-----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, NLTpE/+mROkMdgfL2iop7NAJ7hzplYyRfD4pd9CpSRarMgqVlhM2xXGoPN4NjFzL BvrRXanydV8rsHAh93eQdg== 0000096313-00-000015.txt : 20000203 0000096313-00-000015.hdr.sgml : 20000203 ACCESSION NUMBER: 0000096313-00-000015 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 20000131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLD STANDARD INC CENTRAL INDEX KEY: 0000042136 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 870302579 STATE OF INCORPORATION: UT FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08397 FILM NUMBER: 517950 BUSINESS ADDRESS: STREET 1: KEARNS BUILDING STREET 2: SUITE 712 CITY: SALT LAKE CITY STATE: UT ZIP: 84101 BUSINESS PHONE: 8013284452 MAIL ADDRESS: STREET 1: KEARNS BUILDING STREET 2: SUITE 712 CITY: SALT LAKE STATE: UT ZIP: 84101 10-K 1 U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: October 31, 1999 ----------------------------------- OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from -------------- to -------------- Commission file number: 001-08397 GOLD STANDARD, INC. ------------------------------------------------------ (Name of small business issuer in its charter) UTAH 87-0302579 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 136 South Main Street, Ste 712, Salt Lake City, Utah 84101 ---------------------------------------------------------- (Address of principal executive offices)(Zip Code) Issuer's telephone number: (801) 328-4452 Securities registered under Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $.001 par value Pacific Exchange, Inc. Common Stock, $.001 par value NASDAQ Small Cap Market Securities registered under Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.001 PER SHARE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is contained herein, and will not 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-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting and non-voting common equity of the issuer held by non-affiliates, based upon the closing price of the Common Stock on December 31, 1999 as reported on The NASDAQ SmallCap Market, was approximately $1,154,576 (Assumes affiliates include only officers, directors and shareholders known to the issuer to beneficially own 10% or more of the Company's Common Stock.) The number of shares of the issuer's common equity outstanding as of December 31, 1999 was: 1,168,594 shares of Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement provided to shareholders in conjunction with its 2000 Annual Meeting of Shareholders to be held February 29, 2000, are incorporated into Part III of this Form 10-K. Transitional Small Business Disclosure Format (check one): YES NO X ------ ------- PART I ITEM 1: Description of Business. Gold Standard, Inc. was incorporated pursuant to the laws of the State of Utah on November 28, 1972, for the purpose of engaging in the exploration for, and the production and sale of, gold. Gold Standard, Inc. and its subsidiaries ("Registrant") are primarily engaged in acquiring, leasing and selling hard mineral properties and, if warranted, developing those properties which have the most economic potential. Registrant also seeks joint ventures or other financial arrangements with other companies to develop and/or operate the properties it controls. Presently, Registrant is an exploration stage company and there is no assurance that a commercially viable ore body (reserves) exists in any of Registrant's properties until further exploration work and drilling is done and a final feasibility report based upon such test results is concluded. In the 1994-1995 period, Registrant initiated a large land acquisition (mineral rights) program in the country of Brazil. Offices were established and staffed in the city of Curitiba in the state of Parana. Operations are carried on through the wholly-owned Brazilian subsidiary company, Gold Standard Minas, S.A. Presently this company has approximately twelve employees consisting of senior and junior geologists, technicians, prospectors, clerical and laborers. Gold Standard Minas, S.A. is presently involved in active exploration programs in the Brazilian states of Mato Grasso, Rondonia, Amazonas and Santa Catarina. During fiscal year 1999, Registrant engaged in mineral exploration in the United States, Brazil, Uruguay and Paraguay. Exploration activities will continue in 2000. Registrant did not engaged in any material business transactions during the fiscal year ended October 31, 1999. Further, except as otherwise described herein, no material expenditures have occurred during the Registrant's last three fiscal years for research and development activities, nor has compliance with federal, state and local environmental laws and regulations resulted in a material effect on the capital expenditures, earnings or competitive position of Registrant. Most of the time of Registrant's president is spent on Registrant's activities. In addition to the President, Registrant has two part-time employees located in Salt Lake City. Item 2. Description of Property. The Country of Brazil --------------------- Registrant, through its 100% owned subsidiary company Gold Standard Minas, S.A., in 1994 and 1995 acquired mineral rights to 1.5 million acres of land with priority and another 1 million acres application in the country of Brazil. These properties were selected by Registrant's geologists and were considered to be highly prospective for gold. To hold down the maintenance and carrying costs of this huge land position, priority was given to delineate the most prospective areas. In addition, the fall in the price of gold drastically reduced the competition for properties as the majority of mining exploration companies left the country or went out of business. Management did not feel the need to retain this large land position, and Registrant reduced its present holdings to nine parcels in granted or priority status in the aggregate of 47,040 acres. The claims are located in the states of Mato Grosso, Santa Catarina, Minas Gerais, Sao Paulo and Parana. The properties are in the initial stages of development. Generalized reconnaissance, including rock sampling, stream sediment, soil geochemistry, ground geophysics and geologic mapping are being conducted at this time. Current project areas undergoing detailed investigation by Registrant's geologists, technicians and prospectors include Rebeira in Sao Paulo, the state of Parana, Arcangelo and Resende Costa in the state of Minas Gerais. Registrant maintains fully staffed computerized offices in Curitiba, Parana. All full time employees and part time consultants are Brazilian. The Country of Uruguay ---------------------- During 1999 Registrant decided to curtail operations in Uruguay, closed its offices there, and relinquished itself of its property holdings. Presently, Registrant still retains a geologist on a part time basis in Uruguay. Office fixtures, laboratory equipment and vehicles have been placed in storage. The Country of Paraguay ----------------------- Registrant was approached in 1998 by Dr. Patrick Delaney, a professor of geology residing in Rio de Janeiro, Brazil. Dr. Delaney had been working several years on the theory that southwestern Paraguay was an overlooked area and that it was a basin capable of hosting commercial quantities of oil and gas. Registrant obtained an exclusive hydrocarbon prospecting permit from the government in the area known as the Pilar Basin. This permit encompassed 3,447,500 acres. Registrant commenced its exploration program under the direction of Dr. Delaney in late 1998. In 1999 Dr. Delaney was diagnosed with prostate cancer and died in the early stages of exploration. Without Dr. Delaney to direct and spearhead the operation, Registrant decided to abandon the project. In October, 1999 Registrant left the oil and gas exploration business in Paraguay. Item 3. Legal Proceedings. There are no material legal proceedings pending against or involving the Registrant. Item 4. Submission of Matters to a Vote of Security Holders. Registrant did not submit any matters to a vote of its security holders during the fourth quarter of the fiscal year ended October 31, 1999. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The common stock of Registrant is traded on NASDAQ and on the Pacific Stock Exchange. The principal market makers of Registrant's common stock on the NASDAQ system are Market Makers, Wilson Davis & Co., Inc., Mayer & Schweitzer, Inc., Troster Singer Corp., Nash Weiss, and Sherwood Securities Corp. However, Registrant has made no independent verification of the magnitude of the transactions of any of the above-mentioned or other firms. Other broker/dealers may also make a market in Registrant's stock. Market Prices of Common Stock ----------------------------- The following table sets forth, for the periods indicated, the prices of Registrant's common stock from the NASDAQ Small Cap Market. Fiscal Quarterly Sales Prices Year Period High Low ------ ------------- ---- --- 1999:* First Quarter $3.38 $1.00 Second Quarter 2.00 1.25 Third Quarter 2.50 1.19 Fourth Quarter 4.00 1.25 1998:* First Quarter $13.83 $8.66 Second Quarter 8.29 4.50 Third Quarter 6.42 5.09 Fourth Quarter 4.05 1.67 *Restated to reflect two reverse stock splits occurring on April 1, 1998 and December 1, 1998. There were approximately 2,013 record holders of the Registrant's common stock as of October 31,1999. Registrant has not declared or paid any dividends with respect to its common stock during the past two years. Registrant has no present intention to pay any such dividends in the foreseeable future due to its limited financial resources and the desire of Registrant's management to reinvest most of whatever revenue it might obtain into additional properties and investments. Item 6. Selected Financial Data. The selected financial data is presented on a consolidated basis with the Company's wholly owned and partially owned subsidiaries. A discussion of the changes in the results of operations is included in this document at Item 7. A summary of selected financial data for the five fiscal years ended October 31, 1999, is presented below:
Fiscal Years Ended October 31, 1999 1998 1997 1996 1995 ----------- ----------- ----------- ----------- ----------- STATEMENT OF OPERATIONS DATA Operating revenue $ - $ - $ - $ 649,926 $ 485,624 Operating expense 805,976 1,433,648 1,174,684 906,519 928,900 ----------- ----------- ----------- ----------- ----------- Operating loss (805,976) (1,433,648) (1,174,684) (256,593) (443,276) Other income (expense) 27,638 (254,716) (96,535) (121,926) (195,065) ----------- ----------- ----------- ----------- ----------- Net loss before income taxes (778,338) (1,688,364) (1,271,219) (378,519) (638,341) Income tax expense (100) (100) (100) (300) (200) ----------- ----------- ----------- ----------- ----------- Net loss (778,438) (1,688,464) (1,271,319) (378,819) (638,541) ----------- ----------- ----------- ----------- ----------- Basic and diluted loss per share $(.67) $ (1.44) $ (1.09) $ (.37) $ (.69) ----------- ----------- ----------- ----------- ----------- Weighted average shares out- standing 1,168,594 1,168,594 1,168,594 1,031,015 925,552 BALANCE SHEET DATA Current assets $ 2,485,948 $ 3,211,533 $ 4,408,033 $ 5,692,504 $ 2,604,017 Current liabilities 13,905 85,927 95,067 128,274 120,162 Total assets 2,846,059 3,696,519 5,400,272 6,677,761 3,281,856 Stockholders' equity 2,832,154 3,610,592 5,305,205 6,549,487 3,161,694
In 1997, the Company had a temporary unrealized holding gain of $27,037 on securities held which are classified as available-for-sale. This unrealized gain was recorded as other comprehensive income in equity. In 1996, the Company had a temporary unrealized holding loss of $20,888 on securities classified as available-for-sale. This unrealized loss was recorded as other comprehensive loss in equity. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION The Registrant is principally engaged in the acquisition, exploration, and if warranted, development of hard mineral properties. Its activities during 1999 were concentrated, for the most part, in Brazil, Uruguay and Paraguay. RESULTS OF OPERATIONS No revenue was generated by company operations for the years ended October 31, 1999, 1998 and 1997. The Registrant has focused its exploration activities during the three years in the reporting period on its mineral holdings in South America. Exploration costs incurred at these locations are summarized as follows:
Year Ended October 31, 1999 1998 1997 ---------- ---------- ---------- South American Properties Brazil $ 302,157 $ 728,415 $ 847,666 Uruguay 19,064 261,710 (60,908) Paraguay 84,311 32,994 16,558 ---------- ---------- ---------- 405,532 1,023,119 803,316 ---------- ---------- ---------- Utah Properties - - 4,954 ---------- ---------- ---------- $ 405,532 $1,023,119 $ 808,270 ========== ========== ==========
Exploration costs in Brazil declined 58.5% to $302,157 in 1999, following a decline of 14.19% in exploration costs from 1997 to 1998. Exploration costs in Uruguay declined to $19,064 during 1999. The Registrant will discontinue exploration activities in this country in 2000. In 1997, the Registrant identified an over-accrual of $60,908 of expenses relating to its Uruguay operation. In 1998, the Registrant acquired its former subsidiary's Uruguay activities. The results of operations of its former subsidiary, Big Pony Gold (since renamed to Pan American Motorsports, Inc.) were restated under the equity method for 1997 and earlier periods. As a result of this restatement, Big Pony Gold's Uruguay operations were removed from the Registrant's exploration activities. Subsequent to the acquisition of Big Pony Gold's Uruguay assets, the Registrant increased its exploration activities in 1998 and expended $261,710 during that period. During the period ended October 31, 1997, the Registrant conducted a preliminary geologic evaluation in the country of Paraguay. The Registrant's geologists believe that a portion of the country's regional geology has been misinterpreted. Exploration costs in 1999 increased 155% to $84,311 as a result of the Registrant's heightened interest in this area. However, due to the death of a key employee in Paraguay, exploration in that country has been discontinued for the foreseeable future. The Registrant has funded its operations with settlement proceeds from a suit prior to 1996 and through equity financing during the most recent three years. This equity financing is described more fully under the Liquidity and Capital Resources section of this discussion. The Registrant does not anticipate receiving a material amount of operating revenue within the foreseeable future, and as such, the current trend in losses from operations is expected to continue. The Registrant's current business plans call for the continued exploration of potential mineral and oil and gas deposits. Future operating losses will be funded through the cash, cash equivalents and certificates of deposit currently on hand or through obtaining additional equity capital. The most significant component of expenses which has contributed to the Registrant's net operating losses for the past three fiscal years is exploration (shown above). The Registrant's other general and administrative expenses have remained fairly constant for the past three years. The two most significant expense categories included in general and administrative expenses are (a) professional fees, and (b) wages and salaries. These two combined categories of expenses represented 64%, 70%, and 73% of the total general and administrative expenses during the years ended October 31, 1997 and 1998, and 1999, respectively. These two expense categories are further discussed as follows: a. The majority of professional fees included in general and administrative expense are those of attorneys, consultants, auditors and accountants. During each of the three years in the period ended October 31, 1999, legal fees included in general and administrative expenses totaled $10,149 in 1997, $28,515 in 1998, and $29,550 in 1999. Audit, accounting and outside consultants fees for the periods totaled $57,555 in 1997, $74,183 in 1998, and $70,634 in 1999. b. Wages, exclusive of payroll taxes, were $137,000 in 1997, $146,000 in 1998, and $156,000 in 1999. The balance of general and administrative expenses is an aggregation of many expense accounts, none of them being individually significant. These accounts include auto expense, travel, postage, printing, office rent, office supplies, etc. In general, management has been conscientious in striving to reduce and control general and administrative expenses. The stability of general and administrative costs during the past three years is a positive reflection on management's cost control efforts. General and administrative expenses are expected to remain the same as in 1999. Exploration expense in South America is expected to continue to decrease in 2000. LIQUIDITY AND CAPITAL RESOURCES The Registrant relied solely on equity financing to provide needed working capital. Operations during 1997, 1998 and 1999 were funded from the following sources: a. In 1996 the Registrant exchanged rights to mineral properties located in Brazil for stock in a company. Subsequent sales of this stock generated approximately $300,000 in cash to fund operations. b. Working capital at October 31, 1997, 1998 and 1999 was $4,312,966, $3,125,606, and $2,832,154, respectively. The Registrant's working capital at October 31, 1999 is sufficient to fund its projected exploration activities in Brazil and to maintain a level of corporate operations consistent with the past several years. The Registrant has no immediate plans to seek significant funding during 2000 either through equity offerings or debt financing. The Registrant has no material capital commitments or agreements which would require significant outlays of capital during 2000. The Registrant's anticipated capital require ments for the next three fiscal years are as follows:
2000 2001 2002 --------- --------- --------- Leasehold exploration and carrying costs $ 400,000 $ 375,000 $ 350,000 Legal expenses 30,000 25,000 25,000 Other general and administrative expenses 300,000 300,000 300,000
Expenses should remain close to the 1999 level. At this rate, the Registrant has cash and cash equivalents to meet its expenses for the next three fiscal years. The Registrant has no term debt and is expected to meet all of its obligations as they come due. In the short term, the Registrant has sufficient cash reserves to fund operations. In the long term, there can be no assurance that the cash on hand will be sufficient to defray all operating costs that will be incurred. In the event additional long-term cash funds are needed, the Registrant intends to obtain those funds through the issuance of additional equity capital. Based upon its twenty-three years of experience in generating equity capital, the Registrant believes it has the ability to generate additional funds when needed. INFLATION The impact of inflation on the Registrant's operations will vary. The future price of gold, oil and gas, and the level of future interest rates could directly affect the Registrant's share of any future operating revenue. Lower interest rates and higher gold prices enhance the value of the Registrant's investments. The Registrant's future results of operations, to a significant degree, depend on its success in locating, acquiring and producing commercial gold or oil and gas deposits. With exploration currently proceeding on several properties whose commercial production potential is not presently determinable, and considering the difficulty of projecting future prices, which tend to be volatile, it is, at best, difficult to accurately project future results of operations. Because the Registrant does not have a steady, dependable source of revenue, serious increases in inflation could increase the Registrant's general and administrative expenses and make it difficult to remain within its budget. However, the inflation rate has remained relatively low, with only a minor impact on the Registrant during 1997, 1998 and 1999. Management does not anticipate material increases in the inflation rate during the immediate future. ENVIRONMENTAL RULES AND REGULATIONS The Registrant is not aware of any noncompliance with environmental rules and regulations, nor has the Registrant been cited by any local, state or national agency either in the United States or South America for noncompliance with environmental rules and regulations. As of October 31, 1999, the Registrant has obtained a standby letter of credit in the amount of $100,000 pledged as security for operations in Paraguay. Furthermore, the Registrant is not aware of any potential reclamation costs in any of the areas in which it is conducting exploration. Except for the above, the Registrant has no actual or potential involvement in environmental remediation activities. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are "forward-looking," including statements contained in this report and other filings with the Securities and Exchange Commission and in reports to the Company's stockholders. Management believes that all statements that express expectations and projections with respect to future matters, as well as from developments beyond the Company's control including changes in global economic conditions, are forward-looking statements within the meaning of the Act. These statements are made on the basis of management's views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance, however, that management's expectations will necessarily come to pass. Factors that may affect forward-looking statements a wide range of factors could materially affect future developments and performance, including the following: Changes in Company-wide strategies, which may result in changes in the types or mix of businesses in which the Company is involved or chooses to invest; changes in U.S., global or regional economic conditions, changes in U.S. and global financial and equity markets, including significant interest rate fluctuations, which may impede the Company's access to, or increase the cost of, external financing for its operations and investments; increased competitive pressures, both domestically and internationally; legal and regulatory developments, such as regulatory actions affecting environmental activities, the imposition by foreign countries of trade restrictions and changes in international tax laws or currency controls; adverse weather conditions or natural disasters, such as hurricanes and earthquakes, labor disputes, which may lead to increased costs or disruption of operations. This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable pursuant to Regulation S-K, Item 305, Instruction (e). Item 8. Financial Statements and Supplementary Data. The following Consolidated Financial Statements of the Company and its subsidiaries for the year ended October 31, 1999, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended October 31, 1999, are filed as part of this report: Report of Foote, Passey, Griffin & Company, Independent Auditors Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Cash Flows Consolidated Statements of Stockholders' Equity Notes to Consolidated Financial Statements REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- Board of Directors and Stockholders Gold Standard, Inc. We have audited the accompanying consolidated balance sheets of Gold Standard, Inc. and Subsidiaries as of October 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years ended October 31, 1999, 1998 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Gold Standard, Inc. and Subsidiaries as of October 31, 1999 and 1998, and the consolidated results of their operations and their consolidated cash flows for the years ended October 31, 1999, 1998, and 1997 in conformity with generally accepted accounting principles. FOOTE, PASSEY, GRIFFIN & CO., LC Salt Lake City, Utah January 11, 2000 FINANCIAL STATEMENTS Gold Standard, Inc., and Subsidiaries CONSOLIDATED BALANCE SHEETS October 31, ASSETS
1999 1998 ----------- ----------- CURRENT ASSETS Cash and cash equivalents $ 1,173,257 $ 1,940,615 Certificates of deposit ($100,000 restricted in 1999) 1,284,425 1,252,723 Accounts receivable 6,992 4,312 Accrued interest 9,192 9,789 Prepaid expenses 12,082 4,094 ----------- ----------- Total current assets 2,485,948 3,211,533 ----------- ----------- PROPERTY AND EQUIPMENT, at cost Furniture and equipment 114,443 119,850 Transportation equipment 164,341 195,390 Leasehold improvements 3,200 3,200 ----------- ----------- 281,984 318,440 Less accumulated depreciation and amortization (202,521) (186,484) ----------- ----------- 79,463 131,956 ----------- ----------- OTHER ASSETS Investment in affiliate 279,958 351,943 Deposits 690 1,087 ----------- ----------- 280,648 353,030 ----------- ----------- $ 2,846,059 $ 3,696,519 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Trade accounts payable $ 9,630 $ 67,309 Accrued liabilities 4,175 18,518 Income taxes payable 100 100 ----------- ----------- Total current liabilities 13,905 85,927 ----------- ----------- STOCKHOLDERS' EQUITY Common stock - authorized 100,000,000 shares of .001 par value; issued, and outstanding 1,168,594 shares in 1999 and 1998 1,169 1,169 Additional paid-in capital 13,197,456 13,197,456 Accumulated deficit (10,366,471) (9,588,033) ----------- ----------- 2,832,154 3,610,592 ----------- ----------- $ 2,846,059 $ 3,696,519 =========== ===========
The accompanying notes are an integral part of these statements.
Gold Standard, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS Years ended October 31, 1999 1998 1997 ------------ ------------ ----------- REVENUE $ - $ - $ - ------------ ----------- ----------- EXPENSES General and administrative Legal 29,550 28,515 10,149 Other 322,854 327,329 310,587 Leasehold exploration and carrying costs 405,532 1,023,119 808,270 Depreciation and amortization 48,040 54,685 45,678 ------------ ------------ ----------- 805,976 1,433,648 1,174,684 ------------ ------------ ----------- Net loss from operations (805,976) (1,433,648) (1,174,684) ------------ ------------ ----------- OTHER INCOME (EXPENSE) Interest income 105,060 151,225 223,569 Loss from equity investment (71,985) (198,139) (291,352) Loss on securities available-for- sale - (101,409) (18,783) Loss on exchange of stock for rights - (90,569) - Loss on disposal of equipment (5,437) (15,824) (9,969) ------------ ------------ ----------- 27,638 (254,716) (96,535) ------------ ------------ ----------- Net loss before income taxes (778,338) (1,688,364) (1,271,219) INCOME TAX EXPENSE 100 100 100 ------------ ------------ ----------- NET LOSS (778,438) (1,688,464) (1,271,319) OTHER COMPREHENSIVE INCOME Unrealized holding gain - - 6,149 ------------ ------------ ----------- COMPREHENSIVE LOSS $ (778,438) $ (1,688,464) $(1,265,170) ============ ============ =========== Basic and diluted earnings per share Net loss per share $(.67) $(1.44) $(1.09) ===== ====== ====== Weighted average number of shares outstanding 1,168,594 1,168,594 1,168,594 ========= ========= =========
The accompanying notes are an integral part of these statements.
Gold Standard, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended October 31, 1999 1998 1997 ------------ ------------ ----------- Common stock Balance at beginning and end of period $ 1,169 $ 1,169 $ 1,169 ------------ ------------ ----------- Additional paid-in capital Balance at beginning and end of period 13,197,456 13,197,456 13,197,456 ------------ ------------ ----------- Other comprehensive income (loss) Balance at beginning of period - - (20,888) Net unrealized holding gain on securities available-for-sale - - 27,037 ------------ ------------ ----------- Balance end of period - - 6,149 ------------ ------------ ----------- Accumulated deficit Balance at beginning of period (9,588,033) (7,899,569) (6,628,250) Net loss (778,438) (1,688,464) (1,271,319) ------------ ------------ ----------- Balance end of period (10,366,471) (9,588,033) (7,899,569) ------------ ------------ ----------- $ 2,832,154 $ 3,610,592 $ 5,305,205 ============ ============ ===========
The accompanying notes are an integral part of these statements.
Gold Standard, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended October 31, 1999 1998 1997 ------------ ----------- ----------- Increase (decrease) in cash and cash equivalents Cash flows from operating activities: Net loss $ (778,438) $(1,688,464) $(1,271,319) Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: Depreciation and amortization 48,040 54,685 45,678 Loss from equity investment 71,985 198,139 291,352 Loss on disposal of equipment 5,437 15,824 9,969 Loss from available-for-sale securities - 101,409 18,783 Loss on exchange of stock for rights - 90,569 - Write-off of deferred liability - - (61,000) Decrease (increase) in assets: Accounts Receivable (2,680) (4,312) - Accrued interest 597 (750) (3,343) Prepaid expenses (7,988) 2,750 (6,844) Deposits 397 (397) - Increase (decrease) in liabilities: Trade accounts payable (57,679) (7,524) (538) Accrued liabilities (14,343) (11,016) 28,331 ------------ ----------- ----------- Net cash used in operating activities (734,672) (1,249,087) (948,931) ------------ ----------- ----------- Cash flows from investing activities: Proceeds from exchange of stock - 23,551 - Proceeds from disposal of equipment 18,401 20,525 17,500 Investment in affiliate - (123,964) (271,082) Proceeds from available-for-sale securities - 145,440 - Purchase of certificate of deposit (31,702) (55,501) (1,197,222) Property and equipment purchased (19,385) (15,277) (91,485) ------------ ----------- ----------- Net cash used in investing activities (32,686) (5,226) (1,542,289) ------------ ----------- -----------
(Continued)
Gold Standard, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED Years ended October 31, 1999 1998 1997 ------------ ----------- ----------- Net cash provided by financing activities - - - ------------ ----------- ----------- Net decrease in cash and cash equivalents (767,358) (1,254,313) (2,491,220) Cash and cash equivalents at beginning of year 1,940,615 3,194,928 5,686,148 ------------ ----------- ----------- Cash and cash equivalents at end of year $ 1,173,257 $ 1,940,615 $ 3,194,928 ============ =========== =========== Supplemental disclosures of cash flows information Cash paid during the year for: Interest $ - $ - $ - Income taxes $ 100 $ 100 $ 100
Non-cash transactions: In 1998, the Company exchanged 750,000 shares of stock in a former subsidiary for 100% of the outstanding stock of a corporation which held mineral exploration rights and certain assets located in Uruguay. The following assets and liabilities were received: Cash $23,551 Furniture and Fixtures 34,290 Accounts payable 9,400 In 1998, the Company converted $689,092 in debt of a former subsidiary to equity giving the Company a 20% equity investment in the former subsidiary. In 1998, the Company sold all of its available-for-sale securities resulting in the recognition of an unrealized holding loss of $6,149 In 1997, the Company had a temporary unrealized holding gain of $27,037 on securities held which are classified as available-for-sale. This unrealized gain was recorded in equity. The accompanying notes are an integral part of these statements. Gold Standard, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS October 31, 1999 and 1998 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows. 1. Principles of Consolidation --------------------------- The accompanying consolidated financial statements include the accounts of Gold Standard, Inc. (the Company), its subsidiaries, Gold Standard South, Gold Standard Minas, S.A. and Tormin, S.A. As used herein, references to Gold Standard, Inc., the Registrant, or the Company refer to Gold Standard, Inc. and its consolidated subsidiaries. All significant inter-company balances and transactions are eliminated. Gold Standard South, a Utah Corporation, was organized for the purpose of carrying on a property acquisition and gold exploration program in the country of Uruguay. Gold Standard Minas S.A. was organized for the purpose of carrying on a gold exploration program in the country of Brazil. Tormin S.A. holds certain mineral exploration concessions in Uruguay and conducted exploration work on those properties. 2. Recently Adopted Accounting Standards ------------------------------------- In 1998 the Company adopted Statement of Financial Accounting Standards No. 128 Earnings Per Share (SFAS No. 128), which requires the calculation of basic and diluted loss per share. There was no material effect on the presentation of loss per share. In 1998 the Company adopted Statement of Financial Accounting Standards No. 130 Reporting Comprehensive Income (SFAS No. 130). Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. In 1998 the Company adopted Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS No. 131). This standard establishes standards for reporting information about operating segments in annual financial statements, selected information about operating segments in interim financial reports and disclosures about products and services, geographic areas and major customers. This new standard requires the Company to report financial information on the basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments. Previously reported information in 1997 has been restated to conform to the new information requirements (Note J). (Continued) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED In 1997, the Company adopted SFAS No. 123, Accounting For Stock-Based Compensation, (SFAS 123), which requires disclosure of the fair value and other characteristics of stock options. The Company has chosen under the provisions of SFAS 123 to continue using the intrinsic-value method of accounting for employee stock-based compensation in accordance with Accounting Principles Board Option No. 25, Accounting for Stock Issued to Employees, (APB 25). 3. Property and Equipment ---------------------- Property and equipment are stated at cost. Maintenance and repairs which neither materially adds to the value of the property nor appreciably prolongs its life are charged to expense as incurred. Gains or losses on dispositions of property, equipment, and leasehold improvements are included in operations. Depreciation and amortization of property and equipment are provided on the straight-line method using the estimated lives as shown below: Years ----- Furniture and equipment 5-7 Transportation equipment 5 Leasehold improvements Lease term 4. Investment in Mining Properties ------------------------------- Prospecting and exploration costs incurred in the search for new mining properties are charged to expense as incurred. Direct costs associated with the development of identified reserves are capitalized until the related geologic areas are either put into production, sold or abandoned. As of October 31, 1999 there were no geologic areas under production. 5. Loss Per Share -------------- Basic loss per share of common stock is computed based on the weighted-average number of common shares outstanding during the period. The Company had common stock equivalents outstanding at October 31, 1999, 1998, and 1997 in the form of stock warrants (Notes G and H). These warrants were excluded in the calculations of diluted loss per share during the years ended October 31, 1999, 1998, and 1997 because their inclusion in those calculations would have been anti-dilutive. Loss per share amounts have been adjusted for all years presented to reflect the 1:4 reverse stock splits on the effective dates of April 1, 1998 and December 1, 1998. 6. Cash Equivalents ---------------- For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments and investments readily convertible into cash, or purchased with a maturity of three months or less, to be cash equivalents. (Continued) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 7. Estimates --------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 8. Fair Values of Financial Instruments ------------------------------------ The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash, cash equivalents and certificates of deposit: The carrying amounts reported in the statement of financial position approximate fair values because of the short maturities of those instruments. 9. Reclassifications ----------------- Certain amounts in the 1998 and 1997 financial statements have been reclassified to conform to current year presentation. NOTE B - INVESTMENT IN AFFILIATE During 1998 the Company changed its method of accounting for and reporting on its investment in PAMS from the consolidated to the equity method due to the decline in their ownership interest from 64.4% to 20%. The Company's investment in PAMS is as follows at October 31:
1999 1998 ----------- ---------- Investment in PAMS at beginning of year - equity method $ 351,943 $ 550,082 Recognition of Company's share of losses for the year (71,985) (198,139) ----------- ----------- Investment in PAMS at end of year - equity method $ 279,958 $ 351,943 =========== ===========
The following is summarized financial information for the Company's equity investment as of October 31:
1999 1998 1997 --------------------- --------------------- -------------------- Gold Gold Gold Standard Standard Standard Total Amount Total Amount Total Amount ----- -------- ----- -------- ----- --------- Current assets $ 232,043 $ 46,312 $ 114,000 $ 22,800 $ 36,500 $ 23,500 Other assets 48,506 9,681 105,000 21,000 35,800 23,000 Current liabilities (414,863) (82,800) (65,000) (13,000) (586,000) (569,000) --------- --------- --------- --------- --------- --------- Net assets $(204,314) $ (26,870) $ 154,000 $ 30,800 $(513,700) $(522,500) ========= ========= ========= ========= ========= =========
(Continued) NOTE B - INVESTMENT IN AFFILIATE - CONTINUED
1999 1998 1997 --------------------- --------------------- -------------------- Gold Gold Gold Standard Standard Standard Total Amount Total Amount Total Amount ----- -------- ----- -------- ----- --------- Total revenue $ 103,614 $ 20,680 $ 5,800 $ 1,000 $ - $ - Loss before income taxes $(360,673) $ (71,985) $(511,000) $(198,139) $(717,700) $(461,588) Net loss $(360,673) $ (71,985) $(511,000) $(198,139) $(717,900) $(461,588)
For the year ended October 31, 1997, the Company had receivables from their affiliate of $565,000. Certain officers and directors of the Company were given compensatory stock bonuses from Pan American Motorsports, Inc. in March of 1998, which PAMS valued at $200,000. NOTE C - MINING PROPERTIES The Company holds directly or through its subsidiaries, mineral and exploration rights to property located in the Dugway region of western Utah, southern Uruguay and Brazil. All exploration costs associated with these activities during the three years ended October 31, 1999 have been charged to operations as incurred. No development costs have been capitalized on these properties through October 31, 1999. NOTE D - RELATED PARTY TRANSACTIONS The Company has made unsecured, non-interest bearing, long-term cash advances to its subsidiaries to fund exploration projects. Amounts due from the Company's subsidiaries as of October 31, are as follows:
1999 1998 1997 ----------- ------------ ----------- Gold Standard South $ 513,936 $ 513,936 $ 513,832 Gold Standard Minas, S.A. 1,776,408 1,425,721 661,594 Tormin S.A. 232,615 207,640 -
During 1997 the Company converted cash advances to Gold Standard Minas, S.A., to equity in the amount of $817,652. NOTE E - NON-COMPENSATORY STOCK WARRANTS In connection with issuance of its common stock, the Company has issued warrants to outside parties for the purchase of additional shares at specified prices in the future. Unexercised non-compensatory warrants to these parties aggregate 46,875 shares at October 31, 1999. They carry a weighted average price of $12 per share and have a weighted average remaining life of 3.42 years. In 1999, the Company issued to the president a non-compensatory option to purchase 100,000 shares of common stock at a price of $.25 above the published market price on the date of exercise. According to the agreement, the stock will be purchased with cash or a non-interest bearing promissory note to be repaid within four years. The option expires in August 2004. NOTE F - WARRANTS ISSUED AS COMPENSATION The Company has issued compensatory stock warrants to officers, employees and consultants during the course of business. No compensation expense has been recorded for these warrants. Reported and proforma net loss and loss per share for the years ended October 31, are as follows:
1999 1998 1997 ----------- ------------ ----------- Net loss As reported $ (778,438) $(1,688,464) $(1,271,319) Pro forma (1,090,938) (1,651,929) (1,271,319) Loss per share As reported $ (.67) $ (1.44) $ (1.09) Pro forma (.93) (1.41) (1.09)
The pro forma effect on net loss for 1999, 1998, and 1997 may not be representative of the pro forma effect on net income or loss for future years because the SFAS No. 123 method of accounting for pro forma compensation expense has not been applied to warrants granted prior to January 1, 1995. The weighted-average fair values at date of grant for compensatory warrants granted in 1999 were estimated using the Black-Scholes option-pricing model, based on the following assumptions: (i) no expected dividend yields; (ii) expected volatility rates of 110%; (iii) expected weighted average lives of 3.67 years and (iv) a weighted-average risk-free interest rate of 5.78%. No compensatory warrants were granted in 1998 and 1997. Stock warrant activity is summarized as follows:
1999 1998 1997 ---------------- ----------------- ---------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ -------- ------ -------- ------ -------- Warrants outstanding beginning of period 50,000 $20.50 56,250 $20.00 56,250 $20.00 Granted 200,000 1.75 - - - - Canceled or expired (50,000) 20.50 (6,250) 16.00 - - ------- ------- ------- Warrants outstanding and exercisable, end of period 200,000 $ 1.75 50,000 $20.50 56,250 $20.00 ======= ======= =======
All 200,000 outstanding warrants at October 31, 1999 were exercisable at $1.75 per share and carried a weighted average remaining contractual life of 3.67 years. NOTE G - INCOME TAXES The Company has significant net operating loss and net capital loss carry-forwards which could give rise to a deferred tax asset. Because the Company has no assurance that the tax benefit from the net operating loss and net capital loss will ever be realized, a valuation allowance has been provided equal to the deferred tax asset. There are no other significant timing differences which arise from recognizing income and expense in different periods for financial and tax reporting purposes. The Company's gross deferred tax asset attributable to the net operating loss and net capital loss carryforwards and the associated valuation allowance is summarized as follows at October 31,:
1999 1998 1997 ----------- ----------- ---------- Total deferred tax asset (based on net operating loss and capital loss carryforwards) $ 2,109,660 $ 1,999,907 $ 2,609,812 Less valuation allowance (2,109,960) (1,999,907) (2,609,812) ----------- ----------- ----------- Net deferred tax asset $ - $ - $ - =========== =========== ===========
The amounts and expiration dates of net operating loss and capital loss carryforwards at October 31, 1999, are detailed in the following summary:
Federal State Net Net Operating Net Operating Net Operating Capital Expiration Date Loss Loss Loss --------------- ------------- ------------- ------- October 31, 2000 $ - $ - $ 150,056 October 31, 2002 - - 74,928 October 31, 2003 1,441,272 - 191,978 October 31, 2004 675,277 - - October 31, 2005 1,106,261 - - October 31, 2006 545,495 - - October 31, 2007 478,137 - - October 31, 2009 613,656 - - October 31, 2010 124,338 124,138 - October 31, 2012 63,410 63,210 - October 31, 2013 - 245,865 - October 31, 2014 - 321,411 - October 31, 2018 246,157 - - October 31, 2019 321,611 - - ----------- ----------- ---------- $ 5,615,614 $ 754,624 $ 416,962 =========== =========== ==========
NOTE H - COMMITMENTS To guarantee future reclamation commitments in Paraguay, the Company has obtained a standby letter of credit in the amount of $100,000. This letter of credit is secured with a $100,000 certificate of deposit. NOTE I - CONCENTRATIONS OF CREDIT RISK The Company maintains substantially all cash balances with various financial institutions located in the State of Utah. Accounts at the financial institutions are insured by the Federal Deposit Insurance Corporation up to $100,000 per institution. Uninsured balances totaled $1,067,615 at October 31, 1999. NOTE J - SEGMENT INFORMATION The Company's only activity and, therefore, dominant business segment is gold exploration and development. The Company has had no revenues during the three years ended October 31, 1999. The following table presents property and equipment, net of accumulated depreciation and amortization, based upon the location of the asset: 1999 1998 ---------- ---------- United States $ 27,934 $ 42,008 South America 51,529 89,948 ---------- ---------- $ 79,463 $ 131,956 ========== ========== Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure. Not Applicable PART III TO THE EXTENT IDENTIFIED BELOW, CERTAIN INFORMATION CALLED FOR IN PART III IS INCORPORATED BY REFERENCE FROM THE REGISTRANT'S PROXY STATEMENT, TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE REGISTRANT'S 2000 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD FEBRUARY 29, 2000. Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act; see Proxy Statement sections entitled "Directors and Executive Officers of the Company" and "Section 16(a) Beneficial Ownership Reporting Compliance". Item 11. Executive Compensation; see Proxy Statement sections entitled "Compensation of Directors and Executive Officers". Item 12. Security Ownership of Certain Beneficial Owners and Management; see Proxy Statement sections entitled "Security Ownership of Certain Beneficial Owners and Management". Item 13. Certain Relationships and Related Transactions; see Proxy Statement section entitled "Certain Relationships and Related Transactions". Item 14. Exhibits and Reports on Form 8-K (a) The following Exhibits are attached hereto or incorporated herein by reference as indicated in the table below: Exhibit No. Description - ------- ------------------ 3.01 Articles of Incorporation 3.02 Bylaws 10.1 *Employment Agreement - Scott L. Smith 10.2 *Form of Warrant Grant Used With Non-employee Directors 11 Computation of Net Loss Per Common Share 21 Subsidiaries of the Registrant 27 Financial Data Schedule -------- * Identifies a "management contract or compensatory plan or arrangement". (b) There were no current reports on Form 8-K filed by Registrant during the last quarter of the period covered by this report. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GOLD STANDARD, INC. Date January 31, 2000 /s/ Scott L. Smith ------------------------ Scott L. Smith President POWER OF ATTORNEY Know all men by these presents, that each person whose signature appears below constitutes and appoints Scott L. Smith his true and lawful attorney in fact and agent, with full power of substitution for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorney in fact or his substitute(s) may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated. Date: January 28, 2000 /s/ Bret C. Decker --------------------------- Bret C. Decker, Director Date: January 31, 2000 /s/ Charles W. Shannon --------------------------- Charles W. Shannon, Director Date: January __, 2000 --------------------------- Gerald L. Sneddon, Director Date: January 31, 2000 /s/ Scott L. Smith --------------------------- Scott L. Smith, Director EX-3.(I) 2 Exhibit 3.01 Articles of Incorporation ARTICLES OF INCORPORATION OF GOLD STANDARD, INC. * * * * * We, the undersigned natural persons of the age of twenty-one years or more, acting as incorporators of a corporation pursuant to the Utah Business Corporation Act, adopt the following Articles of Incorporation for such corporation: ARTICLE I. ---------- The name of this corporation is - - Gold Standard, Inc. ARTICLE II. ----------- The duration of this corporation is perpetual. ARTICLE III. ------------ Section 1. To generally engage in the mining, oil and gas business for profit; to engage in, conduct ventures in, perform contracts and have dealings in any and all mineral operations, explorations, geologic and engineering activities, drilling, mineral recovery, smelting, refining and marketing; to conduct business and dealings in mineral properties, interests, investments, rights and royalties of all kinds and description; including the rendering of such or related services and performances to other business entities by contract or other arrangement. Section 2. To engage in any other and all lawful business ventures, purposes, acts, or activity in various fields of endeavor, for which a business corporation may be organized under the Utah Business Corporation Act. ARTICLE IV. ----------- Without being limited or restricted thereto, the general powers of this corporation shall include: Section 1. To purchase, take, receive, lease, or otherwise acquire, own, hold, improve, use and otherwise deal in and with, real and personal property, or any interest therein, wherever situated. Section 2. To sell, convey, mortgage, pledge, lease, exchange, transfer and otherwise dispose of all or any part of its property or assets. Section 3. To make contracts and guarantees, and incur liabilities, borrow money, issue obligations and secure obligations by mortgage or pledge of all or any property, franchises and income. Section 4. To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent, patent rights, licenses and privileges, inventions, improvement and processes, copyrights, trademarks and trade names, relating to, or useful or profitable for the corporate business and purposes. Section 5. All powers necessary or convenient to effect any or all of the purposes for which the corporation is organized. Section 6. All other powers enumerated, granted or implied under the provisions of the Utah Business Corporation Act (Section 16-10-4 of the Utah Code Annotated, 1953, as amended to date). Section 7. The powers and purposes of this corporation as specified hereinbefore shall not restrict or limit by reference or inference, except as otherwise specifically expressed as so doing, the terms of any other clause of these articles. ARTICLE V. ---------- The aggregate number of shares which this corporation shall have authority to issue shall be One Hundred Million (100,000,000); and the par value of such shares is One Mill ($0.001) each, with the total authorized capital of the corporation being One Hundred Thousand Dollars ($100,000.00). There shall be but one class of stock of equal rights and preferences, known as common stock. All shares shall be non-assessable. Pre-emptive rights of a shareholder to acquire unissued shares of the corporation are denied, and no such right shall exist. Any unissued shares or other securities of the corporation may be issued and disposed of by the Board of Directors to such person, on such terms, at such prices, and in such manner, as the Board of Directors may in its sole discretion and judgment determine. ARTICLE VI. ----------- This corporation will not commence business until consideration of the value of at least one thousand dollars has been received for the issuance of shares. ARTICLE VII. ------------ Provisions for Regulation of Internal Affairs of Corporation ------------------------------------------------------------ Section 1. The Board of Directors shall have the power to adopt ByLaws for the corporation and to amend the same from time to time at any regular or special meeting of the Board of Directors. The affairs of the Corporation shall be governed by these Articles of Incorporation until ByLaws are adopted, and thereafter shall be governed by the Articles of Incorporation and the By-Laws. Section 2. The Board of Directors shall have the power to fix the fiscal period of the corporation, and until change the fiscal period shall commence July 1st and end the following June 30th. Section 3. Meetings of shareholders may be held at such place either within or without this state, as may be provided further in the By-Laws. An annual meeting of the shareholders shall be held at such time as may be provided in the By-Laws. Failure to hold the annual meeting at the designated time shall not work a forfeiture or dissolution of the corporation. Special meetings of the shareholders may be called by the Chairman of the Board, the President, the Board of Directors, the holders of not less than one-tenth of all shares entitled to vote at the meeting, or, by such other officers or persons as may be provided in the articles or the ByLaws. A majority of the shares of the common stock of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders. Section 4. Vacancies in the Board of Directors may be filled by an affirmative vote of a majority of the remaining Directors. Any directorship to be filled by reason of an increase in the number of Directors shall also be filled by the Board of Directors, such appointment to be until the next annual meeting or special meeting called for the purpose of such election. A majority of the then established number of directors shall constitute a quorum for the transaction of business, until or unless a greater number is required by the By-Laws. Meetings of the board of directors, regular or special, may be held either within or without this state, upon notice as prescribed in the ByLaws or compatible with law. Unless required by the By-Laws, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice of meeting or waiver. ARTICLE VIII. ------------- The initial registered agent and registered office are: Registered Agent: Scott L. Smith Registered Office: 725 Kearns Building Salt Lake City, Utah 84101 ARTICLE IX. ----------- The number of directors of this corporation may be fixed by the Board of Directors and By-Laws, but in no case to be less than three nor more than seven. Directors terms shall be until a stockholders' meeting is called and successors are elected and qualify. A director must be a shareholder. The initial Board of Directors shall consist of three members and their respective names and addresses are: Name: Address: ----- -------- Scott L. Smith 4931 Marilyn Drive Salt Lake City, Utah 84117 Paul C. O'Leary 2571 Solar Drive Salt Lake City, Utah 84117 John Simpson 242 West Third North Salt Lake City, Utah 84103 Officers of the corporation shall be elected by the Board of Directors, and may or may not also serve as directors. The officers shall include a President, a Vice-President, a Secretary and a Treasurer. The offices of Secretary and Treasurer may be combined. Additional offices may be established by the Board of Directors through the By-Laws. Until successors are elected and qualify, the initial officers of the corporation shall be: Scott L. Smith - President Paul C. O'Leary - Vice-President John Simpson - Secretary and Treasurer The duties of the officers shall be those usually incumbent upon the holders of such office, and in conformity with By-Laws and the policy set by the Board of Directors. Such duties shall include the preparation and keeping of proper and necessary books, records and accounts, of such nature and at such place as may be designated by the Board, or as stated in the By-Laws. ARTICLE X. ---------- The name and address of each incorporator is as follows: Scott L. Smith 4931 Marilyn Drive Salt Lake City, Utah 84117 Paul C. O'Leary 2571 Solar Drive Salt Lake City, Utah 84117 John Simpson 242 West Third North Salt Lake City, Utah 84103 ARICLE XI. ---------- No contract or other transaction between this corporation and any other corporation shall be affected or invalidated solely by the fact that any director or officer of this corporation is interested in, or is a director or officer of such other corporation, and any director or directors, officer or officers, individually or jointly, may be a party or parties to or may be interested in any contract or transaction of this corporation or in which this corporation may be interested; and no contract or transaction of this corporation with any person, firm or corporation, shall be affected or invalidated solely by the fact that any director or officer of this corporation is a party or interested n such contract, act or transaction; provided that the full extent of the interest and connection of such director or officer shall have been fully disclosed to the board of directors, and the board shall not have disapproved of such contract or transaction under the circumstances disclosed. EXECUTED on this 28th day of November, 1972 at Salt Lake City, Utah. INCORPORATORS: /s/ Scott L. Smith ------------------ Scott L. Smith /s/ Paul C. O'Leary ------------------ Paul C. O'Leary and, /s/ John Simpson ------------------ John Simpson * * * * * EX-3.(II) 3 Exhibit 3.02 Bylaws BY-LAWS OF GOLD STANDARD, INC. ARTICLE XII. OFFICES ------- Section 1. The principal office of the corporation shall be 1019 Kearns Building, Salt Lake City, County of Salt Lake, State of Utah 84101. Section 2. The corporation may also have offices at such other places as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II. Section 1. All annual meetings of the stockholders shall be held at such place as the board of directors shall determine. Special meetings of the stockholders may be held at such place as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof. Section 2. An annual meeting of stockholders, commencing with the year 1981, shall be held on the second Monday in February in each year, if not a legal holiday, and if a legal holiday, then on the next secular day following, when they shall elect by a majority vote a board of directors and transact such other business as may properly be brought before the meeting. Section 3. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called by the President and shall be called by the President or Secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 4. Written notice of the annual meeting and of all special meetings of the stockholders, signed by the President or a Vice-President, or the Secretary or an Assistant Secretary, stating the purpose or purposes for which the meeting is called, and the time when and the place where it is to be held, shall be either delivered personally or shall be mailed to each stockholder of record entitled to vote thereat, not less than ten nor more than fifty days prior to the meeting, and if mailed, it shall be directed to any such stockholder at his address as it appears on the records of the corporation. Section 5. Business transacted at all special meetings shall be confined to the objects stated in the call. Section 6. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute, by the articles of incorporation or by these by-laws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be presented or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 7. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power, present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the articles of incorporation or of these by-laws, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 8. At each meeting of the stockholders every stockholder having the right to vote shall be entitled to vote in person, or by proxy. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation on the date of closing the books of the corporation against transfers of stock or on the record date fixed for the determination of stockholders entitled to vote at such meeting, or, if the books be not closed or a record date fixed, then on the date of such meeting. Upon the demand of any stockholder, the vote upon any question before the meeting shall be by ballot. Section 9. Every proxy must be appointed by an instrument in writing. No proxy shall be valid after the expiration of 6 months from the date of its execution, unless coupled with an interest, or unless the person executing it specifies therein its duration, which in no case shall exceed seven years from the date of its execution. Subject to the above, any proxy duly executed is not revoked and continues in full force until an instrument revoking it, or duly executed proxy bearing a later date is filed with the Secretary of the corporation. ARTICLE III. Section 1. The number of directors which shall constitute the board shall be three. The number of directors may from time to time be increased from three to not more than seven (7) as is provided for in the Articles of Incorporation. Directors need not be stockholders, and each director shall be elected to serve until his successor shall be elected and shall qualify. Section 2. The directors may hold their meetings at such times and such places as they may from time to time determine within or without the State of Utah. Section 3. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum, and each director so elected shall hold office for the unexpired term in respect to which such vacancy occurred or until the next annual election of directors. Section 4. The property and business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. COMMITTEES OF DIRECTORS ----------------------- Section 5. The board of directors may, by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in said resolution or resolutions shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation and may have power to authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 6. The committees shall keep regular minutes of its proceedings and report the same to the board of directors when required. COMPENSATION OF DIRECTORS ------------------------- Section 7. Directors as such, shall not receive any stated salary for their services, but by resolution of the board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the board; provided, that nothing herein contained shall be construed to preclude any directors from serving the corporation in any other capacity and receiving compensation therefor. Section 8. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 9. Any director may be removed from office by the vote or written consent of stockholders representing not less than two-thirds of the issued and outstanding capital stock having voting power, and his successor may be elected at the same meeting. ARTICLE IV. NOTICES ------- Section 1. Whenever under the provisions of the statutes or of the articles of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder at such address as appears on the books of the corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed. Section 2. Whenever all parties entitled to vote at any meeting, whether of directors or stockholders, consent, either by a writing on the records of the meeting or filed with the Secretary, or by presence at such meeting and oral consent entered on the minutes, or by taking part in the deliberations at such meeting without objection, the actions taken at such meeting shall be as valid as if had at a meeting regularly called and noticed, and at such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time, and if any meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of such meeting may be ratified and approved and rendered valid and the irregularity or defect therein waived by a writing signed by all parties having the right to vote thereat. Such consent or approval, if given by stockholders, may be by proxy or attorney, but all such proxies and powers of attorney must be in writing. Section 3. Whenever any notice whatever is required to be given under the provisions of the statutes, of the articles of incorporation or of these by-laws, a waiver thereof in writing signed by the person entitled to said notice either before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V. OFFICERS -------- Section 1. The officers of the corporation shall be chosen by the directors, and there shall be a President, one or more Vice-Presidents, a Secretary and a Treasurer. The offices of Secretary and Treasurer may be held by the same person. Section 2. The board of directors, at its first meeting, after each annual meeting of stockholders, shall choose a President from its members and shall choose a Vice-President, a Secretary and a Treasurer, none of whom need be a member of the board. Section 3. The board may appoint additional vice-presidents, assistant secretaries, assistant treasurers and such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the whole board of directors. If the office of any officer becomes vacant for any reason, the vacancy shall be filled by the board of directors. THE PRESIDENT ------------- Section 6. The President shall be the chief executive officer of the corporation; he shall preside at all meetings of the stockholders and directors, shall be ex officio a member of all standing committees, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. VICE PRESIDENT -------------- Section 8. The Vice-Presidents shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties as the board of directors shall prescribe. THE SECRETARY ------------- Section 9. The Secretary shall attend all sessions of the board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors and shall perform such other duties as may be prescribed by the board of directors or President, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation, and when authorized by the board of directors, affix the same to any instrument requiring a seal, and when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary. THE TREASURER ------------- Section 10. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 11. He shall disburse the funds of the corporation as may be ordered by the board, taking proper vouchers for such disbursements and shall render to the President and directors, at the regular meeting of the board, or whenever they may require it, an account of all transactions as Treasurer and of the financial condition of the corporation. Section 12. If required by the board of directors, he shall give the corporation a bond in such sum, and with such surety or sureties as shall be satisfactory to the board, for the faithful performance of the duties of his office, and for the restoration to the corporation in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and the property of whatever kind in his possession or under his control belonging to the corporation. ARTICLE VI. CERTIFICATES OF STOCK --------------------- Section 1. Certificates of stock of the corporation shall be in such form not inconsistent with the articles of incorporation as shall be approved by the board of directors, shall be issued under the seal of the corporation and shall be numbered and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and the number of shares owned by him and shall be signed by the President or Vice-President and the Secretary or an assistant secretary or the Treasurer or an assistant treasurer. If any stock certificate is counter-signed or otherwise authenticated by a transfer agent or transfer clerk and a registrar, a facsimile of the signatures of the said officers may be printed or lithographed upon such certificate in lieu of the actual signature. TRANSFER OF STOCK ----------------- Section 2. Upon surrender to the corporation or the transfer agent of the corporation of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. CLOSING OF TRANSFER BOOKS ------------------------- Section 3. The directors may prescribe a period not exceeding forty days prior to any meeting of the stockholders or prior to the day appointed for the payment of dividends during which no transfer of stock on the books of the corporation may be made, or may fix a day not more than forty days prior to the holding of any such meeting or the date for the payment of any such dividend as the day as of which stockholders entitled to notice of and to vote at such meeting and entitled to receive payment of such dividend shall be determined; and only stockholders of record on such day shall be entitled to notice or to vote at such meeting or to receive payment of such dividend. REGISTERED STOCKHOLDERS ----------------------- Section 4. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of Utah. LOST CERTIFICATES ----------------- Section 5. The board of directors may direct a new certificate or certificates of stock to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion, and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. ARTICLE VII. GENERAL PROVISIONS ------------------ DIVIDENDS --------- Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the articles of incorporation, if any relate thereto, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the articles of incorporation. Section 2. Before payment of any dividend or making any distribution of profits, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may modify or abolish any such reserve in the manner in which it is created. CHECKS ------ Section 3. All checks or demand for money and notes of the corporation shall be signed by such officer or officers as the board of directors may from time to time designate. FISCAL YEAR ----------- Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL ---- Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its incorporation and the words "Corporate Seal, Utah." ARTICLE VIII. AMENDMENTS ---------- Section 1. These by-laws may be altered or amended at any regular meeting of the stockholders or at any special meeting of the stockholders at which a quorum is present or represented, if notice of the proposed alteration or amendment be contained in the notice of such special meeting, by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote at such meeting and present and represented thereat, or by the affirmative vote, of a majority of the board of directors at any regular meeting of the board or at any special meeting of the board if notice of the proposed alteration or amendment be contained in the notice of such special meeting. I, THE UNDERSIGNED, being the Secretary of GOLD STANDARD, INC., do hereby certify the foregoing to be the by-laws of said corporation, as adopted at a meeting of the directors held on the 15th day of February, 1980. ---------------------------- Secretary EX-10.1 4 Exhibit 10.1 Scott L. Smith Employment Agreement GOLD STANDARD, INC. EMPLOYMENT AGREEMENT This Employment Agreement is entered into as of August 15, 1999 by and between Gold Standard, Inc., a Utah corporation, (the "Company") and Scott L. Smith (the "Employee"). In consideration of the promises and mutual covenants contained herein, the parties hereto agree as follows: 1. Employment; Location -------------------- The Company hereby employs Employee and Employee hereby accepts such employment in Salt Lake County in the State of Utah or in such other location as may be mutually agreed between the parties. 2. Term ---- The Company agrees to employ Employee and Employee agrees to accept employment with the Company for the 5-year period beginning as of the date hereof through the fifth anniversary date hereof, unless this Agreement is sooner terminated pursuant to Section 6 below. 3. Duties ------ Employee shall be the President and Chief Executive Officer of the Company. Employee shall diligently execute such duties and shall devote his full time, skills, and efforts to such duties during ordinary working hours. Employee shall perform such duties subject to the general supervision and control of the Company's Board of Directors. 4. Compensation and Benefits ------------------------- The Company shall pay Employee, and Employee accepts as full compensation for all services to be rendered to the Company, the following compensation and benefits: 4.1 Salary. The Company shall pay Employee an annual salary of Eighty Five Thousand Dollars ($85,000) per year, payable in equal installments at least monthly on the last day of each month or at more frequent intervals in accordance with the Company's customary pay schedule, subject to such increases as the Board of Directors may determine from time to time in its sole discretion. At a minimum unless Employee decines, Employee's annual salary will be increased as follows: (i) on the second anniversary of this Agreement, by $1,000 per month; and (ii) on the fourth anniversary of this Agreement, by $1,000 per month. 4.2 Right to Purchase Shares. As partial consideration for Employee's employment, Employee is hereby granted the right to purchase 100,000 restricted shares of the Employer's common stock (the "Shares"), exercisable on a single occasion during the period that this Agreement remains in force. The purchase price per share shall be $0.25 greater than the trading price of the Shares on the date of exercise. The Employee may purchase the Shares using a promissory note ("Note") having the following terms: (i) the Note shall be non-recourse to the Employee; (ii) the Note shall be interest-free; (iii) the principal amount of the Note shall be due in a single installment on the fourth anniversary of the date of issuance of the Note; and (iv) the Note shall be secured by a pledge of the Shares. 4.3 Company Automobile. The Employee shall have the right to use of an automobile furnished by the Employer, the costs of which shall not exceed those customary for an employee holding the position of the Employee in a comparable organization. 4.4 Additional Benefits. Employee shall be eligible to participate in the Company's employee benefit plans for employees, if and when any such plans may be adopted, including, without limitation, bonus plans, pension or profit sharing plans, incentive stock plans, and those plans covering life, disability, health, and dental insurance in accordance with the rules established in the discretion of the Board of Directors for individual participation in any such plans as may be in effect from time to time. 4.5 Vacation, Sick Leave, and Holidays. Employee shall be entitled to an aggregate of up to four (4) weeks leave for vacation each calendar year at full pay or such increased leave as may be allowed by the Company's Board of Directors for members of management generally. In addition, Employee shall be entitled to sick leave and holidays at full pay in accordance with the Company's policy. 4.6 Deductions. The Company shall have the right to deduct from the compensation due to Employee hereunder any and all sums required for social security and withholding taxes and for any other federal, state, or local tax or charge which may be hereafter enacted or required by law as a charge on the compensation of Employee. 5. Business Expenses ----------------- The Company shall promptly reimburse Employee for all reasonable out-of-pocket business expenses he incurs in fulfilling his duties hereunder, in accordance with the general policy of the Company in effect from time to time, provided that Employee furnishes to the Company adequate records and other documentary evidence required by all federal and state statutes and regulations issued by the appropriate taxing authorities for the substantiation of each such business expense as a deduction on the federal or state income tax returns of the Company. 6. Termination ----------- 6.1 Termination for Cause. This Agreement and Employee's employment hereunder shall terminate upon Employee's death and is otherwise immediately terminable for "cause" (as defined below) upon written notice from the Company to Employee. As used in this Agreement, "cause" shall include (i) habitual neglect of or deliberate or intentional refusal to perform his duties and obligations under this Agreement, (ii) fraudulent or criminal activities, (iii) any grossly negligent or unethical activity, or (iv) any activity that causes substantial harm to the Company, its reputation, or to its directors or employees. A determination of whether Employee's actions justify termination for cause and the date on which such termination is effective shall be made by the Company's Board of Directors in its sole discretion. 6.2 Termination for Disability. The Company's Board of Directors may terminate this Agreement for the "disability" (as defined below) of Employee at the expiration of a consecutive two-month period of disability if the Board of Directors determines in its sole discretion that Employee's disability will prevent him from substantially performing his duties hereunder. As used in this Agreement, "disability" shall be defined as (i) Employee's inability, by reason of physical or mental illness or other cause, substantially to perform his duties hereunder, or (ii) in the discretion of the Board of Directors, as it is defined in any disability insurance policy in effect at the Company during the time in question. Employee shall receive full compensation, benefits, and reimbursement of expenses pursuant to Sections 4 and 5 above from the date the disability begins until the scheduled termination of this Agreement, or until he begins to receive disability benefits pursuant to a Company disability insurance policy, whichever occurs first. 6.2 Effect of Termination. In the event Employee's employment is terminated hereunder, all obligations of the Company and all obligations of Employee shall cease except as provided in Sections 7 through 16 below. Upon such termination, Employee or his representative or estate shall be entitled to receive only the compensation, benefits, and reimbursement earned or accrued by him under Sections 4 and 5 above, but shall not be entitled to any further compensation, benefits, or reimbursement from such date. 6.4 Option to Retain as Consultant Upon termination of Employee's employment, other than for reason of Employee's death, the Company shall have an option to retain the services of Employee as a consultant for a period of two years from the date of termination. The Company shall exercise such option by giving written notice thereof to Employee on the date of termination or within five (5) days thereafter, and the obligations of Employee as a consultant upon such exercise shall be effective from the date of termination. If the Company elects to exercise such option, then the Company shall be obligated to utilize the services of employee for a minimum of ten hours per calendar month during the consultancy period, and Employee shall make himself available to the Company for no less than 10 hours per calendar month. The parties agree that as consideration for his services as a consultant the Employee shall receive the greater of: (i) an hourly fee to be mutually agreed by the parties, or (ii) an amount to be no less than an hourly equivalent to Employee's salary as a full time employee of the Company. In addition, the Company shall reimburse Employee for any reasonable expenses paid or incurred by employee in connection with the performance of his duties as a consultant of the Company. Employee shall be entitled to no compensation as a consultant other than the above fees and expenses. Employee acknowledges and agrees that he shall be bound by the covenant not to compete with the Company as set forth in Section 7 below, as well as by the obligations concerning confidential information as set forth in Section 8, below, during the period for which he is a consultant for the Company. 7. Covenant Not to Compete ----------------------- 7.1 Covenant. Employee hereby agrees that, while he is employed by the Company as either an employee or as a consultant pursuant to this Agreement, and, in any event, during the one-year period following the termination of his employment hereunder, he will not directly or indirectly compete (as defined in Section 7.2 below) with the Company in any geographic area in which the Company does or has done business. 7.2 Direct and Indirect Competition. As used herein, the phrase "directly or indirectly compete" shall include owning, managing, operating or controlling, or participating in the ownership, management, operation or control of, or being connected with or having any interest in, as a stockholder, director, officer, employee, agent, consultant, assistant, advisor, sole proprietor, partner or otherwise, any business (other than the Company's) which is the same as, or similar to, or competitive with any business conducted or to be conducted by the Company or any of the Company's subsidiaries; provided, however, that this prohibition shall not apply to ownership of less than one percent (1%) of the voting stock in companies whose stock is traded on a national securities exchange or in the over-the-counter market. 7.3 Enforceability. If any of the provisions of this Section 7 is held unenforceable, the remaining provisions shall nevertheless remain enforceable, and the court making such determination shall modify, among other things, the scope, duration, or geographic area of this Section to preserve the enforceability hereof to the maximum extent then permitted by law. In addition, the enforceability of this Section is also subject to the injunctive and other equitable powers of a court as described in Section 10 below. 8. Confidential Information ------------------------ Employee acknowledges that during his employment or consultancy with the Company he will develop, discover, have access to, and become acquainted with technical, financial, marketing, personnel, and other information relating to the present or contemplated products or the conduct of business of the Company which is of a confidential and proprietary nature ("Confidential Information"). Employee agrees that all files, records, documents, and the like relating to such Confidential Information, whether prepared by him or otherwise coming into his possession, shall remain the exclusive property of the Company, and Employee hereby agrees to promptly disclose such Confidential Information to the Company upon request and hereby assigns to the Company any rights which he may acquire in any Confidential Information. Employee further agrees not to disclose or use any Confidential Information and to use his best efforts to prevent the disclosure or use of any Confidential Information either during the term of his employment or consultancy or at any time thereafter, except as may be necessary in the ordinary course of performing his duties under this Agreement. Upon termination of Employee's employment or consultancy with the Company for any reason, Employee shall promptly deliver to the Company all materials, documents, data, equipment, and other physical property of any nature containing or pertaining to any Confidential Information, and Employee shall not take from the Company's premises any such material or equipment or any reproduction thereof. 9. No Conflicts ------------ Employee hereby represents that, to the best of his knowledge, his performance of all the terms of this Agreement and his work as an employee or consultant of the Company does not breach any oral or written agreement which he has made prior to his employment with the Company. 10. Equitable Remedies ------------------ Employee acknowledges and agrees that the breach or threatened breach by him of certain provisions of this Agreement, including without limitation, Sections 7and 8, above, would cause irreparable harm to the Company for which damages at law would be an inadequate remedy. Accordingly, Employee hereby agrees that in any such instance the Company shall be entitled to seek injunctive or other equitable relief in addition to any other remedy to which it may be entitled. 11. Assignment ---------- This Agreement is for the unique personal services of Employee and is not assignable or delegable in whole or in part by Employee without the consent of the Board of Directors of the Company. This Agreement may not be assigned by Employer without the prior written consent of Employee. The terms of this Agreement shall inure to the benefit of, be binding upon, assumed by, and be binding upon, the successors and permitted assigns of the parties. 12. Waiver or Modification ---------------------- Any waiver, modification, or amendment of any provision of this Agreement shall be effective only if in writing in a document that specifically refers to this Agreement and such document is signed by the parties hereto. 13. Entire Agreement ---------------- This Agreement constitutes the full and complete understanding and agreement of the parties hereto with respect to the subject matter covered herein and supersedes all prior oral or written understandings and agreements with respect thereto. 14. Severability ------------ If any provision of this Agreement is found to be unenforceable by a court of competent jurisdiction, the remaining provisions shall nevertheless remain in full force and effect. 15. Notices ------- Any notice required hereunder to be given by either party shall be in writing and shall be delivered personally or sent by certified or registered mail, postage prepaid, or by private courier, with written verification of delivery, or by facsimile or other electronic transmission to the other party to the address or telephone number set forth below or to such other address or telephone number as either party may designate from time to time according to this provision. A notice delivered personally or by facsimile or electronic transmission shall be effective upon receipt. A notice delivered by mail or by private courier shall be effective on the third day after the day of mailing. (a) To Employee at: 4931 Marilyn Dr. Salt Lake City, UT 84117 (b) To the Company at: Suite 710, Kearns Building 136 South Main Street Salt Lake City, UT 84101 16. Governing Law ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of Utah. IN WITNESS WHEREOF, Employee has signed this Agreement personally and the Company has caused this Agreement to be executed by its duly authorized representative. GOLD STANDARD, INC. EMPLOYEE By:/s/ Bret Decker /s/ Scott L. Smith --------------- ------------------ Scott L. Smith Its: Secretary ------------ EX-10.2 5 Exhibit 10.2 Form of Warrant for Non-employee Directors WARRANTS TO PURCHASE UP TO _____ SHARES OF COMMON STOCK OF GOLD STANDARD, INC. (Incorporated under the laws of the State of Utah) By this certificate and for value received, Gold Standard, Inc., a Utah corporation (hereinafter called the "Company") subject to the conditions herein contained and upon the surrender of this Warrant Certificate to the Company at its principal offices, currently located at 712 Kearns Building, Salt Lake City, Utah 84101, will sell and deliver or cause to be sold and delivered to _______________________, at _____________________, on or before ___________, a certificate for fully paid and non-assessable shares of the Company's common stock, par value $0.001 upon payment of the purchase price for the number of shares in respect of which this Warrant Certificate is exercised, but in no event in excess of the number of shares set forth above; provided, however, that under certain conditions hereinafter set forth, the number of shares of the Company's common stock purchasable upon the exercise of this Warrant Certificate may be increased or reduced as provided in Section 2 hereof and the purchase price may be adjusted as provided in said Section 2. This Warrant Certificate shall not be transferable without the express prior written consent of the Company. The shares issuable upon exercise of this Warrant Certificate are referred to as the "Warrant Shares". Subject to adjustment as aforesaid, the purchase price per share, herein called the "Purchase Price" shall be U.S. $_______ per share. 1. Exercise of Warrants. --------------------- (a) The warrants evidenced by this Warrant Certificate may be exercised on or before _______. (b) This Warrant Certificate shall terminate automatically upon the earlier to occur of (i) ___________, or (ii) the date that the holder of this Warrant Certificate ceases, whether voluntarily or involuntarily, to be a member of the Board of Directors of the Company. Until the date of termination of this Warrant Certificate, the holder hereof may purchase all or any part of the number of shares of the Company's common stock purchasable upon the exercise of this Warrant Certificate, and such shares shall be the sole and complete property of the Warrant holder irrespective of whether the Warrant holder thereafter continues to serve as a member of the Board of Directors of the Company. (c) Subject to the conditions of this warrant, the warrants represented hereby may be exercised by the holder hereof by the surrender of this Warrant Certificate (with the Notice of Exercise annexed hereto properly completed and executed) at the principal office of the Company or at the principal office of the transfer agent, if any, for the Company's common stock (or at such other place as the Company and the holder hereof shall agree upon in writing), together with payment in the form of a certified or bank cashier's check drawn on cleared, U.S. funds to the Company of the aggregate of the purchase price for the number of Warrant Shares in respect of which the warrants represented hereby are then exercised. (d) Upon surrender of this Warrant Certificate and payment of the Purchase Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the holder of this Warrant Certificate and in the name of the Warrant holder, a certificate or certificates for the number of Warrant Shares so purchased upon the exercise of the warrants represented by this Warrant Certificate. Upon surrender of this Warrant Certificate and payment of the Purchase Price, as aforesaid, the Company may issue and cause to be delivered to or upon the written order of the holder of this Warrant Certificate in the name or names of persons other than the Warrant holder, a certificate or certificates for the number of Warrant Shares so purchased upon the exercise of the Warrant represented by this certificate, but only upon the written request of the Warrant holder and only with the unanimous approval of the Board of Directors of the Company. In the event the shares are to be registered in the name of a person other than the registered holder of the Warrant Certificate, the Purchase Price shall be accompanied by payment of any federal, state and local transfer taxes applicable to the transaction. The certificate or certificates representing the Warrant Shares shall be deemed to have been issued and any person named therein shall be deemed, for all purposes, to have become a holder of record of such Warrant Shares as of the close of business on the date of surrender of this Warrant Certificate and payment of the Purchase Price and transfer taxes, if any, as aforesaid. (e) The warrants represented by this Warrant Certificate shall be exercisable, at the election of the holder hereof, and, in the event that fewer than all of the warrants represented by this Warrant Certificate are exercised prior to the expiration of the warrants, a new warrant certificate or certificates will be issued for the number of warrants represented by the surrendered certificate which were not so exercised. All warrant certificates surrendered upon the exercise of the warrants evidenced thereby shall be cancelled. (f) The Company shall not be required to issue fractions of Warrant Shares on the exercise of warrants. If any fraction of a Warrant Share would, except for the provisions of this paragraph, be issuable upon the exercise of any warrant, the warrant so exercised shall be deemed to confer to the right to purchase the next smaller number of full Warrant Shares. If more than one warrant shall be exercisable at one time by the same holder, the number of Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of warrants exercised. 2. Adjustment to Purchase Price and Number of Shares of Common Stock. The Purchase Price and the number of shares of common stock purchasable upon the exercise of a warrant evidenced by any warrant certificate shall be subject to adjustment from time to time as follows: (a) In case the Company shall (i) pay a dividend or make a distribution to all holders of its common stock in shares of its common stock, (ii) subdivide its outstanding shares of common stock into a larger number of shares, or (iii) combine its outstanding shares of common stock into a smaller number of shares, then the Purchase Price in effect immediately prior to such action shall be adjusted to an amount that bears the same relationship to the Purchase Price in effect immediately prior to such action as the total number of shares of the common stock of the Company outstanding immediately prior to such action bears to the total number of shares of common stock of the Company outstanding immediately after such action. An adjustment made pursuant to this subsection (A) shall become effective, and any such action shall be deemed to have been taken, immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision or of a combination. (b) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least three percent (3%) in such price; provided, however, that any adjustment which by reason of this subsection (B) is not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this section shall be made to the nearest cent. (c) In case of any capital reorganization or of any reclassification of the common stock of the Company or in the case of the consolidation of the Company with, or the merger of the Company with or into, any other corporation or of the sale of all of the properties and assets of the Company as, or substantially as, an entirety to any other corporation, each warrant shall, after such capital reorganization, reclassification of common stock, consolidation, merger or sale be exercisable, upon the terms and conditions specified in this agreement and upon payment of the Purchase Price in effect immediately prior to such action, for the number of shares of common stock or other securities or property which he would have owned or have been entitled to receive after the happening of such capital reorganization, reclassification of common stock, consolidation, merger or sale had such warrant been exercised immediately prior to such action, and in any case, if necessary, the provisions set forth in this section with respect to the rights and interests thereafter of the holders of the warrants shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or property thereafter deliverable upon the exercise of the warrants. The subdivision or combination of shares of common stock at any time outstanding into a greater or lesser number of shares of common stock shall not be deemed to be a reclassification of the common stock of the Company for the purpose of this subsection (c). (d) Upon each adjustment of the Purchase Price as a result of (i) a dividend or distribution in shares of common stock, or (ii) a subdivision of the outstanding shares of common stock, the number of Warrant Shares purchasable upon the exercise of any warrant certificate shall be increased to the number of shares of common stock obtained by multiplying the number of shares of common stock purchasable immediately prior to such adjustment upon exercise of warrants evidenced by the warrant certificate held by such holder, by the Purchase Price in effect immediately prior to such adjustment and dividing the product so obtained by the Purchase Price in effect after such adjustment. (e) Upon each adjustment of the Purchase Price as a result of a combination of the common stock, each warrant certificate shall thereupon evidence the right to purchase that number of shares of common stock obtained by multiplying the number of shares of common stock purchasable immediately prior to such adjustment upon exercise of the warrants evidenced by the warrant certificate held by such holder by the Purchase Price in effect immediately prior to such adjustment and dividing the product so obtained by the Purchase Price in effect after such adjustment. (f) Whenever there is an adjustment in the Purchase Price, as provided herein, the Company shall promptly cause a notice stating that such adjustment has been effected and stating the Purchase Price then in effect and the number of shares of common stock purchasable upon exercise of any warrant certificate to be sent by first class mail, postage prepaid, to each registered holder of a warrant certificate at his address appearing on the warrant register. The Company shall keep a copy of the notice on file and available for inspection by holders of warrant certificates during reasonable business hours. (g) Irrespective of any adjustments in the Purchase Price or the number of shares purchasable upon the exercise of a warrant, warrant certificates theretofore or thereafter issued may continue to express the same prices and number of shares as are stated in the similar warrant certificates issuable initially, or at some subsequent time, and the Purchase Price and such number of shares specified therein shall be deemed to have been so adjusted. 3. Notices to Warrant Holders. Nothing contained in any of the warrant certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as stockholders in respect of the meeting of stockholders for the election of directors of the Company or any other matters. 4. Registration Under the Securities Act of 1933. The holder of this warrant, by acceptance hereof, agrees that the warrants represented by this Warrant Certificate and the Warrant Shares have been and will be acquired for investment and not with a view to distribution or resale, and that neither these warrants, nor any such shares, will be transferred or disposed of except in accordance with the Securities Act of 1933, as amended (the "Securities Act"), and the then existing rules and regulations promulgated thereunder. The warrants and the Warrant Shares shall not be transferred except upon the conditions specified in these warrants and compliance with the provisions of the Securities Act in respect of the transfer of any warrant or of any Warrant Shares. 5. Notices. Any notice pursuant to this Warrant Certificate to be given by the Company or the holder of this Warrant Certificate shall be sufficiently given if sent by first class mail, postage prepaid, addressed, if to the Company at its principal office, or if to the warrant holder, to the registered holder's address as it last appears on the warrant registry maintained by the Company or, if appointed, to the warrant agent. 6. Governing Law. This Warrant Certificate and each warrant evidenced hereby shall be deemed to be a contract made under, and shall be construed in accordance with and governed by, the laws of the State of Utah. IN WITNESS WHEREOF, Gold Standard, Inc., has caused this Warrant Certificate to be duly executed under its corporate seal. DATED: ________________ GOLD STANDARD, INC. By ---------------------------- President (SEAL) ATTEST: By ------------------ Secretary "The securities represented hereby have not been registered under the Securities Act of 1933, and no transfer, pledge, hypothecation or other disposition of it may be effected unless registered under the Securities Act of 1933, or in the opinion of counsel of Gold Standard, Inc., such disposition is exempt from the registration provisions of the Act." NOTICE OF EXERCISE ------------------ The undersigned hereby elects to purchase ----- shares of Common Stock, par value $0.001 per share, of Gold Standard, Inc., pursuant to the attached Warrant Certificate ("Warrant") and tenders herewith payment of the Purchase Price in full, together with all applicable transfer taxes, if any. Subject to compliance with the applicable provisions of the U.S. Securities Act of 1933 and the production of evidence satisfactory to Gold Standard, Inc. of such compliance, please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned, or, also subject to payment of the applicable transfer taxes, in such other name as may be specified below: ------------------------------ Name ------------------------------ ------------------------------ Address ------------------------------ Signature FOR VALUE RECEIVED, hereby ------------------------------------ sells, assigns and transfers unto Name---------------------------------------------------------------------------- (Please typewrite or print in block letters) Address------------------------------------------------------------------------- the right to purchase Common Stock represented by this Warrant to the extent of - -------------- shares as to which right is exercisable and does hereby irrevocably constitute and appoint ------------------------- , attorney, to transfer the same on the books of the Company with full power of substitution in the premises. ------------------------------ Signature Dated: EX-11 6
Exhibit 11 Gold Standard, Inc. and Subsidiaries COMPUTATION OF NET LOSS PER COMMON SHARE Years Ended October 31, 1999 1998 1997 ----------- ----------- ---------- Numerator: Net loss attributable to common shares $ (778,438) $(1,688,464) $(1,271,319) Denominator: Weighted average common share outstanding 1,168,594 1,168,594 1,168,594 Basic and diluted loss per share: Net loss attributable to common shares $ (.67) $ (1.44) $ (1.09)
NOTE 1 - Warrants to purchase shares of common stock were outstanding during 1999 but were not included in the computation of diluted loss per share because the warrants' exercise price was greater than the average market price of the common shares. NOTE 2 - On March 2, 1998, the board of directors of the Company approved a one for four reverse stock split, effective April 1, 1998, affecting all of the Company's common stock. On November 9, 1998, the board of directors of the company approved another one for four reverse stock split, effective December 1, 1998, affecting all of the Company's common stock. The financial statements have been adjusted retroactively to reflect these reverse stock splits. EX-21 7 Exhibit 21 Subsidiaries of the Registrant Name Jurisdiction of Organization - ----- ---------------------------- Gold Standard South Utah Tormin, S.A. Uruguay Gold Standard Minas, S.A. Brazil EX-27 8
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GOLD STANDARD, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. year year year OCT-31-1999 OCT-31-1998 OCT-31-1997 OCT-31-1999 OCT-31-1998 OCT-31-1997 2,457,682 3,193,338 4,428,663 0 0 0 6,992 4,312 0 0 0 0 0 0 0 2,485,948 3,211,533 4,444,546 281,984 318,440 378,987 202,521 186,484 172,522 2,846,059 3,696,519 4,907,413 13,905 85,927 115,624 0 0 0 0 0 0 0 0 0 1,169 1,169 18,698 2,830,985 3,609,423 4,773,091 2,846,059 3,696,519 4,907,413 0 0 0 0 0 0 0 0 0 0 0 0 811,413 1,449,472 1,905,770 0 0 0 0 0 0 (778,338) (1,688,364) (1,595,658) 100 100 210 (778,438) (1,688,464) (1,595,868) 0 0 0 0 0 0 0 0 0 (778,438) (1,688,464) (1,595,868) (0.67) (1.44) (0.09) (0.67) (1.44) (0.09)
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