6-K 1 item18.txt GOLD RESERVE ITEM 18 DISCLOSURE FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of May 2006 Commission File Number: 001-31819 Gold Reserve Inc. (Exact name of registrant as specified in its charter) 926 W. Sprague Avenue, Suite 200 Spokane, Washington 99201 (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F X Form 40-F _____ Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No X If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-____________ Filed with this Form 6-K is the following, which is incorporated herein by reference: 99.1 Gold Reserve U.S. GAAP reconciliation to Financial Statements in accordance with item 18 under Form 20-F Certain statements included herein, including those that express management's expectations or estimates of our future performance, constitute "forward looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management are inherently subject to significant business, economic and competitive uncertainties and contingencies. We caution that such forward-looking statements involve known and unknown risks, uncertainties and other risk factors that may cause the actual financial results, performance, or achievements of Gold Reserve to be materially different from our estimated future results, performance, or achievements expressed or implied by those forward looking statements. Numerous factors could cause actual results to differ materially from those in the forward-looking statements, including without limitation, concentration of operations and assets in foreign countries, corruption, requests for improper payments, uncertain legal enforcement, regulatory, political and economic risks associated with Venezuelan operations, our ability to obtain additional funding for the development of the Brisas project, in the event any key findings or assumptions previously determined by our experts in the final feasibility study (including any updates thereto) significantly differ or change as a result of actual results in our expected construction and production at the Brisas project, risk that actual mineral reserves may vary considerably from estimates presently made, impact of currency, metal prices and metal production volatility, changes in proposed development plans (including technology used), our dependence upon the abilities and continued participation of certain key employees, and risks normally incident to the operation and development of mining properties. These are discussed in greater detail in Gold Reserve's filings with the U.S. Securities and Exchange Commission at www.sec.gov and the Annual Information Form and other reports filed with Canadian provincial securities commissions at www.sedar.com. Gold Reserve expressly disclaims any intention or obligation to update or revise any forward looking statement whether as a result of new information, events or otherwise. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Gold Reserve Inc. (Registrant) Date: May 2, 2006 By: s/ Robert A. McGuinness Name: Robert A. McGuinness Title: Vice President - Finance & CFO EXHIBIT INDEX 99.1 Gold Reserve U.S. GAAP reconciliation to Financial Statements in accordance with item 18 under Form 20-F Auditors' Report with respect to supplementary information To the Board of Directors of Gold Reserve Inc. Our audit of the consolidated financial statements of Gold Reserve Inc. referred to in our report to the Shareholders dated February 17, 2006 included consideration of note 11, Differences Between Canadian and U.S. GAAP as at December 31, 2005 and 2004 and for each of the years in the three-year period ended December 31, 2005. Management has also prepared supplementary disclosure under U.S. GAAP as at December 31, 2005 and 2004 and for each of the years in the three-year period ended December 31, 2005 ("Supplementary Information on Differences Between Canadian and U.S. GAAP"). In our opinion, this Supplementary Information on Differences Between Canadian and U.S. GAAP presents fairly, in all material respects, the disclosures set forth therein when read in conjunction with the related consolidated financial statements of the Company. /s/ PricewaterhouseCoopers LLP Chartered Accountants Vancouver, British Columbia, Canada February 17, 2006 Supplementary Information on Differences Between Canadian and U.S. GAAP The Company prepares its consolidated financial statements in U.S. dollars in accordance with Canadian GAAP, which principles differ in certain respects from United States GAAP. The Company has previously reported its financial statements in accordance with Item 17 under Form 20-F, including the U.S. GAAP reconciliation requirements thereunder. This should be read in conjunction with the financial statements of the Company set forth in the 2005 Form 20-F. The effect of the principal differences between U.S. and Canadian GAAP as required by Item 18 of Form 20-F (and the rules and regulations of the SEC) are summarized below. Consolidated Summarized Balance Sheets ------------------------------------------------------------------------------ Canadian GAAP Change U.S. GAAP ------------------------------------------------------------------------------ 2005 ------------------------------------------------------------------------------ Assets Current assets A $ 22,797,616 $ 4,112,904 $ 26,910,520 Mineral property costs C 46,381,380 (41,034,321) 5,347,059 Other assets 12,775,876 - 12,775,876 ------------------------------------------------------------------------------ $ 81,954,872 $(36,921,417) $ 45,033,455 ============================================================================== Liabilities $ 2,317,106 - $ 2,317,106 Shareholders' equity Common shares & equity units B 140,512,063 (5,185,930) 135,326,133 Less, common shares & equity units held by affiliates (674,598) (674,598) Contributed surplus 1,489,156 1,489,156 Stock options B 1,867,537 3,922,652 5,790,189 Value assigned to warrants 3,682,447 3,682,447 Accumulated deficit B,C (61,983,016) (44,942,646) (106,925,662) Accumulated other comprehensive income A 4,112,904 4,112,904 KSOP debt (84,220) (84,220) ------------------------------------------------------------------------------ 79,637,766 (36,921,417) 42,716,349 ------------------------------------------------------------------------------ $ 81,954,872 $ (36,921,417) $ 45,033,455 ============================================================================== ------------------------------------------------------------------------------ Canadian GAAP Change U.S. GAAP ------------------------------------------------------------------------------ 2004 ------------------------------------------------------------------------------ Assets Current assets A $ 33,057,053 $ 3,043,978 $ 36,101,031 Mineral property costs C 41,034,321 (41,034,321) Other assets 12,514,157 12,514,157 ------------------------------------------------------------------------------ $ 86,605,531 $(37,990,343) $ 48,615,188 ============================================================================== Liabilities $ 2,429,473 $ 2,429,473 Shareholders' equity Common shares & equity units B 136,907,516 (5,409,346) 131,498,170 Less, common shares & equity units held by affiliates (674,598) (674,598) Stock options B 1,004,197 7,071,690 8,075,887 Value assigned to warrants 5,395,019 5,395,019 Accumulated deficit B,C (52,955,734) (48,091,684) (101,047,418) Accumulated other comprehensive income A 3,043,978 3,043,978 KSOP debt (105,323) (105,323) ------------------------------------------------------------------------------ 84,176,058 (37,990,343) 46,185,715 ------------------------------------------------------------------------------ $ 86,605,531 $(37,990,343) $ 48,615,188 ============================================================================== Consolidated Summarized Statements of Operations 2005 2004 2003 ------------------------------------------------------------------------------ Net Loss under Canadian GAAP $ (9,027,282) $ (5,482,629) $ (3,707,336) Stock based compensation B 3,149,038 1,391,066 (7,704,726) Mineral property costs C (6,268,328) ------------------------------------------------------------------------------ Net loss under U.S. GAAP (5,878,244) (10,359,891) (11,412,062) Other comprehensive income (loss) Unrealized gain (loss) on available-for-sale securities A 1,068,926 (70,147) 3,072,941 Reclassification adjustment for (gain)loss included in net loss 55,957 (176,375) ------------------------------------------------------------------------------ Total comprehensive loss under U.S. GAAP $ (4,753,361) $ (10,430,038) $ (8,515,496) ============================================================================== Basic and diluted net loss per share under U.S. GAAP $ (.17) $ (.35) $ (.46) ============================================================================== Consolidated Summarized Statements of Cash Flows 2005 2004 2003 ------------------------------------------------------------------------------ Cash flow used by operating activities under Canadian GAAP $ (7,729,508) $ (3,958,108) $ (2,898,151) Mineral property costs C (6,268,328) ------------------------------------------------------------------------------ Cash flow used by operating activities under U.S. GAAP $ (7,729,508) $ (10,226,436) $ (2,898,151) ============================================================================== Cash flow (used) provided by investing activities under Canadian GAAP $ (2,691,289) $ (3,661,785) $ 2,731,267 Mineral property costs C 6,268,328 ------------------------------------------------------------------------------ Cash flow (used) provided by investing activities under U.S. GAAP $ (2,691,289) $ 2,606,543 $ 2,731,267 ============================================================================== A Under U.S. GAAP, marketable securities would be divided between held-to-maturity securities and available-for-sale securities. Those securities classified as available-for-sale would be recorded at market value and the unrealized gain or loss would be recorded as part of comprehensive income. B For U.S. GAAP purposes, the Company accounts for stock-based employee compensation arrangements using the intrinsic value method prescribed in Accounting Principles Board (APB) Opinion No.25, iAccounting for Stock Issued to Employeesi. Under U.S. GAAP, when the exercise price of certain stock options is amended (the iRepricing i), these options are accounted for as variable compensation from the date of the effective Repricing. Under this method, following the Repricing date, compensation expense is recognized when the quoted market value of the Companyis common shares exceeds the amended exercise price. Should the quoted market value subsequently decrease, a recovery of a portion, or all of the previously recognized compensation expense will be recognized. For U.S. GAAP purposes, the Company will adopt SFAS 123R, iAccounting for Stock Based Compensationi effective January 1, 2006. SFAS 123R requires the use of the fair value method of accounting for stock based compensation. This standard is substantially consistent with the revised provisions of CICA 3870, which was adopted by the Company for Canadian GAAP effective January 1, 2004. For U.S.GAAP, the Company has not yet determined which acceptable method of adoption it will apply. C Under Canadian GAAP, the Company capitalizes mineral property exploration and development costs after proven and probable reserves have been established. The Company also capitalizes costs on properties where it has found non-reserve material that does not meet all the criteria required for classification as proven or probable reserves. Under U.S. GAAP, exploration and development expenditures incurred on properties where mineralization has not been classified as a proven and probable reserve under SEC rules, are expensed as incurred. Accordingly, certain expenditures are capitalized for Canadian GAAP purposes but expensed under U.S. GAAP. Pro-forma stock based compensation For U.S. GAAP purposes, the Company accounts for stock-based employee compensation arrangements using the intrinsic value method. Had the fair value method of accounting been used under U.S. GAAP, the net loss and net loss per share would have been as follows: 2005 2004 2003 ----------------------------------------------------------------------------- Net loss under U.S. GAAP $ (5,878,244) $ (10,359,891) $ (11,412,062) Variable plan accounting adjustment included in net loss (2,285,698) (791,643) 7,704,726 Stock based compensation under the fair value method (863,340) (599,423) (406,108) ----------------------------------------------------------------------------- Pro-forma net loss under U.S. GAAP $ (9,027,282) $ (11,750,957) $ (4,113,444) ============================================================================= Pro-forma basic and diluted net loss per share under U.S. GAAP $ (.26) $ (.40) $ (.17) ============================================================================= Development Stage Enterprise In August of 1992, the Company acquired the Brisas Project. Beginning in 1993 the Company decided to focus its efforts on the Development of Brisas thereby meeting the definition of a development stage enterprise under Statement of Financial Accounting Standards No. 7 (FAS 7), Accounting and Reporting by development Stage Enterprises. The following additional information is required under FAS 7. Consolidated Summarized Statements of Operations - U.S. GAAP For the period from January 1, 1993 to December 31, 2005 Other income $ (14,935,581) Mineral property exploration and development 39,505,080 General & administrative expense 27,345,826 Other expense 49,085,509 ----------------------------------------------------------------- Deficit accumulated during the development stage from January 1, 1993 to December 31, 2005 $ 101,000,834 ----------------------------------------------------------------- Accumulated deficit, December 31, 1992 5,924,828 ----------------------------------------------------------------- Accumulated deficit, December 31, 2005 $ 106,925,662 ================================================================= Consolidated Summarized Statements of Cash Flows - U.S. GAAP For the period from January 1, 1993 to December 31, 2005 Cash used by operating activities $ (73,097,165) Cash used by investing activities (12,432,736) Cash provided by financing activities 103,271,301 ----------------------------------------------------------------- Increase in cash and cash equivalents for the period from January 1, 1993 to December 31, 2005 17,741,400 Cash and cash equivalents at December 31, 1992 1,628,852 ----------------------------------------------------------------- Cash and cash equivalents at December 31, 2005 $ 19,370,252 ================================================================= Additional Shareholders' Equity disclosure - U.S. GAAP For the period from January 1, 1993 to December 31, 2005
Common Shares and Equity Units Issued Shares $ $ Value $ Value $ $ Compre- $ and units Contrib- assigned assigned Accum- hensive $ Issue Common Equity held by uted to to ulated income KSOP Price Shares Units $ Amount affiliates surplus options warrants Deficit (loss) debt ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1992 8,875,862 8,290,819 (70,944) (5,924,828) 50,000) Stock issued for cash Private placement 4.12 2,530,000 10,413,976 Exercise of options 1.34 300,000 401,000 Exercise of warrants 3.52 5,037 17,749 Stock issued for services 3.89 12,552 48,851 Net loss (5,495,061) Change in KSOP debt 5,000 Reduction of shareholders' equity due to change in subsidiaries' minority interest (25,050) ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1993 11,723,451 19,147,345 (70,944) (11,419,889) (45,000) Stock issued for cash Private placement 9.82 2,000,000 19,630,530 Exercise of options 2.32 295,967 687,494 Exercise of warrants 6.07 2,134,250 12,962,750 Stock issued for services 5.50 6,000 33,000 Stock issued to KSOP 6.19 20,000 123,760 Stock issued for litigation settlement 6.15 2,750,000 16,912,500 Value attributed to warrants issued in litigation settlement 800,000 Net loss (26,297,415) Increase in common stock held by affiliates (433,332) Effect of change in accounting for investments 108,425 Decrease in unrealized gain on available- for-sale securities (29,408) Change in KSOP debt (103,760) Reduction of shareholders' equity due to change in subsidiaries' minority interest (843,986) ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1994 18,929,668 69,453,393 (504,276) (37,717,304) 79,017 (148,760) Stock issued for cash Exercise of options 2.74 167,835 460,162 Stock issued to KSOP 5.60 50,000 280,195 Stock issued for minority interest in subsidiaries 7.43 1,329,185 9,882,028 Net loss (3,847,605) Increase in common stock held by affiliates (924,289) Increase in unrealized gain on available- for-sale securities 6,943 Change in KSOP debt (187,949) Reduction of shareholders' equity due to change in subsidiaries' minority interest (6,924) ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1995 20,476,688 80,068,854 (1,428,565) (41,564,909) 85,960 (336,709) Stock issued for cash Exercise of options 5.37 497,623 2,673,988 Exercise of warrants 10.52 1,729,500 18,202,500 Net loss (7,908,701) Decrease in unrealized gain on available- for-sale securities (83,210) Change in KSOP debt 150,001 Addition to shareholders' equity due to change in subsidiaries' minority interest 7,436 ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1996 22,703,811 100,952,778 (1,428,565) (49,473,610) 2,750 (186,708) Stock issued for cash Exercise of options 5.75 124,649 716,716 Stock issued to KSOP 5.02 89,683 450,000 Net loss (10,918,111) Increase in unrealized gain on available-for- sale securities 8,250 Change in KSOP debt (436,152) ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1997 22,918,143 102,119,494 (1,428,565) (60,391,721) 11,000 (622,860) Stock issued for cash Exercise of options 1.90 223,624 425,883 Stock issued to KSOP 3.00 50,000 150,000 Net loss (5,147,658) Change in shares held by affiliates (1,034,323) 1,025,234 Decrease in unrealized gain (loss) on available- for-sale securities (22,625) Change in KSOP debt 208,089 ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1998 23,191,767 101,661,054 (403,331) (65,539,379) (11,625)(414,771) Stock issued for cash Exercise of options 1.19 12,500 14,899 Stock issued for services 0.84 70,000 58,760 Stock issued to KSOP 1.13 300,000 337,500 Stock retired 3.02 (1,629) (4,915) Net loss (4,499,321) Net common shares exchanged for equity units (1,584,966) 1,584,966 Decrease in unrealized loss on available- for-sale securities (328,618) Change in KSOP debt 230,352 ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1999 21,987,672 1,584,966 102,067,298 (403,331) (70,038,700) (340,243)(184,419) Stock issued for services 0.55 70,000 38,688 Net loss (2,807,648) Equity units exchanged for common shares 138,570 (138,570) Increase in unrealized gain on available- for-sale securities 437,875 Change in KSOP debt 99,310 ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2000 22,196,242 1,446,396 102,105,986 (403,331) (72,846,348) 97,632 (85,109) Stock issued for cash Exercise of options 0.78 5,500 4,285 Stock issued for services 0.75 20,000 15,000 Stock issued to KSOP 0.47 300,000 140,640 Net loss (2,258,191) Change in common stock held by affiliates (271,267) Equity units exchanged for common shares 133,380 (133,380) Increase in unrealized gain on available- for-sale securities 62,368 Change in KSOP debt 1,322 ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2001 22,655,122 1,313,016 102,265,911 (674,598) (75,104,539) 160,000 (83,787) Stock issued for cash Exercise of options 0.72 18,000 12,960 Stock issued for services 0.85 100,000 85,200 Stock issued to KSOP 0.67 200,000 134,000 Variable plan accounting for options 1,162,804 Net loss (4,170,926) Equity units exchanged for common shares 23,036 (23,036) Decrease in unrealized gain on available- for-sale securities (118,816) Change in KSOP debt 19,003 ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2002 22,996,158 1,289,980 102,498,071 (674,598) 1,162,804 (79,275,465) 41,184 (64,784) Stock issued for cash Private placement 1.95 4,042,000 7,888,508 Exercise of options 0.74 400,000 294,605 Stock issued for services 5.06 60,000 303,600 Stock issued to KSOP 1.28 200,000 256,000 Value assigned to warrants issued 1,730,641 Variable plan accounting for options 7,704,726 Net loss (11,412,062) Equity units exchanged for common shares 52,100 (52,100) Increase in unrealized gain on available- for-sale securities 3,072,941 Change in KSOP debt (39,568) ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2003 27,750,258 1,237,880 111,240,784 (674,598) 8,867,530 1,730,641 (90,687,527) 3,114,125 (104,352) Stock issued for cash Private placement 3.61 5,361,000 19,337,034 Exercise of warrants 4.28 21,100 90,211 Exercise of options 0.89 373,954 333,310 Stock issued for services 4.13 54,000 223,012 Stock issued to KSOP 3.41 75,000 255,750 Value assigned to warrants issued 3,682,447 Variable plan accounting for options (791,643) Assigned value of exercised warrants 18,069 (18,069) Net loss (10,359,891) Equity units exchanged for common shares 80,483 (80,483) Decrease in unrealized gain on available- for-sale securities (70,147) Change in KSOP debt (971) ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2004 33,715,795 1,157,397 131,498,170 (674,598) 8,075,887 5,395,019 (101,047,418) 3,043,978 (105,323) Stock issued for cash Exercise of warrants 4.33 260,900 1,129,905 Exercise of underwriter compensation options 3.00 202,100 605,468 Exercise of underwriter compensation warrants 4.32 70,735 305,646 Exercise of options 1.00 573,030 571,326 Stock issued for services 2.92 251,350 733,231 Stock issued to KSOP 3.45 75,000 258,971 Net loss (5,878,244) Variable plan accounting for options (2,285,698) Assigned value of exercised warrants 223,416 (223,416) Assigned value of expired warrants 1,489,156 (1,489,156) Equity units exchanged for common shares 47,377 (47,377) Increase in unrealized gain on available-for- sale securities 1,068,926 Change in KSOP debt 21,103 ------------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2005 35,196,287 1,110,020 135,326,133 (674,598) 1,489,156 5,790,189 3,682,447 (106,925,662) 4,112,904 (84,220)