-----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, BHK5yvgt0xfoa6Wcu2QfAK2VxAsThh+GpDCX2lq1y90S0TlG+3b/xxotXLibC1tL qDLxfrGjcRRAriIRQljr8Q== /in/edgar/work/0001000096-00-000866/0001000096-00-000866.txt : 20001117 0001000096-00-000866.hdr.sgml : 20001117 ACCESSION NUMBER: 0001000096-00-000866 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDSTATE CORP CENTRAL INDEX KEY: 0001050248 STANDARD INDUSTRIAL CLASSIFICATION: [1040 ] IRS NUMBER: 880354425 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-26705 FILM NUMBER: 771351 BUSINESS ADDRESS: STREET 1: 3305 SPRING MOUNTAIN RD STREET 2: STE 60 CITY: LAS VEGAS STATE: NV ZIP: 89012 BUSINESS PHONE: 8882285526 MAIL ADDRESS: STREET 1: 3305 SPRING MOUNTAIN RD STREET 2: STE 60 CITY: LAS VEGAS STATE: NV ZIP: 89012 10QSB 1 0001.txt 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 0-26705 GOLDSTATE CORPORATION --------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) NEVADA 88-0354425 ------------------------------ --------------- (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 3305 Spring Mountain Road, Suite 60 Las Vegas, Nevada 89102 -------------------------------------- (Address of Principal Executive Offices) (888) 228-5526 ------------------------- (Issuer's telephone number) N/A -------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: Class Outstanding as of November 14, 2000 ------ ---------------------------------- Common Stock, $.0003 par value 38,119,500 Transitional Small Business Disclosure Format (check one) Yes No X ----- ----- GOLDSTATE CORPORATION (An Exploration Stage Company) FINANCIAL STATEMENTS (Unaudited) SEPTEMBER 30, 2000 TABLE OF CONTENTS Page ---- Table of Contents 1 Balance Sheet 2 Statements of Operations 3 Statements of Cash Flows 4 Notes to Financial Statements 5 - 8 Management's Discussion and Analysis or Plan of Operation 9 Changes in Securities and Use of Proceeds 14 Defaults Upon Senior Securities 14 Submission of Matters to a Vote of Security Holders 14 Other Information 14 Exhibits and Reports on Form 8-K 14 Signatures 15 1
Part I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The unaudited financial statements of Goldstate Corporation (the "Company") reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the operating results for the interim period presented. GOLDSTATE CORPORATION (An Exploration Stage Company) Balance Sheet (Unaudited) September 30, 2000 ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ -- ----------- Total Assets $ 0 =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 13,904 Advances payable 59,388 Accrued interest payable 36,621 Directors fees payable 25,500 Notes payable (Note 2) 600,000 ----------- Total Liabilities 735,413 ----------- STOCKHOLDERS' EQUITY (Note 3) Preferred stock, $.001 par value; authorized 25,000,000 shares; Nil shares issued and outstanding at September 30, 2000 - Common stock $.0003 par value; authorized 75,000,000 shares; 38,119,500 shares issued and outstanding at September 30, 2000 11,740 Additional paid - in capital 2,567,089 Accumulated deficit through exploration stage (3,314,242) ----------- Total Stockholders' Equity (Deficiency) (735,413) ----------- Total Liabilities and Stockholders' Equity $ 0 =========== See accompanying notes to financial statements. 2
GOLDSTATE CORPORATION (An Exploration Stage Company) Statements of Operations (Unaudited) Inception (February 28, 1996) to For the 3 Months Ended Sep.30, For the 9 Months Ended Sep.30,September 30, ---------------------------- ---------------------------- 2000 1999 2000 1999 2000 ------------ ------------ ------------ ------------ ------------ PROPERTY EXPLORATION EXPENSES Technology sub-license costs -- -- -- 666,852 666,852 Claims maintenance fees, exploration, and staking costs -- 45,870 (2,702) 45,870 187,805 Impairment loss related to profit sharing interest -- 170,000 -- 170,000 170,000 ------------ ------------ ------------ ------------ ------------ Total Property Exploration Expenses (recoveries) -- 215,870 (2,702) 882,722 1,024,657 ------------ ------------ ------------ ------------ ------------ ADMINISTRATIVE EXPENSES General and administration 17,949 182,495 22,529 782,554 1,690,432 Professional fees 8,090 63 34,559 30,643 113,197 Directors fees -- 1,500 1,500 4,500 25,500 Internet design and access 114 -- 1,000 -- 6,172 Printing and stationary (21) -- 576 -- 5,142 Transfer agent 200 75 900 510 3,773 News wire services 250 975 920 1,075 5,020 Courier and postage (15) 371 615 968 11,376 Reports/information/subscripitions 371 2,086 1,078 2,086 38,841 Interest Expense 6,944 18,885 26,702 43,088 160,559 Office supplies -- 613 -- 613 6,460 Consulting fees -- -- -- -- 88,190 Office rent 549 -- 1,279 -- 43,787 Telephone and fax 64 11 218 11 35,987 Wages and salaries -- -- 140 -- 22,584 Travel -- -- -- -- 16,731 Auto -- -- -- -- 7,259 Promotion -- -- -- -- 7,165 Miscellaneous -- -- -- -- 1,410 ------------ ------------ ------------ ------------ ------------ Total Administrative Expenses 34,495 207,074 92,016 866,048 2,289,585 ------------ ------------ ------------ ------------ ------------ Net Loss 34,495 $ 422,944 $ 89,314 $ 1,748,770 $ 3,314,242 ============ ============ ============ ============ ============ Basic and fully diluted loss per share 0.001 $ 0.030 $ 0.003 $ 0.141 $ 0.280 ============ ============ ============ ============ ============ Weighted Average Number of Common Shares Outstanding 38,119,500 14,131,300 30,868,398 12,382,536 11,834,311 ============ ============ ============ ============ ============ See accompanying notes to financial statements. 3
GOLDSTATE CORPORATION (An Exploration Stage Company) Statements of Cash Flows (Unaudited) Inception (February 28, For the 9 Months Ended Sep.30, 1996) to ------------------------------ September 30, 2000 1999 2000 ----------- ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (89,314) $(1,748,770) $(3,314,242) Adjustments to reconcile net (loss) to cash used by operating activities Impairment loss on profit sharing interest -- 160,255 170,000 Non-cash technology sub-license costs -- 500,000 690,000 Changes in Assets and Liabilities Accounts payable 1,476 (4,231) 22,413 Director fees payable 1,500 4,500 25,500 Accrued interest payable 26,702 29,686 137,413 ----------- ----------- ----------- Net Cash Flows Used for Operating Activities (59,636) (1,058,560) (2,268,916) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Sale of common stock -- 968,509 1,707,380 Offering costs -- -- (7,173) Advances received 59,388 837,970 1,939,909 Advances repaid -- (848,000) (1,546,200) Proceeds from notes payable -- 100,000 175,000 ----------- ----------- ----------- Net Cash Flows Provided by Financing Activities 59,388 1,058,479 2,268,916 ----------- ----------- ----------- Net increase in cash (248) (81) -- Cash and cash equivalents - Beginning of period 248 877 -- ----------- ----------- ----------- Cash and cash equivalents - End of period $ -- $ 796 $ -- =========== =========== =========== Significant Non-Cash Transactions - --------------------------------- The Company accrued interest on notes payable of $46,225 and $29,218 for the twelve month periods ended December 31, 1999 and 1998, respectively. The Company has also recognized an additional $19,653 in imputed interest during 1999. The Company has accrued interest on notes payble of $17,250 during 2000. Company issued 22,970,000 shares of common stock in settlement of a $334,321 in advances payable and $67,827 of related accrued interest during 2000. The Company issued 1,018,000 shares of common stock in settlement of $175,000 of notes payable and $32,964 of related accrued interest during 2000. Since inception the Company has not capitalized any interest. See accompanying notes to financial statements. 4
GOLDSTATE CORPORATION (An Exploration Stage Company) Notes to Financial Statements September 30, 2000 Unaudited NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Interim Financial Statements ---------------------------- The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, adjustments (consisting of normal recurring accruals) considered necessary for a fair representation have been included. Operating results for the nine month period ending September 30, 2000, are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 1999. Going Concern and Continued Operations -------------------------------------- To date, the Company has not generated revenues from operations and as of September 30, 2000 had working capital and stockholders' deficits of $735,413. The Company ceased exploration of the joint venture lode mining claims located in the State of Idaho, pending the outcome of Intergold Corporation and Geneva's ongoing litigation with regard to the transfer of technology pursuant to the Sub-license Agreement between the Company and Geneva There is a chance that the technology to be transferred under the Sub-license Agreement may be delayed indefinitely, or cancelled all together, depending on the outcome of the Intergold/Geneva litigation. The Company expects to fund ongoing operations for the next twelve months through a combination of advances from directors and shareholders and future common stock offerings. The Company has been undertaking research relating to new business endeavors and possible new acquisitions. This research may result in the Company entering into business operations and possible acquisitions that are not in the minerals exploration field. 5 GOLDSTATE CORPORATION (An Exploration Stage Company) Notes to Financial Statements September 30, 2000 Unaudited NOTE 2: NOTES PAYABLE Pursuant to the Technology Sub-license agreement with Geneva Resources, Inc., the Company issued promissory notes to both Geneva and AuRIC in the amount of $250,000 to each company. These are 3% interest bearing notes and are payable upon the transfer of the technology. These notes have been discounted to bear an imputed interest rate of 8%. Pursuant to an amendment to the Technology Sub-license agreement, the company has issued a convertible promissory note to Geneva Resources, Inc. ("Geneva") in the amount of $100,000 that is convertible to 500,000 restricted common shares upon demand, and bears interest at the rate of 8% per annum. These promissory notes become due and payable upon the transfer of the technology. Transfer of the technology or any settlement thereto will be contingent on the outcome of the lawsuit described in Note 6. NOTE 3: STOCKHOLDERS' EQUITY Common Stock ------------ On May 3, 2000, the Company issued 1,018,000 common shares on the conversion of $175,000 in convertible notes and accrued interest totaling $32,964. On March 21, 2000, the Company issued 22,970,000 common shares on the settlement of $402,148 of advances and accrued interest payable. 6 GOLDSTATE CORPORATION (An Exploration Stage Company) Notes to Financial Statements September 30, 2000 Unaudited NOTE 4: EMPLOYEE STOCK OPTION PLAN Selected information regarding the Company's employee stock options as of September 30, 2000 are as follows: September 30, 2000 ---------------------- Weighted Number Average of Exercise Options Price --------- ---------- Outstanding at Beg. of Period 1,000,000 -0- Outstanding at End of Period -0- $.15/share Exercisable at End of Period -0- $.15/share Options Granted ............. -0- $.15/share Options Exercised ........... -0- -0- Options Forfeited ........... 1,000,000 -0- Options Expired ............. -0- -0- On April 17, 2000, the Company received assignments of all issued and outstanding grants of options under the Employee Stock Option Plan. As of September 30, 2000 all options exercisable to purchase common stock have been assigned to the Company for possible redistribution at a future date according to the direction of the Board of Directors. NOTE 5: CONTINGENCIES On May 8, 2000, the Company executed an assignment agreement that transferred and conveyed the potential claims and causes of action that the Company may have in connections with the Sub-license Agreement with Geneva. If amounts are recovered by the lawsuit initiated by International Gold Corporation and Geneva, the Company will receive the equivalent pro rata share of the Claims in relation to all other claims and causes of action for which any damages of settlement amounts are recovered. The Company has made this assignment to Geneva. On September 27, 1999, the Company's joint venture partner, Intergold Corporation ("IGCO"), its wholly owned subsidiary, International Gold Corporation ("IGC"), and Geneva initiated a legal complaint against AuRIC Metallurgical Laboratories, LLC ("AuRIC"), Dames & Moore, Ahmet Altinay, General Manager of AuRIC, and Richard Daniele, Chief Metallurgist for Dames & Moore. The damages sought by IGCO/IGC/Geneva are to be determined in court. 7 GOLDSTATE CORPORATION (An Exploration Stage Company) Notes to Financial Statements September 30, 2000 Unaudited NOTE 5: CONTINGENCIES (Continued) The damages incurred stem from reliance on assays and representations made by AuRIC and upon actions and engineering reports produced by Dames & Moore related to the Blackhawk claims. IGCO/IGC/Geneva also alleges there were breaches of contract by AuRIC and Dames and Moore, as well as other causes of action. This legal proceeding affected the timing of technology to be transferred from Geneva to the Company that was scheduled initially before the end of 2000. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION GENERAL The Blackhawk II Property The Company previously held possessory title to 439 contiguous unpatented lode mining claims located in Lincoln and Gooding Counties, in south-central Idaho (the "Blackhawk II Property"). Pursuant to a joint venture agreement dated March 17, 1999 (the "Joint Venture Agreement") with Intergold Corporation a Nevada corporation ("IGCO") and its wholly-owned private subsidiary, International Gold Corporation, a Nevada corporation ("INGC"), the Company owed a fifty-one percent (51%) future profit sharing interest in profits to be realized from the exploration of the Blackhawk II Property. Pursuant to the terms of the Joint Venture Agreement, the Company is to conduct work programs involving exploration of the mining claims on the Blackhawk II Property. On March 18, 1999, INGC, on behalf of IGCO, and AuRIC Metallurgical Laboratories, LLC, of Salt Lake City, Utah ("AuRIC") entered into an agreement for services (the "Agreement for Services"), whereby AURIC agreed to perform certain services, including the development of proprietary technology and know-how relating to fire and chemical assay analysis techniques and metallurgical ore extraction procedures developed specifically for the exploration of properties of IGCO. Dames & Moore subsequently verified the fire and chemical assay techniques and procedures developed by AuRIC, their repeatability, and confirmed preliminary metallurgical recovery testing. AuRIC and Geneva Resources, Inc., a Nevada corporation ("Geneva") entered into a technology license agreement dated March 17, 1999 (the "Technology License Agreement"), whereby AuRIC agreed to supply the proprietary technology to Geneva and grant to Geneva the right to sub-license the proprietary technology to the Company for use on the Blackhawk II Property. The Company and Geneva entered into a technology sub-license agreement dated March 18, 1999 (the "Sub-License Agreement"), whereby the Company acquired from Geneva a sub-license to utilize AuRIC's proprietary testing and chemical leach analysis of core samples derived from any subsequent drilling the Blackhawk II Property. On September 27, 1999, INGC, on behalf of IGCO, and Geneva initial legal proceedings against AuRIC by filing a complaint in the District Court of the Third Judicial District for Salt Lake City, State of Utah, alleging (i) multiple breaches of contract relating to the Agreement for Services and the License Agreement, respectively, including, but not limited to, establishment and facilitation of the proprietary technology and fire assay procedures developed by AuRIC at an independent assay lab and failure to deliver the proprietary technology and procedures to the Company, Geneva and Dames & Moore; (ii) breach of the implied covenant of good faith and fair dealing; (iii) negligent misrepresentation; (iv) specific performance; (v) non-disclosure injunction; (vi) failure by AuRIC to repay advances; and (vii) quantum meruit/unjust enrichment. INGC, on behalf of IGCO, also named Dames & Moore in the legal proceeding in a declaratory relief cause of action. 9 The proprietary technology forms the basis of claims made by Geneva and INGCO, on behalf of IGCO, in the complaints as filed with the District Court. Geneva and INGC allege that the proprietary technology does not exist and that Geneva and INGC were fraudulently, recklessly and/or negligently deceived by AuRIC, Dames & Moore, and other parties to the lawsuit. Management deems the proprietary technology crucial with respect to successful exploration of the Blackhawk II Property. Management, therefore, had suspended exploration of the Blackhawk II Property indefinitely until resolution of the legal proceedings. Effective September, 1, 2000, the Company has ceased continuation of payments of any maintenance fees for any of the Blackhawk II Property, as management does not believe that the Blackhawk II Claims contain any commercial grades of gold or silver. See "Part II. Item 1. Legal Proceedings" for additional disclosure. Investment in Other Ventures Management of the Company has been undertaking research relating to prospective new business endeavors and acquisitions. This research may result in the Company entering into business operations that are not in the minerals exploration field. As of the date of this Quarterly Report, the Company is seeking further acquisitions and assessing other business prospects. RESULTS OF OPERATION As of the date of this Quarterly Report, there has been no income realized from the business operations of the Company. During fiscal year 1999 and the nine-month period ended September 30, 2000, the Company's primary source of financing has been from advances made to the Company. Nine-Month Period Ended September 30, 2000 Compared to Nine-Month Period Ended September 30, 1999. For the nine-month period ended September 30, 2000, the Company recorded a net loss of $89,314 compared to a net loss of $1,748,770 in the corresponding period of 1999. During the nine-month period ended September 30, 2000, and September 30, 1999, the Company recorded no income. During the nine-month period ended September 30, 2000, the Company recorded operating expenses of $92,016 as compared to $1,748,770 of operating expenses recorded in the same period for 1999. There were no property exploration expenses incurred during the nine-month period ended September 30, 2000 as compared to property exploration expenses incurred in the amount of $882,722 during the same period for 1999; however, a credit for claims maintenance fees, exploration and staking costs offset the total operating expenses by $2,702 for nine-month period ended September 30, 2000. The lack of property exploration expenses during the nine-month period ended September 30, 2000 resulted from suspension of further exploration of the Blackhawk II Property and the cessation of work orders for research, development and metallurgical services compared to the significant property exploration expenses of $882,722 incurred in the same period for 1999 relating to amounts paid by the Company for research, development and metallurgical services performed associated with contractual agreements between the Company and Geneva Resources, Inc. 10 Administrative expenses decreased significantly by approximately $774,032 in the nine-month period ended September 30, 2000 as compared to the nine-month period ended September 30, 1999. Administrative expenses of $866,048 was incurred during the nine-month period in 2000 as compared to administrative expenses of $92,016 during the nine-month period ended September 30, 1999. This decrease in administrative expenses was due primarily to a $760,025 decrease in general, overhead and administration expenses resulting from the decreasing scale and scope of overall corporate activity pertaining to exploration of the Blackhawk II Property. General, overhead and administration expenses of $22,529 was incurred during the nine-month period in 2000 as compared to general, overhead and administration expenses of $782,554 incurred during the nine-month period ended September 30, 1999. Interest expense also decreased by $16,386 during the nine-month period ended September 30, 2000 as compared to the nine-month period ended September 30, 1999. Interest expense of $26,702 was incurred during the nine-month period in 2000 as compared to interest expense of $43,088 incurred during the nine-month period ended September 30, 1999. As discussed above, the decrease in net loss during the nine-month period ended September 30, 2000 as compared to the nine-month period ended September 30, 1999 is attributable primarily to the substantial decrease in property exploration expenses and in administrative expenses associated with cessation of the exploration of the Blackhawk II Property. The Company's net earnings (losses) during the nine-month period ended September 30, 2000 were approximately ($89,314) or ($0.003) per share compared to a net loss of approximately ($1,748,770) or ($0.141) per share during the nine-month period ended September 30, 1999. The weighted average number of common shares outstanding were 30,868,398 for the nine-month period ended September 30, 2000 compared to 12,382,536 for the nine-month period ended September 30, 1999. Three-Month Period Ended September 30, 2000 Compared to Three-Month Period Ended September 30, 1999. For the three-month period ended September 30, 2000, the Company recorded a net loss of $34,495 compared to a net loss of $422,944 in the corresponding period of 1999. During the three-month period ended September 30, 2000 and September 30, 1999, the Company recorded no income. During the three-month period ended September 30, 2000, the Company recorded operating expenses of $34,495 compared to $422,944 of operating expenses recorded in the same period for 1999. There were no property exploration expenses incurred during the three-month period ended September 30, 2000 as compared to property exploration expenses incurred in the amount of $215,870 during the same period for 1999. Administrative expenses decreased significantly by approximately $172,579 during the three-month period ended September 30, 2000 as compared to the three-month period ended September 30, 1999. Administrative expenses of $207,074 was incurred during the nine-month period in 1999 as compared to administrative expenses of $34,495 during the nine-month period ended September 30, 2000. 11 This decrease in administrative expenses was due primarily to a $164,546 decrease in general, overhead and administration expenses. General, overhead and administration expenses of $17,949 was incurred during the nine-month period in 2000 as compared to general, overhead and administration expenses of $182,495 incurred during the nine-month period ended September 30, 1999. Interest expense also decreased by $11,941 during the three-month period ended September 30, 2000 as compared to the three-month period ended September 30, 1999. Interest expense of $6,944 was incurred during the three-month period ended September 30, 2000 as compared to $18,885 of interest expense incurred during the three-month period ended September 30, 1999. As discussed above, the decrease in net loss during the three-month period ended September 30, 2000 as compared to the three-month period ended September 30, 1999 is attributable primarily to the decrease in property exploration costs and in administrative expenses associated with cessation of the exploration of the Blackhawk II Property. The Company's net earnings (losses) during the three-month period ended September 30, 2000 were approximately ($34,495) or ($0.001) per share compared to a net loss of approximately ($422,944) or ($0.030) per share during the three-month period ended September 30, 1999. The weighted average number of common shares outstanding were 38,119,500 for the three-month period ended September 30, 2000 compared to 14,131,300 for the three-month period ended September 30, 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's financial statements have been prepared assuming that it will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation. As of the nine-month period ended September 30, 2000, the Company's total assets were $ -0-. As of the nine-month period ended September 30, 2000, the Company's total liabilities were $735,413. Stockholders' Equity (deficit) increased from ($700,918) for the six-month period ended June 30, 2000 to ($735,413) for the nine-month period ended September 30, 2000. Stockholders' Equity (deficit) decreased from ($1,256,211) for fiscal year ended December 31, 1999 to ($735,413) for the nine-month period ended September 30, 2000. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On September 27, 1999, INGC, on behalf of IGCO, and Geneva initiated legal proceedings against AuRIC by filing a complaint in the District Court of the Third Judicial District for Salt Lake City, State of Utah, alleging (i) multiple breaches of contract relating to the Agreement for Services and the License Agreement, respectively, including, but not limited to, establishment and facilitation of the proprietary technology and fire assay procedures developed by AuRIC at an independent assay lab (the "Proprietary Technology") and failure to deliver the Proprietary Technology and procedures to the Company, Geneva and Dames & Moore; (ii) breach of the implied covenant of good faith and fair dealing; (iii) negligent misrepresentation; (iv) specific performance; (v) non-disclosure injunction; (vi) failure by AuRIC to repay advances; and (vii) quantum meruit/unjust enrichment. INGC, on behalf of IGCO, also named Dames & Moore in the legal proceeding in a declaratory relief cause of action. 12 On October 8, 1999, INGC, on behalf of IGCO, and Geneva amended the complaint by naming as defendants AuRIC, Dames & Moore, Ahmet Altinay General Manager of AuRIC, and Richard Daniele, Chief Metallurgist for Dames & Moore and specifying damages in excess of $10,000,000. The damages sought by Geneva and INGC, on behalf of IGCO, are based on the general claims and causes of action set forth in the amended complaint relating to reliance on the assays and representations made by AuRIC, the actions and engineering reports produced by Dames & Moore and, specifically, the negligent misrepresentations and inaccuracies contained within some or all of those Dames & Moore reports and breaches of contract by AuRIC and Dames & Moore. On June 21, 2000, INGC, on behalf of IGCO, and Geneva filed a second amended complaint in the District Court of the Third Judicial District for Salt Lake City, State of Utah. The second amended complaint increased detail regarding the alleged breaches of contract and increased causes of action against other parties involved by adding two new defendants, MBM Consulting, Inc. and Dr. Michael B. Merhtens, who provided consulting services to INGC. The amendment also added certain claims of other entities involved through Geneva against the defendants. The Proprietary Technology forms the basis of claims made by Geneva and INGC, on behalf of IGCO, in the complaints as filed with the District Court. Geneva and INGC, on behalf of IGCO, allege that the Proprietary Technology does not exist and that Geneva and INGC were fraudulently, recklessly and/or negligently deceived by AuRIC, Dames & Moore, and other parties to the lawsuit. Geneva and INGC subsequently obtained an order from the District Court granting its Motion to Compel. The Order requires that AuRIC and Dames & Moore produce the Proprietary Technology that was allegedly developed by AuRIC and confirmed by multiple engineering reports by Dames & Moore for Geneva's and INGC's restricted use by its legal counsel and industry experts. Geneva and INGC, on behalf of IGCO, have obtained an expert opinion as to the ineffectiveness of the Proprietary Technology. As of the date of this Quarterly Report, various depositions have been taken by various parties to the lawsuit. Discovery and document production have been conducted by both sides to the dispute. Geneva and INGC, on behalf of IGCO, continue to pursue all such legal actions and review further legal remedies against AuRIC and Dames & Moore. Management deems the Proprietary Technology crucial with respect to successful exploration of the Blackhawk II Property. Management has, therefore, suspended exploration of the Blackhawk II Property indefinitely until resolution of the legal proceedings, and has ceased to hold possessory title to the Blackhawk II Property. Management believes that the legal proceedings will prove that the Proprietary Technology is invalid. If the Proprietary Technology is proven to be invalid and not transferable, and INGC/Geneva are not successful in the outcome of the litigation and damages are not awarded, the Company may not be able to recover its potential losses and expenses incurred due to the breach of the Sub-License Agreement by Geneva. However, if the Proprietary Technology is proven to be invalid and not transferable, and INGC/Geneva are successful in the outcome of the litigation, INGC/Geneva may then receive damages from AuRIC and Dames & Moore. Geneva's damages result primarily from its inability to transfer the proprietary technology to the Company in accordance with the provisions of the Sub-License Agreement. Management believes that the Company will, under these circumstances, be entitled to receive a pro-rata portion of the awarded damages for potential losses incurred due to the breach of the Sub-License Agreement by Geneva. 13 The Company and Geneva have entered into an assignment agreement dated May 9, 2000 (the "Geneva Assignment Agreement") that transferred and conveyed to Geneva the potential claims and causes of action that the Company may have under the Sub-License Agreement with Geneva. If damages are recovered in the lawsuit initiated by Geneva and INGC, on behalf of the Company, the Company will receive a pro rata share of such damages relating to its claims and causes of action in relation to all other claims and causes of action for which damages are recovered. Thus, Geneva will receive any such pro rata share of the damages recovered pursuant to the terms and provisions of the Geneva Assignment Agreement. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS No report required. ITEM 3. DEFAULTS UPON SENIOR SECURITIES No report required. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No report required. ITEM 5. OTHER INFORMATION No report required. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) No exhibits required. (b) No reports required. On behalf of the Company an 8-K was filed on October 19, 2000. 14 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GOLDSTATE CORPORATION Dated: November 14, 2000 By: /s/ Carson Walker ------------------------------- Carson Walker, President 15 EX-27 2 0002.txt FDS
5 1 9-MOS DEC-31-2000 SEP-30-2000 0 0 0 0 0 0 0 0 0 735,413 0 0 0 11,740 2,567,089 0 0 0 0 0 92,016 0 26,702 (89,314) 0 0 0 0 0 (89,314) (.003) 0
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