOLD CORP CENTRAL INDEX KEY: 0000314203 STANDARD INDUSTRIAL CLASSIFICATION: MINERAL ROYALTY TRADERS [6795] IRS NUMBER: 840796160 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09137 FILM NUMBER: 04697948 BUSINESS ADDRESS: STREET 1: 2201 KIPLING ST STREET 2: STE 100 CITY: LAKEWOOD STATE: CO ZIP: 80215-1545 BUSINESS PHONE: 3032381438 MAIL ADDRESS: STREET 1: 2201 KIPLING STREET STE 100 CITY: LAKEWOOD STATE: CO ZIP: 80215 FORMER COMPANY: FORMER CONFORMED NAME: U S SILVER STATE MINING CORP DATE OF NAME CHANGE: 19880706 FORMER COMPANY: FORMER CONFORMED NAME: SILVER STATE MINING CORP DATE OF NAME CHANGE: 19880629 10KSB 1 f10k_dec2003usgold.txt U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-KSB (Mark One) [X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2003 [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to __________ Commission file number 0-9137 U.S. GOLD CORPORATION (Name of small business issuer in its charter) Colorado 84-0796160 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2201 Kipling Street, Suite 100, Lakewood, Colorado 80215 (Address of principal executive office) (Zip Code) Issuer's telephone number (303) 238-1438 Securities to be registered pursuant to Section 12(b) of the Act: Title of class Name of exchange on which registered None N/A Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.10 par value (Title of class) Check whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities 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 Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [x]. State issuer's revenues for its most recent fiscal year. $404,802 in revenues for year ended December 31, 2003. The aggregate market value (at the last trade price of $1.05 per share) of the Common Stock of U.S. Gold Corporation held by non-affiliates as of March 26, 2004 was approximately 11,728,000. As of March 26, 2004, there were 19,628,954 shares of Common Stock, par value $0.10, outstanding. Documents incorporated by reference: None. Transitional Small Business Disclosure Format (check one): Yes No x
TABLE OF CONTENTS PART I Item 1: Description of Business......................................................................... 3 Item 2: Properties...................................................................................... 10 Item 3: Legal Proceedings............................................................................... 14 Item 4: Submission of Matters to a Vote of Security Holders............................................. 14 PART II Item 5: Market for Common Equity and Related Stockholder Matters........................................ 15 Item 6: Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................................ 19 Item 7: Financial Statements............................................................................ 24 Item 8: Changes in and Disagreements with Accountants on Accounting Financial Disclosure................................................................................... 47 Item 8A: Controls and Procedures......................................................................... 47 PART III Item 9: Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act....................................................... 47 Item 10: Executive Compensation.......................................................................... 52 Item 11: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.................................................................. 57 Item 12: Certain Relationships and Related Transactions.................................................. 59 PART IV Item 13: Exhibits and Reports on Form 8-K................................................................ 64 Item 14: Principal Accountant Fees and Services.......................................................... 69 Signatures .................................................................................................... 70
2 PART I ITEM 1. DESCRIPTION OF BUSINESS. U.S. Gold Corporation ("U.S. Gold" or the "Company") was organized under the laws of the State of Colorado on July 24, 1979 under the name Silver State Mining Corporation. On June 21, 1988, by vote of our shareholders, we changed our name from Silver State Mining Corporation to U.S. Gold Corporation. On September 19, 2003, by a vote of our shareholders, the authorized number of common shares of stock that we can issue was increased from 18 million shares to 35 million shares. Since our inception, we have been engaged in the exploration for, development of, and the production and sale of gold and silver, as well as base metals, and have conducted such activities in various western U.S. states and Mexico. The Company has not had revenues from mining operations since 1990. The Company participates in two mining properties through a direct 45% interest at the Tonkin Springs gold property in Eureka County, Nevada, and through a 40% equity interest in Gold Resource Corporation ("GRC") that is exploring the El Aguila gold/silver property in the state of Oaxaca, Mexico. At the Tonkin Springs gold property we are presently in the exploration stage for gold and silver at the Tonkin Springs property. Our interest in this property is held by a 45% interest in Tonkin Springs LLC, a Delaware limited liability company also referred to as "TSLLC." That 45% interest is held by subsidiaries of the Company, Tonkin Springs Venture Limited Partnership, which is a Nevada limited partnership also referred to as "TSVLP" holds 44.5% of TSLLC and 0.5% of TSLLC is held by U.S. Environmental Corporation, a Colorado corporation and subsidiary of the Company. TSVLP, in turn, is owned 100% by two of our wholly-owned subsidiaries. On March 25, 2003 the Company and BacTech Enviromet Corporation, a Canadian corporation based in Ontario now named BacTech Mining Corporation ("BacTech) entered into an option agreement whereby BacTech could purchase a 55% ownership interest in TSLLC from the Company for $1,750,000 (the "Purchase Price") plus a funding obligation of $12 million to TSLLC by BacTech. The option was exercisable through July 31, 2003. BacTech paid the Company a non-refundable deposit of $250,000 under the option agreement, which was applied against the Purchase Price, and was obligated to fund reasonable and necessary holding costs of the Properties from March 25, 2003 through Closing or termination of the option agreement in the amount of $68,500. Effective July 31, 2003, BacTech Nevada, a subsidiary of BacTech, closed on the purchase of 55% equity ownership interest in TSLLC assumed management and funding responsibilities for TSLLC. The purchase price for BacTech Nevada's 55% equity ownership interest in TSLLC is $1,750,000 (the "Purchase Price") plus a funding obligation of $12 million to TSLLC. Including the $250,000 paid by BacTech with the Letter Agreement, the $150,000 paid by BacTech Nevada at the closing and $600,000 paid by BacTech on October 31, 2003, BacTech Nevada has 3 paid a total of $1,000,000 of the Purchase Price to date. The remaining $750,000 is to be paid either upon commencement of commercial production at Tonkin Springs as defined, or if production has not commenced by July 31, 2004, in 12 consecutive monthly payments of $62,500 commencing on that date. BacTech Nevada shall also pay 100% of funding required by TSLLC up to $12 million (the "Funding Obligation"). Through December 31, 2003, BacTech Nevada has reported that it has spent approximately $1,374,453 toward its Funding Obligation. If additional funding is required by TSLLC after the Funding Obligation, BacTech Nevada is required to advance the Company's share of any cash calls if requested by the Company (the "Advances"), with repayment to BacTech Nevada of any Advances plus interest from 50% of cash distributions otherwise due the Company. If BacTech Nevada withdraws from TSLLC at any time, its equity ownership interest would revert back to subsidiaries of the Company. The Company estimates that the gain on the sale of the 55% interest to BacTech Nevada will result in a gain of approximately $640,601 which will be recognized as the Purchase Price is realized. Through December 31, 2003, the Company has recognized $369,696 of the gain on this sale. Our 100% ownership in TSLLC held prior to the transaction with BacTech Nevada described above was achieved effective October 17, 2001 upon the withdrawal from TSLLC of our former partner, Tonkin Springs Holding Inc., also referred to as "TSHI", who prior to their withdrawal held 60 percent ownership in TSLLC and were the project managers. There was no gain nor loss recognized on the withdrawal of TSHI from TSLLC. After the withdrawal of TSHI from TSLLC the Company provided for the holding costs related to Tonkin Springs until closing of the BacTech Nevada transaction described above. TSLLC is currently evaluating the Tonkin Springs property to determine if the property can be put back into production. On March 15, 2004, TSLLC submitted permit applications to governmental agencies for review, approval and permit issuances related to proposed recommencement of gold production at Tonkin Springs. The permit amendments are for a staged operation lasting up to 10 years. (See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.") We also have an equity investment in an affiliate company, GRC, a private Colorado corporation. At December 31, 2003, the Company held approximately 40 percent of the outstanding shares in GRC. William W. Reid and David C. Reid, executive officers of the Company, personally or beneficially own collectively approximately 29 percent of GRC as of that date. Through the GRC equity investment we have the opportunity to participate in potential business activities in Mexico without any required funding obligations. In November 2002, GRC leased a gold exploration property in the state of Oaxaca, Mexico, designated the El Aguila property. In August 2003, GRC entered into an exploration and development funding agreement regarding the El Aguila property with Canyon Resources Corporation (AMEX:CAU) ("Canyon") whereby Canyon can earn a 50% interest in the El Aguila property by funding over time $3.5 million in exploration and development costs of which Canyon has committed to and has funded $500,000 through March 30, 2004. GRC is evaluating results of its Phase I 4 and Phase II exploratory drilling program of the El Aguila project focused on one target area of interest in the 14.7 square mile property. This exploration drilling encountered some high-grade gold intercepts which will require additional exploration drilling in order to fully evaluate. GRC is having a scoping study performed by an independent engineering firm on El Aguila project in order to estimate capital and operating costs for evaluation of possible development of the property which study is anticipated to be completed during the second quarter of 2004. After the study is complete, Canyon will have 90 days to elect to fund the remaining balance of $3,000,000 to earn a 50% interest in the El Aguila project, or alternatively, convert their Phase I and Phase II program funding of $500,000 into 600,000 shares of Gold Resource Corporation stock. In August 2003 GRC dropped the previously leased base-metal property, designated as the Zimapan property, located in the Zimapan Mining District in the state of Hidalgo, Mexico. From July 1, 2000 through December 31, 2002 we managed all activities of GRC under management contracts while GRC was responsible for funding the Zimapan and El Aguila properties. GRC is currently involved in an effort to raise funds through the private sale of its Common Stock with the proceeds to be used, in part, for its corporate overhead. (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS-CONTRACT WITH GOLD RESOURCE CORPORATION.") We may also seek to secure other financings for our operations or to enter into other business arrangements. We may also consider a potential merger with another company, which would normally require approval by shareholders of the Company. We have begun, and TSLLC is continuing, the evaluation of the potential of recommencing gold production at the Tonkin Springs project utilizing the known mineralized material and existing facilities to the extent possible. The current TSLLC effort is being carried out by BacTech Nevada as the manager under the joint venture agreement effective July 31, 2003. This involves the evaluation of the financial aspects and operational issues involved and the processes necessary to recommence production. In addition, this evaluation also involves identification, engineering and estimation of the additional capital investment required as well as the evaluation of and estimation of the time required to seek amendments of our existing regulatory permits and authorities or new ones to allow resumption of operations. On March 15, 2004, TSLLC submitted permit applications to governmental agencies for review, approval and permit issuances related to proposed recommencement of gold production at Tonkin Springs. The permit amendments are for a staged operation lasting up to 10 years. TSLLC is proposing for Tonkin Springs the construction of a new heap leach pad for processing oxide and oxidized sulfide mineralization and to oxidize sulfide mineralization in an engineered bio-oxidation facility that has been designed to contemporary standards. The project will use traditional open pit mining methods and involve three open pits. The reclamation and closure plans and reclamation bond are designed to fully close the property at the end of the project's life. Commencement of operations at Tonkin Springs is dependent, among other things, upon the timing of regulatory permit review and approval. 5 General The Company is primarily engaged in the precious metals and base metals mining business in the continental United States and through an equity investment in an affiliate company, in Mexico. However, we may also evaluate and develop properties outside the United States. The Company owns a 45% interest in the Tonkin Springs gold mine located in Eureka County, Nevada, and a 40% equity investment in an affiliated company, Gold Resources Corporation which is currently exploring a gold property in Mexico. As a mining company, our activities include, at various times and to various degrees, exploration, land acquisition, geological evaluation and feasibility studies of properties and, where warranted, development and construction of mining and processing facilities, mining and processing and the sale of gold and other metals and by-products. We may also enter into joint ventures, partnerships or other arrangements to accomplish these activities. All refined bullion would be either sold to outside companies, delivered in satisfaction of spot or forward sale delivery contracts, or held in inventory for later disposition. Prior Ownership and Control of Tonkin Springs Project. Effective October 17, 2001, we assumed 100% ownership of TSLLC which in turn owns the Tonkin Springs Project located in Eureka County, Nevada, following the withdrawal of Tonkin Springs Holding Inc. ("TSHI") from TSLLC effective October 17, 2001. Under the TSLLC agreements, TSHI was required to fund all costs of TSLLC until their withdrawal. During the period from February 26, 1999 through October 17, 2001, TSHI reported that it spent approximately $5.1 million at Tonkin Springs including exploration expenditures in the approximate amount of $2.6 million, reclamation and bonding of approximately $.5 million and holding costs of approximately $2.0 million. During the period of TSHI's involvement with TSLLC it paid the Company an aggregate $1,720,000 (the "Project Payments") as partial consideration for the terms and conditions of the TSLLC agreements. Prior to formation of TSLLC in 1999, the Company's 40% ownership interest in the Tonkin Springs properties was subject to a Project Joint Venture under a 1993 Agreement with Gold Capital Corporation, a Colorado corporation, the owner of 60%. Effective February 26, 1999, the Company and Gold Capital terminated the 1993 Agreement and each retained their respective 40% and 60% undivided interests in Tonkin Springs. Gold Capital then immediately sold its 60% interest in Tonkin Springs to TSHI, and then TSHI and the Company each immediately contributed their respective undivided interests in Tonkin Springs into the TSLLC in exchange for 40% and 60%, respectively, of the equity capital of TSLLC. 6 The Company recognized neither a gain nor a loss on the termination of the 1993 Agreement and on the contribution of its 40% undivided interest in the Properties to the TSLLC. Loan Settlement Agreement with FABC Effective February 21, 1992, the Company entered into a Loan Settlement Agreement with its former senior secured lender, French American Banking Corporation ("FABC"). As partial consideration to FABC under that agreement the Company entered into an agreement between Tonkin Springs Gold Mining Company ("TSGMC"), a wholly owned subsidiary of the Company, and FABC entitled Agreement To Pay Distributions, which requires TSGMC to pay a limited portion of certain distributions, if any, from TSVLP to FABC. TSVLP has complete control of such distributions, if any, to TSGMC. Under the terms of the Agreement To Pay Distributions, TSGMC is required to pay to FABC (i) the first $30,000 of retained distributions, as defined in such agreement, received from the TSVLP, plus (ii) an amount equal to 50% of such retained distributions after TSGMC has first received and retained $500,000 of such retained distributions. This obligation to FABC shall terminate after FABC has been paid a total of $2,030,000 thereunder. No amounts have been paid FABC to date under this obligation. Competitive Business Conditions and Gold Price The exploration for, and the acquisition and development of gold properties are subject to intense competition. Companies with greater financial resources, larger staffs, more experience, and more equipment for exploration and development may be in a better position than the Company to compete for such mineral properties. Our present limited funding means that our ability to compete for properties to be explored and developed is more limited than in the past. We believe that competition for acquiring mineral prospects will continue to be intense in the future. The market price for gold depends on numerous factors beyond our control, including production or sales by other gold producing nations, sales and leasing of gold reserves by governments and central banks, a low rate of inflation and a strong U.S. dollar, global and regional depression or reduced economic activity, and speculative trading. Major Customers During recent years the Company has been dependent upon Project Payments from former partners at Tonkin Springs and management contract revenues from affiliates of the Company for its only source of revenues. Sales of concentrates of mineralized material or of refined gold and silver bullion, if any, derived from future operations are anticipated to be made to unaffiliated companies. We believe that the loss of these customers for concentrates or for refined gold and silver would not affect our business. 7 Patents, Trademarks, Licenses, Franchises, Concessions On May 30, 2002 the Company finalized the non-exclusive license agreement with Newmont for possible use Newmont's commercially proven N2TEC technology to process sulfide gold mineralization at Tonkin Springs, such license has been assigned to TSLLC. TSLLC is currently evaluating use of this technology as well as other processing alternatives for Tonkin Springs. We do not own any patents, trademarks, licenses, franchises or concessions, except mining interests granted by governmental authorities and private landowners. No portion of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government. Government Regulations In connection with mining, milling and exploration activities, we are subject to extensive Federal, state and local laws and regulations governing the protection of the environment, including laws and regulations relating to protection of air and water quality, hazardous waste management, mine reclamation and the protection of endangered or threatened species. Prior to the commencement of any mining operations at the Tonkin Springs properties, if any, TSLLC will have to secure various regulatory permits from federal, state and local agencies. These governmental and regulatory permits generally govern the processes being used to operate, the stipulations concerning air quality and water issues, and the plans and obligations for reclamation of the properties at the conclusion of operations. At the Tonkin Springs properties, certain existing governmental or regulatory permits will require modification or reissue to reflect any resumed mining activities. The material State of Nevada permits that will need to be modified to operate Tonkin Springs include the Water Pollution Control Permit which current permit expires by its term April 15, 2005 (amendment expected to require approximately six months for approval after satisfactory submission), Air Quality Emissions Permit which current permit expires October 23, 2005 (amendment expected to take sixty days from satisfactory submission), Artificial Pond Permits (recently renewed with expiration date of April 30, 2007). The current regulatory agency approved Plan of Operations and Reclamation Plan (which includes the $1.8 million cash bond) is valid until changes in the status of the properties requires modification or until required for update by the regulators to reflect future cost estimate changes. Changes to the Reclamation Permit which will be submitted contemporaneously to both the Nevada Division of Environmental Protection ("NDEP") and the Bureau of Land Management ("BLM") for their review and approval. On March 15, 2004, TSLLC submitted permit applications to governmental agencies for review, approval and permit issuances related to recommencement of gold production at Tonkin Springs. The permit amendments are for a staged operation lasting up to 10 years. TSLLC is proposing for Tonkin Springs the construction of a new heap leach pad for processing oxide and oxidized sulfide mineralization and to oxidize sulfide mineralization in an engineered bio-oxidation facility that has been designed to contemporary standards. The project will use traditional open pit mining methods and involve three open pits. The reclamation and closure plans and reclamation bond are designed to 8 fully close the property at the end of the project's life. Commencement of operations at Tonkin Springs is dependent, among other things, upon the timing of regulatory permit review and approval. The Tonkin Springs Property may, however, not move beyond the exploration stage. A number of bills have been introduced in the U.S. Congress over the past years that would revise in various respects the provisions of the Mining Law of 1872. If enacted, such legislation could substantially increase the cost of holding unpatented mining claims and could impair the ability of companies to develop mineral resources on unpatented mining claims. Under the terms of these bills, the ability of companies to obtain a patent on unpatented mining claims would be nullified or substantially impaired, and most contain provisions for the payment of royalties to the federal government in respect of production from unpatented mining claims, which could adversely affect the potential for development of such claims and the economics of operating new or even existing mines on federal unpatented mining claims. Pending possible reform of the Mining Law of 1872, Congress has put in place a moratorium which prohibits acceptance or processing of most mineral patent applications. It is not possible to predict whether any change in the Mining Law of 1872 will, in fact, be enacted or, if enacted, the form the changes may take. Costs and Effects of Compliance with Environmental Laws In connection with any mining, milling and exploration activities, we are required to comply with various federal, state and local laws and regulations pertaining to the discharge of materials into the environment or otherwise relating to the protection of the environment. The Company or TSLLC have obtained, or are in the process of obtaining, environmental permits, licenses or approvals required for potential operations, if any. Management is not aware of any material violations of environmental permits, licenses or approvals issued with respect to our operations. TSLLC, the Company and BacTech Nevada are responsible for the reclamation obligations related to disturbances at Tonkin Springs. The current regulatory agency required estimate of reclamation costs related to the existing disturbances of the Properties is approximately $1.8 million which estimate has been approved by appropriate governmental agencies, the NDEP and BLM. As set forth under various governmental requirements, bonding of reclamation under Nevada and BLM has been funded for the Tonkin Springs Properties in the form of cash bonds posted in the amount of $1.8 million secured by TSLLC restricted cash deposits. Actual reclamation, generally, will be commenced upon the completion of mining operations in various locations of the Properties and generally thereafter upon the completion of the remaining operations at the Properties. The Company believes it and TSLLC are in compliance with Federal, state and local requirements regarding reclamation bonding and other guarantees. TSLLC has in place as of December 31, 2003 (a) cash bonding of approximately $45,500 in favor of the State of Nevada Department of Conservation and Natural Resources for pad expansion, monitoring wells and tailings pond permits (aggregate 9 required amount $40,911), (b) cash bonding of $34,400 in favor of BLM for property wide exploration (aggregate required amount $34,000), and (c) cash bonding of approximately $1,741,000 for project reclamation jointly administered by the State of Nevada and the BLM (aggregate required amount $1,737,866). Therefore, as of December 31, 2003, TSLLC has approximately $1,821,000 in aggregate balances of restrictive cash deposits which secure $1,812,777 in various bond and permit requirements to governmental authorities. The Company has transferred its interest in several mining properties over the past years. We could remain potentially liable for environmental enforcement actions related to our prior ownership interest of such properties. However, we have no reasonable belief that any violation of relevant environmental laws or regulations has occurred regarding these transferred properties. We are not currently subject to any material pending administrative or judicial enforcement proceedings arising under environmental laws or regulations. Environmental laws and regulations may be adopted and enacted in the future which may have an impact on our operations. We cannot now accurately predict or estimate the impact of any such future laws or regulations on our current and prior operations. Employees At March 30, 2004, we had 3 employees, each of whom is employed on a full-time basis. ITEM 2. DESCRIPTION OF PROPERTIES. Tonkin Springs Properties History Exploration and other mineral related activities have occurred at the Tonkin Springs property area since the 1950's, when prospecting for mercury and barite was active. Between 1966 and 1980, several companies including Homestake Mining Company and Placer Amex, conducted exploration including road building, surface sampling and drilling on portions of the property. Precambrian Exploration, Inc. ("PEX") subsequently staked several mining claims and continued drilling and developed a mineral resource. In 1985 the Company joint-ventured the property with PEX and later bought their interest in the project. Between 1985 and 1988 the Company built and operated an oxide heap leach operation. In 1988 it began developing the sulfide resource and built a mill to process that ore using bio-oxidation followed by standard cyanidation to recover the gold. In late 1989, the Company substantially completed construction of a 1,500 ton-per-day milling facility at the Tonkin Springs property designed to process sulfide gold mineralization through the use of bacteria to oxidize the sulfide mineralization prior to extraction of the gold through the conventional milling process utilizing cyanidation to dissolve the gold and activated carbon to capture the gold through adsorption. The construction cost of the mill was approximately $31 million. The Company operated the integrated mill facility in a start-up mode commencing in March 1990. However, the mill facility did not reach commercial 10 operation by June 1990, and because of severe liquidity problems we put the operation on stand-by status beginning in June 1990. Since 1990 we have had various joint venture and similar partners at the Tonkin Springs Project, most recently BacTech Nevada under a transaction which closed effective July 31, 2003.The Tonkin Springs property area has been drilled with approximately 2,800 holes averaging about 200 feet in depth. Drilling has included reverse circulation, down-the-hole hammer, core and air-track drilling. The Company did the great majority of drilling between 1984-1990 but joint-venture partners Homestake Mining also drilled 86 RC and core holes (79,288 feet) between 1991-1992 and Agnico-Eagle Mines drilled 107 RC holes (63,575 feet) from 1999-2001. Based on the drilling to date as well as other information the Tonkin Springs property has an estimate of mineralized material of 30.7 million tons with an average grade of 0.045 ounces gold per ton. General The Tonkin Springs properties are located on the Battle Mountain-Cortez Trend, approximately 45 miles northwest of Eureka, Nevada. Effective July 31, 2003 TSLLC is owned 45% by subsidiaries of the Company and 55% by BacTech Nevada. During the period February 26, 1999 through October 17, 2001, the Company held a 40% equity interest in TSLLC with TSHI holding the remaining 60% and its affiliate, Tonkin Spring Management Company, being manager. However, effective October 17, 2001, TSHI withdrew from TSLLC and as provided in the agreement transferred its ownership interest to the Company through TSVLP. After the withdrawal of TSHI, TSVLP assumed management responsibilities for TSLLC until July 31, 2003, when BacTech Nevada assumed management responsibilities for TSLLC. Tonkin Springs is an open-pit gold mining and processing project consisting of unpatented mining claims, an integrated milling facility, and support facilities on approximately 23,640 acres of Federal land located along the Battle Mountain - - Cortez Trend approximately 45 miles northwest of the town of Eureka in Eureka County, Nevada. Part of the mineralized material at the Project is contained in sulfides and will require concentration and/or pre-treatment prior to final processing. An important part of the mineralized material at the Project is in oxide form, located at the Tonkin North deposit, and is amenable to conventional extraction methods. The Company has held an interest in Tonkin Springs since 1984 and historically produced approximately 26,000 ounces gold from an oxide ore heap leach operation during 1985 through 1988 prior to construction of the mill facilities to process sulfide mineralization discussed further above under "History." Recent Activities at Tonkin Springs During 2003, and until the BacTech Nevada transaction effective July 31, 2003, TSLLC was maintained by the Company on a care-and-maintenance basis. Subsequent to July 31, 2003, TSLLC, with BacTech Nevada as manager, has been involved with 11 the analysis of data and evaluation of the potential of commencing gold production operations at the Tonkin Springs project. On March 15, 2004, TSLLC submitted permit applications to governmental agencies for review, approval and permit issuances related to proposed recommencement of gold production at Tonkin Springs. The permit amendments are for a staged operation lasting up to 10 years. TSLLC is proposing for Tonkin Springs the construction of a new heap leach pad for processing oxide and oxidized sulfide mineralization and to oxidize sulfide mineralization in an engineered bio-oxidation facility that has been designed to contemporary standards. The project will use traditional open pit mining methods and involve three open pits. The reclamation and closure plans and reclamation bond are designed to fully close the property at the end of the project's life. Commencement of operations at Tonkin Springs is dependent, among other things, upon the timing of regulatory permit review and approval. (See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS".) Continuing a program first begun by the Company in 1998, the Company was satisfied with results of test work on Tonkin Springs sulfide gold mineralization using Newmont's proprietary and commercially proven N2TEC Flotation Technology. This process deals with the concentration of sulfide gold mineralization which can make transportation and/or further processing more efficient. Test work performed by Newmont on samples of Tonkin Springs sulfide mineralization involved grinding the ore followed by flotation using the N2TEC Flotation Technology process to concentrate the gold bearing sulfides. While the test work was limited in sample size and scope, the tests did indicate that the sulfide ores from Tonkin Springs are amenable to Newmont's flotation technology with total gold recovery from the combined concentrates as well as through conventional processing of the oxide portion of the mineralization of 88 to 91%. On May 30, 2002 the Company and Newmont executed a non-exclusive technology license that allows TSLLC to use the Newmont commercially proven technology to process sulfide gold mineralization at Tonkin. The license includes a net smelter return production royalty of 2% of net revenues derived from precious metal concentrates produced utilizing the Newmont technology. This license has been transferred by the Company to TSLLC. Access to Tonkin Springs is provided by a county maintained road. Electrical power is provided through a substation located near the mill and operated by Sierra Pacific Power Company. Water is available through production wells which have been established on or adjacent to the site. The project also contains an assay laboratory and metallurgical pilot plant testing lab. In addition to the heavy equipment shop for repair and maintenance of mining equipment, a repair shop and warehouse building is situated adjacent to the mill building. The site also contains facilities to store and distribute propane, diesel fuel and gasoline. An administrative building is available for office management and administrative personnel. Potable water will be brought in from outside the project. 12 Geology Host rocks for gold mineralization at Tonkin Springs consist of a sequence of Paleozoic rocks that were subsequently faulted, intruded and mineralized. Gold-bearing solutions originated at depth and migrated up along fracture systems until reaching fractured rock or chemically favorable rock suitable for deposition of mineralized material. Later volcanism, faulting, erosion and sedimentation affected the mineralized material. The oldest sedimentary rocks identified at Tonkin Springs are the Ordovician Vinini siliclastic, carbonate and greenstone lithologies. The Vinini is well exposed and makes up most of the central core of the property. It has been divided into three distinct units: the Telephone Member, the Rooster Member and the Coils Member. The Telephone Member is the lowest member and is comprised of thin to medium-bedded, gray, blocky, sandy to silty carbonates, calcareous carbon shales, micrites, and thin-bedded limestone in the upper part. All ore developed to date in the gold resource at Tonkin Springs is in the Vinini Formation or intrusives in contact with the Vinini and is within or adjacent to low-angle and high-angle structures. The Devonian Devils Gate and Denay Formation carbonates units are integrated into the Vinini package and may have been back-thrusted into this position throughout the central core of the claim area. These same units are also exposed on the western side of the property. Permian Garden Valley Formation clastic sediments and Cretaceous Newark Canyon Formation clastic sediments flank the area in isolated exposures to the north, east and west. Lithologies vary from coarse chert pebble conglomerates, fine-grained limestone to immature coarse clastic limestone. Both of these units have been juxtaposed against and on top of the Vinini via high angle and thrust faults. Tertiary rhyolite, rhyodacite and andesite volcanic units flank the project area to the east, west and north and occur within the interior on the southern end of the property. The dominant structures mapped at Tonkin are high angle faults and open folds that trend northwest, north and northeast. The fault dips are primarily steeply to the east. Southeast low angle shearing is evident in pit wall exposures. Mineralization identified to date occurs in clusters located along a northwest trend. There is a strong east-northeast component to each of these clusters which possibly represents an east-northeast fold axis created by strike slip faulting along master faults on the eastern and western edges of the range. The increased ground preparation due to folding and the intersection with northwest shearing and thrust faulting appears to be the locus of mineralization. In some instances mineralization is also spatially associated with igneous dikes and sills. Claims Currently, the Tonkin Springs project consists of a total of 1,215 unpatented mining and mill site claims encompassing approximately 37 square miles. Of that 13 amount, an aggregate of 370 of the unpatented mining claims covered by the Project are leased from unaffiliated third parties pursuant to two mining leases. One lease at Tonkin North, which covers 269 claims, has an initial term which expires December 31, 2006 and may be extended from year to year, up to a maximum term of 99 years, by production from the leased claims. Each lease contains certain conditions and other requirements for annual payments, as well as expenditures or work to be performed in order to retain the leased claims. The Tonkin North lease requires an annual advance royalty in the amount of $150,000, or the value of 450 ounces of gold, whichever is greater, such royalty is payable in January of each year and has been paid for 2003. The lease also requires production royalties of 5% of the gross sales price of gold or silver but provides for recapture of annual advance royalties previously paid which has a balance at December 31, 2003 of approximately $2.6 million. TSLLC is required to perform an annual work commitment and the lease includes a defined area of interest extending from the boundaries of certain claims. Certain of the claims, which are included in the Tonkin North lease, are also subject to a 1% net smelter return royalty (defined as gross revenues from sales of minerals, less refining costs, transportation costs, severance, production and sales taxes, and sales commissions) payable to Precambrian Exploration, Inc. after $15 million in gross revenues are realized from the claims. In 1994, 215 claims covering approximately 4,400 acres adjacent to the Tonkin Springs project were acquired from an unaffiliated third party. The claims are subject to a royalty of 1% of net smelter returns for gold when the indexed price of gold is $350 per ounce or more, and a royalty of 1% of net smelter returns for silver when the indexed price of silver is $3.50 per ounce or more. No royalties are payable at lower indexed prices. The indexed prices shall reflect adjustments based on the Producer's Price Index, sub-index Finished Goods Excluding Foods, as published by the United States Department of Commerce. An aggregate of 913 of the unpatented mining claims covered by the Project, as well as 33 mill sites claims, are owned by TSLLC. A total of 317 of these claims are subject to a royalty of 2% of net smelter returns, which becomes payable to Precambrian Exploration, Inc. after $50 million in gross revenues is realized from the claims. Precambrian Exploration, Inc. is an unaffiliated third party and predecessor in interest to the claims. Precambrian may elect to receive its royalty in the form of gold and silver upon proper notice to TSLLC. Of the total of 1,215 mining claims encompassing the Tonkin Springs project, 381 are not subject to any royalties. ITEM 3. LEGAL PROCEEDINGS. There are no legal proceedings involving the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 14 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Our common stock trades on the OTC Bulletin Board under the symbol "USGL." The tables below set forth the high and low sales prices for our common stock as reflected on the OTC Bulletin Board, for the two fiscal years ended December 31, 2003 and first quarter to date for 2004. Quotations represent prices between dealers, do not include retail markups, markdowns or commissions, and do not necessarily represent prices at which actual transactions were effected. Effective February 28, 2003 the shares if the Company began trading on the Berlin, Germany Stock Exchange under symbol "US 8." The Company has a number of European shareholders and the listing on the Berlin, Germany Stock Exchange is intended to facilitate a market in its shares in such locale. The high and low sales price on March 26, 2004 were $1.11 and $1.01, respectively. Fiscal Year Ended December 31, 2004 High Low - ----------------- ---- --- First Quarter (to 3/26/04) $1.55 $.83 Fiscal Year Ended December 31, 2003 High Low - ----------------- ---- --- First Quarter $.79 $.45 Second Quarter $.58 $.30 Third Quarter $.62 $.43 Fourth Quarter $1.10 $.52 Fiscal Year Ended December 31, 2002 High Low - ----------------- ---- --- First Quarter $.41 $.33 Second Quarter $.71 $.39 Third Quarter $.53 $.32 Fourth Quarter $.55 $.27 As of March 26, 2004 there were approximately 7,250 record holders for our common stock. No dividends have ever been paid with respect to our common stock and we do not anticipate the payment of dividends in the foreseeable future. 15 Securities Authorized for Issuance Under Equity Compensation Plans. Shown below is information at December 31, 2003 with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance. This information relates to the Company's Non-Qualified Stock Option and Stock Grant Plan.
Equity Compensation Plan Information Number of securities remaining available for Weighted-average future issuance under Number of securities to exercise price of equity compensation plans be issued upon exercise outstanding options, (excluding securities of outstanding options, Warrants and rights reflected in the left Plan category warrants and rights warrants and rights hand column) - ------------- ----------------------- ------------------- ------------------------- Equity compensation plans approved by security holders 1,367,693 $0.43/share 759,944 Equity compensation plans not approved by security holders None None None Total 1,367,693 $0.43/share 759,944
Recent Sales of Unregistered Securities: During the proceeding three years, the Company has sold an aggregate of 4,673,243 shares of its Common Stock without registering those securities under the Securities Act as follows:
Section of Amount Price Total Underwriter Act for Date Purchaser Sold per share Offering Fee Exemption - ---- --------- ------ ---------- -------- ----------- ----------- 5/30/02 Excalibur Limited 857,143 $.35 $300,000 $27,000(1) (20) Partnership(3) 428,572(4) $.30 $128,572(3) $11,571(1)(4) (20) 6/5/02 Global Gold & 125,000 $.40 $50,000 $4,500(1) (20) Precious(5) 6/18/02 1056149 Ontario 50,000 $.40 $20,000 $1,800(1) (20) Ltd. c/o HSBC Securities (Canada) Inc.(6) 618/02 John Ryan(7) 375,000 $.40 $150,000 $13,500(1) (20) 16 6/18/02 Michaux-Gestion 250,000 $.40 $100,000 $9,000(1) (20) Paris(8) 6/18/02 ING Ferri 125,000 $.40 $50,000 $4,500(1) (20) a/c 2000024(9) 6/18/02 Concord Bank 50,000 $.40 $20,000 $1,800(1) (20) Limited(10) 6/20/02 Excelsior 125,000 $.40 $50,000 $4,500(1) (20) Mining Fund(11) 6/28/02 R. Clarke(12) 75,000 $.40 $30,000 $2,700(1) (20) 6/28/02 Arlington Group 187,500 $.40 $75,000 $6,750(1) (20) PLC(13) 6/28/02 Kayjay Realty 112,500 $.40 $45,000 $4,050(1) (20) Inc.(14) 6/28/02 GUNDYCO in 25,000 $.40 $10,000 $900(1) (20) Trust for Account No. 500-1327427(15) 9/29/03 RMB International 672,528 $.54 $363,165 - (20)(21) (Dublin) Ltd.(16) 12/7/02 Resource Investment Trust plc(17) 70,000 $.40 $28,000 - (20)(21) 1/21/03 Resource Investment Trust plc(17) 1,000,000 $.45 $450,000 - (20)(21) 3/10/04 Haywood Securities 100,000 $.90 $90,000 $7,650(2) (20)(21) in trust for Nicholas Barhas (18) 25,000(19) $1.25 $31,250(19) - (20)(21) 3/10/04 Meridian Capital Ltd. (2) 20,000(2) $0.90 $18,000(2) - (20)(21)
(1) On December 17, 2002 the Company and GRC jointly entered into an agreement with IBK Capital Corp. of Toronto, Ontario, Canada ("IBK") whereby IBK agreed assist the Company and GRC in seeking and arranging equity investment independently for the Company as well as for GRC. The agreement provided commission due IBK of 9% computed on any money raised for the Company or for IBK. (2) On February 25, 2004, the Company entered into a Finders Fee Agreement with Meridian Capital Ltd. of Vancouver, B.C., Canada ("Meridian") whereby Meridian agreed to assist the Company in seeking and arranging equity investment for the Company. The agreement provided commission due Meridian of 8.5% computes on any money raised for the Company and 2 year warrants to purchase shares of the Company equal to 20% of the shares sold at exercise price of $0.90 per share. Aggregate Meridian Warrants to purchase 20,000 shares of common stock at $0.90/share and expiring March 10, 2006 have been issued to Meridian. The warrants have been assigned no value by the Company. The agreement with Meridian terminated by its terms March 12, 2003. (3) Excalibur Limited Partnership is an Ontario, Canada limited partnership the sole general partner of which is William Hechter. (4) Represents 428,572 shares of Common Stock underlying unexercised warrants that are exercisable as of June 30, 2002 and expiring May 30, 2006. (5) Global Gold & Precious is a gold and precious mutual fund company based in Paris, France with investment manager Jean Bernard Guyon. 17 (6) 1056149 Ontario Ltd. is an Ontario, Canada private foreign investment management company controlled by Marilyn Barker. (7) Mr. John Ryan is a Canadian individual who makes his own investment decisions. (8) Michaux-Gestion Paris is a private foreign investment management company based in Paris, France with investment manager Remy Bert. (9) ING Ferri a/c 2000024 is the account of Societe Parisienne Gestion is a private foreign investment management company based in Paris, France with investment officer Yves Tailleur. (10) The Concorde Bank Limited is a bank registered in Barbados, West Indies, with investment manager Norbert Marchal. (11) Excelsior Mining Fund is registered in Nassau (Bahamas) and is managed by Lion Resources Management Ltd, London, England. (12) Mr. R. Clark is a individual living in France who makes his own investment decisions. (13) The Arlington Group PLC is a private foreign venture capital firm based in London, England. (14) Kayjay Realty Inc. is a business based in Ontario, Canada, and the investment account is managed by HSBC Securities (Canada) Inc. (15) GUNDYCO in Trust for Account No. 500-1327427 is managed by CIBC Wood Gundy for the benefit of Minh-Thu Dao-Hoy, an individual living in Canada. (16) RMB International (Dublin) Ltd. is a wholly owned subsidiary of First Rand Bank Holding Limited of South Africa. The investment manager is Rick Winters. (17) Resource Investment Trust plc is an publicly-traded investment fund registered in the United Kingdom. (18) Mr. Nicholas Barham is an individual living in the United Kingdom who makes his own investment decisions. (19) Represents 25,000 shares of Common Stock underlying unexercised Unit Warrants that are exercisable as of March 10, 2004 and expire March 10, 2006. (20) The Company relied on Sections 4(2) and 4(6) of the Securities Act and Rule 506 of Regulation D promulgated under the Act. All purchasers are "Accredited Investors" as that term is defined in Regulation D. All purchasers had access to information that enabled them to evaluate the risks and merits to an investment in the Company. (21) In addition to Section 4(2), the Company believes that this transaction was exempt under Regulation S promulgated under the Act. Effective February 25, 2004, the Company entered into a Finder's Fee Agreement with Meridian Capital Ltd. ("Meridian"), a Canadian merchant bank, whereby Meridian agreed to assist the Company in seeking qualified equity investment through the sale of Units. With Unit Subscription Agreements, the Company sold Units at $0.90 where each Unit was made up of one share of common stock and one Unit Purchase Warrant. Unit Purchase Warrants are exercisable for 2 years from date of issue and provide that one share of common stock can be purchased for $1.25 plus four (4) Unit Purchase Warrants. Through the March 12, 2004 termination date of the Meridian agreement, the Company raised net proceeds of $82,350 through the sale of 100,000 Units made up of 100,000 shares of common stock and Unit Purchase Warrants for aggregate 25,000 common shares exercisable at $1.25/share and expiring March 10, 2006. Meridian was paid a fee of 8.5% of monies raised for the Company through the sale of Units, $10,000 for expenses, and warrants exercisable for 2 years to purchase 20,000 shares of the Company (equal to 20% of the Units sold) at a warrant exercise price of $0.90 per share (the "Meridian Warrants"). The common stock issued with the Units and the common shares reserved for exercise of the Unit Purchase Warrants and Meridian Warrants have not been registered under the 1933 Act and are restricted securities. The Company has agreed to use its commercially reasonable efforts to prepare and file with the Securities and Exchange Commission a registration statement covering the resale of common stock issued with the Units and common stock 18 issuable upon exercise of the Unit Purchase Warrants and the Meridian Warrants, and to maintain the effectiveness of such registration statement for up to 2 years. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview: The Company participates in two mining properties through a direct 45% interest at the Tonkin Springs gold property in Eureka County, Nevada, and through a 40% equity interest in Gold Resource Corporation that is exploring the El Aguila gold/silver property in the state of Oaxaca, Mexico. Tonkin Springs (the "Properties") is the only property interest of the Company. The Properties are owned by Tonkin Springs LLC ("TSLLC"), a Delaware limited liability company. As discussed further below, effective July 31, 2003, the Company sold a 55% interest in TSLLC to BacTech Nevada Corporation ("BacTech Nevada"), a subsidiary of BacTech Mining Corporation ("BacTech"), a Canadian corporation based in Ontario with shares traded on the TSX-Venture Exchange (symbol BM). Through July 31, 2003, the Company owned TSLLC 100% and maintained the Properties on a care-and-maintenance basis. The Company had consolidated TSLLC in its balance sheet and statement of operations prior to the sale to BacTech. Effective July 31, 2003, the Company reflects its ownership interest in TSLLC as an investment. Since BacTech Nevada is funding the initial $12 million of all cost of TSLLC as part of their purchase obligation, the Company does not reflect in its 2003 financial statements the costs of TSLLC after July 31, 2003. As discussed further below, during the year ended December 31, 2003, the Company raised $450,000 through the sale of restricted common stock in private sale transaction with a significant shareholder of the Company, and the Company has received $1,000,000 from BacTech related to the sale of 55% interest of TSLLC. During 2004, the Company will receive a minimum of $375,000 of the remaining $750,000 purchase price balance from BacTech. As of December 31, 2003 the Company had a working capital balance of $501,204. The Company will be required to raise additional funding in order to be able to meet its obligations, protect its assets, and carryout its business plan. Effective February 25, 2004, the Company entered into a Finder's Fee Agreement with Meridian Capital Ltd. ("Meridian"), a Canadian merchant bank, whereby Meridian agreed to assist the Company in seeking qualified equity investment through the sale of Units. With Unit Subscription Agreements, the Company sold Units at $0.90 where each Unit was made up of one share of common stock and one Unit Purchase Warrant. Unit Purchase Warrants are exercisable for 2 years from date of issue and provide that one share of common stock can be purchased for $1.25 plus four (4) Unit Purchase Warrants. Through the March 12, 2004 termination date of the Meridian agreement, the Company raised net proceeds of $82,350 through the sale of 100,000 Units made up of 100,000 shares of common stock and Unit Purchase Warrants for aggregate 25,000 common shares exercisable at $1.25/share and expiring March 10, 2006. Meridian was paid a fee of 8.5% of monies raised for the Company through the sale of Units, $10,000 for expenses, and warrants exercisable for 2 years to purchase 20,000 shares of the Company (equal to 20% 19 of the Units sold) at a warrant exercise price of $0.90 per share (the "Meridian Warrants"). The common stock issued with the Units and the common shares reserved for exercise of the Unit Purchase Warrants and Meridian Warrants have not been registered under the 1933 Act and are restricted securities. The Company has agreed to use its commercially reasonable efforts to prepare and file with the Securities and Exchange Commission a registration statement covering the resale of common stock issued with the Units and common stock issuable upon exercise of the Unit Purchase Warrants and the Meridian Warrants, and to maintain the effectiveness of such registration statement for up to 2 years. Interest in TSLLC Effective July 31, 2003 Tonkin Springs Venture Limited Partnership ("TSLVP"), a Nevada limited partnership wholly-owned by the Company, closed the sale of 55% equity ownership interest in TSLLC to BacTech Nevada. The Company, through subsidiaries, owns the remaining 45% equity ownership interest in TSLLC. With the closing BacTech Nevada assumed management and funding responsibilities for TSLLC. This transaction was completed pursuant to a letter agreement between the Company and BacTech dated March 25, 2003 (the "Letter Agreement"). The purchase price for BacTech Nevada's 55% equity ownership interest in TSLLC was $1,750,000 (the "Purchase Price") plus a funding obligation of $12 million to TSLLC. Through December 31, 2003 BacTech Nevada had paid a total of $1,000,000 of the Purchase Price. The remaining $750,000 is to be paid either upon commencement of commercial production at Tonkin Springs as defined, or if production has not commenced by July 31, 2004, in 12 consecutive monthly payments of $62,500 commencing on that date. BacTech Nevada shall also pay 100% of funding required by TSLLC up to $12 million (the "Funding Obligation"). Through December 31, 2003, BacTech Nevada has reported that it had spent approximately $1,374,453 of the Funding Obligation. If additional funding is required by TSLLC after the Funding Obligation, BacTech Nevada is required to advance the Company's share of any cash calls if requested by the Company (the "Advances"), with repayment to BacTech Nevada of any Advances plus interest from 50% of cash distributions otherwise due the Company. If BacTech Nevada withdraws from TSLLC at any time, its 55% equity ownership interest in TSLLC would revert back to subsidiaries of the Company. Under the Letter Agreement, BacTech reimbursed the Company for the holding costs at Tonkin Springs from March 25, 2003 through the date of the closing, which totaled approximately $68,500. Activities at Tonkin Springs Properties TSLLC, with BacTech Nevada as manager, is evaluating the Tonkin Springs property to determine if the property can be put back into production. On March 15, 2004, TSLLC submitted permit applications to governmental agencies for review, approval and permit issuances related to proposed recommencement of gold production at Tonkin Springs. The permit amendments are for a staged operation lasting up to 10 years. TSLLC is proposing for Tonkin Springs the construction 20 of a new heap leach pad for processing oxide and oxidized sulfide mineralization and to oxidize sulfide mineralization in an engineered bio-oxidation facility that has been designed to contemporary standards. The project will use traditional open pit mining methods and involve three open pits. The reclamation and closure plans and reclamation bond are designed to fully close the property at the end of the project's life. Commencement of operations at Tonkin Springs is dependent, among other things, upon the timing of regulatory permit review and approval. Liquidity and Financial Condition As of December 31, 2003, the Company had working capital of $501,204 comprised of current assets of $581,626 and current liabilities of $80,422. The remaining $750,000 Purchase Price payment from BacTech Nevada is to be paid either upon commencement of commercial production at Tonkin Springs as defined, or if production has not commenced by July 31, 2004, in 12 consecutive monthly payments of $62,500 commencing on that date. Of the total amount, $375,000 has been classified as a current asset assuming six monthly payments during the year and $375,000 has been classified long-term. The annual cost of corporate overhead for the Company is approximately $590,000. As noted above, in 2004 the Company has sold equity Units with the assistance of Meridian and has raised $72,350 net of fees and expenses. The Company has no other source of anticipated working capital other than these payments from BacTech Nevada. Since July 31, 2003, BacTech Nevada is responsible for funding 100% of all costs of Tonkin Springs until an aggregate of $12,000,000 has been funded by BacTech Nevada, and thereafter BacTech is obligated, if requested by the Company, to fund the Company's shares of any subsequent cash calls for TSLLC. The Company's financial statements are prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and obligations in the normal course of business. The Company experienced net losses for the years ended December 31, 2003 and 2002 of $(854,079) and $(1,375,459), respectively. With the closing of the Bactech Nevada transaction discussed above, the Company had received a total of $1,000,000 in Purchase Price. Net cash used by operations increased to $(1,252,172) for the year ended December 31, 2003 from $(834,911) for the corresponding period in 2002. Included in the change is the receipt of $30,000 in management contract payments from Gold Resource Corporation ("GRC"), an affiliate of the Company, in the 2002 period and none during the 2003 period. Cash paid to suppliers and employees increased to $1,253,584 during the 2003 period from $871,869 during the 2002 period, reflecting payment during 2003 of accrued 2002 salaries to executive officers of $196,789. Other increases for 2003 include the payment of expenses related to the Company's annual meeting of shareholders during 2003 of approximately $45,000, and reduction of other liabilities to vendors of $157,000 offset, in part by the assumption of TSLLC funding and expenses commencing July 31, 2003 by BacTech Nevada and funding provided by BacTech 21 Nevada from March 25, 2003 through the July 31, 2003. Interest received decreased $8,063 to $3,047 in 2003 from $11,110 in 2002 primarily related to 2003 interest related to restrictive cash deposits that secure reclamation costs at the Tonkin Springs project which the Company only received payments made through July 31, 2003. Cash flows from investing activities was $1,004,000 for the year ended December 31, 2003 compared to $(35,962) in 2002 primarily reflecting the $1,000,000 Purchase Price payments by BacTech and BacTech Nevada in 2003, a $40,000 technology license payment in 2002. Cash flow from financing activities decreased to $441,727 for the year ended December 31, 2003 from $803,221 in 2002 and consisted primarily of the $450,000 in proceeds from the sale of common stock during 2003 compared to $816,154 in net proceeds raised from the sale of common stock in 2002. In addition, during 2003 there was a decrease in payments on installment purchase contracts as those contracts were paid-off. Purchase Price payments to the Company under the BacTech Nevada transaction are anticipated to be adequate to fund corporate costs through (date) 2004. Additional Purchase Payments from BacTech Nevada are to be received under the agreement commencing July 31, 2004. The Company's ability to fund its operations is dependent upon BacTech Nevada making its payments of the Purchase Price to the Company and fulfilling its Funding Obligation to TSLLC. The Company may also sell additional equity, seek merger candidates or enter into other business arrangements. Results of Operations - 2003 Compared to 2002 For the year ended December 31, 2003, the Company recorded a net loss of $(854,079), or $(.05) per share, compared to a net loss for 2002 of $(1,375,459) or $(.09) per share. The Company recorded a cumulative-effect gain on implementation of SFAS 143 of $404,000, or $0.02 per share as discussed further below, while no similar item was recorded during 2002. In 2003, the Company realized $369,696 of gain on the sale of the 55% interest in TSLLC to BacTech Nevada and $27,155 of accrued interest related to the BacTech Nevada Purchase Price receivable. This gain on the sale of the TSLLC interest is being realized as Purchase Price payments from BacTech Nevada are received. For 2002 the Company recorded $30,000 in revenues for management contract fees with GRC. General and administrative expense increased $162,674 in 2003 to $492,876, primarily reflecting the costs of the annual meeting of shareholders of approximately $45,000 and $32,000 in increased legal and accounting costs primarily related to the Registration Statement filed with the Securities and Exchange Commission, and a $27,000 increase in outside directors fees with the addition of 3 directors to the board. During 2003 $258,613 of general and administrative expense was allocated to "Holding costs of Tonkin Springs property" while $217,909 of such allocations were made in 2002. However, in 2002 $129,441 of general and administrative expense was allocated to the cost of 22 services provided under the GRC management contract and included in "Exploration expense (costs of services provided under GRC management contract)" while no such allocations were made during 2003. Total holding costs for the Tonkin Springs property were $443,218 during 2003 (through July 31, 2003) compared to $956,356 for all of 2002 and include allocation of corporate office general and administrative as noted above. Holding costs for the Tonkin Springs property were reduced in 2003 by $68,500 of cost reimbursement from BacTech and a $36,000 reduction of reclamation liability related to the Properties. Stock compensation expense of $290,000 was recognized in 2003 related to the sale of 1,000,000 shares of Common Stock to its largest shareholder at a price below the market price of the shares on the date of the transaction. The Company took an expense charge as a realization reserve for the full value ($363,165) of shares of its common stock issued in exchange for 675,676 shares of stock of GRC. In 2003, accretion expense of asset retirement obligations under SFAS 143 totaled $56,583 while no similar expense was recognized in 2002 since the Company implemented SFAS 143 effective January 1, 2003. Depreciation expense increased during 2003 to $15,404 from $11,082 during 2002 primarily reflecting amortization of capitalized license fees commencing during 2003. The implementation of SFAS 143 effective January 1, 2003 resulted in a cumulative effect gain on implementation of SFAS 143 of $404,000 related to the reversal of reclamation obligation expense in prior years for the Tonkin Springs project reduced by amortization capitalized costs related to SFAS 143 computed asset retirement reflecting prior years gold production. The gain on implementation of SFAS 143 and the accretion of asset retirement obligations had no impact on the Consolidated Statement of Cash Flows for 2003. GRC's audited operating loss for the year ended December 31, 2003 and 2002 was $(496,017) and $(788,646), respectively, of which the Company's share would be approximately $(188,653) and $(218,021), respectively. Under equity accounting, the Company has not recorded its share of GRC's operating losses to date since such recognition would reduce its zero basis investment in GRC to below zero. The overhead expense of the Company allocated to the management contract during the year ended December 30, 2002 totaled $129,441, representing allocation of staff time. 23 ITEM 7. FINANCIAL STATEMENTS Index to Financial Statements.................................... 24 Report of Independent Auditors................................... 25 Consolidated Statements of Operations for the years ended December 31, 2003 and 2002................................. 26 Consolidated Balance Sheet at December 31, 2003.................. 27 Consolidated Statements of Changes in Shareholders'.............. 28 Equity for the years ended December 31, 2003 and 2002 Consolidated Statements of Cash Flows for the ................... 29 years ended December 31, 2003 and 2002 Notes to Consolidated Financial Statements....................... 31 24 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders U.S. Gold Corporation Lakewood, Colorado We have audited the accompanying consolidated balance sheet of U.S. Gold Corporation as of December 31, 2003 and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the years ended December 31, 2003 and 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based upon our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, has no current source of operating revenues, and needs to secure financing to remain a going concern. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of U.S. Gold Corporation as of December 31, 2003, and the results of its operations and its cash flows for the years ended December 31, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of America. Stark Winter Schenkein & Co., LLP March 18, 2004 Denver, Colorado 25
U.S. GOLD CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2003 2002 ---- ---- OTHER REVENUE: Recognized gain on sale of TSLLC interest to BacTech Nevada (Note 3) $ 369,696 $ -- Management contract fees from Gold Resource Corporation ("GRC")(Note 4) -- 30,000 Interest income 31,106 10,276 Gain on sale of other assets 4,000 15,498 ----------- ----------- Total other revenue 404,802 55,774 ----------- ----------- COSTS AND EXPENSES: General and administrative 492,876 330,202 Holding costs of Tonkin Springs property 443,218 956,356 Exploration expense (costs of services provided to GRC under management contract) (Note 4) -- 129,441 Stock compensation expense (Note 8) 290,000 -- Realization reserve-GRC stock (Note 4) 363,165 -- Interest 1,635 4,152 Accretion of asset retirement obligation 56,583 -- Depreciation 15,404 11,082 ----------- ----------- Total costs and expenses 1,662,881 1,431,233 ----------- ----------- (Loss) before income taxes and cumulative effect of accounting change (1,258,079) (1,375,459) ----------- ----------- Provision for income taxes -- -- ----------- ----------- (Loss) before cumulative effect of accounting change (1,258,079) (1,375,459) ----------- ----------- Accounting change: cumulative-effect gain on implementation of SFAS 143 404,000 -- ----------- ----------- Net (loss) $ (854,079) $(1,375,459) =========== =========== Basic and diluted per share data: (Loss) before accounting change: Basic $ (0.07) $ (0.09) =========== =========== Diluted $ (0.07) $ (0.09) =========== =========== Accounting change Basic $ 0.02 $ -- =========== =========== Diluted $ 0.02 $ -- =========== =========== Net (loss) Basic $ (0.05) $ (0.09) =========== =========== Diluted $ (0.05) $ (0.09) =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
26 U.S. GOLD CORPORATION CONSOLIDATED BALANCE SHEET DECEMBER 31, 2003 ASSETS Current assets: Cash and cash equivalents $ 197,992 Installment purchase contract receivable, current portion (Note 3) 375,000 Other current assets 8,634 ------------ Total current assets 581,626 ------------ Installment purchase contract receivable, (non-current) (Note 3) 369,338 Property and equipment, net (Note 6) 8,344 Investment in Tonkin Springs LLC (Note 3) 880,840 Investment in affiliate-GRC (Note 4) -- Other assets 706 ------------ TOTAL ASSETS $ 1,840,854 ============ LIABILITIES, DEFERRED GAIN & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities 48,522 Accrued directors fees, related parties 31,900 ------------ Total current liabilities 80,422 ------------ Related party payables, long-term (Note 11) 544,760 ------------ Total liabilities 625,182 ------------ Deferred gain-sale of TSLLC interest 270,905 ------------ Commitments and contingencies (Notes 1, 3, 5 and 11) -- Shareholders' equity (Note 8): Common stock, $.10 par value, 35,000,000 shares authorized; 19,188,954 shares issued and outstanding 1,918,896 Additional paid-in capital 33,405,364 Accumulated (deficit) (34,379,493) ------------ Total shareholders' equity 944,767 ------------ TOTAL LIABILITIES, DEFERRED GAIN & SHAREHOLDERS' EQUITY $ 1,840,854 ============ The accompanying notes are an integral part of these consolidated financial statements. 27
U.S. GOLD CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 Stock Additional Common Par Paid-in Accumulated Shares Value Capital (Deficit) Total ---------- ---------- ----------- ------------- ---------- Balance, January 1, 2002 14,026,390 $1,402,639 $31,975,303 $(32,149,955) $1,227,987 Sale of shares and warrants for cash at $.35/share, net of issuance cost 857,143 85,714 178,285 - 263,999 Sale of shares for cash at $.40/share, net of issuance cost 1,570,000 157,000 395,155 - 552,155 Net (loss) - - - (1,375,459) (1,375,459) ---------- ---------- ----------- ------------ ----------- Balance, December 31, 2002 16,453,533 $1,645,353 $32,548,743 $(33,525,414) $ 668,682 ---------- ---------- ----------- ------------- ----------- Sale of shares for cash at $.45/share, plus adjustment of $.29/share 1,000,000 100,000 640,000 - 740,000 Penalty forgiven with warrant re-pricing - - 25,500 - 25,500 Issuance of shares in exchange for GRC shares at $.54/share 672,528 67,253 295,912 - 363,165 Exercise of stock options at $.16/share 1,063,128 106,313 (104,713) - 1,600 Treasury shares cancelled (235) (23) (78) - (101) Net (loss) - - - (854,079) (854,079) ---------- ---------- ----------- ------------ ----------- Balance, December 31, 2003 19,188,954 $1,918,896 $33,405,364 $(34,379,493) $ 944,767 ========== ========== =========== ============ =========== The accompanying notes are an integral part of these consolidated financial statements.
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U.S. GOLD CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2003 2002 ---- ---- Cash flows from operating activities: Cash received under management contract (Note 4) $ -- $ 30,000 Cash paid to suppliers and employees (1,253,584) (871,869) Interest received 3,047 11,110 Interest paid (1,635) (4,152) Income taxes paid -- -- ----------- ----------- Cash (used in) operating activities (1,252,172) (834,911) ----------- ----------- Cash flows from investing activities: BacTech Nevada purchase price payments (Note 3) 1,000,000 -- Increase in restrictive time deposits for reclamation -- (10,223) Payment on technology license -- (40,000) Capital expenditures -- (1,237) Sale of assets 4,000 15,498 ----------- ----------- Cash provided by (used in) investing activities 1,004,000 (35,962) ----------- ----------- Cash flows from financing activities: Sale of common stock & warrants for cash, net of issuance cost (Note 8) 450,000 816,154 Advance to GRC (Note 4) (30,000) (30,000) Repayment of borrowing from GRC (Note 4) 30,000 30,000 Payments on installment purchase contracts (8,273) (12,933) ----------- ----------- Cash provided by financing activities 441,727 803,221 ----------- ----------- Increase (decrease) in cash and cash equivalents 193,555 (67,652) Cash and cash equivalents, beginning of year 4,437 72,089 ----------- ----------- Cash and cash equivalents, end of year $ 197,992 $ 4,437 =========== =========== Reconciliation of net (loss) to cash (used in) operating activities: Net (loss) $ (854,079) $(1,375,459) Items not providing/requiring cash: Accrued interest income (18,155) -- Stock compensation expense (Note 9) 290,000 -- Realization reserve-GRC stock (Note 4) 363,165 -- Gain on sale of interest to BacTech Nevada (Note 3) (369,696) -- Cumulative-gain-implementation of SFAS 143 (Note 3) (404,000) -- Accretion of asset retirement obligation-SFAS 143 56,583 Depreciation 22,297 11,082 (Increase) decrease in other assets related to operations 7,135 (18,886) Increase (decrease) in liabilities related to operations (345,422) 548,352 ----------- ----------- Cash (used in) operating activities $(1,252,172) $ (834,911) =========== ===========
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U.S. GOLD CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, (continued) Non-cash financing and investing activities: 2003 2002 ---- ---- Stock issued to RMB in exchange for GRC shares (Note 8) $ 363,165 $ -- ========== ========= Deferred credit-BacTech Nevada (Note 3) $ 270,905 $ -- ========== ========= Net assets transferred to BacTech Nevada in purchase (Note 3) $1,076,582 $ -- ========== ========= Installment purchase contract receivable (Note 3) $ 744,338 $ -- ========== ========= TSLLC Investment (Note 3) $ 880,840 $ -- ========== ========= Exercise of stock options utilizing cashless exercise $ 106,313 $ -- ========== ========= The accompanying notes are an integral part of these consolidated financial statements.
30 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: U.S. Gold Corporation (the "Company") was organized under the laws of the State of Colorado on July 24, 1979. Since its inception, the Company has been engaged in the exploration for, development of, and the production and sale of gold and silver. RECLASSIFICATIONS: Certain adjustments have been made in the financial statements for the year ended December 31, 2002 to conform to accounting and financial statement presentation for the year ended December 31, 2003. BASIS OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated. The financial statements of Tonkin Springs LLC ("TSLLC") were consolidated until July 31, 2003, when a 55% interest in TSLLC was sold to BacTech Nevada (See Note 3), after which the Company's 45% interest in TSLLC is classified as an investment. STATEMENTS OF CASH FLOWS: The Company considers cash in banks, deposits in transit, and highly liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. EQUITY METHOD INVESTMENTS: Investment in common stock of GRC, an affiliate of the Company, are recorded under the equity method of accounting. The shares of GRC were assessed by the Company to be of undeterminable market value and have therefore been recorded on a zero basis. See Note 4 for additional information. PROPERTY AND EQUIPMENT: Office furniture, equipment and vehicles are carried at cost not in excess of their estimated net realizable value. Normal maintenance and repairs are charged to earnings while expenditures for major maintenance and betterments are capitalized. Gains or losses on disposition are recognized in operations. EXPLORATION AND DEVELOPMENT COSTS: Costs of acquiring mining properties and any exploration and development costs are expensed as incurred unless proven and probable reserves exist and the property is a commercially minable property. Mine development costs incurred either to develop new ore deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production are also capitalized. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates, at least quarterly, the carrying value of capitalized mining costs and related property, plant and equipment costs, if any, to determine if these costs are in excess of their net realizable value and if a permanent impairment needs to be recorded. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets." 31 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 Depreciation: Depreciation of office furniture, equipment and vehicles is computed using straight-line methods. Office furniture, equipment and vehicles are being depreciated over the estimated economic lives ranging from 3 to 5 years. PROPERTY RETIREMENT OBLIGATION: The Company implemented SFAS 143, "Accounting for Asset Retirement Obligations," effective January 1, 2003. SFAS 143 requires the fair value of a liability for an asset retirement obligation to be recognized in the period that it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The adoption of SFAS 143 as related to the Tonkin Springs property resulted in an adjustment to operations for the cumulative effect of such implementation. Ongoing environmental and reclamation expenditures are credited to the asset retirement obligation as incurred to the extent they relate to asset retirement obligation and to expense to the extent they do not so apply. The Company's 45% interest in TSLLC is carried as an investment subsequent to the sale of a 55% interest to BacTech, effective July 31, 2003. Footnote disclosure of financial information relating to TSLLC includes SFAS 143 disclosure (see Note 3). STOCK OPTION PLANS: The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees", and related interpretations in accounting for all stock option plans. Under APB Opinion 25, no compensation cost has been recognized for stock options issued to employees as the exercise price of the Company's stock options granted equals or exceeds the market price of the underlying common stock on the date of grant. SFAS 123, "Accounting for Stock-Based Compensation", requires the Company to provide pro forma information regarding net income as if compensation costs for the Company's stock option plans had been determined in accordance with the fair value based method prescribed in SFAS 123. To provide the required pro forma information, the Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model. REVENUE RECOGNITION: Gains on the sale of mineral interests, if any, includes the excess of the net proceeds from sales over the Company's net book value in that property. Management contract fees are recognized as revenue earned is determined to be realizable. PER SHARE AMOUNTS: SFAS 128, "Earnings Per Share", provides for the calculation of "Basic" and "Diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted-average number of shares outstanding during the period (17,696,098 for 2003 and 15,334,157 for 2002). Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the Company, similar to fully diluted earnings per share. As of December 31, 2003 and 2002, warrants and options are not considered in the computation of diluted earnings per share as their inclusion would be antidilutive. INCOME TAXES: The Company accounts for income taxes under SFAS 109, "Accounting for Income Taxes". Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. 32 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 BUSINESS RISKS: The Company continually reviews the mining risks it encounters in its operations. It mitigates the likelihood and potential severity of these risks through the application of high operating standards. The Company's operations have been and in the future may be, affected to various degrees by changes in environmental regulations, including those for future site restoration and reclamation costs. The Company's business is subject to extensive license, permits, governmental legislation, control and regulations. The Company endeavors to be in compliance with these regulations at all times. USE OF ESTIMATES: The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. FAIR VALUE OF FINANCIAL INSTRUMENTS: SFAS 107, "Disclosures About Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2003. The respective carrying value of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, cash equivalents, restricted time deposits, purchase price receivables, accounts payable and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value or they are receivable or payable on demand. RECENT PRONOUNCEMENTS In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS 150 changes the accounting guidance for certain financial instruments that, under previous guidance, could be classified as equity or "mezzanine" equity by now requiring those instruments to be classified as liabilities (or assets in some circumstances) on the balance sheet. Further, SFAS 150 requires disclosure regarding the terms of those instruments and settlement alternatives. SFAS 150 is generally effective for all financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150 in the first quarter of fiscal 2004 is not expected to have any material impact on the Company's financial position, results of operations or cash flows. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS 149 amends SFAS 133 to clarify the definition of a derivative and incorporate many of the implementation issues cleared as a result of the Derivatives Implementation Group process. This statement is effective for contracts entered into or modified after June 30, 2003, and should be applied prospectively after that date. The adoption of SFAS 149 is not expected to have a material effect on the financial statements. 33 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 In December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS 148, "Accounting for Stock-Based Compensation--Transition and Disclosure--an amendment of SFAS 123." SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation from the intrinsic value-based method of accounting prescribed by APB 25. As allowed by SFAS 123, the Company has elected to continue to apply the intrinsic value-based method of accounting, and has adopted the disclosure requirements of SFAS 123. The Company currently does not anticipate adopting the provisions of SFAS 148. In July 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 provides new guidance on the recognition of costs associated with exit or disposal activities. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan. SFAS 146 supercedes previous accounting guidance provided by the EITF Issue No. 94-3 "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." EITF Issue No. 94-3 required recognition of costs at the date of commitment to an exit or disposal plan. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Early application is permitted. The Company adopted SFAS 146 effective January 1, 2003. The adoption of SFAS 146 by the Company did not have a material impact on the Company's financial position, results of operations, or cash flows. In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements 4, 44, and 64, Amendment of FASB Statement 13, and Technical Corrections." Among other things, this statement rescinds FASB Statement 4, "Reporting Gains and Losses from Extinguishment of Debt" which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in APB Opinion 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," will now be used to classify those gains and losses. The provisions of SFAS 145 related to the classification of debt extinguishment are effective for years beginning after May 15, 2002. The adoption of SFAS 145 by the Company did not expected to have a material impact on the Company's financial position, results of operations, or cash flows. In November 2001, the EITF of the FASB issued EITF 01-9 "Accounting for Consideration Given by a Vendor to a Subscriber (Including a Reseller of the Vendor's Products)." EITF 01-9 provides guidance on when a sales incentive or other consideration given should be a reduction of revenue or an expense and the timing of such recognition. The guidance provided in EITF 01-9 is effective for financial statements for interim or annual periods beginning after December 15, 2001. The adoption of EITF 01-9 by the Company did not have a material impact on the Company's financial statements. 2. GOING CONCERN The Company's financial statements are prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced losses for the years ended December 31, 2003 and 2002 of $(854,079) and $(1,375,459), respectively. The Company has no current source of operating revenue and has remained operational during 2003 through the sale of equity and the sale of a 55% interest in TSLLC to BacTech. The Company's ability to continue as a going concern is contingent upon its ability to receive the remaining purchase price payments from BacTech, secure additional financing, increase ownership equity and attain profitable operations. 34 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 The Company is evaluating financing for its operations, which could include issuance of equity of the Company in public or private transactions. The Company may also consider a corporate transaction with another company such as a merger. It is presently uncertain if any such financing will be available to the Company, or will be available on terms acceptable to the Company. 3. TONKIN SPRINGS PROJECT As of December 31, 2003, the Company owns 45% of the Tonkin Springs LLC, a Delaware limited liability company ("TSLLC") which in turn owns the Tonkin Springs gold mine property located in Eureka County, Nevada. Effective July 31, 2003, the Company sold a 55% equity ownership interest in TSLLC to BacTech Nevada Corporation ("BacTech Nevada"), a Nevada corporation and subsidiary of BacTech Mining Corporation ("BacTech"), a Canadian corporation based in Ontario with shares traded on the TSX-Venture Exchange (symbol BM-T). BacTech Nevada assumed management and funding responsibilities for TSLLC effective July 31, 2003. BacTech is currently evaluating the Tonkin Springs property to determine if the property can be put back into production. The purchase price for BacTech Nevada's 55% equity ownership interest in TSLLC was $1,750,000 plus a funding obligation of $12 million to TSLLC. BacTech Nevada has paid a total of $1,000,000 of the purchase price through December 31, 2003. The remaining $750,000 is to be paid either upon commencement of commercial production at Tonkin Springs, or if production has not commenced by July 31, 2004, in 12 consecutive monthly payments of $62,500 commencing on that date. BacTech Nevada shall also pay 100% of funding required by TSLLC up to $12 million (the "Funding Obligation"). Through December 31, 2003, BacTech Nevada has reported that it has spent approximately $1,374,453 towards its Funding Obligation. If additional funding is required by TSLLC after the Funding Obligation, BacTech Nevada is required to advance the Company's share of any cash calls if requested by the Company (the "Advances"), with repayment to BacTech Nevada of any Advances plus interest from 50% of cash distributions otherwise due the Company. If BacTech Nevada withdraws from TSLLC at any time, its equity ownership interest would revert back to subsidiaries of the Company. The present value of the $1,750,000 purchase price payments of BacTech Nevada at July 31, 2003 was $1,717,183. The Company's gain of $640,601 on the sale to BacTech Nevada consists of $369,696 which has been recognized in income at December 31, 2003 and $270,905 which will be recognized in income as purchase price payments are received from BacTech Nevada. As of December 31, 2003, the Company had accrued interest of $18,155 related to the BacTech Nevada purchase price obligations. Under a letter agreement dated March 25, 2003, BacTech purchased the 55% interest in TSLLC effective as of July 31, 2003. As provided under that agreement BacTech reimbursed the Company for all holding costs at the Tonkin Springs property from March 25, 2003 through July 31, 2003 of approximately $68,500. The Company and BacTech Nevada have amended and restated both the Member's Agreement and the Operating Agreement of TSLLC to reflect the July 31, 2003 transaction. As amended, those agreements provide that until BacTech Nevada has 35 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 recovered its Funding Obligation, cash distributions from TSLLC (the "Distributions"), if any, shall be made based upon a sliding scale related to the gold price in effect from time to time. Pursuant to the sliding scale, Distributions to BacTech Nevada will range from 55% at $360 or more per ounce gold to 80% at $320 or less per ounce gold. After BacTech Nevada has received Distributions equal to its Funding Obligation of $12 million, then all Distributions shall be 55% to BacTech Nevada and 45% to the Company. BacTech Nevada has provided the Company with certain unaudited financial information for the period ended December 31, 2003. Set forth below are the unaudited summarized statement of operations of TSLLC for the five months ended December 31, 2003, and the unaudited summarized balance sheet of TSLLC as of December 31, 2003, both as prepared from data reported to the Company by BacTech Nevada. All costs have been funded by BacTech Nevada. TONKIN SPRINGS LLC STATEMENT OF OPERATIONS Five Month Period Ended December 31, 2003 ----------------------- (Unaudited) Property holding and evaluation costs $ 1,374,453 Accretion of asset retirement obligation 42,850 ----------- Total expenses 1,417,303 ----------- Net loss $(1,417,303) =========== TONKIN SPRINGS LLC BALANCE SHEET December 31, 2003 ------------------ (Unaudited) Assets: Property, plant, equipment, net $ 4,750,705 Restricted time deposit for reclamation bond 1,820,952 Other assets 63,333 ----------- Total assets $ 6,634,990 =========== Liabilities, Reserve and Members' Equity: Accounts payable and accrued liabilities $ - Reserve for asset retirement and reclamation 1,196,004 Other permitted obligations 72,511 ----------- Total liabilities and reserve 1,269,515 ----------- Members' Equity- BacTech Nevada Contributions 1,374,453 Net loss (1,417,303) ----------- Total BacTech Equity (42,850) ----------- Total U.S. Gold subsidiaries equity 5,409,325 ----------- Total members equity 5,366,475 ----------- Total liabilities, reserves and members' equity $ 6,634,990 =========== 36 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 Bonding of reclamation as required under various Nevada agencies and the Federal Bureau of Land Management "BLM" is the responsibility of TSLLC under the terms of the Tonkin Springs LLC. The estimate of reclamation costs, as approved by these agencies is currently $1,810,377. As of December 31, 2003, TSLLC had bonds posted in the aggregate amount of approximately $1,820,952 with the required governmental agencies secured by a restricted cash time deposit related to the estimated of reclamation costs. The projected estimate of "Obligation for asset retirement" for the Tonkin Springs properties as of December 31, 2003, reflecting the adoption of SFAS 143, is $1,196,004. The Company reflects its 45% share of this obligation, $538,200, in its investment balance for TSLLC. Actual asset retirement and reclamation, generally, will be commenced upon the completion of operations at the properties. The Company adopted SFAS 143 effective January 1, 2003 and related thereto, the Company recorded a cumulative-effect gain to operations of $404,000. This reflected the reversal of prior period expense related to reclamation cost accruals, and reduced in part, by amortization of capitalized reclamation amounts based upon units of production in prior years. The consolidated balance sheet effect at January 1, 2003 of implementation of SFAS 143 was to reduce obligations for retirement by $641,295 and reduce the carrying value of Tonkin Springs project assets by $237,295. During 2003 and through the date of the sale of 55% interest in TSLLC to BacTech, the Company recorded an expense for accretion and an increase in the Obligation for asset retirement by $56,583, to recognize the accretion of reclamation liability at an 8.5% annual factor through July 31, 2003. The following is a reconciliation of the aggregate of asset retirement obligation projected for TSLLC's books since adoption of SFAS 143 effective January 1, 2003: Asset retirement and reclamation liability-1/1/2003 $1,096,571 Accretion of liability at assumed 8.5% annual rate 99,433 ---------- Asset retirement and reclamation liability-12/31/03 $1,196,004 ========== It is anticipated that the capitalized asset retirement costs will be charged to expense based on the units of production method commencing with gold production at Tonkin Springs. There was no projected adjustment during 2003 for amortization expense of capitalized asset retirement cost required under SFAS 143 since the Tonkin Springs property was not in operation. 4. GOLD RESOURCE CORPORATION As of December 31, 2003, the Company owned 1,955,676 shares of common stock of Gold Resource Corporation ("GRC"), a private Colorado corporation and affiliate company. This ownership includes the acquisition of GRC shares from RMB International (Dublin) LTD. ("RMB") during 2003 as discussed in Note 8, and represents approximately 40% of GRC's capitalization as of December 31, 2003. Through its stock ownership in GRC, the Company has the opportunity to benefit from GRC's activities in Mexico. 37 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 GRC is currently evaluating a gold property in the state of Oaxaca, Mexico, designated as GRC's "El Aguila" property that GRC leased in November 2002. In August 2003, GRC entered into an agreement with Canyon Resources Corporation ("Canyon"), a public company with shares traded on the American Stock Exchange under the symbol "CAU", whereby Canyon could earn a 50% interest in the El Aguila property from GRC in exchange for funding $3.5 million in exploration and development cost at that property. That agreement provides various dates for Canyon to commit to funding of portions of the $3.5 million. Through December 31, 2003, Canyon has committed to fund $500,000 to GRC of which Canyon has paid $400,000 with the balance funded in January 2004. This funding is being used for Phase I and II exploration drilling (completed during 2003) and certain other engineering and metallurgical test work and other analysis, which is anticipated to be completed by the end of the second quarter of 2004. Upon completion of this work, Canyon will have up to 90 days to commit to fund an additional $3 million to earn a 50% joint venture interest in the El Aguila project, or alternatively, to receive 600,000 shares in GRC upon the withdrawal of Canyon from additional funding and termination of the El Aguila agreement with GRC. During August 2003 GRC terminated its lease of the Zimapan Project, a silver/lead/zinc mining property in the state of Zimapan, Mexico. The Company earned 1,280,000 of its shares of GRC stock through a management contract under which the Company provided general management of GRC business activities through December 31, 2001. As discussed further in Note 8, effective September 30, 2003, the Company acquired the 675,676 shares of GRC owned by RMB in exchange for 672,528 shares of unregistered common shares of the Company valued at $0.54 per share (for an aggregate value of $363,165). Effective January 1, 2002, the Company and GRC entered into a second management contract which expired by its term December 31, 2002. Under that contract the Company was to be paid $30,000 per month to provide similar general management of GRC. GRC paid only $30,000 to the Company and has been unable to make the other required payments. The balance due the Company of $330,000 has not been recognized as a receivable or as revenue, and will not be until and unless realization is assured. It is uncertain if GRC will be able to raise sufficient funding to pay the remaining management fee. GRC was responsible for its own funding and intends to and has been raising funds through the sale of GRC stock. The overhead expense of the Company allocated to the management contract for year 2002 totaled $129,441, representing allocation of staff time. The Company and GRC determined not to enter into a management contract for 2003. During 2003, the Company made a non-interest bearing and unsecured advance to GRC of $30,000 to enable GRC to make critical payments related to its mineral properties. GRC had repaid these advances as of December 31, 2003. These loans were approved by the then independent directors of the Company, consisting of Mr. John W. Goth and Mr. Richard F. Nanna. During 2002, the Company borrowed approximately $15,900 from GRC to make critical payments to vendors which advance was repaid during 2002. Subsequently in 2002, the Company made a non-interest bearing and unsecured advance to GRC of $30,000 to enable GRC to make critical payments related to its mineral properties. GRC had repaid these advances as of December 31, 2002. 38 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 William W. Reid and David C. Reid, each founders of GRC and officers and directors of the Company, had approximately 29% aggregate direct and beneficial ownership of GRC as of December 31, 2003. During 2003, William W. Reid, David C. Reid and William F. Pass, each officers of the Company, were each granted by GRC a non-qualified stock option to purchase 200,000 shares of GRC common stock at an exercise price of $.50 per share. During 2003, John W. Goth, a director of the Company, subscribed for and purchased directly from GRC 10,000 shares of GRC at $.50 per share. The shares of GRC are not currently publicly traded. The 1,280,000 shares of GRC earned under the 2000 Management Contract were assessed by the Company to have indeterminable market value and the investment was therefore recorded on a zero basis. The 675,676 shares of GRC acquired from RMB in September 30, 2003 in exchange for 672,528 shares of restricted shares of the Company's common stock (for an aggregate value of $363,165) were likewise assessed by the Company to have indeterminable market value. As a result, a reserve for realization of the cost of the GRC shares acquired from RMB has been fully established with an expense charge of $363,165 recognized during the year ended December 31, 2003. Under equity accounting, the Company has not recorded its share of GRC's operating losses to date since such recognition would reduce its zero basis investment in GRC to below zero. As presented below, GRC's unaudited operating losses for the two years ended December 31, 2003 and 2002 were $(496,017) and $(788,646), respectively, of which the Company's share is approximately $(199,994) and $(221,294), respectively. Following are the summarized audited consolidated balance sheet for GRC as of December 31, 2003 and consolidated statement of operations for two years ended December 31, 2003: 39 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 Gold Resource Corporation Consolidated Balance Sheet December 31, 2003 Assets Current assets-cash and cash equivalents $ 135,849 ----------- Total current assets 135,849 ----------- Other assets 1,937 ----------- Total assets $ 137,786 =========== Liabilities, Deferred Credit and Shareholders' (Deficit) Current liabilities: Accounts payable and accrued liabilities $ 98,358 Management contract fee payable to Affiliate U.S. Gold Corporation 330,000 Other liabilities - related parties 5,097 ----------- Total current liabilities 433,455 ----------- Deferred credit-Canyon phase I and II funding for El Aguila project 400,000 ----------- Total liabilities and deferred credit 833,455 ----------- Shareholders' (deficit): Preferred stock, $.001 par value; 5,000,000 shares authorized, none issued or outstanding -- Common stock, $.001 par value; 20,000,000 shares authorized; 4,850,176 issued and outstanding 4,850 Additional paid-in capital 1,136,491 Comprehensive income 12 Accumulated (deficit) (1,837,022) ----------- Total shareholders' (deficit) (695,669) ----------- Total Liabilities, Deferred Credit and Shareholders' (Deficit) $ 137,786 =========== 40 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 Gold Resource Corporation Statements of Operations Year Ended December 31, 2003 2002 ---------- ------------ Interest income $ 193 $ 243 --------- --------- Costs and Expenses: Costs of services provided under Management Contract with U.S. Gold Corporation -- 360,000 General and administration 58,173 4,547 Property acquisition related costs 46,750 130,562 Property exploration and evaluation 391,316 293,763 --------- --------- Total expenses 496,239 788,872 --------- --------- Net (loss) (496,046) (788,629) --------- --------- Comprehensive income (loss): Translation gain (charge) 29 (17) --------- --------- Net comprehensive (loss) $(496,017) $(788,646) ========= ========= 5. LOAN SETTLEMENT AGREEMENT WITH FABC On February 21, 1992, the Company entered into a Loan Settlement Agreement with its senior secured lender, The French American Banking Corporation ("FABC"). The Company discharged its debt to FABC and terminated all prior security interests related thereto. As part of the consideration to FABC under the Loan Settlement Agreement, the Company entered into an agreement between Tonkin Springs Gold Mining Company, a wholly-owned subsidiary of the Company ("TSGMC") and FABC entitled "Agreement To Pay Distributions," which requires TSGMC to pay a limited portion of certain distributions from TSVLP to FABC. TSVLP has complete control of such distributions, if any, to TSGMC. Under the terms of the Agreement To Pay Distributions, TSGMC is required to pay to FABC (i) the first $30,000 in cash or value of asset distributions, as defined in such agreement, received from TSVLP, plus (ii) an amount equal to 50 percent of such retained distributions in cash or value of asset distributions after TSGMC has first received and retained $500,000 of such retained distributions. This obligation to FABC shall terminate after FABC has been paid a total of $2,030,000 thereunder. 6. PROPERTY AND EQUIPMENT At December 31, 2003, property and equipment consisted of the following: Office furniture and equipment $ 43,640 Trucks and autos 73,579 Other equipment 9,947 --------- Subtotal 127,166 Less: accumulated depreciation (118,822) --------- Total $ 8,344 ========= 41 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 7. INCOME TAXES In various transactions entered into February 21, 1992, the Company had an ownership change, as that term is defined under Section 382 (g), IRC. As a result, the tax net operating loss carry forwards and the investment tax credit carry forwards are subject to annual limitations under Section 382 IRC, following the date of such ownership change. Except as noted below, the Company will receive no future benefits from net operating loss carryforwards or investment tax credit carryforwards existing as of the date of the ownership change. At December 31, 2003, the Company estimates that tax loss carry forwards to be $5,950,000 expiring through 2023. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2003 are presented below: Deferred tax assets: Alternative minimum tax credit carryfoward $ 11,200 Reclamation obligation 114,200 Net operating (loss) carryforward 1,391,600 Capital (loss) carryforward 268,400 ----------- Total gross deferred tax assets 1,785,400 ----------- Less valuation allowance (1,670,800) ----------- Net deferred tax assets 114,600 ----------- Deferred tax liabilities: Basis in TSVLP (114,600) ----------- Total net deferred tax asset $ -- =========== The Company believes that it is unlikely that the net deferred tax asset will be realized. Therefore, a valuation allowance has been provided for net deferred tax assets. The change in valuation allowance of approximately $370,000 primarily reflects a $258,000 increase of net operating (loss) carryforwards, a $26,600 decrease in the reclamation obligation related to the sale of a 55% interest to BacTech Nevada, and a $140,000 decrease in tax liability relating to the basis of TSVLP. A reconciliation of the tax provision for 2003 and 2002 at statutory rates is comprised of the following components: 2003 2002 ---- ---- Statutory rate tax provision on book loss $(290,000) $(303,000) Book to tax adjustments: Valuation allowance 290,000 303,000 --------- --------- Tax provision $ - $ - ========= ========= 8. SHAREHOLDERS' EQUITY Increase in authorized shares- Effective September 19, 2003, the shareholders of the Company approved an amendment to its Articles of Incorporation increasing the authorized shares of the Company from 18,000,000 common shares to 35,000,000 common shares. Subsequent to the increase to the authorized shares of the Company, agreements to refrain from exercise of certain stock option agreements with executive officers of the Company and with a non-executive director, aggregating 1,930,400 shares of the Company's common stock, were terminated and those stock option agreements became fully exercisable. 42 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 Private placement sale of stock to RIT- In December 2002, the Company entered into a subscription agreement with Resource Investment Trust, plc ("RIT"), an investment fund located in London, England, for the sale of 70,000 shares of restricted common stock at $.40/share for proceeds of $28,000. During January 2003, the Company entered into a second subscription agreement with RITfor the sale of 1,000,000 shares of restricted common stock at $.45 per share for net proceeds of $450,000. RIT is the Company's largest shareholder, owning approximately 17% of the outstanding shares as of December 31, 2003. Because RIT is a greater than 10% shareholder of the Company and the stock was issued below its market price at the date of the closing of the transaction, the Company recognized stock compensation expense of $290,000. Exchange of stock for shares in GRC- Effective September 30, 2003, the Company acquired the 675,676 shares of GRC common stock owned by RMB International (Dublin) Ltd. ("RMB") in exchange for 672,528 shares of unregistered common shares of the Company valued at $0.54 per share (for an aggregate value of $363,165). The Company has filed a registration statement with the Securities and Exchange Commission covering the shares issued to RMB but it has not been declared effective to date. This transaction with RMB terminates the "Bring Along Obligation" under a subscription agreement dated May 6, 2002 that obligated the Company and the founders of GRC, under certain circumstances, to sell some or all of their shares of GRC to a third party on a pari passu basis along with all of the shares owned by RMB, and which gave RMB the contingent right to seek and negotiate such sale for up to 51% of the then outstanding shares of GRC. The independent directors of the Company unanimously approved this transaction with RMB (see Note 4). Sale of stock arranged by IBK Capital- Effective May 30, 2002 the Company entered into a subscription agreement ("Initial Private Placement") with Excalibur Limited Partnership ("Excalibur"), an Ontario, Canada limited partnership, for the sale of 857,143 restricted common shares and warrants for $300,000. The net proceeds were $263,999, after payment of commission and legal and accounting costs of $36,001. The Company was willing to sell the stock at a price per share lower than the quoted market price and to include warrants to purchase 428,572 shares of common stock at $0.53 per share through May 30, 2004. No value was assigned to the warrants. On April 30, 2003, the Company and Excalibur agreed to reduce the exercise price of warrants held by Excalibur for the purchase of 428,572 shares of stock of the Company from $.53 per share to $.30 per share (the market price of the shares on April 30, 2003) and to extend the exercise period under the warrants from May 30, 2004 to May 30, 2006. In exchange, Excalibur agreed to forgive current and future penalties incurred by the Company for failure to have an effective registration statement with the Securities and Exchange Commission for the Excalibur purchased shares and warrants. While the Company has filed a registration statement with the Securities and Exchange Commission, it has not been declared effective to date. Penalties forgiven by Excalibur aggregated $25,500 through April 30, 2003, which was credited to Additional paid-in capital. During May and June 2002, the Company entered into various subscription agreements ("Second Private Placement") with sophisticated private investors for the sale of 1,500,000 shares of restricted common stock at $.40/share for an aggregate of $600,000, with net proceeds of $552,155. 43 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 The Company is obligated to file a registration statement with the Securities and Exchange Commission for shares subject to the Initial Private Placement and the Second Private Placement and to maintain the effectiveness of such registration statement for the lesser of 2 years or when such registration is no longer required. Stock Options- Stock options have been granted to key employees, directors and others under the amended and restated Non-Qualified Amended and Restated Stock Option and Stock Grant Plan (the "Plan"). Options to purchase shares under the Plan were granted at market value as of the date of the grant. Effective September 19, 2003 the shareholders of the Company increased the total number of shares under the Plan to 3,500,000.
2003 2002 ------------------------ ----------------------- Weighted Average Weighted Average Range of Exercise Range of Exercise Shares Prices Shares Prices -------- -------- -------- -------- Outstanding, beginning of year 2,048,295 $.16 2,048,295 $.16 Granted 675,000 $.50-.86 - - Exercised 1,063,128 $.16 - - Canceled through cashless exercise (292,474) $.16 - - Expired - - - - --------- -------- --------- ---- Outstanding, end of year 1,367,693 $.16-.86 2,048,295 $.16 Options conditionally agreed not to be exercised - - (930,400) $.16 --------- -------- --------- ---- Options exercisable, end of year 1,367,693 $.16-.86 1,117,895 $.16 ========= ======== ========= ==== Weighted average fair value of Option granted during year $ .71 $ - ========= =========
During 2002 and 2003, the Company entered into agreements with its executive officers and a director whereby those persons agreed not to exercise stock options for an aggregate total of 1,750,100 shares (including 930,400 as of December 31, 2002) so as to make shares available for sale by the Company. With the increase approved by the shareholders effective September 19, 2003 to the authorized capitalization of the Company, these agreements were terminated by their terms. Exercise of stock options during 2003 included 1,053,128 shares exercised utilizing the cashless exercise provisions under the Plan where 292,474 option shares are cancelled in payment for the exercise price of option shares exercised. The following table summarizes information about stock options outstanding at December 31, 2003: 44 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 Options Outstanding Weighted Average Weighted - ----------------------- ----------------------- -------- Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Prices at 12/31/03 Life Price At 12/31/03 Price - -------- ----------- ----------- -------- ----------- -------- $.16 692,693 0.1 yrs. $.16 692,693 $.16 $.50 100,000 4.2 yrs. $.50 100,000 $.50 $.56 200,000 4.8 yrs. $.56 - $.56 $.85 275,000 4.9 yrs. $.85 - $.85 $.86 100,000 4.2 yrs. $.86 - $.86 The effect of applying SFAS 123 pro forma net (loss) is not necessarily representative of the effects on reported net income (loss) for future years due to, among other things, the vesting period of the stock options and the fair value of additional stock options in future years. For purpose of pro forma disclosure, the estimated fair value of the options is charged to expense in the year that the options were granted. In 2002, the Company's pro forma loss is equal to their net (loss) since no options were granted 2002. Under the accounting provisions of SFAS 123, the Company's net loss and net loss per share for 2003 would have been adjusted to the following pro forma amounts: 2003 Net Loss ------------------------------------ As reported Pro forma ------------ ------------- (Loss) before cumulative effect of accounting change $(1,258,079) $(1,621,079) Accounting change: cumulative-effect gain on Implementation of SFAS 143 404,000 404,000 ----------- ----------- Net (loss) $ (854,079) $(1,217,079) ============= =========== Basic and diluted net loss per share ------------------------------------ As reported Pro forma ----------- --------- (Loss) before accounting change: Basic $(0.07) $(0.09) Diluted $(0.07) $(0.09) Accounting change Basic $ 0.02 $ 0.02 Diluted $ 0.02 $ 0.02 Net (loss) Basic $(0.05) $(0.07) Diluted $(0.05) $(0.07) 9. Employee Benefit Plans On December 10, 1985, the Company's Board of Directors adopted a Simplified Employee Pension Plan ("SEP"). The Company intends to make a determination of contributions under the SEP on an annual basis, based upon review by the Board of Directors of the Company's financial statements as of its fiscal year end. The Company has not yet determined any contributions to the SEP for the year ended December 31, 2003 and no contribution was made for the year ended December 31, 2002. Contributions made under the SEP in any one calendar year for any one employee may not be more than the smaller of $40,000 or 25% of that employee's total compensation. 45 U.S. GOLD CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2003 10. RENTAL EXPENSE AND COMMITMENTS AND CONTINGENCIES Rent expense during the years ended December 31, 2003 and 2002 on all operating leases was $0 and $12,461, respectively. The Company has transferred its interest in several mining properties over the past years. The Company could remain potentially liable for environmental enforcement actions related to its prior ownership interest of such properties. However, the Company has no reasonable belief that any violation of relevant environmental laws or regulations has occurred regarding these transferred properties. 11. RELATED PARTY TRANSACTIONS Gold Resource Corporation- See Note 4. Other Related Party Items- Commencing in 1998 and through December 31, 2002, the executive officers of the Company voluntarily deferred a portion of their base salary in order to conserve working capital of the Company. As of December 31, 2003, the total amount of such voluntary deferral was $544,760 including $154,666 relating to 2002. 12. SUBSEQUENT EVENT Effective February 25, 2004, the Company entered into a Finder's Fee Agreement with Meridian Capital Ltd. ("Meridian"), a Canadian merchant bank, whereby Meridian agreed to assist the Company in seeking qualified equity investment through the sale of Units. With Unit Subscription Agreements, the Company sold Units at $0.90 where each Unit was made up of one share of common stock and one Unit Purchase Warrant. Unit Purchase Warrants are exercisable for 2 years from date of issue and provide that one share of common stock can be purchased for $1.25 plus four (4) Unit Purchase Warrants. Through the March 12, 2004 termination date of the Meridian agreement, the Company raised net proceeds of $82,350 through the sale of 100,000 Units made up of 100,000 shares of common stock and Unit Purchase Warrants for aggregate 25,000 common shares exercisable at $1.25/share and expiring March 10, 2006. Meridian was paid a fee of 8.5% of monies raised for the Company through the sale of Units, $10,000 for expenses, and warrants exercisable for 2 years to purchase 20,000 shares of the Company (equal to 20% of the Units sold) at a warrant exercise price of $0.90 per share (the "Meridian Warrants"). The common stock issued with the Units and the common shares reserved for exercise of the Unit Purchase Warrants and Meridian Warrants have not been registered under the 1933 Act and are restricted securities. The Company has agreed to use its commercially reasonable efforts to prepare and file with the Securities and Exchange Commission a registration statement covering the resale of common stock issued with the Units and common stock issuable upon exercise of the Unit Purchase Warrants and the Meridian Warrants, and to maintain the effectiveness of such registration statement for up to 2 years. 46 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 8A. CONTROLS AND PROCEDURES DISCLOSURES CONTROLS AND PROCEDURES. Regulations under the Securities Exchange Act of 1934 require public companies to maintain "disclosure controls and procedures," which are defined to mean a company's controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), we evaluated the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-14(c) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act")). Based on this evaluation performed as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure and controls and procedures as of December 31, 2003 are effective to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The following table sets forth certain information as to each officer and director of the Company: 47
Board Positions With Position Name Age the Company Held Since Term Expires - ---- --- -------------- ---------- ------------ William W. Reid 55 President, Chief 1979 Next Meeting Executive Officer of Shareholders or and Director When Successor is Elected John W. Goth 76 Director 1987 Next Meeting of Shareholders or When Successor is Elected Richard F. Nanna 54 Director 2003 Next Meeting of Shareholders or When Successor is Elected Peter Bojtos 54 Director 2003 Next Meeting of Shareholders or When Successor is Elected Curtis Deane 54 Director 2003 Next Meeting of Shareholders or When Successor is Elected Richard F. Mauro 58 Director 2003 Next Meeting of Shareholders or When Successor is Elected David C. Reid 52 Vice President 1993 Next Meeting and Director of Shareholders or When Successor is Elected William F. Pass 57 Vice President, n/a n/a Chief Financial Officer, Secretary
48 WILLIAM W. REID-PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR Mr. Reid, a founder of the Company, has served as a Director and the President of the Company since its inception in 1979. Mr. Reid devotes a majority of his time to the business and affairs of the Company. Mr. Reid is also president and chairman of the board of directors of Gold Resource Corporation ("GRC"), a private corporation and an affiliate of the Company. From July 1, 2000 through December 31, 2002, the Company, including Mr. Reid, managed the affairs of GRC under management contracts between the Company and GRC which expired December 31, 2002. Commencing January 2, 2003, Mr. Reid may spend personal time on the business affairs of GRC. This time is not expected to interfere with his duties as an officer and director of the Company. (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS-CONTRACT WITH GOLD RESOURCE CORPORATION.") Effective January 1, 1994, Mr. Reid and the Company entered into an employment contract as discussed further under Executive Compensation, Employment Contracts. JOHN W. GOTH-DIRECTOR Mr. Goth has been a director of the Company since 1987. Mr. Goth also serves on the board of directors of Royal Gold, Inc., a publicly traded company. For the past ten years, Mr. Goth has been a self-employed mining consultant. RICHARD F. NANNA-DIRECTOR Mr. Nanna has been a director of the Company since January 17, 2003. Since 2000, Mr. Nanna has been employed by Apollo Gold Corporation, a publicly traded company and its predecessor company, Nevaro Gold, as Vice President-Exploration/Development. From 1993 to 1999, Mr. Nanna was Vice President of Exploration for FirstMiss Gold, Getchell Gold Mining and Placer Dome. PETER BOJTOS-DIRECTOR Mr. Bojtos was appointed as a director of the Company on May 19, 2003. From 1993 to 1995, he was chairman and chief executive officer of Greenstone Resources Limited, a company which was then constructing gold mines in Central America. Mr. Bojtos is a Professional Engineer and for the past 7 years has been an independent director of several mining and exploration companies. Mr. Bojtos is director, vice president and vice chairman of Fisher-Watt Gold Co. Inc. Mr. Bojtos also serves on the board of directors of Asian Mineral Resources Ltd., Birim Goldfields Inc, Desert Sun Mining Corp, GMD Resources Corp, Gossan Resources, Kalimantan Gold Corp Ltd, Link Mineral Ventures Inc., LMX Resources, Queenstake Resources Ltd, Tournigan Gold Corp (formerly named Tournigan Ventures Corp) and Vaaldiam Reources Ltd (previously named Noble Peak Resources Ltd). Mr. Bojtos is also a director of Sahelian Goldfields Inc. (Sahelian) which filed a proposal to its creditors under the Bankruptcy and Insolvency Act of Canada in July 2001. As a result Sahelian's creditors were stayed from taking action and the company was not placed into receivership or bankruptcy. The proposal of Sahelian was approved by the courts in September, 2001, and the company is now being reorganized. 49 CURTIS DEANE-DIRECTOR Mr. Deane was appointed as a director of the Company on May 19, 2003. Since 1987 Mr. Deane has been an employee of BNP Paribas with the title of director. BNP Paribas is a banking entity with worldwide operations and is an affiliate of French American Banking Corporation ("FABC"). FABC, in turn, is the owner of 2,197,265 shares of the Company representing approximately 12 percent of the outstanding shares as of the date of this Prospectus. In addition, FABC has certain contingent rights under the "Agreement To Pay Distributions" dated February 21, 1992 (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS- French American Banking Corporation"). RICHARD F. MAURO-DIRECTOR Mr. Mauro was appointed as a director of the Company on November 3, 2003. From 1999 until his retirement in 2003, Mr. Mauro was a partner and an attorney with the firm Moye, Giles, O'Keefe, Vermeire & Gorrell LLP, now known as Moye Giles LLP, which was the counsel to the Company. From 1992 to 1997, Mr. Mauro was executive vice president of the Castle Group, Inc., an investment management firm which invested in mining properties and companies in developing countries. Mr. Mauro is also a director of Canyon Resources Corporation, a publicly-held company. An affiliate of the Company, Gold Resource Corporation, has an exploration agreement with Canyon related to exploration of a gold property in Oaxaca, Mexico (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS-Gold Resource Corporation"). DAVID C. REID-VICE PRESIDENT EXPLORATION AND DIRECTOR Effective October 19, 1993, Mr. David Reid was appointed a member of the Board of Directors of the Company. On January 1, 1994, Mr. Reid became an employee and officer of the Company with the title Vice President Exploration and entered into an employment contract with the Company as discussed further under Executive Compensation, Employment Contracts. Mr. Reid devotes a majority of his time to the business and affairs of the Company. Mr. Reid is also vice president and a board member of GRC. From July 1, 2000 through December 31, 2002, the Company, including Mr. Reid, managed the affairs of GRC under management contracts between the Company and GRC which expired December 31, 2002. Commencing January 2, 2003, Mr. Reid may spend personal time on the business affairs of GRC. This time is not expected to interfere with his duties as an officer and director of the Company. (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS-CONTRACT WITH GOLD RESOURCE CORPORATION.") From January 1, 1993 through December 31, 1993, Mr. Reid was an employee of TSVLP and sole director and president of U.S. Environmental Corporation, a wholly-owned subsidiary of the Company and 0.5 percent owner and limited partner in TSVLP. From September 1, 1991 through December 31, 1992, Mr. Reid was a consultant to the Company. Prior to September 1991, Mr. Reid was an employee and officer (secretary) of the Company and served as a director. 50 WILLIAM F. PASS-VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY Mr. Pass joined the Company in June 1988 and was appointed Corporate Secretary on September 1, 1991 and effective January 1, 1994, was made Vice President Administration. Effective February 1, 1996, Mr. Pass was appointed Vice President, Chief Financial Officer and Corporate Secretary. Mr. Pass devotes a majority of his time to the business and affairs of the Company. From July 1, 2000 through December 31, 2002, the Company, including Mr. Pass, managed the affairs of GRC under management contracts between the Company and GRC which expired December 31, 2002. Commencing January 2, 2003, Mr. Pass may spend personal time on the business affairs of GRC. This time is not expected to interfere with his duties as an officer of the Company. Effective January 1, 1994, Mr. Pass and the Company entered into an employment contract as discussed further under Executive Compensation, Employment Contracts. There are no family relationships between officers and directors of the Company except that David C. Reid is brother to William W. Reid. Audit Committee and Financial Expert The Company has a separately-designated standing Audit Committee of the Board of Directors established in accordance with the Exchange Act and made up of John W. Goth, Curtis Deane and Peter Bojtos, each independent members of the Board of Directors. The Board of Directors have determined that John W. Goth, a Director and chairman of the Audit Committee of the Board of Directors, qualifies as a financial expert, and is independent as that term is used in the Exchange Act. Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon review of Forms 3 and 4 and amendments thereto furnished to the Company during 2003 and Forms 5 and amendments thereto, if any, furnished to the Company with respect to 2003, the Company is not aware that any person, who at any time during the fiscal year was a director, officer, beneficial owner of more than ten percent of the stock of the Company, failed to file on a timely basis, as disclosed in the above Forms, reports required by section 16(a) during the most recent fiscal year or prior years. Code of Ethics The Company has adopted, effective December 31, 2003, a code of ethics that applies to all the executive officers of the Company. A copy of the code of ethics is filed as an exhibit to this report. 51 ITEM 10. EXECUTIVE COMPENSATION Compensation of Officers Pension Plan On December 10, 1985, the Company's Board of Directors adopted a Simplified Employee Pension Plan ("SEP"). The Company evaluates annually contributions to the SEP based upon review by the Board of Directors of the performance of the Company. The Company has not yet determined if a contribution will be made for 2003. No contribution was made for 2002 or 2001. Under the SEP, the Company has the option of contributing a certain amount directly to its employees' Individual Retirement Accounts. The Plan covers all employees of the Company with certain participation requirements, however the Company is not required to make any contributions in a given year. If contributions are made, they must be made to all eligible employees. Contributions made under the SEP in any one calendar year for any one employee may not be more than the smaller of $40,000 for year 2003 or 25% of that employee's total compensation. Equity Compensation Plans The following table summarizes the total compensation of the Executive Officers of the Company for the Company's three fiscal years ended December 31, 2003. Except as set forth below under "Non-Qualified Stock Option and Stock Grant Plan," and "Pension Plan," there were no compensation plans for which cash or non-cash distributions, other than salaries, were made during the last fiscal year:
Summary Compensation Table Long Term Compensation Awards Payouts ---------------------- --------- Annual Compensation Restricted Securities All Name and Principal ----------------------------------- Stock Underlying LTIP Other Position Year Salary Bonus Other Awards($) Options Payouts($) Compensation - ------------------ ---- ---------- ----- ----- ----------- ---------- ---------- ------------ William W. Reid, 2003 $230,590(1) $ - $ - $ - 75,000(4) $ - $220,000(5) President and CEO 2002 $268,552(1) $ - $ - $ - - $ - $ - 2001 $256,803(1) $ - $ - $ - - $ - $ - William F. Pass, 2003 $114,372(1) $ - $ - $ - 75,000(4) $ - $185,920(5) Vice President, 2002 $121,688(2) $ - $ - $ - - $ - $ - Chief Financial 2001 $116,401(2) $ - $ - $ - - $ - $ - Officer and Secretary David C. Reid, 2003 $126,745(1) $ - $ - $ - 75,000(4) $ - $393,937(5) Vice President 2002 $134,873(3) $ - $ - $ - - $ - $ - 2001 $128,999(3) $ - $ - $ - - $ - $ -
(1) During 2002, the Company only paid Mr. William Reid $89,761 of his contractual salary of $268,552 with the balance of such contractual amount being deferred. During 2003, $99,475 of the balance due for 2002 contractual salary was paid and the remainder remains deferred and currently owing to Mr. Reid. Likewise for 2001, Mr. Reid was only paid $189,236 with the balance of his contractual salary amounts of $67,567 deferred and currently owing. The salary deferrals, which commenced during 1998 and continued through 2002, were each effected in order to conserve working capital of the Company. The balance of deferred salary due to Mr. 52 William Reid at December 31, 2003 totals $279,364 (which amount has not been paid to date). Effective January 1, 2003, Mr. William W. Reid and the Company amended Mr. Reid's Employment Contract to eliminate the annual upward adjustment provisions related to increases in the Consumer Price Index and to reduce his salary commencing for 2003 to $225,000 per year. Mr. Reid has agreed to re-negotiate with the Compensation Committee of the Board of Directors his compensation package. (2) During 2002, the Company only paid Mr. Pass $41,232 of his contractual salary of $121,688 with the balance of such contractual amount being deferred. During 2003, $44,764 of the balance due for 2002 contractual salary was paid and the remainder remains deferred and currently owing to Mr. Pass. Likewise for 2001, Mr. Pass was only paid $85,996 with the balance of his contractual salary amounts of $30,405 deferred and currently owing. The salary deferrals, which commenced during 1998 and continued through 2002, were each effected in order to conserve working capital of the Company. The balance of deferred salary due to Mr. Pass at December 31, 2003 totals $125,714 (which amount has not been paid to date). Mr. Pass has agreed to re-negotiate with the Compensation Committee of the Board of Directors his compensation package. (3) During 2002, the Company only paid Mr. David Reid $45,478 of his contractual salary of $134,873 with the balance of such contractual amount being deferred. During 2003, $49,737 of the balance for 2002 contractual salary was paid and the remainder remains deferred and currently owing to Mr. David Reid. Likewise for 2001, Mr. David Reid was only paid $95,215 with the balance of his contractual salary amount of $33,784 deferred and currently owing. The salary deferrals, which commenced during 1998 and continued through 2002, were each effected in order to conserve working capital of the Company. The balance of deferred salary due to Mr. David Reid at December 31, 2003 totals $139,682 (which amount has not been paid to date). Mr. Reid has agreed to re-negotiate with the Compensation Committee of the Board of Directors his compensation package. (4) During 2003, stock options of 75,000 shares at exercise price of $0.85/share were granted to each of the three Executive Officers of the Company under the Non-Qualified Stock Option and Stock Grant Plan. (5) During 2003, the Executive Officers exercised certain of their respective stock options at exercise price of $0.16/share which resulted in compensation for Federal tax purposes based upon the market price on the shares on the day of each exercise. During 2003, William W. Reid exercised options to purchase aggregate 300,000 shares, William F. Pass exercised options to purchase aggregate 232,326 shares, and David C. Reid exercised options to purchase 520,802 shares. Option Grants in Last Fiscal Year During 2003 the following grants of stock options were made to Executive Officers pursuant to the Non-Qualified Stock Option and Stock Grant Plan (the "Plan"): 53 Number of % of Total Securities Options Granted Underlying to Employees Options in Fiscal Exercise Expiration Name Granted Year Price/Share Date - ---- ---------- -------------- ----------- ---------- William W. Reid 75,000 33.3% $0.85 11/6/2008 William F. Pass 75,000 33.3% $0.85 11/6/2008 David C. Reid 75,000 33.3% $0.85 11/6/2008 Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Table Value Shown below is information at December 31, 2003 and for the year then ended with respect to the exercised and unexercised options to purchase the Company's common stock to Executive Officers under the Plan. Number of Securities Underlying Value of Unexercised Unexercised Shares Options at Options at Acquired 12/31/03 12/31/03($)(1) on Value Exercisable/ Exercisable/ Name Exercise(#) Realized($) Unexercisable Unexercisable - ---- ------------ ----------- ------------- -------------- William W. Reid 300,000 $220,000 318,407 and $210,149 75,000(2) $0 William F. Pass 232,326 $185,920 75,000(2) $0 David C. Reid 520,802 $393,937 75,000(2) $0 (1) Based upon the close price as reported by OTC Bulletin Board as of December 31, 2003 ($0.82 per share). (2) Unexercisable at December 31, 2003. Material Terms of Equity Compensation Plans The Non-Qualified Stock Option and Stock Grant Plan, as Amended (also as referred to as the "Plan") was adopted by the Company effective March 17, 1989. The Plan terminates by its terms on March 16, 2009. Under the Plan, as amended by shareholders on September 19, 2003, a total of 3,500,000 shares of Common Stock were reserved for issuance thereunder. As of December 31, 2003, there are outstanding stock option agreements under the Plan for an aggregate 1,367,693 shares, as described further above. During 2003, grants of 5-year stock option agreements covering an aggregate of 675,000 shares at an exercise prices of $.50-$.86 per share were made to four non-executive directors and the three executive officers of the Company. Five of the non-executive directors each 54 received options for 100,000 shares each at exercise prices reflecting the market price of the stock as of the date of grant of the option. Richard F. Nanna was granted options are exercisable at $0.50/share, Peter Bojtos' was granted options exercisable at $0/56/share, Curtis Deane was granted options exercisable at $0.56/share, and Richard F. Mauro was granted options exercisable at $0.86/share, and John W. Goth was granted options for 50,000 shares exercisable at $0.85/share. During 2003, executive officers William W. Reid, William F. Pass and David C. Reid were granted options for 75,000 shares each at exercise price of $0.85/share. General Information Regarding the Plan Under the Plan non-qualified stock options ("Options") and/or stock grants of Common Stock of the Company may be granted to key persons. The Plan was established to advance the interests of the Company and its stockholders by affording key persons, upon whose judgment, initiative and efforts the Company may rely for the successful conduct of their businesses, an opportunity for investment in the Company and the incentive advantages inherent in stock ownership in the Company. This Plan gives the Board broad authority to grant Options and make stock grants to key persons selected by the Board while considering criteria such as employment position or other relationship with the Company, duties and responsibilities, ability, productivity, length of service or association, morale, interest in the Company, recommendations by supervisors, and other matters, and to set the option price, term of option, and other broad authorities. Options shall not be granted at less than the fair market value at the date of grant and may not have a term in excess of 10 years. Shares issued to optioned upon exercise of Options or upon stock grants under the Plan are "restricted securities" as defined under the Securities Act of 1933, unless a Form S-8 Registration Statement covering such shares is effective. Restricted shares cannot be freely sold and must be sold pursuant to an exemption from registration (such as Rule 144) which exemptions typically impose conditions on the sale of the shares. Tax Effects on Participants Non-Qualified Stock Options. A non-qualified stock option results in no taxable income to the optionee or deduction to us at the time it is granted. An optionee exercising such an option will, at that time, realize taxable compensation in the amount of the difference between the option price and the then market value of the shares. Subject to the applicable provisions of the Code, a deduction for federal income tax purposes will be allowable to us in the year of exercise in an amount equal to the taxable compensation realized by the optionee. The optionee's basis in such shares is equal to the sum of the option price plus the amount includible in his income as compensation upon exercise. Any gain (or loss) upon subsequent disposition of the shares will be long-term or short-term gain (no loss), depending upon the holding period of the shares. If a non-qualified option is exercised by tendering previously owned shares of the Company's common stock in payment of the option price, then, instead of the 55 treatment described above, the following will apply. A number of new shares equal to the number of previously-owned shares tendered will be considered to have been received in a tax-free exchange; the optionee's basis and holding period for such number of new shares will be equal to the basis and holding period of the previously-owned shares exchanged. The optionee will have compensation income equal to the fair market value on the date of exercise of the number of new shares received in excess of such number of exchanged shares; the optionee's basis in such excess shares will be equal to the amount of such compensation income, and his holding period in such shares will begin on the date of exercise. Stock Grants. A stock grant results in taxable income to the grantee and deduction to the Company at the time of the grant for the market value of the stock grant. Compensation of Directors The Company reimburses its outside directors for reasonable expenses incurred by them in attending meetings of the Board of Directors or of Committees of the Board. No such expenses were incurred or paid during 2003 and 2002. Outside directors are to be paid $1,000 per month for services as directors. However, during 2002 and for prior year, Mr. Goth was not paid his full directors pay of which $1,600 was utilized during 2003 to exercise 10,000 shares under a stock option agreement and $29,900 remains due and payable as of December 31, 2003. Mr. Mauro elected not to receive payment of his director pay during 2003 and $2,000 is due and payable as of December 31, 2003. Employment Contracts The Company entered into Employment Agreements effective January 1, 1994, as amended June 1, 1995 and July 21, 1998 with William W. Reid, William F. Pass, and David C. Reid (the "Employment Contracts") each of which was initially for a five-year term. The Employment Contracts shall be extended automatically by one year upon each anniversary date unless either the Company or employee provides the other party required written notice, that the Employment Contract will not be so extended. During 1998 the Company gave written notice under each Employment Contract that it was not automatically extending the term by an additional year which resulted in such contracts having a term of four years subject to the automatic extensions each year as discussed above. Therefore, each of the Employment Contracts have a current term through December 31, 2006. William W. Reid's Employment Contract, as amended January 1, 2003, provides for annual base salary of $225,000. William F. Pass' Employment Contract provides for base salary of $75,000 per year for the first year, $90,000 per year for the second year, and annual upward adjustments thereafter based upon increases in the Consumer Price Index (All Items-Urban), also referred to as the "CPI-U". David C. Reid's Employment Contract provides for base salary of $75,000 per year for the first year, $100,000 per year for the second year, and annual upward adjustments thereafter based upon increases in the CPI-U. Effective January 1, 2003, Mr. William W. Reid and the Company amended Mr. Reid's Employment Contract to eliminate the annual upward adjustment provisions related to increases in the Consumer Price Index and to reduce his salary commencing for 2003 to $225,000 per year. During 1998, 1999, 2000, 2001 and through December 31, 2002, the 56 executives voluntarily deferred a portion of their base salary in order to conserve working capital. As of December 31, 2003, the Company owed deferred salary to William Reid in the amount of $279,364, William F. Pass in the amount of $125,714 and David C. Reid in the amount of $139,682. During 2003, the Company paid its executive officers the balance of regular pay due for 2002 (which was not paid in 2002 in order to conserve working capital) with William Reid paid $99,475, William Pass paid $44,764 and David Reid paid $49,737. Each of the Employment Agreements provides that the employee would be entitled to receive a termination payment from the Company in a lump sum equal to 2.9 times the employee's average annual compensation for the five taxable years immediately preceding the date of termination by the employee under certain circumstances (provided that the employee is not provided continued employment for a minimum of three years with compensation and other business terms equal to or more favorable to the employee than under the Employment Agreement) summarized as follows: i) the sale by the Company of substantially all of its assets to a single purchaser or to a group of affiliated purchasers; ii) the sale, exchange or other disposition, in one transaction or a series of related transactions, of at least 30 percent of the outstanding voting shares of the Company; iii) a decision by the Company to terminate its business and liquidate its assets; iv) the merger or consolidation of the Company with another entity or an agreement to such a merger or consolidation or any other type of reorganization; v) there is a material change in employee's authority, duties or responsibilities; or, vi) the Company acquires any stock or other investment in any business enterprise which acquisition or investment exceeds 40 percent of the net book value of the Company. Upon the death of an employee, the Company shall pay the employee's estate an amount equal to one year's salary; and upon termination by the Company following permanent disability of the employee, the Company shall pay the employee an amount equal to two years salary. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth the number of shares of the Company's common stock owned beneficially as of December 31, 2003, by each person known by the Company to have owned beneficially more than five percent of such shares then outstanding, by each person serving as a director of the Company, the Executive Officers, and all of the Company's officers and directors as a group. Percentage of Class Name and Address of Number Beneficially Beneficial Owner Type of Ownership of Shares Owned - ------------------- ----------------- --------- ------------ William W. Reid Record and Beneficial 720,693(1) 3.7% 25 Downing St. No. 1-501 Denver, CO 80218 David C. Reid Record and Beneficial 373,302(2) 1.9% 2201 Quitman St. Denver, CO 80212 57 William F. Pass Record and Beneficial 132,826(3) 0.7% 14820 W. 58th Pl Golden, CO 80403 John W. Goth Record and Beneficial 200,000(4) 1.0% 15140 Foothill Road Golden, CO 80401 Richard F. Nanna Record and Beneficial 100,000(5) 0.5% 4430 W. Commander Drive Winnemucca, Nevada 89445 Peter Bojtos Record and Beneficial 100,000(6) 0.5% 2582 Taft Ct. Lakewood, CO 80215 Curtis Deane Record and Beneficial 100,000(7) 0.5% BNP Paribas 787 7th Avenue New York, NY 10019 Richard F. Mauro Record and Beneficial 0(8) 0% 2552 East Alameda No. 128 Denver, Colorado 80209 Placer Dome U.S. Inc. Record and Beneficial 975,000 5.1% Suite 600-1055 Dunsmuir St. Vancouver, British Columbia, Canada V7X 1L3 (9) Resource Investment Beneficial 3,232,373 16.8% Trust plc Ocean House 10/12 Little Trinity Lane London, England EC4V 2DH French American Record and Beneficial 2,197,265 11.5% Banking Corporation 787 7th Ave New York, NY 10019 U.S. Global Investor Record and Beneficial 1,000,000 5.2% 7900 Callaghan Road San Antonio, Texas 78278-1234 (11) All officers and 1,726,821 8.8% directors as a group (7 persons) 58 (1) This number includes an option to purchase 502,693 shares at $.16 per share which are currently exercisable. This number excludes an option to purchase 75,000 shares at $.85 per share which cannot be exercised until May 7, 2004. (2) This number excludes an option to purchase 75,000 shares at $.85 per share which cannot be exercised until May 7, 2004. (3) This number excludes an option to purchase 75,000 shares at $.85 per share which cannot be exercised until May 7, 2004. (4) This number consists of an option to purchase 190,000 shares at $.16 per share which are currently exercisable. This number excludes an option to purchase 50,000 shares at $.85 per share which cannot be exercised until May 7, 2004. (5) This number consists of an option to purchase 100,000 shares at $.50 per shares which are currently exercisable. (6) This number consists of an option to purchase 100,000 shares at $.56 per share exercisable on or after March 20, 2004. (7) This number consists of an option to purchase 100,000 shares at $.56 per share exercisable on or after March 20, 2004. Mr. Curtis Deane, a director of the Company, is an employee of BNP Paribas which is an affiliate of French American Banking Corporation which is the record and beneficial owner of 2,197,265 shares if the Company, for which Mr. Deane disclaims beneficial ownership. (8) This number excludes an option to purchase 100,000 shares at $.86 per share which cannot be exercised until May 5, 2004. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Executive Officers and Directors- During 2002 the three executive officers made cash advances to the Company to allow the payment of wages to other employees and certain critical payments. The maximum aggregate amount of such advances from the three executive officers was approximately $30,000 which were repaid effective May 31, 2002. 59 During a portion of 2002, the Company elected not to pay certain salaries to its three executive officers in the aggregate amount of approximately $193,976 as of December 31, 2002 in order to conserve working capital. Of this total, $99,475 was not paid and was owned to William W. Reid, $44,764 was not paid and was owed to William F. Pass and $49,737 was not paid and was owned to David C. Reid. These amounts were fully paid to the executive officers during 2003. Commencing July 1, 1998 and effective through December 31, 2002, the three executive officers of the Company voluntarily deferred a portion of their individual salaries in order to conserve working capital of the Company. As of December 31, 2002 and 2003, the cumulative total amount of such voluntary deferral was $544,760 with William W. Reid owed $279,364, William F. Pass owed $125,714 and David C. Reid owed $139,682. Effective December 6, 2002 and as amended January 20, 2003 and March 17, 2003, the Company and each of its three executive officers and one non-executive director entered into agreements whereby those individuals agreed not to exercise an aggregate of 1,940,100 option shares until and unless there are sufficient authorized but unissued Common Shares became available. Of the aggregate number, William W. Reid agreed to not exercise 847,200 option shares, William F. Pass agreed to not exercise 278,600 option shares, David C. Reid agreed not to exercise 624,300 option shares, and John W. Goth agreed not to exercise 189,900 option shares. Such agreements were entered into so as to make shares available for sale by the Company during 2002 and 2003. Those individuals agreed to this limitation under their respective stock option agreements in order to allow the sale by the Company of Common Stock and warrants during 2002 and 2003 to raise critical funding for the Company. With the increase to the authorized amount of Common Stock of the Company approved by shareholders effective September 19, 2003, these agreements were terminated by their terms. IBK Capital Corp. On December 17, 2001 the Company and GRC, an affiliate of the Company, jointly entered into an agreement with IBK Capital Corp. of Toronto, Ontario, Canada ("IBK") whereby IBK agreed to separately assist the Company as well as GRC in efforts to seek and arrange equity investment. The Company and GRC determined to jointly seek the assistance of IBK since both the Company and GRC were interested in raising equity funding and IBK represented that since the shares of the Company are publicly traded and the shares of GRC are not, the pools of potential investors who might be contacted by IBK for equity investment would generally be different groups and therefore would not result in any conflict of interest between the interests of the Company and GRC. IBK is a limited market dealer based in Canada whose business includes seeking funding for public and private companies from institutional and exempted investors. That joint agreement had a term of six months but was extended by the parties and terminated January 15, 2003. The agreement provided for an initial work fee of $16,192 of which $15,882 was to be first deducted from the commission due IBK, if any, of 9% computed on any money raised for the Company and/or GRC, plus a non-accountable expense advance of $2,267, both of which were paid by GRC in December, 2001. IBK did not conclude any transactions concerning or for the 60 benefit of GRC. Under various transactions arranged by IBK during 2002 for the Company, IBK was paid by the Company total fees and commissions of $80,100 which includes $15,882 paid by GRC to IBK in 2001, and which was deductible from commissions due to IBK by the Company. The Company reimbursed GRC in 2002 for the $15,882 paid by them to IBK during 2001. Gold Resource Corporation Through investment in the equity securities of Gold Resource Corporation ("GRC"), a private Colorado corporation and affiliate company, the Company has the opportunity to benefit from GRC's exploration of mineral properties and other activities in Mexico. Effective July 1, 2000, the Company and GRC entered into a management contract (the "2000 Management Contract") under which the Company provided general management of GRC business activities through December 31, 2001 in exchange for 1,280,000 shares of GRC of which 666,672 were earned during 2001. Effective January 1, 2002, the Company and GRC entered into a new management contract (the "2002 Management Contract") which expired December 31, 2002. Under the 2002 Management Contract the Company was to be paid $30,000 per month to provided general management of GRC business activities through December 31, 2002. GRC paid $30,000 to the Company under the 2002 Management Contract but was unable to make the other required payments which amounts remain outstanding as of December 31, 2003. The Company will recognize revenue related to this item as payments, if any, are received from GRC. Under both the 2000 Management Contract and the 2002 Management Contract, GRC was responsible for all funding needed and intends to and has been raising funds through the sale of GRC stock. The parties agreed not to enter into a new management contract for year 2003 and to date have not entered into a contract for year 2004. The independent director(s) of the Company approved both contracts with GRC. Commencing January 2, 2003, William W. Reid, David C. Reid and William F. Pass may spend personal time on the business affairs of GRC. This time will not interfere with their respective duties as directors and/or officers of the Company. Effective September 30, 2003, the Company acquired the 675,676 shares of GRC common stock owned by RMB International (Dublin) Ltd. ("RMB") in exchange for 672,528 shares of unregistered common shares of the Company valued at $0.54 per share (for an aggregate value of $363,165). This transaction with RMB terminated the Bring Along Obligation under a GRC stock subscription agreement dated May 6, 2002 that obligated the Company and the founders of GRC, under certain circumstances, to sell some or all of their shares of GRC to a third party on a pari passu basis along with all of the shares owned by RMB, and which gave RMB the contingent right to seek and negotiate such sale for up to 51% of the then outstanding shares of GRC. The independent directors of the Company unanimously approved this transaction with RMB. 61 The 1,955,676 shares of GRC owned by the Company represents approximately 40% of GRC capitalization as of December 31, 2003. As noted above, through its stock ownership in GRC, the Company has the opportunity to benefit from GRC's activities in Mexico. William W. Reid and David C. Reid, each founders of GRC, directly and beneficially own approximately 29% of GRC capitalization as of December 31, 2003. John W. Goth, a director of the Company, during 2003 purchased directly from GRC 10,000 shares of GRC at $.50 per share. In 2000, William F. Pass, an officer of the Company, was granted by GRC a non-qualified stock option to purchase 200,000 shares of GRC common stock at an exercise price of $.50 per share. In 2003, William W. Reid and David C. Reid, each officers and directors if the Company, were each granted by GRC non-qualified stock options to purchase 200,000 shares of GRC common stock at an exercise price of $.50 per share. GRC was formed in August 1998 by founders William W. Reid and David C. Reid to provide a corporate vehicle for potential future business activities. GRC was inactive until July 1, 2000. At its formation and through July 1, 2000, a majority of the outstanding capital stock of GRC was owned by its founders. As of December 31, 2003, other than U.S. Gold, William W. Reid and David C. reid, there are no other owners of five percent or more of GRC capital stock. Throughout the history of GRC William W. Reid and David C. Reid were and are the sole directors of GRC and there have been no other executive officers of GRC. During year 1999 and 2000 the Company actively evaluated mining opportunities in Mexico and made proposals to the owners of a number of properties. The Company's proposals to those property owners were rejected however, primarily because the Company could not offer any up-front cash nor could the Company demonstrate an ability to raise funding sufficient to meet the financial and other obligations under those proposed transactions. The board of directors then concluded that the Company could not negotiate competitively for property acquisitions in Mexico due to its limited resources and its inability to raise additional equity funding due to a lack of authorized but unissued shares and the Company decided to curtail activities in Mexico. In June 2000 William W. Reid and David C. Reid made a proposal to the independent directors of the Company, John W. Goth and Douglas J. Newby, as to a possible way the Company could participate in opportunities in Mexico while limiting any direct funding obligations to that effort through equity participation with a then inactive private Colorado corporation, GRC. The concept presented to the Company was that William W. Reid and David C. Reid would commit to an aggregate $50,000 in funding to GRC at the rate of $.50/share of GRC stock in order to pay for the costs of evaluating and potentially acquiring one or more mining properties in Mexico and GRC would then raise additional funding needed. The Company could earn an equity position in GRC through the management of the affairs of GRC under a management contract for a specific period of time. The Company would have no obligation to fund expenses 62 of GRC. The business plan of GRC was to raise additional equity funding from third parties if and when a mineral property of merit was acquired. The independent directors of the Company negotiated and finalized the terms of the transaction with GRC and the management agreement entered into July 1, 2000 was first drafted by the Company, reviewed and finalized by legal counsel representing the Company, and executed on behalf of the Company by its independent directors, Mr. Goth and Mr. Newby, as discussed in more detail below. Throughout its history GRC has had no employees; however GRC does currently retain the services of a Mexican national under a consulting arrangement. Through August 31, 2001, GRC was funded only by investment of its founders as discussed above. During September 2001, following the lease of the Zimapan property in Mexico, GRC commenced private placement sale of its common stock to third parties. With regard to corporate opportunities and potential conflicts of interest among and between the Company and GRC, the Company is primarily focused on activities in Nevada and the western United States and any business opportunities in these locations would be first available to the Company. Conversely, GRC is focused on corporate opportunities in Mexico and any business opportunities in Mexico would be first available to GRC. If the board of directors of either the Company or GRC first elect not to evaluate a particular business opportunity for any reason, the other company would be free to undertake that particular business opportunity without conflict of interest related to corporate opportunity between the Company and GRC. Effective August 23, 2001, GRC leased a prospective silver/lead/zinc mining property covering approximately 47 hectares and located in the Zimapan Mining District in the state of Hidalgo, Mexico. This was an exploration stage project and was designated by GRC its Zimapan Project. During August 2003, GRC dropped its lease of the Zimapan Project. Effective November 1, 2002, GRC leased a prospective gold/silver property covering approximately 1,897 hectares located in the historic Octolan mining district in the state of Oaxaca, Mexico, designated the "El Aguila" property. The El Aguila property is an exploration stage property. The lease agreement for El Aguila is subject to a 4% net smelter return royalty where production is sold in gold/silver dore form and 5% for production sold in concentrate form, and the lease requires periodic advance royalty payment to the concession owner. During 2002 and 2003, GRC paid the concession owner an aggregate $35,000 under the lease. In August 2003 GRC entered into an agreement with Canyon Resources Corporation, a public company with shares traded on the American Stock Exchange under symbol "CAU" ("Canyon"), whereby Canyon could earn a 50% interest in the El Aguila property from GRC in exchange for funding $3.5 million in exploration and development costs at the El Aguila property. Canyon has agreed to fund aggregate $500,000 to date for Phase I and Phase II exploration drilling and other program at El Aguila of which $400,000 was funded during 2003 and $100,000 was funded in 2004. Phase I and II exploration drilling was completed in 2003 and included approximately 12,939 feet of drilling focused on one target area of the now 14.7 square mile property. This exploration drilling encountered in some high-grade gold intercepts which will require additional exploration drilling in order to fully evaluate. GRC is having a scoping study performed by an independent engineering firm on the El Aguila project in order to estimate capital and operating costs for evaluation of possible development of the property which study is anticipated to be completed during the second quarter of 2004. After the study is compete, Canyon will have 90 days to commit to funding the remaining $3 million to earn a 50% interest in the El Aguila project, or alternatively, convert their Phase I and Phase II drilling program funding of $500,000 into 600,000 shares of GCR stock. Mr. Richard F. Mauro, a Director of the Company since November 2003, is also a director of Canyon. 63 GRC has been involved in ongoing efforts to raise funds through the sale of its common stock required to fund its property exploration and evaluation programs, property maintenance costs and corporate overhead. From September 2001 through December 31, 2003, GRC has raised approximately $697,160 from sale of its common stock. During 2002, the Company borrowed approximately $15,900 from GRC to make critical payments to vendors which advance was repaid during 2002. Subsequently in 2002, the Company made a non-interest bearing and unsecured advance to GRC of $30,000 to enable GRC to make critical payments related to its mineral properties. GRC had repaid these advances as of December 31, 2002. During 2003, the Company made a non-interest bearing and unsecured loan to GRC of $30,000 to enable GRC to make certain critical payments. This loan was repaid by GRC during 2003. The shares of GRC are not currently publicly traded. The GRC shares have been assessed by the Company to have indeterminable market value and the shares have therefore been recorded at zero value. Under equity accounting, the Company has not recorded its share of GRC's operating losses to date since such recognition would reduce its zero basis investment in GRC to below zero. GRC's unaudited operating loss for year 2003 and 2002 is approximately $(496,017) and $(788,646), respectively, of which the Company's share would be approximately $(188,653) and $(218,021), respectively. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 3.0 Company's Articles of Incorporation, as Amended June 22, 1988, July 5, 1988, and December 20, 1991 (incorporated by reference from the Report on Form 10-KSB dated December 31, 1995, Exhibit 3.0). 3.1 Company's Bylaws, as Amended June 22, 1988 (incorporated by reference from the Report on Form 10-KSB dated December 31, 1995, Exhibit 3.1). 64 10.1 Agreement To Pay Distributions dated February 21, 1992, by and between Tonkin Springs Gold Mining Company and French American Banking Corporation (incorporated by reference from the Report on Form 8-K dated February 21, 1992, Exhibit 4). *10.2 Amended and Restated Non-Qualified Stock Option and Stock Grant Plan, as amended effective September 19, 2003. 10.3 Amended Employment Agreement with William W. Reid dated June 1, 1995 (Incorporated by reference from the Report on Form 10-QSB for the period ended September 30, 1995, Exhibit 10.1). 10.4 Amended Employment Agreement with William F. Pass dated June 1, 1995 (Incorporated by reference from the Report on Form 10-QSB for the period ended September 30, 1995, Exhibit 10.2). 10.5 Amended Employment Agreement with David C. Reid dated June 1, 1995 (Incorporated by reference from the Report on Form 10-QSB for the period ended September 30, 1995, Exhibit 10.3). 10.6 Amendment to Employment Agreement with William W. Reid dated July 21, 1998 (Filed with Form SB-2 Amendment No. 2 filed December 6, 2002). 10.7 Amendment to Employment Agreement with William F. Pass dated July 21, 1998 (Filed with Form SB-2 Amendment No. 2 filed December 6, 2002). 10.8 Amendment to Employment Agreement with David C. Reid dated July 21, 1998 (Filed with Form SB-2 Amendment No. 2 filed December 6, 2002). 10.9 Letter Agreement by and between William W. Reid and U.S. Gold Corporation dated March 31, 2003 amending the Employment Agreement dated July 21, 1998, As Amended (Filed with Form SB-2 Amendment No. 2 filed December 6, 2002). 10.10 Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between William W. Reid and the Company dated December 6, 2002 (Incorporated by reference from the Report on Form 8-K dated December 6, 2002, Exhibit 10.4.) 10.11 Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between William F. Pass and the Company dated December 6, 2002 (Incorporated by reference from the Report on Form 8-K dated December 6, 2002, Exhibit 10.5.) 10.12 Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between David C. Reid and the Company dated December 6, 2002 (Incorporated by reference from the Report on Form 8-K dated December 6, 2002, Exhibit 10.6.) 10.13 Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between John W. Goth and the Company dated December 6, 2002 (Incorporated by reference from the Report on Form 8-K dated December 6, 2002, Exhibit 10.7.) 65 10.14 Amended Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between William W. Reid and the Company dated January 16, 2003 (Incorporated by reference from the Report on Form 8-K dated January 16, 2003, Exhibit 10.1.) 10.15 Amended Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between William F. Pass and the Company dated January 16, 2003 (Incorporated by reference from the Report on Form 8-K dated January 16, 2003, Exhibit 10.2.) 10.16 Amended Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between David C. Reid and the Company dated January 16, 2003 (Incorporated by reference from the Report on Form 8-K dated January 16, 2003, Exhibit 10.3) 10.17 Amended Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between John W. Goth and the Company dated January 16, 2003 (Incorporated by reference from the Report on Form 8-K dated January 16, 2003, Exhibit 10.4.) 10.18 Amended Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between William W. Reid and the Company dated March 17, 2003 (Incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 2002, Exhibit 10.41.) 10.19 Amended Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between William F. Pass and the Company dated March 17, 2003 (Incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 2002, Exhibit 10.42.) 10.20 Amended Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between David C. Reid and the Company dated March 17, 2003 (Incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 2002, Exhibit 10.43.) 10.21 Amended Conditional Agreement Not To Exercise Certain Stock Options Under Stock Option Agreement Dated January 20, 1999 by and between John W. Goth and the Company dated March 17, 2003 (Incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 2002, Exhibit 10.44.) 10.22 Management Agreement dated effective January 1, 2002 between U.S. Gold Corporation and Gold Resource Corporation (Filed with Form SB-2 Amendment No. 2 filed December 6, 2002). 10.23 Non-Exclusive Technology License Agreement dated May 31, 2002 by and between Newmont USA Limited, d/b/a Newmont Mining Corporation and U.S. Gold Corporation (Filed with Form SB-2 Amendment No. 2 filed December 6, 2002). 66 10.24 Subscription Agreement dated May 30, 2002 by and between Excalibur Limited Partnership and U.S. Gold Corporation (Filed with Form SB-2 Amendment No. 2 filed December 6, 2002). 10.25 Amendment to Subscription Agreement dated May 30, 2002 by and between Excalibur Limited Partnership and U.S. Gold Corporation dated April 30, 2003 (Filed with Form SB-2 Amendment No. 2 filed December 6, 2002). 10.26 Form of Subscription Agreement at $.40/share with various Selling Shareholders of the Common Stock of U.S. Gold Corporation (Incorporated by reference from the Report on Form 10-QSB for the period ended June 30, 2002, Exhibit 10.3). 10.27 Gold Resource Corporation Share Subscription Agreement dated May 6, 2002 among U.S. Gold Corporation, William W. Reid, David C. Reid, RMB International (Dublin) Limited, and Gold Resource Corporation (Incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 2002, Exhibit 10.39). 10.28 Letter Agreement between IBK Capital Corp. and U.S. Gold Corporation dated November 1, 2002 regarding non-exclusive assistance of IBK to seek corporate transaction for the Company (Incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 2002, Exhibit 10.40). 10.29 Letter Agreement dated December 20, 2002 by and between William W. Reid and the Company terminating for no consideration that certain Incentive Stock Option Agreement dated August 20, 2002 (Incorporated by reference from the Report on Form 8-K dated December 6, 2002, Exhibit 10.1.) 10.30 Letter Agreement dated December 20, 2002 by and between David C. Reid and the Company terminating for no consideration that certain Incentive Stock Option Agreement dated August 20, 2002 (Incorporated by reference from the Report on Form 8-K dated December 6, 2002, Exhibit 10.2.) 10.31 Letter Agreement dated December 20, 2002 by and between William F. Pass and the Company terminating for no consideration that certain Incentive Stock Option Agreement dated August 20, 2002 (Incorporated by reference from the Report on Form 8-K dated December 6, 2002, Exhibit 10.3.) 10.32 Subscription Agreement and Investment Agreement dated effective December 6, 2002 by and between Resource Investment Trust plc and the Company covering 70,000 shares of common stock in a private transaction (Incorporated by reference from the Report on Form 8-K dated December 6, 2002, Exhibit 10.8) 67 10.33 Subscription Agreement and Investment Agreement dated effective January 16, 2003 and closed January 21, 2003 by and between Resource Investment Trust plc and the Company covering 1,000,000 shares of common stock in a private transaction (Incorporated by reference from the Report on Form 8-K dated January 16, 2003, Exhibit 10.5.) 10.34 Letter agreement between the Company and IBK Capital Corp. dated November 1, 2002 regarding non-exclusive assistance of IBK to seek corporate transaction for the Company (Incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 2002, Exhibit 10.40.) 10.35 Letter Agreement between BacTech Enviromet Corporation and U.S. Gold Corporation dated March 25, 2003 as amended March 28, 2003, related to the purchase by BacTech of 55% interest in Tonkin Springs LLC from Tonkin Springs Venture LP, a subsidiary of the Company (Incorporated by reference from the Report on Form 8-K dated May 5, 2003, Exhibit 10.1) 10.36 Purchase Agreement between BacTech Nevada Corporation and U.S. Gold Corporation dated effective July 31, 2003 related to the purchase by BacTech of 55% interest in Tonkin Springs LLC from Tonkin Springs Venture L.P., a subsidiary of the Company (Incorporated by reference from the Report on Form 8-K dated August 6, 2003, Exhibit 10.1). 10.37 Amended and Restated Members' Agreement of the Tonkin Springs LLC between Tonkin Springs Venture L.P. and BacTech Nevada Corporation dated effective July 31, 2003 (Incorporated by reference from the Report on Form 8-K dated August 6, 2003, Exhibit 10.2). 10.38 Amended and Restated Operating Agreement of the Tonkin Springs LLC between Tonkin Springs Venture L.P. and BacTech Nevada Corporation dated effective July 31, 2003 (Incorporated by reference from the Report on Form 8-K dated august 6, 2003, Exhibit 10.3). *10.39 Finder's Fee Agreement between Meridian Capital Ltd. and U.S. Gold Corporation dated February 25, 2004, regarding non-exclusive assistance of Meridian to seek corporate transactions for the Company. *10.40 Form of Unit Subscription Agreement used for private placement sale of common stock and warrants to purchase common stock, as assisted by Meridian Capital Ltd. *10.41 Code of Ethics Policy of U.S. Gold Corporation adopted effective December 31, 2003. 68 21. Subsidiaries of the Company (Incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 2001, Exhibit 21). *23.1 Consent of Stark Winter Schenkein & Co., LLC, to the incorporation by reference of their audit report dated March 18, 2004, in the Company's Form S-8 *31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for William W. Reid. *31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for William F. Pass. *32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for William W. Reid and William F. Pass. *Filed herewith. (b) Reports on Form 8-K during the 4th quarter of 2003. The Company filed a Form 8-K dated October 1, 2003, reporting under Item 5. Other Events and Regulation FD Disclosure, regarding communication between the Corporation and eight of its shareholders to obtain written concurrence to the transaction with BacTech Enviromet Corporation. The Company filed a Form 8-K dated October 9, 2003, reporting under Item 5. Other Events and Regulation FD Disclosure, related to the press release regarding drilling results of Gold Resource Corporation, an affiliate of the Corporation, on the El Aguila exploration property in Oaxaca, Mexico. The Company filed a Form 8-K dated November 11, 2003, reporting under Item 5. Other Events and Regulation FD Disclosure, related to the press release of Gold Resource Corporation, an affiliate of the Corporation, regarding plans to commence the second round of drilling on the El Aguila exploration property in Oaxaca, Mexico. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table sets forth fees paid to the Company's principal accounting firm of Stark Winter Schenkein & Co., LLP: 2003 2002 ---- ---- Audit Fees $21,888 $21,350 Audit Related Fees 3,116 400 Tax Fees 0 0 All Other Fees 0 0 ------- ------- Total Fees $25,004 $21,750 ======= ======= 69 It is the policy of the Audit Committee of the Board of Directors to engage the principal accounting firm selected to conduct the financial audit for the Company and to confirm, prior to such engagement, that such principal accounting firm is independent of the Company. All services of the principal accounting firm reflected above were approved by the Audit Committee. 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. U.S. GOLD CORPORATION March 30, 2004 By: /s/ William W. Reid -------------------------------------------- President and Chief Executive Officer March 30, 2004 By: /s/ William F. Pass --------------------------------------- Vice President, Chief Financial Officer and Secretary In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. March 30, 2004 By /s/ William W. Reid -------------------------------------------- Chairman of the Board of Directors March 30, 2003 By /s/ David C. Reid -------------------------------------------- Exploration Vice President and Director March 30, 2004 By /s/ John W. Goth -------------------------------------------- Director March 30, 2004 By /s/ Richard F. Nanna -------------------------------------------- Director March 30, 2004 By /s/ Peter Bojtos -------------------------------------------- Director March 30, 2004 By /s/ Curtis Deane -------------------------------------------- Director March 30, 2004 By /s/ Richard F. Mauro -------------------------------------------- Director 70 EX-10 3 exh10_2.txt Exhibit 10.2 U. S. GOLD CORPORATION AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION AND STOCK GRANT PLAN This Amended and Restated Non-Qualified Stock Option and Stock Grant Plan (the "Plan") is adopted in consideration of services rendered and to be rendered by key personnel to U. S. Gold Corporation, its subsidiaries and affiliates. 1. Definitions. The terms used in this Plan shall, unless otherwise indicated or required by the particular context, have the following meanings: Board: The Board of Directors of U. S. Gold Corporation, or any duly authorized committee of the Board. Common Stock: The $.10 par value Common Stock of U. S. Gold Corporation. Company: U. S. Gold Corporation, a corporation incorporated under the laws of Colorado, and any successors in interest by merger, operation of law, assignment or purchase of all or substantially all of the property, assets or business of the Company. Date of Grant: The date on which an Option (see below) is granted under the Plan. Fair Market Value: The Fair Market Value of the Option Shares. Such Fair Market Value as of any date shall be reasonably determined by the Board; provided, however, that if there is a public market for the Common Stock, the Fair Market Value of the Option Shares as of any date shall not be less than the bid price for the Common Stock on that date (or on the preceding business day if such date is a Saturday, Sunday, or a holiday), on either an over-the-counter market or national exchange, as reported by NASDAQ, The Denver Post, Denver, Colorado, or if not available there, in the Wall Street Journal, or if not available there, as available from internet sources such as America On-Line or other reporters of such financial data; provided, further, that if no such reported bid price is available, the Fair Market Value of such shares shall not be less than the average of the means between the bid and asked prices quoted on that date by any two independent persons or entities making a market for the Common Stock, such persons or entities to be selected by the Board. Fair Market Value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse. Key Person: A person (including, without limitation, employees, directors, officers, consultants or advisors) designated by the Board upon whose judgment, initiative and efforts the Company or a Related Company may rely. Option: The rights granted to a Key Person to purchase Common Stock pursuant to the terms and conditions of an Option Agreement (see below). Option Agreement: The written agreement (and any amendment or supplement thereto) between the Company and a Key Person designating the terms and conditions of an Option. Option Shares: The shares of Common Stock underlying an Option granted to a Key Person. Optionee: A Key Person who has been granted an Option. Recipient: A Key Person who has been granted a Stock Option or Stock Grant. Related Company: Any subsidiary or affiliate of the Company. The determination of whether a corporation is a Related Company shall be made without regard to whether the entity or the relationship between the entity and the Company now exists or comes into existence hereafter. Stock Grant: The grant of shares of the Company's Common Stock to a Key Person pursuant to the terms of the Plan. Stock Grant Shares: The shares of Common Stock represented by a Stock Grant. 2. Purpose and Scope. (a) The purpose of the Plan is to advance the interests of the Company and its stockholders by affording Key Persons, upon whose judgment, initiative and efforts the Company may rely for the successful conduct of their businesses, an opportunity for investment in the Company and the incentive advantages inherent in stock ownership in the Company. (b) This Plan authorizes the Board to grant Options and make Stock Grants to Key Persons selected by the Board while considering criteria such as employment position or other relationship with the Company, duties and responsibilities, ability, productivity, length of service or association, morale, interest in the Company, recommendations by supervisors, and other matters. 3. Administration of the Plan. The Plan shall be administered by the Board or a designated Committee of the Board. The Board shall have the authority granted to it under this section and under each other section of the Plan. In accordance with and subject to the provisions of the Plan, the Board shall select the Optionees and Recipients, shall determine (i) the number of shares of Common Stock to be subject to each Option and/or Stock Grant, (ii) the time at which each Option and/or Stock Grant is to be granted, (iii) whether an Option shall be granted in exchange for the cancellation and termination of a previously granted option or options under the Plan or otherwise, (iv) the purchase price for Option Shares, (v) the option period, (vi) the consideration (if any) for a Stock Grant, and (vii) the manner in which an Option becomes exercisable. In addition, the Board shall fix such other terms of each Option and/or Stock Grant as it may deem necessary or desirable. The Board shall determine the form of Option Agreement to evidence each Option. The Board from time to time may adopt such rules and regulations for carrying out the purposes of the Plan as it may deem proper and in the best interests of the Company. The Board may from time to time make such changes in and additions to the Plan as it may deem proper and in the best interest of the Company provided, however, that no such change or addition shall impair any Option or Stock Grant previously granted under the Plan. Each determination, interpretation or other action made or taken by the Board shall be final, conclusive and binding on all persons, including without limitation, the Company, the Related Companies, the stockholders, directors, officers and employees of the Company and the Related Companies, and the Optionees, the Recipients and their respective successors in interest. 4. The Common Stock. The Board is authorized to appropriate, grant Options and make Stock Grants with respect to, and otherwise issue and sell for the purposes of the Plan, a total number not in excess of 3,500,000 shares of Common Stock, either treasury or authorized but unissued, or the number and kind of shares of stock or other securities which in accordance with Section 9 shall be substituted for the 3,500,000 shares or into which such 3,500,000 shares shall be adjusted. All or any unsold shares subject to an Option or Stock Grant that for any reason expires or otherwise terminates may again be made subject to Options and Stock Grants under the Plan. 2 5. Eligibility. Options and Stock Grants shall be granted only to Key Persons. Key Persons may hold more than one Option or Stock Grant under the Plan and may hold Options and Stock Grants under the Plan and options granted pursuant to other plans or otherwise. 6. Option Price. The Board shall determine the purchase price for the Option Shares; provided, however, that the purchase price to be paid by Optionees for Option Shares shall not be less than one hundred percent of the Fair Market Value of the Option Shares on the Date of Grant. 7. Duration and Exercise of Options. (a) The option period shall commence on the Date of Grant and shall be up to 10 years in length subject to the limitations in this Section 7 and the Option Agreement. (b) During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee. Any Option held by an Optionee at the time of his death may be exercised by his estate only within six months of his death or such longer period as the Board may determine. (c) The Board may determine whether an Option shall be exercisable as provided in Paragraph (a) of this Section 7 or whether the Option shall be exercisable in installments only; if the Board determines the latter, it shall determine the number of installments and the percentage of the Option exercisable at each installment date. All such installments shall be cumulative. (d) In the case of an Optionee who is an employee of the Company or a Related Company, if, for any reason, other than the Optionee's death, the Optionee ceases to be employed by either the Company or a Related Company, any option held by the Optionee at the time his employment ceases may be exercised within 90 days after the date that his employment ceased, (subject to the limitations of Paragraph (a) above), but only to the extent that the option was exercisable according to its terms on the date the Optionee's employment ceased. After such 90-day period, any unexercised portion of an Option shall expire. (e) Notwithstanding the provision of Paragraph (d) of this Section 7, in the case of an Optionee who is an employee of the Company or a Related Company, if the Optionee's employment by the Company or a Related Company ceases due to the Company's or Related Company's termination of such Optionee's employment for cause, any unexercised portion of any Option held by the Optionee shall immediately expire. (f) Each Option shall be exercised in whole or in part by delivering to the office of the Treasurer of the Company written notice of the number of shares with respect to which the Option is to be exercised and by paying in full the purchase price for the Option Shares purchased as set forth in Section 8; provided, that an Option may not be exercised in part unless the purchase price for the Option Shares Purchased is at least $1,000.00. 8. Payment for Option Shares. If the purchase price of the Option Shares Purchased by any Optionee at one time exceeds $2,000, the Board may permit all or part of the Purchase price for the Option Shares to be paid by delivery to the Company for cancellation shares of the Company's Common Stock previously owned by the Optionee with a Fair Market Value as of the date of the payment equal to the portion of the purchase price for the Option Shares that the Optionee does not pay in cash. 3 The Board may also permit use of attestation of shares already owned by the Optionee to eliminate the need for physical delivery of stock certificate(s) by the Optionee to the Company under this Section 8. By use of attestation, the Optionee will be issued the number of shares exercised reduced by the number of whole shares necessary to pay the exercise price, or portion thereof. In the case of all other Option exercises, the purchase price shall be paid in cash or available funds upon exercise of the Option. 9. Change in Stock, Adjustments Etc. In the event that each of the outstanding shares of Common Stock (other than shares held by dissenting stockholders that are not changed or exchanged) should be changed into, or exchanged for, a different number or kind of shares of stock or other securities of the Company, or, if further changes or exchanges of any stock or other securities into which the Common Stock shall have been changed, or for which it shall have been exchanged, shall be made (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividends, reclassification, split-up, combination of shares or otherwise), then there shall be substituted for each share of Common Stock that is subject to the Plan, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock (other than shares held by dissenting stockholders which are not changed or exchanged) shall be so changed or for which each outstanding share of Common Stock (other than shares held by dissenting stockholde rs) shall be so changed or for which each such share shall be exchanged. Any securities so substituted shall be subject to similar successive adjustments. In the event of any such changes or exchanges, the Board shall determine whether, in order to prevent dilution or enlargement of rights, an adjustment should be made in the number, kind, or option price of the shares or other securities then subject to an Option or Stock Grant granted pursuant to the Plan and the Board shall make any such adjustment, and such adjustments shall be made and shall be effective and binding for all purposes of the Plan. 10. Relationship to Employment. Nothing contained in the Plan, or in any Option or Stock Grant granted pursuant to the Plan, shall confer upon any Optionee or Recipient any right with respect to employment by the Company, or interfere in any way with the right of the Company to terminate the Optionee's or Recipient's employment or services at any time. 11. Nontransferability of Option or Stock Grant. No Option or Stock Grant granted under the Plan shall be transferable by the Optionee or Recipient, either voluntarily or involuntarily, except by will or the laws of descent and distribution, and any attempt to do so shall be null and void. 12. Rights as a Stockholder. No person shall have any rights as a stockholder with respect to any share covered by an Option or Stock Grant until that person shall become the holder of record of such shares and, except as provided in Section 9, no adjustments shall be made for dividends or other distributions or other rights as to which there is an earlier record date. 13. Securities Laws Requirements. No Option Shares or Stock Grants shall be issued unless and until, in the opinion of the Company, any applicable registration requirements of the Securities Act of 1933, as amended, any applicable listing requirements of any securities exchange on which stock of the same class is then listed, and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery, have been fully complied 4 with. Each Option and each Option and Stock Grant Share certificate may be imprinted with legends reflecting federal and state securities laws restrictions and conditions, and the Company may comply therewith and issue "stop transfer" instructions to its transfer agent and registrar in good faith without liability. 14. Disposition of Shares. Each Optionee, as a condition of exercise, and each Recipient shall represent, warrant and agree, in a form of written certificate approved by the Company, as follows: (a) that all Option and Stock Grant Shares are being acquired solely for his own account and not on behalf of any other person or entity; (b) that no Option or Stock Grant Shares will be sold or otherwise distributed in violation of the Securities Act of 1933, as amended, or any other applicable federal or state securities laws; (c) that if he is subject to reporting requirements under Section 16(a) of the Securities Exchange Act of 1934, as amended, he will (i) not sell any shares of Common Stock within six months of the date he acquired any Option or Stock Grant, (ii) furnish the Company with a copy of each Form 3, 4 or 5 filed by him, and (iii) timely file all reports required under the federal securities laws; and (d) that he will report all sales of Option and/or Stock Grant Shares to the Company in writing on a form prescribed by the Com pany. 15. Effective Date of Plan; Termination Date of Plan. The Plan shall be deemed effective as of March 17, 1989. The Plan shall terminate at midnight on March 16, 2009 except as to Options previously granted and outstanding under the Plan at that time. No Options or Stock Grants shall be granted after the date on which the Plan terminates. The Plan may be amended, extended, abandoned or terminated at any earlier time by the Board, except with respect to any Options or Stock Grant then outstanding under the Plan. 16. Other Provisions. The following provisions are also in effect under the Plan: (a) The use of a masculine gender in the Plan shall also include within its meaning the feminine, and the singular may include the plural, and the plural may include the singular, unless the context clearly indicates to the contrary. (b) Any expense of administering the Plan shall be borne by the Company. (c) This Plan shall be construed to be in addition to any and all other compensation plans or programs. The adoption of the Plan by the Board shall not be construed as creating any limitations on the power or authority of the Board to adopt such other additional incentive or other compensation arrangements as the Board may deem necessary or desirable. (d) The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and the rights of any and all personnel having or claiming to have an interest therein or thereunder shall be governed by and determined exclusively and solely in accordance with the laws of the state of Colorado. As Amended 9/19/2003 5 EX-10 4 exh10_39.txt Exhibit 10.39 FINDER'S FEE AGREEMENT THIS AGREEMENT is made as of the 25 day of February, 2004, AMONG: U.S. Gold Corporation, a Colorado corporation, having an office at 2201 Kipling Sheet, Suite 100, Lakewood, Colorado 80215-1545(the "Corporation") AND: Meridian Capital Ltd., having an office at Suite 3400, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 (the "Finder"). WHEREAS: A. the Corporation wishes to raise up to $8,100,000.00 by the sale of Units with each Unit consisting of one (1) Common Share and one (1) Unit Warrant (the "Financing"); and B. the Corporation has agreed to retain the Finder to introduce potential Accredited Investors to the Corporation to participate in the Financing upon the terms and conditions hereinafter set out. NOW THEREFORE in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: Part 1 INTERPRETATION 1.1 For the purpose of this Agreement, including the recitals and any amendment hereto, the following words and phrases shall have the following meanings: (a) "Accredited Investor" means those persons as defined in Regulation D promulgated under the Securities Act of 1933 and those persons as defined in section 1.1 of Ontario Securities Commission Rule 45-501 and in section 1.1 of multilateral Instrument 45-103 proclaimed in Canada; (b) "Closing" means the closing of the issue and sale of the Units as herein contemplated; (c) "Closing Date" means the date upon which the Closing occurs, or if more than one Closing, the dates on which the Closings occur, which date(s) shall be determined by the Corporation and shall in any event not be later than the last day of the Offering Period; (d) "Commission" means the United State Securities and Exchange Commission; (e) "Common Shares" means common shares in the capital of the Corporation; (f) "Disclosure Record" means all documents filed or published pursuant to the constatuting documents of the Corporation, all securities laws affecting the Corporation and the laws under which the Corporation is incorporated; (g) "Effective Date" means the date that the Registration Statement filed pursuant to Part 4 is first declared effective by the Commission; (h) "Filing Date" means with respect to the initial Registration Statement required to be filed to cover the resale of the Registerable Securities, the date that is 90 days following the Closing Date; (i) "Finder's Fee" has the meaning ascribed thereto in section 3.1; (j) "Finder's Warrants" means the non-transferable share purchase warrants which entitle the Finder to purchase Common Shares in the aggregate, equal to 20% of the number of Units sold pursuant to the Financing, to be granted by the Corporation to the Finder in accordance with section 3.1; (k) "Misrepresentation" has the meaning ascribed thereto by applicable securities legislation; (l) "Offering Period" means a period from the date of this Agreement to the close of business on March 12, 2004; (m) "Registration Statement" means a registration statement covering the resale of the Registerable Securities not already covered by an existing and effective registration statement for an offering to be made on a continuous basis pursuant to Rule 415 promulgated by the Commission pursuant to the Securities Act of 1933; (n) "Registerable Securities" means the Common Shares comprising part of the Units and Common Shares issued upon exercise of the Unit Warrants as well as the Finder's Warrants, together with any securities issued upon any stock split, dividend or other distribution, recapitalization or similar event, or any conversion price adjustment with respect thereto; (o) "Time of Closing" means 10:00 a.m. on the Closing Date or such other time on the Closing Date as the Corporation agrees; (p) "US Persons" means those persons as defined in Regulation S promulgated under the Securities Act of 1933; (q) "Unit(s)" means up to 9,000,000 Units to be offered by the Corporation, each consisting of one (1) Common Share and one (1) Unit Warrant, for sale by the Corporation at an aggregate price of $0.90 per Unit; (r) "Unit Warrants" means the non-transferable share purchase warrants which will be included in the Units, each four (4) of which entitles the holder to purchase one Common Share for $1.25 , exercisable for a period of 2 years from the date of Closing; (s) "Work Fee" means the fee to be paid to the Finder pursuant to section 2.2. 1.2 For the purpose of this Agreement, all references to "Dollar" or "$" shall means U.S. funds, unless otherwise specified. 1.3 The headings of the Articles of this Agreement are inserted for convenience of reference only and shall not in any manner affect the construction or meaning of anything herein contained or govern the rights or liabilities of the parties hereto. 1.4 Words importing the singular number only shall include the plural and vice versa and words of gender shall entail all genders, including the neuter gender and words importing persons shall include companies, corporations, partnerships, syndicates, trusts and any number or aggregate of persons. Part 2 APPOINTMENT OF FINDER 2.1 The Corporation hereby appoints the Finder as its exclusive agent for the Financing, and the Finder hereby agrees to accept the appointment and agrees to use its commercially reasonable efforts to identify and introduce to the Corporation potential Accredited Investors to purchase up to 9,000,000 Units (the "Units") at a price of $0.90 per Unit. In no event shall the appointment of the Finder as agent for Corporation extend beyond the expiration of the Offering Period and in no event is the Finder authorized to act on behalf of the Corporation except as specifically set forth herein. 2.2 The Corporation shall pay to the Finder a work fee (the "Work Fee") of $10,000which is due and payable upon execution of this Agreement and which is non-refundable, the receipt of which is hereby acknowledged. 2 2.3 The Finder acknowledges and agrees that the decision to accept an Accredited Investor introduced by the Finder in the Financing is at the sole discretion of the Corporation. Part 3 FINDER'S FEES 3.1 In the event that an Accredited Investor is accepted by the Corporation, the Corporation agrees at the Time of Closing: (a) to pay to the Finder a cash fee equal to 8.5% of the total subscription actually received and accepted by the Corporation (the "Finder's Fee"); and (b) to issue the Finder share purchase warrants ("Finder's Warrant") which entitle the Finder to purchase in the aggregate that number of Common Shares of the Corporation equal to 20% of the number of Units sold to the Accredited Investors upon Closing. (c) Each Finder's Warrant shall be exercisable any time from the Closing Date until the expiration of two years from the Closing Date and shall entitle the Finder to purchase one Common Share of the Corporation at a price of $0.90 per Common Share. The Finder's warrant shall not be transferable by the Finder. 3.2 The Finder's Fee shall at the Time of Closing be paid by the Corporation to the Finder by wire transfer. Part 4 REGISTRATION STATEMENT AND RELEASE OF SUBSCRIPTION FUNDS 4.1 The Corporation agrees to use its commercially reasonable efforts to register the Common Shares issued with the sale of Units and the Common Shares issuable upon exercise of the Unit Warrants and the Finders' Warrants, and to prepare and file a Registration Statement with the United States Securities and Exchange Commission (the "SEC") on or before the Filing Date covering the Common Shares included in any Units that are sold in the offering, the Common Shares underlying the Unit Warrants and the Common Shares underlying the Finder's Warrants. The Corporation shall use its commercially reasonable efforts to cause the Registration Statement to be declared effective by the Commission under the Securities Act of 1933 and to keep the Registration Statement current for 24 months after the Closing Date or such earlier date when the Common Share issued with the sale of Units and Common Shares issued upon exercise of the Unit Warrants and Finder's Warrants have been sold or may be sold with or without volume restrictions pursuant to Rule 144 as determined by counsel to the Corporation. Part 5 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION 5.1 The Corporation represents and warrants to the Finder, and hereby acknowledges that the Finder is relying on such representations and warranties in entering into this Agreement as follows: (a) the Corporation has been duly incorporated and organized and is valid and subsisting and in good standing under the laws of its jurisdiction of incorporation and has all the requisite corporate power and capacity to carry on its business as now conducted and as presently proposed to be conducted; (b) the Corporation has full corporate power and authority to enter into this Agreement and assuming the due execution and performance by Finder, to perform its obligations set out herein and this Agreement has been duly authorized, executed and delivered by the Corporation and constitutes a legal, valid and binding obligation of the Corporation enforceable in accordance with the terms, subject to the general qualification that: 3 (i) enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other laws affecting creditors' rights generally; (ii) equitable remedies, including the remedies of specific performance and injunctive relief are available only in the discretion of the applicable court; and (iii) rights to indemnity, contribution and waiver hereunder and the ability to sever unenforceable terms may be limited under applicable law; (c) the authorized capital of the Corporation and the issued capital of the Corporation is as disclosed in the Disclosure Record; all of the issued and outstanding securities have been duly issued in compliance with all applicable securities laws and are fully paid and non-assessable; and, no person, firm or corporation has any agreement or option, or right or privilege, whether preemptive or contractual, capable of becoming an agreement, including convertible securities, for the purchase, subscription or issuance of any unissued shares or other securities of the Corporation except as disclosed in the Disclosure Record; (d) there is no action, proceeding or investigation pending or to the best of its knowledge threatened against the Corporation before or by any federal, provincial, state, municipal, county or other governmental department, commission, board or agency, domestic or foreign, which may result in any material adverse change in the condition, financial or otherwise, of the Corporation, or which questions the validity of any action taken or to be taken by the Corporation pursuant to or in connection with this Agreement; (e) there is not, in the constituting documents or by-laws of the Corporation or in any agreement, mortgage, note, debenture, indenture or other instrument or document to which the Corporation is a party, any restriction upon or impediment to the declaration or payment of dividends by the directors of the Corporation or the payment of dividends by the Corporation to the holders of its Common Shares; (f) the audited Hfinancial statements of the Corporation, including the notes thereto, as contained in the Disclosure Record, present the financial position and condition of the Corporation as at the date thereof, in accordance with generally accepted accounting principle applicable in the United States ("GAAP") and reflect all material liabilities (absolute, accrued, contingent or otherwise) of the Corporation as at the date thereof in accordance with GAAP, and there has not been any material adverse change in such position or condition since such date except as described in the Disclosure Record; (g) no event of material default under the constituting documents, by-laws or resolutions of the Corporation or under any agreement or instrument to which the Corporation is a party, has occurred and no event which with the giving of notice or the passage of time or both would constitute an event of material default under the constituting documents, by-laws or resolutions of the Corporation or under any such agreement or instrument has occurred and is continuing; (h) subject to the Closing occurring at a minimum of US $5,000,000, the Corporation shall not issue or sell any Common Shares or financial instruments convertible or exchangeable into Common Shares of the Corporation other than for the purpose of employee, directors and qualified consultant stock options or stock grants (under the Non Qualified Option and Stock Grant Plan) or to satisfy instruments or agreements already existing as of the date hereof for period of 180 days from the Closing Date without the prior written consent of the Finder, such consent not to be unreasonably withheld; 4 (i) except as disclosed herein, there is no person, firm or corporation acting or purporting to act for the Corporation entitled to any brokerage or finder's fee in connection with any of the transactions contemplated herein; (j) the execution and delivery by the Corporation of this Agreement and, assuming due performance and registration or qualification of the Finder, the performance of its obligations hereunder will not result in any breach or violation of, or be in conflict with, or constitute a default, under any term or provision of the constituting documents of the Corporation or any shareholders' or directors' resolutions of the Corporation, or any agreement to which the Corporation is a party or by which the Corporation or any of its property is bound, and this Agreement has been duly authorized, executed and delivered by the Corporation; (k) assuming due qualification and/or registration by the Finder, no approval, authorization, consent or other order of any governmental authority is required in connection with the execution and delivery or by the performance by the Corporation of this Agreement except requisite filings with the Commissions; (l) there is no order ceasing or suspending trading in securities of the Corporation or prohibiting the sale of such securities against the Corporation or, to the best of the Corporation's knowledge, after due inquiry: any of its directors, officers and promoters; any other companies that have common directors, officers and promoters; and no proceedings for this purpose have been instituted or are pending, contemplated or threatened; (m) all statements, facts, data, information and material made, furnished or provided from time to time by the Corporation in writing to the Finder relating to the Corporation are true and correct in all material respects as at the respective dates of said documents and all material facts relating to the Corporation have been fully disclosed to the Finder and such statements, facts, data, information and material did not and do not (except where modified or superseded by subsequently provided statements, facts, data, information and materials) contain an untrue statement of a material fact or omit to state a material fact necessary in order to make any statement or fact contained therein not misleading in light of the circumstances in which it was made; and (n) upon Closing, the Finder's Warrant will be validly created, authorized and delivered and the Common Shares will be validly authorized, allotted and reserved for issuance upon the exercise of the Finder's Warrant in accordance with its terms, and Common Shares will, when issued, be issued as fully paid and non-assessable securities and will be issued free and clear of all liens, charges and encumbrances of any kind whatsoever. Part 6 COVENANTS OF THE CORPORATION 6.1 Forthwith following execution of this Agreement, the Corporation will use, at its own expense, commercially reasonable efforts to take or cause to be taken all steps and proceedings that may be necessary under applicable securities legislation, including but not limited to, the filing and obtaining of an effective date for the Registration Statement in all applicable jurisdictions. (a) The Corporation covenants and agrees, notwithstanding the termination of this Agreement, to protect, indemnify and save harmless the Finder and its directors, officers and employees (collectively the "Indemnified Parties") from and against all losses, claims, damages, liabilities, valid costs or expenses as provided herein (other than loss of profits), in any way caused, sustained or incurred by reason of or resulting directly from: 5 (i) any statement or information contained in or omitted from the Registration Statement, any amended Registration Statement and additional or ancillary material, information, evidence, return, report, application, statement, table or document that may be filed, or required to be filed, in connection with the Offering, except statements or information relating solely to or provided solely by the Finder, which, at the time and in light of the circumstances under which it was made, was false or misleading with respect to any material fact or which omits to state any material fact, the omission of which makes the statement false or misleading; (ii) any breach of the representations, warranties and covenants of the Corporation contained herein; (iii) any prohibition or restriction of trading in the securities of the Corporation or any prohibition affecting the distribution of the Common Shares which may be ordered by any one or more competent authorities if such prohibition is based on any statement or omission made by the Corporation in the Registration Statement, except statements or omissions relating solely to, provided or omitted by the Finder or the purchasers in the offering; (iv) the Registration Statement failing to comply with the requirements of securities laws affecting the Offering or by reason of the Corporation having failed to take or cause to be taken such steps or proceedings as were necessary to permit the lawful sale of the Common Shares as contemplated by the Registration Statement and as contemplated hereby excepted to the extent that the failure is caused by the Finder of the Accredited Investors; and (v) any formal inquiry or investigation, whether prior to or subsequent to Closing, into the affairs, records or accounts of the Corporation or into holdings of securities of the Corporation or transactions in securities of the Corporation, which is commenced or contemplated by securities regulations authorities except where same relates solely to the activities of the Finder. (b) If any matter or thing contemplated by section 6.2(a) shall be asserted against an Indemnified Party, the Indemnified Party shall notify the Corporation as soon as possible of the nature of such claim and the Corporation shall be entitled (but not required) to assume the defense of any suit brought to enforce such claim; provided however, that the defense shall be through legal counsel acceptable to the Indemnified Party, acting reasonably, and that no settlement may be made by the Corporation or the Indemnified Party without prior written consent of the other. If the Corporation assumes the defense of any such suit, the Indemnified Party shall continue to have the right to employ its own counsel, which shall be acceptable to the Corporation, in any proceeding relating to the claim contemplated by section 6.2(a) and the reasonable fees and expenses of such counsel shall be recoverable by the Indemnified Party from the Corporation to the extent that the same shall be covered by the indemnity in section 6.2(a) if: (i) the Indemnified Party has been advised by such counsel that there may be legal defenses available to it which are different from or additional to defenses available to the Corporation which counsel for the Corporation fails or refuses to assert; (ii) the Corporation shall not have undertaken the defense of such proceedings and employed counsel within fifteen (15) days after notice of commencement of such proceedings; or 6 (iii) the employment of such counsel has been authorized by the Corporation in connection with the defense of such proceedings. (c) To the extent that any Indemnified Party is not a party to this Agreement, the Finder shall obtain and hold the right and benefit of this section in trust for and on behalf of such Indemnified Party. (d) In the event that, for any reason, the indemnity provided for in this Section, is illegal or unenforceable, the Finder and the Corporation shall contribute to the aggregate of all losses, claims, costs, damages, expenses or liabilities of the nature provided in this Section such that the Finder shall be responsible for that portion represented by the percentage that the Finder's compensation herein bears to the gross proceeds from the Offering and the Corporation shall be responsible for the balance. Notwithstanding the foregoing, a party guilty of fraudulent misrepresentation shall not be entitled to indemnification or contribution from any other party. Any party entitled to indemnification or contribution will, promptly after receiving notice of commencement of any claim, action, suit or proceeding against such party in respect of which a claim for indemnification or contribution may be made against another party or parties under this section, notify such party or parties from whom indemnification or contribution may be sought. In no case shall such party from whom contribution may be sought be liable under this subsection unless such notice shall have been provided, but the omission to so notify such party shall not relieve the party from whom indemnification or contribution may be sought from any other obligation it may have otherwise than under this subsection. The right to contribution provided in this subsection shall be in addition to and not in derogation of any other right to contribution which the Finder or the Corporation, as the case may be, may have by statute or otherwise by law. (e) Notwithstanding the provisions of this section 6.2, the foregoing rights of indemnity shall not enure to an Indemnified Party if the Corporation has complied with the provisions of section 6.1 and the claim for indemnification relates to a person asserting a claim in respect of an alleged untrue statement in or alleged omission from the Registration Statement, or any amendment thereto, and such person was not provided with a copy of the document which corrects such alleged untrue statement or untrue omission and which is required, under applicable law, to be sent or delivered to such person by such Indemnified Party. Part 7 COVENANTS OF THE FINDER 7.1 The Finder covenants: (a) to comply with Rule 502(c) of Regulation D promulgated under the Securities Act of 1933 and not participate in any advertisement or general solicitation in connection with the Financing; (b) not to participate in any negotiations between the Corporation and Accredited Investors; (c) not to perform any independent analysis of the Corporation; (d) not to engage in any due diligence activities; (e) not to provide any advise in relation to the valuation of, or the financial advisability of such investment, by an Accredited Investor; (f) not to handle any funds or securities in respect of the Financing other than the Finder's Fee and Finder's Warrants pursuant to section 3.1 hereof; 7 (g) not to assist in or provide financing for such purchases; and (h) not to provide any information about the Corporation, unless authorized to an Accredited Investor to do so by the Corporation in writing; (i) not to issue any press release or other public announcement regarding the Offering without the written consent of the Corporation; (j) to indemnify the Corporation against any liabilities incurred by it in connection with the Offering caused by the acts or omissions of the Finder. 7.2 The Finder represents to the Corporation that: (a) there is a substantial and pre-existing relationship with the Accredited Investor and the Finder; (b) that the Finder reasonably believes that the US Persons are Accredited Investors and that he reasonably believes that purchasers in Canada are purchasing for investment purposes only and not with a view to resale or distribution. (c) Neither the Units, the Shares nor the shares underlying the warrants have been registered under the 1933 Act, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of Purchaser hereto), and that such Shares and warrants must be held unless a subsequent disposition is registered under the 1933 Act or is exempt from such registration. (d) The Units, Unit Warrants, Finder's Warrants and all Common Shares shall bear the following or a substantially equivalent legend, unless same shall have been included in an effective registration statement under the 1933 Act: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED; (e) It has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company's stage of development so as to be able to evaluate the risks and merits of its investment in the Company and it is able financially to bear the risks thereof; (f) No agency, governmental authority, regulatory body, stock exchange or other entity has made any finding or determination as to the merits for investment of, nor have any such agencies or governmental authorities made any recommendation or endorsement with respect to, the Shares or the Warrants; (g) Purchaser has access to and has reviewed to the extent necessary, via United States Securities and Exchange Commission (the "Commission") Edgar data base, copies of the Company's Form 10-KSB/A for the year ended December 31, 2002 as filed with the Commission together with all subsequently filed forms 10-KSB, 10-QSB, 8-K, Proxy Statements, Registration Statement on Form SB-2 and all amendments thereto and other publicly available filings made with the Commission and has received from the Company such other information concerning its operations, financial condition and other matters as requested of the Company and Purchaser has considered all factors the Purchaser deems material in deciding on the advisability of investing in the Units; 8 (h) The Units are being offered for sale only on a "private placement" basis; (i) The Units are being acquired by the Purchaser in good faith solely for the Purchaser's own account, for investment purposes only, and are not being purchased with a view to, or for the resale or distribution thereof; and Part 8 CLOSING 8.1 Subject to the terms and conditions hereof, the Closing shall take place at the Time of Closing at the offices of the Corporation, or such other location in the City of Denver, in the State of Colorado. 8.2 At the Closing, the Corporation shall deliver to the Finder payment of the Finder's Fee and Finder's Warrant provided for in Part 3 hereof and payment of the balance owed in respect of the Expenses of the Finder. Part 9 TERM AND TERMINATION 9.1 This Agreement shall expire following expiration of the Offering Period on March 12, 2004 unless extended with the mutual written consent of the parties. 9.2 The Corporation may terminate this agreement prior to its expiration without prior notice for just cause, which shall include: (a) the Finder committing an act of bankruptcy or becoming involved in any fraud or dishonest or serious misconduct in circumstances that would, in the reasonable opinion of the Corporation, make the Finder unsuitable to act on behalf of the Corporation; and (b) the Finder failing to comply with any terms of this Agreement with such failure not being rectified within fifteen (15) days of receipt of notice thereof from the Corporation. (c) no termination of this Agreement shall affect the rights of any party to pursue damages for breach of the Agreement by any other party. 9.3 Finder many terminate this agreement prior to its expiration without prior notice for just cause, which shall include; (a) the Corporation committing an act of bankruptcy or becoming involved in any fraud or dishonest or serious misconduct in circumstances that would, in the opinion of the Finder, make representation of the Corporation by the Finder unsuitable; and (b) the Corporation failing to comply with the terms of this Agreement with such failure not being rectified within fifteen (15) days of receipt of notice from the Finder. (c) no termination of this Agreement shall affect the rights of any party to pursue damages for breach of the Agreement by any other party. Part 10 EXPENSES OF THE ISSUE 10.1 Notwithstanding any termination of the Agreement or the cancellation of its obligations by the Finder pursuant to Part 9 hereof and, except as otherwise indicated herein, the Work Fee and costs and expenses of or incidental to the Offering, all other reasonable expenses incurred by the Finder in connection with the Offering and Registration Statement shall be paid by the Corporation whether or not the Offering is completed as contemplated, including the fees and disbursements of legal counsel to Finder, except that expenses in excess of aggregate US$10,000 shall require the prior written approval of the Corporation (the "Expenses"). The Corporation will pay the Work Fee, the Expenses incurred by the Finder's Fee from time to time as requested by the Finder by bank wire transfer to the Finder or counsel to the Finder or in such other manner as is acceptable to the Finder. 9 Part 11 NOTICES 11.1 Any notice required or permitted to be given hereunder shall be in writing and shall be deemed to have been given or made when delivered at the addresses of the relevant party set forth below or such other address as a party may stipulate in writing: (a) to the Corporation at: U.S. Gold Corporation 2201 Kipling Street, Suite 100 Lakewood, Colorado 80215-1545 Facsimile: (303) 238-1724 Attention: Mr. William W. Reid with a copy to: Dufford & Brown, PC 1700 Broadway, Suite 1700 Denver, Colorado 80290-1701 Facsimile: (303) 832-3804 Attention: Mr. David J. Babiarz (b) to the Finder at: Meridian Capital Ltd. Suite 3400, Park Place 666 Burrard Street Vancouver, BC V6C 2X8 Facsimile: (604) 642-6194 Attention: Mr. Kevin Pollard with a copy to: Thomas, Rondeau Suite 1525-625 Howe Street Vancouver, BC V6C 2T6 Facsimile: (604) 688-6995 Attention: Mr. Craig D. Thomas Part 12 MISCELLANEOUS 12.1 Time shall be of the essence with respect to the terms and conditions of this Agreement. 12.2 This Agreement may be executed in several counterparts and may be represented by facsimile, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument and notwithstanding their date of execution, shall be deemed to bear the date above written. 12.3 All warranties, representations, covenants, indemnifications and agreements herein contained or contained in certificates or documents submitted pursuant to or in connection with the transactions herein along with all rights of action in connection therewith shall survive the Closing of the Offering and shall continue in full force and effect for a period of two years following the Closing Date for the benefit of the Finder and for the benefit of the Corporation. 12.4 This Agreement supersedes all other agreements, documents, writings and verbal understandings among the parties relating to the subject matter hereof and represents the entire agreement between the parties relating to the subject matter hereof. 10 12.5 This Agreement shall be construed and interpreted, and the rights and obligations of the parties arising hereunder governed, by the laws of the State of Colorado. The parties agree that the courts of Colorado shall have exclusive jurisdiction over any dispute, termination or breach of any kind or nature whatsoever arising out of or in connection with this Agreement. 12.6 All the terms and provisions of this Agreement shall be binding upon, shall enure to the benefit of, and shall be enforceable by and against the parties hereto and their respective successors and permitted assigns, but shall not be assignable, before or after the Time of Closing, without the written consent of the other parties hereto. 12.7 The Finder may waive in whole or in part any breach of, default under or non-compliance with any representation, warranty, term or condition hereof, or extend the time for compliance therewith. IN WITNESS WHEREOF the parties hereto have executed this Agreement effective the day and year first above written. US GOLD CORPORATION Per: /s/ William W. Reid - ------------------------------------------------------------------------- Chief Executive Officer, President and Chairman of the Board of Directors MERIDIAN CAPITAL LTD. - ---------------------- Per: /s/ Kevin Pollard 11 EX-10 5 exh10_40.txt Exhibit 10.40 UNIT SUBSCRIPTION AGREEMENT (for Canadian and Non-United States Purchasers only) To: U.S. Gold Corporation 2201 Kipling Street, Suite 100 Lakewood, Colorado U.S.A. 80215-1545 The undersigned (the "Purchaser") hereby irrevocably subscribes for and agrees to purchase from U.S. Gold Corporation (the "Company") on the terms and conditions set forth in this Subscription Agreement ("Agreement") that number of Units set forth in Clause 17 below (the "Units"). The price of each Unit is US$0.90 and each Unit shall consist of one Common Share, par value US$0.10 (the "Share"), and one Common Share Purchase Warrant. Each four (4) Purchase Warrants will entitle the holder to subscribe for one Share of the Company at US$1.25 for a period of two years from the date of Closing as provided in Exhibit 1 attached hereto. The Purchaser agrees to pay the purchase price for the Units set forth in Clause 17 to the Company on or before the Closing Date (hereinafter defined). 1. Conditions of Purchase The Purchaser acknowledges that the Company's obligation to sell the Units and issue Units to the Purchaser is subject to, among other things, the conditions that: (a) the Purchaser executes and returns to the Company all documents required by this Agreement, including Schedule B, demonstrating that the Purchaser is an "accredited investor", as such term is defined in Regulation D promulgated by the United States Securities and Exchange Commission under the Securities Act of 1933, as amended (the "1933 Act") and that the purchaser, if resident in Alberta or British Columbia, is an "accredited investors" as defined in Canadian Securities Administrators' Multilateral Instrument 45-103 "Capital Raising Exemptions" ("45-103"), or if resident in Ontario, is an "accredited investor" as such term is defined in Ontario Securities Commission Rule 45-501; (b) all necessary regulatory approvals, if any, being obtained by the Company prior to the Closing; and (c) the representations and warranties of the Purchaser being true and correct as at the Closing (d) the Company has reviewed the completed Unit Subscription Agreement submitted by the Purchaser and accepted the subscription. Notwithstanding this condition, the subscription is irrevocable unless it is rejected by the Company. 2. Delivery and Payment The Purchaser agrees that the following shall be delivered to the Company prior to the Closing: (a) one completed and duly signed copy of this Agreement; (b) all other documentation as may be required by applicable securities legislation, including a duly completed Accredited Investor certificate in the form of Schedule "B" hereto; and (c) a certified cheque, bank draft or evidence of a wire transfer in United States dollars funds payable to U.S. Gold Corporation Trust Account to Meridian Capital LTD, finder for the Company, representing the Aggregate Purchase Price shown in Clause 17 hereof. Details concerning the payment procedure are set out in Schedule "A". The closing of the Offering pursuant to which this Subscription is made may be affected by means of a series of closings, each such closing involving the Company and one or more purchasers of Units. The Purchaser acknowledges that its subscription may be one of many accepted by the Company until the Company has sold in the aggregate up to 9,000,000 Units. Delivery by the Company of the certificates representing the Shares and Warrants, and payment for the Units by the Purchaser, shall be completed at a closing (the "Closing") to be held at such time and place as may be mutually agreed upon by the Company and the Purchaser but not later than March 12, 2004 (the date of the Closing being hereinafter called the "Closing Date"). If the Purchaser chooses not to attend the Closing to receive the Share certificate(s) and warrant(s), then the Company shall deliver such certificate(s) and warrant(s) to the Purchaser at the address set forth below, promptly after the Closing. 3. Purchaser's Acknowledgements The Purchaser acknowledges and agrees that: (a) the sale and delivery of the Shares and Warrants to the Purchaser is conditional upon such sales being made pursuant to the exemption from registration under the 1933 Act as set forth in Regulation D ("Regulation D") promulgated thereunder; (b) the Company will be required to disclose to the Commission, and thereby though public access to Edgar filing, the identity of the beneficial purchasers of the Shares; (c) neither the Units, the Shares, the Warrants nor the shares underlying the Warrants have been registered under the 1933 Act, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of Purchaser hereto), and that such Shares must be held unless a subsequent disposition is registered under the 1933 Act or is exempt from such registration; (d) the Shares and Warrants shall bear the following or a substantially equivalent legend, unless same shall have been included in an effective registration statement under the 1933 Act: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED; (e) it has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company's stage of development so as to be able to evaluate the risks and merits of its investment in the Company and it is able financially to bear the risks thereof; (f) no agency, governmental authority, regulatory body, stock exchange or other entity has made any finding or determination as to the merits for investment of, nor have any such agencies or governmental authorities made any recommendation or endorsement with respect to, the Shares or the Warrants; (g) the Purchaser has access to and has reviewed to the extent necessary, via United States Securities and Exchange Commission (the "Commission") Edgar data base, copies of the Company's Form 10-KSB/A for the year ended December 31, 2002 as filed with the Commission, together with all subsequently filed Forms 10-KSB, 10-QSB, 8-K, Proxy Statements, Registration Statement on Form SB-2 and all amendments thereto and other publicly available filings made with the Commission ("Commission Reports") and has received from the Company such other 2 information concerning its operations, financial condition and other matters as requested of the Company, and Purchaser has considered all factors the Purchaser deems material in deciding on the advisability of investing in the Units; (h) the Units are being offered for sale only on a "private placement" basis; (i) the representations, warranties and covenants contained in this Agreement are made by the Purchaser with the intent that they may be relied upon by the Company in determining the Purchaser's eligibility to purchase the Units, and the Purchaser hereby agrees to indemnify the Company against all losses, claims, costs, expenses and damages or liabilities which it may suffer or incur caused or arising from its reliance thereon. The Purchaser further agrees that by accepting the Shares and Warrants, the Purchaser represents and warrants that the foregoing representations and warranties are true as at the Closing with the same force and effect as if they had been made by the Purchaser at the Closing and that they shall survive the Closing Date and shall continue in full force and effect notwithstanding any subsequent disposition of the Shares or the Warrants; (j) the Purchaser understands and agrees that the Company will pay a finder's fee of 8.5% of the amount of the Aggregate Subscription Amount and finder's warrants to purchase up to 20% of the number of units sold in the offering to Meridian Capital in connection with this subscription; (k) the offer to sell the Shares and Warrants was directly communicated to the Purchaser and at no time was the Purchaser presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer; (l) the Purchaser has been independently advised as to the applicable hold or restricted period imposed in respect of the Shares, Warrants and Shares issued on the exercise of Warrants by applicable securities laws and confirms that no representation has been made respecting the applicable hold or restricted periods for the Shares, Warrants and Shares issued on the exercise of Warrants and is aware of the risks and other characteristics of the Shares and Warrants and of the fact that the Purchaser may not be able to sell the Shares except in accordance with applicable securities laws and regulatory policies and agrees to comply with all such resale restrictions; (m) the Purchaser has not received, nor has it requested, nor does it have any need to receive, any offering memorandum or any other document describing the business and affairs of the Company (other than this Subscription Agreement, the Term Sheet and the Commission Reports), nor has any document been prepared for delivery to, or review by, prospective purchasers in order to assist them in making an investment decision in respect of the Shares and Warrants; (n) the Purchaser has relied solely upon the term sheet and the Commission Reports, prepared and issued by the Company and not upon any verbal or other written representation as to any facts or otherwise made by or on behalf of the Company or any employee, agent or affiliate thereof; and (o) the Company has the right to reject any subscription, in whole or in part, for any reason, in which case the funds tendered by the Purchaser shall be refunded in full, without interest or deduction. 3 4. Purchaser's Representations and Warranties The Purchaser hereby represents, warrants and covenants to the Company (which representations, warranties and covenants shall survive Closing and continue in full force and effect) that: (a) the Purchaser is not a resident of the United States of America and that the Purchaser was offered the Shares outside of the United States of America; (b) the Purchaser is an "accredited investor" as that term is defined in Regulation D promulgated by the 1933 Act by virtue of satisfying the indicated criterion in paragraph 1 of Schedule "B"; (c) the Purchaser acknowledges that in addition to compliance with the restrictions on resale applicable under relevant rules of the Commission, the Purchaser may be subject to various reporting requirements with the Commission if Purchaser is the owner of 5% or more of a class of the issued and outstanding stock of the Company; (d) the Purchaser will execute and deliver all documentation to the Company as may be required by applicable rules, regulations and policies of the Commission and to permit the purchase of the Shares on the terms herein set forth; (e) this agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding agreement of, the Purchaser subject to: (i) any applicable bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally; and (ii) general principles of equity, including that the granting of equitable remedies is within the discretion of a court of competent jurisdiction; (f) the Purchaser is not, directly or indirectly, the holder of any common shares in the capital of the Company other than the number of common shares of the Company included in the Units disclosed in Clause 17(d); (g) the Units are being acquired by the Purchaser in good faith, for investment purposes only, are not being purchased with a view to, or for the resale or distribution thereof and the Purchaser is purchasing as principal or is deemed to be purchasing as principal by applicable securities legislation and if the Purchaser is deemed to be purchasing as a principal, the Purchaser will deliver to the Company prior to Closing a completed and executed Accredited Investor Certificate in the form attached hereto as Schedule "B" on behalf of each beneficial purchaser; (h) the Purchaser: (i) if resident in Alberta or British Columbia, is an "accredited investor" as that term is defined in Canadian Securities Administrators' Multilateral Instrument 45-103 "Capital Raising Exemptions" by virtue of satisfying the indicated criterion in paragraph 6 of Schedule "B"; or (ii) if resident in Ontario, is an "accredited investor" as that term is defined in Ontario Securities Commission Rule 45-501 by virtue of satisfying the indicated criterion in paragraph 7 of Schedule "B"; or; (iii) is purchasing the Units and is a resident in the Province of British Columbia, is purchasing the Units as principal for its own account and not for the benefit of any other person, and is purchasing a sufficient number of Units so that the aggregate acquisition cost to such Purchaser is not less than $97,000; or 4 (iv) is a resident of a country (an "International Jurisdiction") other than Canada or the United States, and A. the delivery of this Subscription Agreement, the acceptance this Subscription Agreement by the Company, the issue of the Shares and Warrants to the Purchaser complies with all applicable laws of the Purchaser's jurisdiction of residence and all other applicable laws and will not cause the Company to become subject to or comply with any disclosure, prospectus or reporting requirements under any such applicable laws, B. the Purchaser is knowledgeable of, or has been independently advised as to, the applicable securities laws of the International Jurisdiction which would apply to this subscription, C. the Purchaser is purchasing the Units pursuant to exemptions from the prospectus and registration requirements (or their equivalent) under the applicable securities laws of that International Jurisdiction or, if such is not applicable, each is permitted to purchase the Units under the applicable securities laws of the International Jurisdiction without the need to rely on an exemption, and D. the applicable securities laws do not require the Company to make any filings or disclosures or seek any approvals of any kind whatsoever from any regulatory authority of any kind whatsoever in the International Jurisdiction; (i) if the Purchaser is not an individual but is a corporation, syndicate, partnership, trust, association, or any other form of unincorporated organization or organized group of persons, it has not been created solely or used primarily to permit a group of persons to purchase securities without a prospectus in reliance on a prospectus exemption or, if created for such purpose, every participant in, or member or beneficiary of, the corporation, syndicate, partnership, trust, association, unincorporated organization or organized group of persons, is an accredited investor with the meaning of Regulation D of the 1933 Act by reason of satisfying one of the requirements designated in Schedule B and, if resident in British Columbia or Alberta, is an "accredited investor" as such term is defined in MI 45-103 and such British Columbia or Alberta resident has indicated the criterion satisfied in paragraph 6 of Schedule "B" attached hereto, or would each have an aggregate acquisition cost of not less than $97,000 and, if resident in Ontario, is an "accredited investor" as such term is defined in Ontario Securities Commission Rule 45-501 and such Ontario resident has indicated the criterion satisfied in paragraph 7 of Schedule "B" attached hereto; (j) the Purchaser is not an investment club; and (k) the representations, warranties and covenants of the Purchaser set forth herein shall survive the closing of the transaction contemplated hereby. 5. Company's Representations and Warranties The Company represents and warrants and agrees with the Purchaser that: (a) Due Incorporation. The Company has been organized under the laws of the State of Colorado, United States of America. The Company and each of its subsidiaries, if any, is a corporation or limited partnership or limited liability company duly organized, validly existing and in good standing under the laws of the respective jurisdictions of their incorporation or registration and have the requisite corporate or other power to own their properties and to carry on their business as 5 now being conducted. The Company and each of its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a material adverse effect on the business, operations or financial condition of the Company. (b) Outstanding Stock. All issued and outstanding shares of common stock of the Company and each of its subsidiaries has been duly authorized and validly issued and are fully paid and non-assessable. (c) Reservation of Warrant Shares. The Company undertakes to reserve on behalf of the purchasers, from its authorized but unissued common stock, at all times that the Warrants are outstanding, a number of common shares necessary to allow fully the exercise of all such Warrant Shares. (d) Authority; Enforceability. This Agreement and other agreements delivered together with this Agreement or in connection herewith have been duly authorized, executed and delivered by the Company and are valid and binding agreements enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity; and the Company has full corporate power and authority necessary to enter into this Agreement, and such other agreements and to perform its obligations hereunder and under all other agreements entered into by the Company relating hereto. (e) Additional Issuances. There are no outstanding agreements or preemptive or similar rights affecting the Company's common stock or equity and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of common stock or equity of the Company or other equity interest in any of the subsidiaries of the Company except as described in the public reports or otherwise provided to Purchaser. (f) Consents. No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, or any of its affiliates, the National Association of Securities Dealers, Inc. ("NASD") or the Company's shareholders is required for execution of this Agreement, and all other agreements entered into by the Company relating thereto, including, without limitation, the issuance and sale of the Shares, and the performance of the Company's obligations hereunder. (g) No Violation or Conflict. Assuming the representations and warranties of the Purchaser in this Agreement are true and correct and the Purchaser complies with its obligations under this Agreement, the issuance and sale of the Shares and the performance of the Company's obligations under this Agreement will not: (i) violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the articles of incorporation, charter or bylaws of the Company, (B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company or any court, governmental agency or body, or arbitrator having jurisdiction over the Company or any of its affiliates or over the properties or assets of the Company or any of its affiliates, 6 (C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company or any of its affiliates is a party, by which the Company or any of its affiliates is bound, or to which any of the properties of the Company or any of its affiliates is subject, or (D) the terms of any "lock-up" or similar provision of any underwriting or similar agreement to which the Company, or any of its affiliates is a party except the violation, conflict, breach, or default of which would not have a material adverse effect on the Company; or (ii) result in the creation or imposition of any lien, charge or encumbrance upon the Shares or any of the assets of the Company, its subsidiaries or any of its affiliates. (h) The Shares. The Shares upon issuance: (i) are, or will be, free and clear of any security interests, liens, claims or other encumbrances, but are subject to restrictions upon transfer under the 1933 Act and state laws; (ii) have been duly and validly authorized and on the date of issuance, fully paid and nonassessable; (iii) will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company; and (iv) will not subject the holders thereof to personal liability by reason of being such holders. (h) Litigation. There is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its affiliates that would affect the execution by the Company or the performance by the Company of its obligations under this Agreement, and all other agreements entered into by the Company relating hereto. To the best knowledge of the Company there is no threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its affiliates which litigation if adversely determined could have a material adverse effect on the Company. (i) Reporting Company. The Company is a publicly held company subject to reporting obligations pursuant to Sections 15(d) or 13 of the Securities Exchange Act of 1934, as amended (the "1934 Act") and has a class of common shares registered pursuant to Section 12(g) of the 1934 Act. The Company's common stock is quoted for trading on the OTC Bulletin Board ("Bulletin Board"). Pursuant to the provisions of the 1934 Act, the Company has filed all public reports and other materials required to be filed thereunder with the Commission during the preceding twelve months. (j) Information Concerning Company. The public reports provided to the Purchaser contain all material information relating to the Company and its operations and financial condition as of their respective dates which information is required to be disclosed therein. Since the date of the most recent financial statements included in public documents, there has been no material adverse change in the Company's business, financial condition or affairs not disclosed to the Purchaser. The public reports, at the time that they were filed, did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made. 7 (k) Dilution. The Company's executive officers and directors have studied and fully understand the nature of the Shares being sold hereby and recognize that they have a potential dilutive effect. The board of directors of the Company has concluded, in its good faith business judgment, which such issuance is in the best interests of the Company. (l) Stop Transfer. The Shares are restricted securities as of the date of this Agreement. As a result, the Company will be obligated to issue stop transfer orders to its transfer agent regarding the Shares and the Warrants, as required by federal securities laws. (m) Defaults. Neither the Company nor any of its subsidiaries is in violation of its Articles of Incorporation or ByLaws. Other than as disclosed in public reports, neither the Company nor any of its subsidiaries is (i) in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a material adverse effect on the Company except as otherwise disclosed in documents provided or made available to the Purchaser, (ii) in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters, or (iii) to its knowledge in violation of any statute, rule or regulation of any governmental authority which violation would have a material adverse effect on the Company. (n) No General Solicitation. Neither the Company, nor any of its affiliates, nor to its knowledge, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Act) in connection with the offer or sale of the Units. (o) No Undisclosed Liabilities. The Company has no liabilities or obligations that are material, individually or in the aggregate, which are not disclosed in public reports, other than those incurred in the ordinary course of the Company's businesses since September 30, 2003. (p) No Undisclosed Events or Circumstances. Since September 30, 2003, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the documents provided or made available to Purchaser. (q) Capitalization. The authorized and outstanding capital stock of the Company as of the date of this Agreement is 35,000,000 common shares authorized, of which 19,528,954 common shares are outstanding as of January 22, 2004 and prior to the issuance of Shares hereunder, and, additionally warrants for the purchase of 428,572 which may be exercised through May 30, 2006 are outstanding and there are outstanding option agreements to purchase 1,367,693 common shares with executive officers and directors of the Company under the Company's Non-Qualified Stock Option and Stock Grant Plan. Except as set forth in public reports, there are no other options, warrants, or rights to subscribe to, securities, rights or obligations convertible into or exchangeable for or giving any right to subscribe for any shares of capital stock of the Company. All of the outstanding shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable. 8 (r) Correctness of Representations. The Company represents that the foregoing representations and warranties are true and correct as of the date hereof in all material respects. The foregoing representations and warranties shall survive during the course and effectiveness of this Agreement. 6. Covenants of the Company The Company covenants and agrees with the Purchaser as follows: (a) The Company will advise the Purchaser, promptly after it receives notice of issuance by the Securities and Exchange Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose. (b) The Company shall promptly secure the listing of the Shares upon each national securities exchange, or automated quotation system, if any, upon which shares of common stock of the Company are then listed (subject to official notice of issuance). The Company will maintain the listing of its Common Stock on the NASD OTC Bulletin Board (the "Principal Market")), and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the National Association of Securities Dealers ("NASD") and such exchanges, as applicable. The Company will provide the Purchaser copies of all notices it receives notifying the Company of the threatened and actual delisting of the Common Stock from any Principal Market. (c) The Company shall notify the Commission, NASD, and applicable state authorities, in accordance with their requirements, if any, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Shares to the Purchaser and promptly provide copies thereof to Purchaser. (d) The Company shall use its commercially reasonable efforts to file with the Commission a Registration Statement on Form SB-2 covering the resale of all of the Shares hereunder within ninety (90) days of the Closing date. In the event that Form SB-2 is unavailable for such a registration, the Company shall use such other form as is available for such a registration. The foregoing covenant is conditioned on the Purchaser providing the Company with such information as may be reasonably requested by the Company in connection with the filing of the registration statement. (e) From the date of this Agreement and until at least two (2) years after the effectiveness of the Registration Statement on Form SB-2 or such other Registration Statement as provided in Section 6(d) above, the Company will use its best efforts to (i) cause its Common Stock and the Share to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, (ii) comply with all reporting requirements that are applicable to an issuer with a class of Shares registered pursuant to Section 12(g) of the Exchange Act, and (iii) comply with all requirements related to any registration statement filed pursuant to this Agreement. The Company will use its best efforts not to take any action or file any document (whether or not permitted by the Act or the Exchange Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said Acts until two (2) years after the actual effective date of the Registration Statement on Form SB-2. Until the resale of the Shares by the Purchaser, the Company will continue the listing of the Common Stock on the Bulletin Board and will comply in 9 all respects with the Company's reporting, filing and other obligations under the bylaws or rules of Bulletin Board. 7. Covenants of the Company and Purchaser Regarding Indemnification. (a) The Company agrees to indemnify, hold harmless, reimburse and defend Purchaser, Purchaser's officers, directors, agents, affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon Purchaser or any such person which results, arises out of or is based upon (i) any material misrepresentation by Company or breach of any warranty by Company in this Agreement or in any Schedules attached hereto, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by the Company of any covenant or undertaking to be performed by the Company hereunder, or any other agreement entered into by the Company and Purchaser relating hereto. (b) Purchaser agrees to indemnify, hold harmless, reimburse and defend the Company and each of the Company's officers, directors, employees, agents, affiliates and control persons against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Company or any such person which results, arises out of or is based upon (i) any material misrepresentation by Purchaser in this Agreement or in any Schedules hereto, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by Purchaser of any covenant or undertaking to be performed by Purchaser hereunder, or any other agreement entered into by the Company and Purchasers relating hereto. 8. Anti-Dilution Provisions In case the Company shall at any time before the Closing Date subdivide or consolidate its outstanding common shares into a greater or lesser number of shares, the exercise price of the Warrants and the terms of the Warrants shall be proportionately increased or reduced, and amended accordingly. 9. Governing Law This agreement shall be governed by and construed in accordance with the laws of the State of Colorado and the federal laws of the United States applicable therein. The Purchaser hereby irrevocably attorns to the non-exclusive jurisdiction of the courts of the State of Colorado with respect to any matters arising out of this agreement. 10. Assignment This agreement is not transferable or assignable by the parties hereto. 12. Entire Agreement This agreement contains the entire agreement of the parties hereto relating to the subject matter hereof and there are no representations, covenants or other agreements relating to the subject matter hereof except as stated or referred to herein or therein. 13. Successors and Assigns This agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and permitted assigns,. 14. Currency All amounts in this agreement are stated and shall be paid in United States dollar currency. 10 15. Time of Essence Time shall be of the essence of this agreement. 16. Headings The headings contained herein are for convenience only and shall not affect the meaning or interpretation of this agreement. 17. Subscription Particulars (a) The Purchaser hereby agrees to purchase Units as set forth below: Number of Units: Aggregate Purchase Price: (US$0.90 x number of Units): US$ Name of Purchaser: Street Address: City and Country: Postal Code: Contact Name: Alternate Contacts Name: Phone No.: Fax No.: E-mail: (b) Registration of the certificates representing the Shares and Warrants should be made as follows (if space is insufficient, attach a list) - or leave blank if registration is to be as detailed in sub-clause (a) above. Name: Registration Address: City and Country: Postal Code: (c) The certificates representing the Shares and Warrants are to be delivered as follows (if different from the address set forth in sub-clause (b) above): Name: Address: City and Country: Postal Code: Telephone/Contact: (d) Number of common shares of the Company owned by the Purchaser: 18. Signature of Purchaser Signature of Purchaser (on its own behalf and, if applicable, on behalf of each principal for whom it is contracting hereunder). (Signature or Authorized Signature) (Name and Official Capacity - please print) 19. Confirmation and Acceptance This agreement is confirmed and accepted by the Company. DATED as of the ____ day of March, 2004 U.S. GOLD CORPORATION By: Name: Title: 11 SCHEDULE "A" (Non-United States Purchasers) 1. Method of Payment: Payment for the Subscribed Units shall be made in United States dollars by bank wire transfer, certified cheque, or bank draft (without deduction of bank service charges or otherwise) payable to "Meridian Capital LTD Trust Account". The entire subscription price for all Subscribed Units must be paid at the time of subscription. In the case of a bank wire transfer, funds should be wired to: Meridian Corresponding Bank: Bank of America, New York, New York ABA # TD's Account # at Bank of America: For further credit to: Meridian Capital LTD, US TRUST ACCOUNT Bank: Canadian Imperial Bank of Commerce 400 Burrard Street Vancouver, B.C., Canada TD's Swift Code: Transit #: Account Name Beneficiary: Meridian Capital LTD., Trust Account Trust Account #: 2. Delivery: The Company is authorized to deliver the Subscribed Shares and Warrants to: (Name) (Address) Attention: (Phone Number) Registration: The undersigned hereby directs that the certificates representing the Subscribed Shares and Warrants shall be delivered as indicated above at the time of the closing and shall be registered as follows: (Name) (Address) SCHEDULE 'B' Certificate of Accredited Investor (Words in bold have the meanings set forth in Section 2 of this Schedule) 1. The Purchaser hereby certifies to U.S. Gold Corporation that the Purchaser is: [Please check the appropriate box.] __ (a) any bank as defined in Section 3(a)(2) of the 1933 Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the 1933 Act whether acting in its individual capacity or fiduciary capacity; __ b) any broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934; __ (c) any insurance company as defined in Section 2(13) of the 1933 Act; __ (d) any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Sections 2(a)(48) of that Act, any Small Business Investment Company licensed by the United States Small Business Administration under Section 301(c) or (d) of the United States Small Business Investment Act of 1658; __ (e) any private business development company as defined in Sections 202(a)(22) of the United States Investment Advisers Act of 1940; any employee benefit plan company licensed to do business as an insurance company in any jurisdiction; __ (f) any organization described in Section 501(c)(3) of the United States Internal Revenue Code, corporation, or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000; __ (g) any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds US$1,000,000; __ (h) any natural person who had an income in excess of US$200,000 in each of the last two most recent years or joint income with that person's spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; __ (i) any trust, with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as defined in paragraph 230.506(b)(2)(ii) of Regulation D of the 1933 Act; and __ (j) any entity in which all of the equity owners are Accredited Purchasers as provided above. 2. For the purposes hereof: "company" means any corporation, incorporated association, incorporated syndicate or other incorporated organization. "control person" means any person, company or combination of persons or companies holding a sufficient number of any Shares of the Company to affect materially the control of the Company, but any holding of any persons, company or combination of persons or companies holding more than 10 per cent of the outstanding voting Shares of the Company, in the absence of evidence to the contrary, shall be deemed to affect materially the control of the Company. "director" where used in relation to a person, includes a person acting in a capacity similar to that of a director of a company. "entity" means a company, syndicate, partnership, trust or unincorporated organization. "financial assets" means cash, Shares, or any contract of insurance or deposit or evidence thereof.. "individual" means a natural person, but does not include a partnership, unincorporated association, unincorporated organization, trust or a natural person in his or her capacity as trustee, executor, administrator or other legal personal representative. "managed account" means an investment portfolio account of a client established in writing with a portfolio adviser who makes investment decisions for the account and has full discretion to trade in shares of the account without requiring the client's express consent to a transaction. "mutual fund" includes an issuer of shares that entitle the holder to receive on demand, or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in a part of the net assets, including a separate fund of trust account, of the issuer of the shares. "non-redeemable investment fund" means an issuer (aa) whose primary purpose is to invest money provided by its security holders; (bb) that does not invest for the purpose of exercising effective control, seeking to exercise effective control, or being actively involved in the management of the issuers in which it invests, other than other mutual funds or non-redeemable investment funds; and (cc) that is not a mutual fund. "officer" means the chair, any vice-chair of the board of directors, the president, any vice president, the secretary, the assistant secretary, the treasurer, the assistant treasurer, and the general manager of a company, and any other person designated an officer or a company by by-law or similar authority, or any individual acting in a similar capacity on behalf of the Company. "person" means an individual, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator, or other legal representative. "portfolio adviser" means (dd) a portfolio manager; or (ee) a broker or investment dealer exempted from registration as an adviser under Section 15 of the United States Securities Exchange Act of 1934. "promoter" means (a) a person or company who, acting alone or in conjunction with one or more other persons, companies or a combination thereof, directly or indirectly, has taken the initiative in founding, organizing or substantially reorganizing the business of the Company, or (b) a person or company who, in connection with the founding, organizing or substantial reorganizing of the business of the Company, directly or indirectly, received in consideration of services or property, or both services and property, 10 per cent or more of any class of shares of the Company or 10 per cent or more of the proceeds from the sale of any class of shares of a particular issue, but a person or company who receives such shares or proceeds either solely as underwriting commissions or solely in 2 consideration of property shall not be deemed a promoter within the meaning of this definition if such person or company does not otherwise take part in founding, organizing, or substantially reorganizing the business. "related liabilities" means liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets and liabilities that are secured by financial assets. "spouse" in relation to an individual, means another individual to whom that individual is married, or another individual of the opposite sex or the same sex with whom that individual is living in a conjugal relationship outside marriage. Affiliated Entities, Control and Subsidiaries 3. A person or company is considered to be an affiliated entity of another person or company if one is a subsidiary entity of the other, or if both are subsidiary entities of the same person or company, or if each of them is controlled by the same person or company. 4. A person or company is considered to be controlled by a person or company if (ff) in the case of a person or company, (i) voting shares of the first mentioned person or company carrying more than 50 percent of the votes for the election of directors are held, otherwise than by way of security only, by or for the benefit of the other person or company, and (ii) the votes carried by the shares are entitled, if exercised, to elect a majority of the directors of the first-mentioned person or company; (gg) in the case of a partnership that does not have directors, other than a limited partnership, the second-mentioned person or company holds more than 50 percent of the interests in the partnership; or (hh) in the case of a limited partnership, the general partner is the second-mentioned person or company. 5. A person or company is considered to be a subsidiary entity of another person or company if (a) it is controlled by, (i) that other, or (ii) that other and one or more persons or companies each of which is controlled by that other, or (iii) two or more persons or companies, each of which is controlled by that other; or (b) it is a subsidiary entity of a person or company that is the other's subsidiary entity. 6. The Purchaser, if resident in Alberta or British Columbia, hereby certifies to U.S. Gold Corporation that the Purchaser, for the purposes of 45-103 satisfies one or more of the following criteria [Please check the appropriate box]: Accredited Investor - Individual __ (a) an individual who, either alone or jointly with a spouse, beneficially owns, directly or indirectly, Financial Assets (cash and securities only) having an aggregate realizable value that before taxes, but net of any Related Liabilities, exceeds $1,000,000; 3 __ (b) an individual whose net income before taxes exceeded $200,000 in each of the two most recent years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent years and who, in either case, reasonably expects to exceed that net income level in the current year; __ (c) a person registered under the securities legislation, or under the securities legislation of another jurisdiction of Canada, as an adviser or dealer, other than a limited market dealer registered under the Securities Act (Ontario); __ (d) an individual registered or formerly registered under the securities legislation, or under the securities legislation of another jurisdiction of Canada, as a representative of a person or company referred to in paragraph (c); __ (e) a person, that, either alone or with a spouse, has net assets of at least $5,000,000, Accredited Investor - Non-Individual __ (f) a Canadian financial institution, or an authorized foreign bank listed in Schedule III of the Bank Act (Canada); __ (g) the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada); __ (h) an association under the Cooperative Credit Associations Act (Canada) located in Canada; or a central cooperative credit society for which an order has been made under subsection 473(1) of that Act, __ (i) a subsidiary of any person or company referred to in paragraphs (f) to (h), if the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary; __ (j) a company registered under the securities legislation, or under the securities legislation of another jurisdiction of Canada, as an adviser or dealer, other than a limited market dealer registered under the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);] __ (k) the government of Canada or a province, or any crown corporation or agency of the government of Canada or a province; __ (l) a municipality, public board or commission in Canada; __ (m) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government; __ (n) a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a provincial pension commission or similar regulatory authority of a jurisdiction of Canada; __ (o) a person or company, other than a mutual fund or non-redeemable investment fund, that, either alone or with a spouse, has net assets of at least $5,000,000, and unless the person or company is an individual, that amount is shown on its most recently prepared financial statements __ (p) a mutual fund or non-redeemable investment fund that, in the local jurisdiction, distributes its securities only to persons or companies that are accredited investors; __ (q) a mutual fund or non-redeemable investment fund that, in the local jurisdiction, distributes its securities under one or more prospectuses for which the regulator has issued receipts, 4 __ (r) a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, trading as a trustee or agent on behalf of a fully managed account, __ (s) a person or company trading as agent on behalf of a fully managed account if that person or company is registered or authorized to carry on business under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction as a portfolio manager or under an equivalent category of adviser or is exempt from registration as a portfolio manager or the equivalent category of adviser, __ (t) a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or other adviser registered to provide advice on the securities being traded, __ (u) an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (c), (f) through (j) and paragraph (n) in form and function; or __ (v) a person or company in respect of which all of the owners of interests, direct or indirect, legal or beneficial, are persons or companies that are accredited investors. 7. The Purchaser, if resident in Ontario, hereby certifies to U.S. Gold Corporation that the Purchaser, for the purposes of 45-501 satisfies one or more of the following criteria [Please check the appropriate box]: __ (a) A bank listed in Schedule I or II of the Bank Act (Canada), or an authorized foreign bank listed in Schedule III of that Act; __ (b) The Business Development Bank incorporated under the Business Development Bank Act (Canada); __ (c) A loan corporation or trust corporation registered under the Loan and Trust Corporations Act (Ontario) or under the Trust and Loan Companies Act (Canada), or under comparable legislation in any other jurisdiction; __ (d) A co-operative credit society, credit union central, federation of caisse populaire, credit union or league, or regional caisse populaire, or an association under the Cooperative Credit Associations Act (Canada), in each case, located in Canada; __ (e) A company licensed to do business as an insurance company in any jurisdiction; __ (f) A subsidiary of any company referred to in paragraph (a), (b), (c), (d) or (e), where the company owns all of the voting shares of the subsidiary; __ (g) A person or company registered under the Securities Act (Ontario) or securities legislation in another jurisdiction as an adviser or dealer, other than a limited market dealer; __ (h) The government of Canada or of any jurisdiction, or any crown corporation, instrumentality or agency of a Canadian federal, provincial or territorial government; __ (i) Any Canadian municipality or any Canadian provincial or territorial capital city; __ (j) Any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any instrumentality or agency thereof; 5 __ (k) A pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a provincial pension commission or similar regulatory authority; __ (l) A registered charity under the Income Tax Act (Canada); __ (m) An individual who beneficially owns, or who together with a spouse beneficially own, financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000; __ (n) An individual whose net income before taxes exceeded $200,000 in each of the two most recent years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of those years and who, in either case, has a reasonable expectation of exceeding the same net income level in the current year; __ (o)An individual who has been granted registration under the Securities Act (Ontario) or securities legislation in another jurisdiction as a representative of a person or company referred to in paragraph (g), whether or not the individuals registration is still in effect; __ (p) A promoter of the issuer or an affiliated entity of a promoter of the Company; __ (q) A spouse, parent, grandparent or child of an officer, director or promoter of the Company; __ (r) A person or company that, in relation to the issuer, is an affiliated entity or a person or company referred to in clause (c) of the definition of distribution in subsection 1(1) of the Securities Act (Ontario); __ (s) An issuer that is acquiring securities of its own issue; __ (t) A company, limited partnership, limited liability partnership, trust or estate, other than a mutual fund or non-redeemable investment fund, that had net assets of at least $5,000,000 as reflected in its most recently prepared financial statements; __ (u) A person or company that is recognized by the Ontario Securities Commission as an accredited investor; __ (v) A mutual fund or non-redeemable investment fund that, in Ontario, distributes its securities only to persons or companies that are accredited investors; __ (w) A mutual fund or non-redeemable investment fund that, in Ontario, distributes its securities under a prospectus for which a receipt has been granted by the Director; __ (x) A managed account if it is acquiring a security that is not a security of a mutual fund or non-redeemable investment fund; __ (y) An account that is fully managed by a trust corporation registered under the Loan and Trust Corporations Act (Ontario); __ (z) An entity organized outside of Canada that is analogous to any of the entities referred to in paragraphs (a) through (g) and paragraph (k) in form and function; and __ (aa) A person or company in respect of which all of the owners of interests, direct or indirect, legal or beneficial, are persons or companies that are accredited investors. 6 The foregoing representations and warranties included in the Unit Subscription Agreement and the designation in this Schedule B are true and accurate as of the date of this certificate and will be true and accurate as of the Closing Date of the offering of the Units as set out in this Subscription Agreement. If any such representations or warranties will not be true and accurate prior to Closing Date, the undersigned will give immediate written notice of such fact to the Company. Dated: Signed: Witness (If Investor is an Individual) Print Name of Beneficial Purchaser Print Name of Witness If Investor is a Partnership, print Name and Title of Authorized Signing Officer Address of Beneficial Purchaser 7 EXHIBIT 1 (Form of Warrant) No.__ U.S. GOLD CORPORTION (the "Company") _,___,___ COMMON SHARE PURCHASE WARRANTS TO PURCHASE COMMON SHARES OF THE COMPANY March __, 2004 This is to certify that, FOR VALUE RECEIVED, (Purchaser) (the "Registered Holder") holder of these Common Share Purchase Warrants (the "Warrants") is entitled to subscribe for and purchase upon and subject to the terms and conditions contained in the Subscription Agreement, fully-paid and non-assessable shares of common stock of the Company, as such common shares are constituted on the date set out below (the "Issue Date"), upon surrender hereof with the subscription form on the reverse side hereof duly completed and upon payment to the Company of US$1.25 (the "Exercise Price") per common share of Company exercised and subscribed for hereunder on or prior to March __, 2006 (the "Expiry Date"). The Warrants may be exercised only at the offices of the Company at 2201 Kipling Street, suite 100, Lakewood, Colorado 80215-1545, U.S.A., or other address with notification thereof as provided in writing to Investor by the Company. The Warrants are issued subject to the terms and conditions governing the holding of Warrants as set forth in the Subscription Agreement annexed hereto. All capitalized terms used in the Subscription Agreement I shall have the meaning set out therein. The Warrants shall become wholly void and shall terminate and lapse at 4:00 p.m., Lakewood, Colorado time, on the Expiry Date and thereafter shall be of no further force and effect. THIS WARRANT AND THE SECURITIES ACQUIRED UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE ACT OR UNDER ANY APPLICABLE UNITED STATES STATE SECURITIES LAWS. THE WARRANT SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENSE OF ANY EFFECTIVE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE ACT AND ANY APPLICABLE UNITED STATES STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, ACCEPTABLE TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. THE WARRANT AND THE SECURITIES ACQUIRED UPON THE EXERCISE THEREOF HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. IN WITNESS WHEREOF the Company has caused this Warrant to be executed by the signature of its proper officers. ISSUED this __ day of March, 2004. U.S. GOLD CORPORATION /s/ William W. Reid - ------------------------------------------------------ William W. Reid, President and Chief Executive Officer EX-10 6 exh10_41.txt Exhibit 10.41 U.S. Gold Corporation Code of Ethics U.S. Gold Corporation is committed to the ethical conduct of the affairs of the Corporation. In that spirit the Corporation hereby codifies the policy related to its Code of Ethics. It is the policy of the Corporation to conduct its business affairs to reasonably deter wrongdoing and to promote: Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships (as further clarified below); Full, fair, accurate, timely, and understandable disclosures in reports and documents that a the Corporation files with, or submits to, the Securities and Exchange Commission (the "Commission") and in other public communications made by the Corporation; Compliance with applicable governmental laws, rules and regulations; The prompt internal reporting to an appropriate person, such as a member of the independent directors of the Corporation; and The Corporation holds its executive officers, directors and employees accountable for adherence to this Code of Ethics. Regarding business dealings involving possible conflicts of interest of or with any executive officer of member of the board of directors of the Corporation: Whenever there is identified by any executive officer or director of the Corporation, a business transaction or other situation, not in the normal course of operations, which involves, directly or indirectly, any executive officer or director of the Corporation, the determination of the Corporation's action or inaction regarding that situation will be deferred to and presented to the disinterested independent members of the Board of Directors, along with all pertinent information, for final determination. This Policy is effective December 31, 2003. EX-23 7 exh23_1.txt Exhibit 23.1 Consent of Stark Winter Schenkein & Co., LLC to the incorporation by reference of their audit report dated March 18, 2004, in the Company's Form S-8 Stark Winter Schenkein Consent of Independent Certified Public Accountants We hereby consent to the incorporation by reference in the Registration Statement of U.S. Gold Corporation on Form S-8, File No. 33-112269 of our report dated March 18, 2004, on our audit of the consolidated balance sheet, and related statements of operations, changes in shareholders' equity and cash flows for U.S. Gold Corporation as of and for the years ended December 31, 2003 and 2002, which report is included in the annual Report on Form 10-KSB. Stark Winter Schenkein March 18, 2004 Denver, Colorado EX-31 8 exh31_1.txt Exhibit 31.1 CERTIFICATE Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, WILLIAM W. REID, certify that: 1. I have reviewed this Annual Report on Form 10-KSB of U.S. Gold Corporation dated December 31, 2003; 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this Report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and d. Disclosed in this Report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Dated: March 29, 2004. U.S. GOLD CORPORATION /s/ William W. Reid, President, Chief Executive Officer and Chairman EX-31 9 exh31_2.txt Exhibit 31.2 CERTIFICATE Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, WILLIAM F. PASS, certify that: 1. I have reviewed this Annual Report on Form 10-KSB of U.S. Gold Corporation dated December 31, 2003; 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this Report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and d. Disclosed in this Report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Dated: March 29, 2004. U.S. GOLD CORPORATION /s/ William F. Pass, Vice President and Chief Financial Officer EX-32 10 exh32.txt Exhibit 32 CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report on Form 10-KSB of U.S. Gold Corporation, a Colorado corporation (the "Company") for the year ended December 31, 2003 as filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the Company does hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to the best of our knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: March 29, 2004. U.S. GOLD CORPORATION /s/ William W. Reid William W. Reid, President, Chief Executive Officer and Chairman of the Board of Directors /s/ William F. Pass William F. Pass, Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----