0000929859-95-000031.txt : 19950822 0000929859-95-000031.hdr.sgml : 19950822 ACCESSION NUMBER: 0000929859-95-000031 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950821 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLD RESERVE CORP CENTRAL INDEX KEY: 0000042119 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 810266636 STATE OF INCORPORATION: MT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08372 FILM NUMBER: 95565409 BUSINESS ADDRESS: STREET 1: 1940 SEAFIRST FINANCIAL CENTER CITY: SPOKANE STATE: WA ZIP: 99201 BUSINESS PHONE: 5096231500 MAIL ADDRESS: STREET 1: 1940 SEAFIRST FINANCIAL CENTER CITY: SPOKANE STATE: WA ZIP: 99201 10-Q/A 1 FORM 10-Q/A AMENDMENT No. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1995 GOLD RESERVE CORPORATION State Of Incorporation: . . . . . . . Montana Commission File Number: . . . . . . . . 1-8372 IRS Employer Identification No: . . . . 81-0266636 Address Of Principal Executive Offices: 1940 Seafirst Financial Center Spokane, Washington 99201 Registrant's Telephone Number: . . . . (509) 623-1500 Securities registered pursuant to Section 12(b) of the Act: Title Of Each Class: . . . . . . . . . Common Stock Name Of Each Exchange On Which Registered: NASDAQ The Toronto Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] The number of shares of common stock outstanding at August 9, 1995, was 20,432,444. GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 CONSOLIDATED BALANCE SHEETS June 30, 1995 and December 31, 1994 (unaudited)
June 30, December 31, 1995 1994 ----------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 8,301,016 $ 6,675,771 Cash held in escrow (Note 3) 4,500,000 Investments: Held-to-maturity securities, at amortized cost 18,314,028 26,079,822 Accrued interest on investments 109,877 259,780 Deposits, advances and other assets 489,258 493,956 ----------- ----------- Total current assets 31,714,179 33,509,329 Available-for-sale securities 221,851 177,809 Property, plant and equipment, net 20,516,283 9,551,676 Other assets 24,733 24,066 ----------- ----------- Total assets $52,477,046 $43,262,880 =========== =========== LIABILITIES Current Liabilities: Litigation settlement payable (Note 3) $ 4,500,000 $ 4,500,000 Accounts payable and accrued expenses 630,471 572,713 KSOP note payable, current portion 92,246 25,000 ----------- ----------- Total current liabilities 5,222,717 5,097,713 KSOP note payable, non-current portion 56,514 123,760 Minority interest in consolidated subsidiaries 95,394 141,651 ----------- ----------- Total liabilities 5,374,625 5,363,124 ----------- ----------- Commitments and contingencies (Note 2) _ _ (Continued)
GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 CONSOLIDATED BALANCE SHEETS, Continued June 30, 1995 and December 31, 1994 (unaudited)
June 30, December 31, 1995 1994 ----------- ----------- SHAREHOLDERS' EQUITY Serial preferred stock, no par value Authorized: 10,000,000 shares, none issued $ _ $ _ Common stock, no par value (Note 2) Shares authorized: 40,000,000 shares Shares issued: 1995 - 20,407,188, 1994 - 18,929,668; shares outstanding: 1995 - 19,926,144, 1994 - 18,577,175 79,702,954 69,453,393 Common stock held by affiliates (1,428,565) (504,276) Unrealized gain on available-for-sale securities 80,677 79,017 Accumulated deficit (31,103,885) (30,979,618) KSOP debt guarantee (148,760) (148,760) ----------- ----------- Total shareholders' equity 47,102,421 37,899,756 ----------- ----------- Total liabilities and shareholders' equity $52,477,046 $43,262,880 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 CONSOLIDATED STATEMENTS OF OPERATIONS For the Three and Six Months Ended June 30, 1995 and 1994 (unaudited)
Three Months Ended SixMonthsEnded ------------------------- ------------------------- 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Other Income: Interest $ 354,387 $ 269,401 $ 782,998 $ 309,082 Foreign currency (loss) gain (4,510) 274,725 (8,372) 343,152 Miscellaneous - 14,309 - 35,985 ----------- ----------- ----------- ----------- 349,877 558,435 774,626 688,219 ----------- ----------- ----------- ----------- Expenses: General and administrative 368,386 424,113 543,720 776,466 Directors' and officers' compensation 54,987 71,225 123,817 152,378 Legal and accounting 142,149 72,259 217,508 170,150 Writedown of capitalized exploration and development cost - 750,000 - 750,000 Depreciation 6,723 3,633 13,324 7,178 Minority interest in net loss of consolidated subsidiaries - (1,970) (3,126) (2,087) Interest expense, net of amount capitalized 2,228 864 3,650 1,537 ----------- ----------- ----------- ----------- 574,473 1,320,124 898,893 1,855,622 ----------- ----------- ----------- ----------- Loss before income taxes (224,596) (761,689) (124,267) (1,167,403) Income tax provision - - - - ----------- ----------- ----------- ----------- Net loss $ (224,596) $ (761,689) $ (124,267) $(1,167,403) =========== =========== =========== =========== Net loss per share $ (0.01) $ (0.06) $ (0.01) $ (0.10) =========== =========== =========== =========== Weighted average common shares outstanding 18,916,606 12,671,050 18,735,539 12,229,179 =========== =========== =========== =========== The accompanying notes are an integral part of the consolidated financial statements.
GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the Six Months Ended June 30, 1995 and the Year Ended December 31, 1994 (unaudited)
Unrealized Common Gain (Loss) Common Shares Issued Stock Held on Available- -------------------------- Accumulated By for-Sale Shares Amount Deficit Affiliates Securities ------------ ------------ ------------ ------------ ----------- Balance, December 31, 1993 11,723,451 $ 19,147,345 $ (7,239,140) $ (70,944) $ - Effect of change in account- ing for investments 108,425 Net loss (23,740,478) Common stock issued for: Services 6,000 33,000 Litigation settlement (Note 3) 2,750,000 16,912,500 Cash 2,020,000 19,754,290 Options and warrants 2,430,217 13,650,244 Value attributed to issuance of warrants (Note 3) 800,000 Decrease in unrealized gain on available-for-sale securities (29,408) Increase in common stock held by consolidated subsidiaries (433,332) Reduction of shareholders' equity associated with change in subsidiaries' minority interest (843,986) ------------ ------------ ------------ ------------ ------------ Balance, December 31, 1994 18,929,668 69,453,393 (30,979,618) (504,276) 79,017 ------------ ------------ ------------ ------------ ------------ (Continued)
GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY, Continued For the Six Months Ended June 30, 1995 and the Year Ended December 31, 1994 (unaudited)
Unrealized Common Gain (Loss) Common Shares Issued Stock Held on Available- -------------------------- Accumulated By for-Sale Shares Amount Deficit Affiliates Securities ------------ ------------ ------------ ------------ ------------ Balance, December 31, 1994 18,929,668 $ 69,453,393 $(30,979,618) $ (504,276) $ 79,017 Net loss (124,267) Common stock issued for: Options 148,335 374,457 Minority interest of con- solidated subsidiaries (Note 2) 1,329,185 9,882,028 Increase in common stock held by consolidated subsidiaries (924,289) Increase in unrealized gain on available-for- sale securities 1,660 Reduction of shareholder's equity associated with change in subsidiaries' minority interest (6,924) ------------ ------------ ------------ ------------ ------------ Balance, June 30, 1995 20,407,188 $ 79,702,954 $(31,103,885) $ (1,428,565) $ 80,677 ============ ============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30,1995 and 1994 (unaudited)
1995 1994 ----------- ----------- Cash flows from operating activities: Net loss $ (124,267) $(1,167,403) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 13,324 7,178 Accreted interest on investments (412,814) - Foreign currency loss (gain) 8,372 (363,235) Writedown of capitalized exploration and development costs - 750,000 Common stock issued for services - 33,000 Minority interest in net loss of consolidated subsidiaries (3,126) (2,087) Net gain on disposition and revalu- ation of equity securities - (61,635) Changes in current assets and liabilities: Net increase in current assets (4,345,399) (368) Net increase in current liabilities 57,758 3,396 ----------- ----------- Net cash used by operating activities (4,806,152) (801,154) ----------- ----------- Cash flows from investing activities: Proceeds from maturity of held-to- maturity securities 16,170,000 - Purchase of held-to-maturity securities (7,991,392) - Purchase of property, plant and equipment (2,121,001) (2,503,315) Proceeds from sale of available-for-sale securities - 75,769 Other (667) - ----------- ----------- Net cash provided (used) by investing activities 6,056,940 (2,427,546) ----------- -----------
(Continued) GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued For the Six Months Ended June 30,1995 and 1994 (unaudited)
1995 1994 ----------- ----------- Cash flows from financing activities: Principal payments on Brisas contract $ - $ (30,661) Proceeds from issuance of common shares 374,457 32,852,304 ----------- ----------- Net cash provided by financing activities 374,457 32,821,643 ----------- ----------- Change in cash and cash equivalents: Net increase in cash and cash equivalents 1,625,245 29,592,943 Cash and cash equivalents - beginning of period 6,675,771 6,766,712 ----------- ----------- Cash and cash equivalents - end of period $ 8,301,016 $36,359,655 =========== =========== Supplemental cash flow information: Non-cash investing and financing activities Exchange of shares for minority interest in subsidiaries 9,882,028 -
GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 Notes to Consolidated Financial Statements June 30, 1995 (unaudited) 1. The Company and Significant Accounting Policies: The Company was incorporated in Montana in 1956 for the purpose of acquiring, exploring and developing mining properties and placing these properties into production. The Company is currently involved in the exploration and development of a potential gold property in Venezuela. The December 31, 1994 financial information has been derived from the Company's 1994 audited financial statements. The notes to the financial statements as of December 31, 1994, as set forth in the Company's 1994 Form 10-K, substantially apply to these interim financial statements at June 30, 1995, and are not repeated here. The financial information given in the accompanying unaudited financial statements reflects all normal, recurring adjustments, which, in the opinion of management, are necessary for a fair presentation for the periods reported. The consolidated financial statements include the accounts of the Company; Glandon Company A.V.V. ("Glandon"), and Gold Reserve de Aruba ("Gold Reserve Aruba"); three Venezuelan subsidiaries, Compania Minera Unicornio, C.A. (Unicorn), Gold Reserve de Venezuela, C.A. (GLDRV) and Compania Aurifera Brisas del Cuyuni, C.A. (Brisas); two domestic majority-owned subsidiaries, Great Basin Energies, Inc. (Great Basin) and MegaGold Corporation (MegaGold); and five additional Aruban subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company's policy is to consolidate those subsidiaries where majority control exists and control is other than temporary. Three of the Company s majority or wholly-owned subsidiaries own shares of the Company. The Company's effective ownership of its own stock (481,044 shares) through these subsidiaries is deducted from common stock outstanding at June 30, 1995 and December 31, 1994, resulting in a difference between common stock issued and outstanding. Due to the availability of net operating loss carryforwards, no income tax provision has been recorded for the six months ended June 30, 1995. Due to the incidence of net operating losses which cannot be currently utilized, no income tax benefit was recorded for the six months ended June 30, 1995. GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 Notes to Consolidated Financial Statements, Continued June 30, 1995 (unaudited) 2. Exchange of Shares for Minority Interest in Subsidiaries: Pursuant to a plan of exchange approved by the Company s shareholders on May 19, 1995, each issued and outstanding share of Gold Reserve Aruba and Glandon, other than shares held by the Company, was exchanged for shares of the Company. As a result of the exchange which was completed on June 23, 1995, the Company issued 1,329,185 common shares. In consequence of the exchange, Gold Reserve Aruba and Glandon are now wholly-owned subsidiaries of the Company and in effect the Company increased its indirect ownership in the Brisas concession from 91% to 100%. 3. Litigation Settlement: In late December 1994, Gold Reserve, on behalf of its Brisas subsidiary, entered a binding agreement to settle all outstanding litigation related to the Brisas concession. Brisas was the plaintiff in a lawsuit commenced in Venezuela in July 1992 to rescind a mining lease and purchase option agreement covering the Brisas concession. Brisas and the Company contended the lease was terminable for nonpayment of rentals during a thirteen month period, and that a purchase option contained in the lease, granting a right of first refusal to purchase the concession was likewise terminable. Gold Reserve agreed to issue 2,750,000 common shares and 750,000 common share purchase warrants (exercisable at $10 Cdn for 18 months) to the defendants and further agreed to deposit $4.5 million into escrow, to be released to one of the defendants upon the granting of the hardrock or veta rights on the Brisas concession to the Company. GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 June 30, 1995 ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations: RESULTS OF OPERATIONS June 30, 1995 compared to June 30, 1994 The Company's primary business activity is the exploration and development of the Brisas Concession, located in Venezuela. All expenditures related to exploration activities on the Brisas concession have been recorded as capitalized exploration and development costs. The Company has no producing mineral properties at this time. Consolidated net loss for the three and six months ended June 30, 1995 amounted to $224,596 and $124,267, or $0.01 and $0.01 per share, respectively, compared to a consolidated net loss of $761,689 and 1,167,403, or $0.06 and $0.10 per share, respectively, for the same periods in 1994. Other income during the three and six months ended June 30, 1995 decreased approximately $209,000 and increased $86,000, respectively, compared to the same periods in 1994. The net change in other income is primarily attributable to an increase in interest income of approximately $85,000 and $474,000, respectively, due to higher levels of invested cash and a decrease in foreign currency gain of approximately $279,000 and $351,000, respectively, due primarily to the effect of exchange and price controls implemented by the Venezuelan government and the payment of a note payable denominated in the Venezuelan currency, in 1994. Total expenses during the three and six months ended June 30, 1995 decreased approximately $746,000 and $957,000 compared to the same period in 1994. The net change in operating expenses for the three month comparison is primarily due to the writedown of $750,000 of capitalized exploration and development costs related to the Alfa concession in June, 1994, a decrease in general and administrative costs and directors and officers compensation of $56,000 and $16,000 respectively and an increase in legal and accounting costs of $70,000. The net change in operating expenses for the six month comparison is primarily due to the $750,000 writedown of capitalized exploration and development costs, a decrease in general and administrative costs and directors and officers compensation of approximately $233,000 and $29,000 respectively and an increase in legal and accounting costs of $47,000. The decrease in general and administrative costs and directors and officers compensation for the three month and six months ended June 30, 1995 was due to a reduction in employee related costs. The increase in legal and accounting costs over the same periods was related to completion of the settlement of the Brisas litigation. GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 June 30, 1995 The Company has incurred losses in each of the last five years due to the lack of an operating property or other revenue-generating business activity. Management anticipates that net losses of the Company will continue over the next several years as the result of expenditures associated with the management of exploration and development activities on the Brisas concession and other properties, even though such expenditures are expected to be offset to some extent by interest income on invested funds. In addition, management expects continued increases in capitalized exploration and development costs as a result of activities on the Brisas concession which may or may not be recovered in future periods. Management estimates the trend of consolidated losses will reverse if and when commercial production occurs at the Brisas concession. However, a number of significant events must occur before commercial production, if any, on the Brisas concession can begin, these being the establishment of proven and probable reserves, financing of anticipated mine development costs, and the procurement of all necessary regulatory permits and approvals. The Company filed an application with the Venezuelan Ministry of Energy and Mines ( MEM ) in February of 1993 to obtain an exploration and exploitation concession to the bedrock or veta mineralization believed to underlie the Brisas alluvial concession. MEM has informed the Company the application was approved on March 3, 1995, but has not been submitted for public comment as of August 9, 1995. The Company is not aware of any facts or circumstances which would prevent MEM from submitting the application for public comment and ultimately granting the bedrock or veta concession to the Company. The Venezuelan government, amid economic uncertainties and a bank crisis, suspended certain constitutional rights and implemented certain currency exchange and price controls on June 27, 1994. Some constitutional rights have been re-established although the exchange and price controls remain in place as of the date of this report, and there is no indication when, and if, such controls will be eliminated or significantly modified. Senior government officials have publicly stated that foreign private investment is encouraged, particularly in the Guayana region where the Company's Brisas concession is located. Venezuela has generally encouraged foreign investment in the past, and the Company believes there presently exist no significant policies, license requirements or other regulations which might present barriers to its continued investment in the country. Venezuela has experienced significant inflation during each of the years in which the Company has been present in the country, and such inflation can be expected to continue. Inflation and other economic conditions have resulted in political and social turmoil on occasion, which also can be expected to continue. Whether and to what extent these conditions may materially adversely affect the Company's operations in the future, if at all, cannot be predicted. GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 June 30, 1995 LIQUIDITY AND CAPITAL RESOURCES Investing: Gold Reserve acquired the Brisas concession in late 1992 and initiated a limited auger and diamond drill program. At that time the property was the subject of a lawsuit over ownership, which was ultimately settled in December, 1994. Exploration activities on the concession have included mapping, surface sampling and assaying, geophysics, geochemistry, preliminary metallurgical testing, airborne magnetic and radiometric surveys, and diamond and auger drilling. These activities have confirmed the existence of an anomaly approximately one mile (1.8 kilometers) in length, on strike with a deposit on Placer Dome Inc.'s Las Cristinas concession to the north. Placer Dome Inc. has announced geologic reserves on its Las Cristinas concession of more than 9 million ounces of gold. The drilling conducted in 1993 indicated a potentially large area of gold and copper mineralization, including some high-grade gold and copper intercepts. Drilling in 1994 was severely interrupted by activities related to the lawsuit. In early 1995, drilling recommenced with the objective of gathering sufficient drilling data to establish an initial geologic resource prior to the end of 1995. The Company's primary focus is the exploration and development of the Brisas concession. During the three and six months ended June 30, 1995, the Company expended approximately $1.3 and 2.2 million, respectively, on the Brisas concession. On a cumulative basis since inception, the Company has expended approximately $43.8 million relating to the Brisas concession. These cumulative costs are attributable to litigation settlement costs of $22.5 million ($17.5 million of which was stock and warrants) which were expensed in 1994, common stock valued at $9.8 million issued to purchase the minority interest in subsidiaries which own the Brisas concession, concession acquisition costs of approximately $2.0 million, capitalized development and exploration costs of $8.9 million and $.6 million for equipment. The present 1995 exploration program is expected to include up to 30,000 meters of auger and core drilling and management estimates the program will cost approximately $5 to 6 million, inclusive of related personnel and administrative costs. Actual amounts expended on the 1995 drilling program may vary, however, depending on the drilling results as the program proceeds. The Company is currently working in three significant areas or zones contained within the main trend in its efforts to define the mineralization located on the concession. The main trend generally has a variable width of 200 to 300 meters, with some areas of the main GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 June 30, 1995 trend extending to 600 meters in width. To-date, in 1995, there have been 55 diamond drill holes that have averaged 200 meters in depth with a few over 300 meters. All holes have been spaced at 100 meter intervals. Based on current information, the mineralized trend appears to extend at least two-thirds of the length of the 2500 meter long concession. The three significant areas or zones of interest within this trend are 1) the Pozo Azul zone located in the northern part of the concession, 2) the high-grade Blue Whale hardrock structure which is contained within the Pozo Azul zone and 3) the Laguna Donna zone immediately to the south of the Pozo Azul zone. Generally the mineralization is characterized by a large low grade system with a higher grade core. In addition to this the Pozo Azul zone contains the high grade gold copper zone called the "Blue Whale" which is characterized by much higher grades of gold as well as copper. Low grade copper is also present in the Pozo Azul zone outside the higher grade core, whereas there is little copper present in the Laguna Donna area. The Pozo Azul zone has been drilled with over 100 diamond and auger holes and to-date an area of wide spaced mineralization has been indicated. Drilling has confirmed a strike length of at least 850 meters and is open to the south. The width of the mineralization typically ranges from 200 meters to more than 300 meters with depths of up to 200 meters and is surrounded, mainly to the east, by additional shallow mineralization of as much as 600 meters wide. The mineralization is also open at depth as some of the holes bottomed in gold and/or copper mineralization. The high-grade Blue Whale horizon, which is contained within the Pozo Azul zone, outcrops in the northeast corner of the property in the Pozo Azul pit, and dips to the southwest of the property. This is believed to be the locus or "feeder zone" for the Brisas mineralization. Limited drilling has indicated the length of the Blue Whale may be over 600 meters along strike. The Blue Whale is characterized by much higher grade gold and copper mineralization, with grades of 6 grams of gold per ton and higher, and over one percent copper has been encountered with very limited drilling. Preliminary results indicate that the Blue Whale could be up to 32 meters thick and 120 meters down dip. The Blue Whale has been encountered at a depth of 328 meters and appears to be open at depth. The Laguna Donna area is in the center of the property and along strike and south of Pozo Azul zone. The drilling to date indicates a mineralized zone of up to 350 meters in width, 350 meters long and has mineralization at depths exceeding 300 meters. The mineralization is open to the north as well as the south. So far, this zone is more characterized by gold. Currently, one drill rig is working on the property. As drill information and assay data is received it is entered into our geologic computer modeling program which will assist in locating future drill holes. This next phase will be mostly in- fill drilling, directed towards the compilation of data for a feasibility study. GOLD RESERVE CORPORATION AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q/A AMENDMENT No. 1 June 30, 1995 The Company has not obtained sufficient information to date to calculate an initial geologic resource or proven (measured) or probable (indicated) reserves, if any. The limited results from the drilling efforts to-date are preliminary and no mineral reserves can be inferred or assumed at this time. Management estimates that an announcement regarding an initial geologic resource, if any, will be made in late September, 1995. The exact timing of such an announcement will be subject to the results of exploration on the property. Commercial development, if warranted, is not likely to commence in less than twelve to eighteen months and significant revenue and cash flow from mining operations is unlikely to occur before twelve to eighteen months thereafter. Financing: Cashflow used by operating activities during the six months ended June 30, 1995 and 1994 increased by approximately $4 million. This increased use of cash is principally the result of the transfer of $4.5 million into escrow, pursuant to the Brisas litigation settlement agreement finalized in January 1995, offset by a decrease in net loss from $1.2 million for the six months ended June 30, 1994 to $.12 million for the six months ended June 30, 1995. A reduction in foreign currency gain of approximately $.35 million and an increase in accreted interest of approximately $.41 million over the prior comparable period also contributed to the change in cash used by operating activities. Cashflow provided from investing activities increased from a $2.5 million use of funds during the six months ended June 30, 1994 to a $6 million source of funds during the six months ended June 30, 1995. The net change of approximately $8.5 million is primarily a result of net maturities of investment securities which provided approximately $8 million. Cashflow provided by financing activities decreased by approximately $32.5 million as a result of a reduction in sales of common stock. As of August 9, 1995, the Company held approximately $26 million in unrestricted cash and held-to-maturity securities. In addition, $4.5 million in cash was held in escrow, to be released to one of the defendants in the Brisas litigation upon the granting of the hardrock or veta rights on the Brisas concession to the Company. Whether, and to what extent, additional or alternative financing options are pursued by the Company in the future will depend on a number of important factors, including: the results of exploration and development activities on the Brisas concession; management's assessment of the financial markets; the successful acquisition of additional properties or projects, if any; and the overall capital requirements of the consolidated group. At this time, management anticipates that its current cash position, together with the proceeds expected to be received from any future exercise of outstanding warrants, will be sufficient to cover estimated operational and capital expenditures associated with the exploration and development of the Brisas concession into 1997.