==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
__________________________________________
|
[ x ] |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 0-25170
CADENCE RESOURCES CORPORATION
|
Utah |
87-0306609 |
6 East Rose Street
Walla Walla, Washington 99362
Address of principal offices
Registrant's Telephone No.: (509) 526-3491
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value, $0.01
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 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-K is not 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: [ x ]
As of January 11, 2002, the aggregate value of the voting stock held by non-affiliates of the Registrant, computed by reference to the average of the bid and ask price ($0.74) on such date was $1,554,733.
As of January 11, 2002, the Registrant had outstanding 3,343,290 shares of common stock ($0.01 par value).
==============================================================================
TABLE OF CONTENTS
|
ITEM NUMBER |
CAPTION |
PAGE NUMBER |
|
|
PART I |
|
|
ITEM 1. |
Business |
3 |
|
ITEM 2. |
Properties |
16 |
|
ITEM 3. |
Legal Proceedings |
16 |
|
ITEM 4. |
Submission of Matters to a Vote of Security Holders |
17 |
|
|
PART II |
|
|
ITEM 5. |
Market for Registrant's Common Equity and Related Stockholder Matters |
17 |
|
ITEM 6. |
Selected Financial Data |
19 |
|
ITEM 7. |
Management's Discussion and Analysis of Financial Condition and Results of Operation |
19 |
|
ITEM 8. |
Financial Statements and Supplementary Data |
21 |
|
ITEM 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
48 |
|
|
PART III |
|
|
ITEM 10. |
Directors and Executive Officers of the Company |
48 |
|
ITEM 11. |
Executive Compensation |
50 |
|
ITEM 12. |
Security Ownership of Certain Beneficial Owners and Management |
53 |
|
ITEM 13. |
Certain Relationships and Related Transaction |
54 |
-2-
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Background
Cadence Resources Corporation, formerly Royal Silver Mines, Inc. (the"Company") is a start-up oil and gas exploration company formed under the laws of the State of Utah on July 8, 1969, originally for the purpose of purchasing, developing and operating mineral properties and leases. In July 2001 the Company underwent a restructuring and refocused on the acquisition, exploration and development of oil and gas properties, generally through leases of the prospective property. The Company is currently not earning any revenues and intends to engage in the exploration of oil and gas leases it has acquired in Texas and Louisiana. As of the date hereof, the Company has not generated any revenues from the sale of oil or gas.
The Company changed its name from Royal Silver Mines, Inc. to Cadence Resources Corporation on May 2, 2001 upon obtaining approval from its shareholders and amending its articles of incorporation with the State of Utah.
On April 23, 2001, the Board of Directors authorized a 1-for-20 reverse stock split of the Company's $0.01 par value common stock which subsequently also gained shareholder approval. All references in the accompanying financial statements and notes to the number of common shares and per-share amounts have been restated to reflect the reverse stock split. The Company shareholders also approved the increase of its authorized common stock to 100,000,000 shares.
Celebration Mining Company ("Celebration"), a wholly owned subsidiary of the Company, was incorporated for the purpose of identifying, acquiring, exploring and developing mining properties. Celebration was organized on February 17, 1994, as a Washington corporation. Celebration has not yet realized any revenues from its planned operations. Celebration holds most of the remaining mineral property interests of the Company which includes properties more fully described below. It is the intention of the Company to transfer any remaining mineral property interests to Celebration in the first calendar quarter of 2002 and, upon shareholder approval, possibly spinning off Celebration to the existing shareholders of Cadence.
Existing Oil and Gas Leasehold Interests
De Soto Parish, Louisiana
Since September 30, 2001, the Company has completed the acquisition of 15,020 acres of year"paid up" leases on over 2000 contiguous acres in three sections in DeSoto Parish, LA. The leases were acquired from the landowners of record in DeSoto Parish. The Company paid approximately $100.00 per acre to acquire the leases. The Company owns 100% of the working interest in each lease and 79.25% of the net revenue interest in each lease. There is a 18.75% royalty interest and 2% overriding royalty on each lease. The lease covers the formations from the surface to the center of the earth.
-3-
Geologically, the DeSoto Parish properties are located on the southeast side of the Sabine Uplift. The Sabine Uplift has influenced hundreds of square miles of cretaceous and younger rocks in northeast Texas and Louisiana.
The Company will be targeting two deeper formations, the Houston and the Cotton Valley. The Houston formation is a sand and shale sequence which demonstrates tight gas bearing sands in thick intervals.
The Company has not begun drilling operations on the property as of the date hereof.
Wilbarger County, Texas
On October 12, 2001, the Company acquired an Exploration License and Option to Lease on 640 acres located in Wilbarger County, Texas from the W. T. Waggoner Estate. The property is located some 13 miles southeast of the town of Vernon, Texas. The Company paid $6,000 for the exploration license and option to lease. The lease covers the formations from the surface to earth.
The Company owns 100% of the working interest in the property and 76% of the net revenue interest in the lease. The property is subject to a 20% royalty interest and a 4% overriding royalty interest. The Company plans to drill its initial exploration well to a formation at about 3900 feet. As of the date hereof, drilling operations have not commenced.
The geology of this part of northeast Texas consists of Permian and Leonardon shales and sands. The major geologic feature is the Red River Arch, which is also sometimes known as the Electra Arch.
Subsequent to the acquisition of the exploration license, the Company in November of 2001 conducted additional seismic surveys over the target to better understand the geology of the subsurface target. Three dimensional processing of the seismic that was acquired has better defined the drilling target. The company plans to drill an initial test well on this pinnacle reef prospect in the first quarter of 2002.
The Company does not intend to acquire additional oil and gas leases until it has initiated drilling operations on its existing leases.
Retention of Experts
Company's management does not have expertise in the area of oil and gas exploration. Accordingly, the Company has engaged third party geologists who have been largely responsible for the evaluation and recommendation for acquisition of the existing leases of the Company. The Company has and will in the future retain drilling contractors, technicians, other geologists, and engineers to direct the drilling and completion of oil and gas wells on its leases, and to aid in the acquisition and evaluation of other properties.
-4-
Techniques of Evaluating Prospective Properties
The Company has undertaken detailed geological surveys and analysis combined with advanced seismic exploration techniques to identify its leases.
Geological interpretation is based upon data recovered from existing oil and gas wells in an area, past seismic data generated by other entities, and other sources. Most of this information is either purchased from the company that generated the data or becomes public knowledge through state agencies after a period of years. Through analysis of rock types, fossils and the electrical, acoustic, and chemical characteristics of rocks from existing wells, the Company can construct a picture of rock layers in the area. The Company may have access to the well logs and decline curves from existing operating wells. Well logs allow the Company to calculate an original oil or gas volume in place while decline curves from production history allow the Company to calculate remaining proved producing reserves. There are no proven reserves on the Company leases.
Market for Oil and Gas Production
The market for oil and gas production is regulated by both the state and federal governments. The overall market is mature and with the exception of gas, all producers in a producing region will receive the same price. The major oil companies will purchase all crude oil offered for sale at posted field prices. There are price adjustments for quality difference from the Benchmark. Benchmark is Saudi Arabian light crude oil employed as the standard on which OPEC price changes have been based. Quality variances from Benchmark crude results in lower or higher prices being paid for the variant oil.
Oil sales are normally contracted with a purchaser or gatherer as it is known in the industry which will pick-up the oil at the well site. In some instances there may be deductions for transportation from the well-head to the sales point. At this time the majority of crude oil purchasers do not charge transportation fees, unless the well is outside their service area. The service area is a geographical area in which the purchaser of crude oil will not charge a fee for picking up the oil. The purchaser or oil gatherer as it is called within the oil industry, will usually handle all check disbursements to both the working interest and royalty owners.
The Company in most instances will be a working interest owner. By being a working interest owner, the Company is responsible for the payment of its proportionate share of the operating expenses of the well. Royalty owners and over-riding royalty owners receive a percentage of gross oil production for the particular lease and are not obligated in any manner whatsoever to pay for the costs of operating the lease. Therefore, the Company, in most instances, will be paying the expenses for the oil and gas revenues paid to the royalty and over-riding royalty interests.
The gas purchaser will pay the well operator 100% of the sales proceeds on or about the 25th of each and every month for the previous months sales. The operator is responsible for all checks and distributions to the working interest and royalty owners. There is no standard price for gas. Prices will fluctuate with the seasons and the general market conditions. It is the Company's intention to utilize this market when ever possible in order to maximize revenues. The Company does not anticipate any significant change in the manner production is purchased, however, no assurance can be given at this time that such changes will not occur.
-5-
Acquisition of Future Oil and Gas Leases
The principal activity for the Company in 2002 will be the exploration its existing oil and gas leases. However, in the future it is likely the Company will again begin to acquire other oil and gas interests. The acquisition process may be lengthy because of the amount of investigation which will be required prior to submitting a bid to a land owner or oil company. Currently, as of the date of this report, the Company is not engaged in any bidding processes and does not intend to do so until exploration of its existing oil and gas leases has been completed.
In the future, if the Company does proceed with further acquisitions, it intends to do so in the following three phases:
Phase 1. Field identification. In some instances the seller will have a formal divestiture department that will provide a sales catalog of leases which will be available for sale. Review of the technical filings made to the states along with a review of the regional geological relationships, released well data and the production history for each lease will be utilized. In addition a review of the proprietary technical data in the sellers office (if applicable)will be made prior to calculation of a bid price for the tract or field. Bid prices are also often determined by the "going rate" in the area at the time.
Phase 2. Submission of Bids. In the case of properties owned by individual land owners the Company will generally hire a third party landman familiar with the local area who will then contact the local land owners of the prospective tracts and negotiate leases on each individual property that are part of the tract. If the tract is owned or under lease by an oil company, generally a member of management or a consultant to the Company will contact the oil company and submit a bid. Some of these tracts are also put up for auction. At this stage the Company would prefer not to participate in auctions because it believes highly prospective properties may be obtained on better terms outside of the auction venue, and because of its low capital in hand, it is at a competitive disadvantage with other prospective bidders.
Phase 3. Closing. Final price negotiation will take place. Cash transfer and issuance of title opinions. The property will then be readied for drill-testing by conducting further exploration which may include added seismic work and other testing.
In connection with the acquisition of an oil and gas lease for work-over operations, the Company may be able to assume 100% ownership of the working-interest and surface production equipment facilities with only minor expenses. In exchange for an assignment of the lease, the Company will agree to assume the obligation to plug and abandon the well in the event the Company determines that reworking operations are either too expensive or will not result in production in paying quantities. The cost of plugging a well can run from $500 to $15,000, depending on the condition of the well.
As noted above, major oil companies often place oil and gas properties out for competitive bidding. The Company currently does not have sufficient revenues or funds available to it to make a bid for such properties. The Company has not initiated a search for additional leases and does not intend to do so until it raises additional capital and completes its evaluation of its existing properties. The Company intends to raise additional capital through loans, from cash flow from its existing oil and gas leases if they can be profitably developed, or through the sale of equity securities.
-6-
There is no assurance that the Company will ever raise such additional capital, or achieve revenue from its existing properties. If the Company is unable to raise such capital, or achieve profitable production, it may have to cease operations.
Competition
The oil and gas industry is highly competitive. The Company's competitors and potential competitors include major oil companies and independent producers of varying sizes of which are engaged in the acquisition of producing properties and the exploration and development
of prospects. Most of the Company's competitors have greater financial, personnel and other resources than does the Company and therefore have greater leverage and a competitive advantage in acquiring prospects, hiring personnel and marketing oil and gas. Accordingly, a high degree of competition in these areas is expected to continue.
Governmental Regulation
The production and sale of oil and gas is subject to regulation by state, federal and local authorities. In most areas there are statutory provisions regulating the production of oil and natural gas under which administrative agencies may set allowable rates of production and promulgate rules in connection with the operation and production of such wells, ascertain and determine the reasonable market demand of oil and gas, and adjust allowable rates with respect thereto.
The sale of liquid hydrocarbons was subject to federal regulation under the Energy Policy and Conservation Act of 1975 which amended various acts, including the Emergency Petroleum Allocation Act of 1973. These regulations and controls included mandatory restrictions upon the
prices at which most domestic crude oil and various petroleum products could be sold. All price controls and restrictions on the sale of crude oil at the wellhead have been withdrawn. It is possible, however, that such controls may be re-imposed in the future but when, if ever, such re-imposition might occur and the effect thereof on the Company cannot be predicted.
The sale of certain categories of natural gas in interstate commerce is subject to regulation under the Natural Gas Act and the Natural Gas Policy Act of 1978 ("NGPA"). Under the NGPA, a comprehensive set of statutory ceiling prices applies to all first sales of natural gas unless the gas is specifically exempt from regulation (i.e., unless the gas is"deregulated"). Administration and enforcement of the NGPA ceiling prices are delegated to the FERC. In June 1986, the FERC issued Order No. 451, which, in general, is designed to provide a higher NGPA ceiling price for certain vintages of old gas. It is possible, though unlikely, that the Company may in the future acquire significant amounts of natural gas subject to NGPA price regulations and/or FERC Order No. 451.
The Company's operations are subject to extensive and continually changing regulation because legislation affecting the oil and natural gas industry is under constant review for amendment and expansion. Many departments and agencies, both federal and state, are authorized by statute to issue and have issued rules and regulations binding on the oil and natural gas industry and its individual participants. The failure to comply with such rules and regulations can result in large penalties. The regulatory burden on this industry increases the Company's cost of doing business and, therefore, affects our profitability. However, we do not believe that we are affected in a significantly different way by these regulations than our competitors are affected.
-7-
Transportation and Production
Transportation and Sale of Oil and Natural Gas. The Company can make sales of oil, natural gas and condensate at market prices which are not subject to price controls at this time. The price that we receive from the sale of these products is affected by the Company's ability to transport and the cost of transporting these products to market. Under applicable laws, the Federal Energy Regulatory Commission ("FERC") regulates:
- the construction of natural gas pipeline facilities, and
- - the rates for transportation of these products in interstate commerce.
The Company's possible future sales of natural gas are affected by the availability, terms and cost of pipeline transportation. The price and terms for access to pipeline transportation remain subject to extensive federal and state regulation. Several major regulatory changes have been implemented by Congress and the FERC from 1985 to the present. These changes affect the economics of natural gas production, transportation and sales. In addition, the FERC is continually proposing and implementing new rules and regulations affecting these segments of the natural gas industry that remain subject to the FERC's jurisdiction. The most notable of these are natural gas transmission companies.
The FERC's more recent proposals may affect the availability of interruptible transportation service on interstate pipelines. These initiatives may also affect the intrastate transportation of gas in some cases. The stated purpose of many of these regulatory changes is to promote competition among the various sectors of the natural gas industry. These initiatives generally reflect more light-handed regulation of the natural gas industry. The ultimate impact of the complex rules and regulations issued by the FERC since 1985 cannot be predicted. In addition, some aspects of these regulatory developments have not become final but are still pending judicial and FERC final decisions. The Company cannot predict what further action the FERC will take on these matters. However, the Company does not believe that any action taken will affect it much differently than it will affect other natural gas producers, gatherers and marketers with which the Company might compete against.
Effective as of January 1, 1995, the FERC implemented regulations establishing an indexing system for transportation rates for oil. These regulations could increase the cost of transporting oil to the purchaser. The Company does not believe that these regulations will affect it any differently than other oil producers and marketers with which it competes with.
Regulation of Drilling and Production. The Company's proposed drilling and production operations are subject to regulation under a wide range of state and federal statutes, rules, orders and regulations. Among other matters, these statutes and regulations govern:
- the amounts and types of substances and materials that may be released into the environment,
- - the discharge and disposition of waste materials,
- - the reclamation and abandonment of wells and facility sites, and
- - the remediation of contaminated sites,
-8-
and require:
- permits for drilling operations,
- - drilling bonds, and
- - reports concerning operations.
Texas and Louisiana law contains:
- provisions for the unitization or pooling of oil and natural gas properties,
- - the establishment of maximum rates of production from oil and natural gas wells, and
- - the regulation of the spacing, plugging and abandonment of wells.
Environmental Regulations
General. The Company's operations are affected by the various state, local and federal environmental laws and regulations, including the:
- Clean Air Act,
- - Oil Pollution Act of 1990,
- - Federal Water Pollution Control Act,
- - Resource Conservation and Recovery Act ("RCRA"),
- - Toxic Substances Control Act, and
- - Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA").
These laws and regulations govern the discharge of materials into the environment or the disposal of waste materials, or otherwise relate to the protection of the environment. In particular, the following activities are subject to stringent environmental regulations:
- drilling,
- - development and production operations,
- - activities in connection with storage and transportation of oil and other liquid hydrocarbons, and
- - use of facilities for treating, processing or otherwise handling hydrocarbons and wastes.
Violations are subject to reporting requirements, civil penalties and criminal sanctions. As with the industry generally, compliance with existing regulations increases our overall cost of business. The increased costs cannot be easily determined. Such areas affected include:
- unit production expenses primarily related to the control and limitation of air emissions and the disposal of produced water,
- - capital costs to drill exploration and development wells resulting from expenses primarily related to the management and disposal of drilling fluids and other oil and natural gas exploration wastes, and
- - capital costs to construct, maintain and upgrade equipment and facilities and remediate, plug and abandon inactive well sites and pits.
-9-
Environmental regulations historically have been subject to frequent change by regulatory authorities. Therefore, the Company is unable to predict the ongoing cost of compliance with these laws and regulations or the future impact of such regulations on its operations. However, the Company does not believe that changes to these regulations will have a significant negative affect on its operations.
A discharge of hydrocarbons or hazardous substances into the environment could subject us to substantial expense, including both the cost to comply with applicable regulations pertaining to the clean up of releases of hazardous substances into the environment and claims by neighboring landowners and other third parties for personal injury and property damage. The Company does not maintain insurance for protection against certain types of environmental liabilities.
The Clean Air Act requires or will require most industrial operations in the United States to incur capital expenditures in order to meet air emission control standards developed by the EPA and state environmental agencies. Although no assurances can be given, the Company believes the Clean Air Act requirements will not have a material adverse effect on our financial condition or results of operations.
RCRA is the principal federal statute governing the treatment, storage and disposal of hazardous wastes. RCRA imposes stringent operating requirements, and liability for failure to meet such requirements, on a person who is either:
- a "generator" or "transporter" of hazardous waste, or
- - an"owner" or"operator" of a hazardous waste treatment, storage or disposal facility.
At present, RCRA includes a statutory exemption that allows oil and natural gas exploration and production wastes to be classified as non-hazardous waste. As a result, the Company will not be subject to many of RCRA's requirements because its operations will probably generate minimal quantities of hazardous wastes.
CERCLA, also known as "Superfund", imposes liability, without regard to fault or the legality of the original act, on certain classes of persons that contributed to the release of a "hazardous substance" into the environment. These persons include:
- the "owner" or "operator" of the site where hazardous substances have been released, and
- - companies that disposed or arranged for the disposal of the hazardous substances found at the site.
CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. In the course of our ordinary operations, the Company could generate waste that may fall within CERCLA's definition of a"hazardous substance". As a result, the Company may be liable under CERCLA or under analogous state laws for all or part of the costs required to clean up sites at which such wastes have been disposed.
Under such law the Company could be required to:
-10-
- remove or remediate previously disposed wastes, including wastes disposed of or released by prior owners or operators,
- - clean up contaminated property, including contaminated groundwater, or
- - perform remedial plugging operations to prevent future contamination.
The Company could also be subject to other damage claims by governmental authorities or third parties related to such contamination.
While the foregoing regulations appear extensive, the Company believes that because it will initially be drilling and operating a small number of oil or gas wells, compliance with the foregoing regulations will not have any material adverse affect upon the Company. Further, the Company believes it will only spend minimal amounts of money to comply therewith in connection with its proposed wells.
Mineral Property Interests
The Company has retained several mineral properties, the most important being the Vipont Mine, located in Northwest Utah. This property was acquired in October 1994 when Celebration and United Silver Mine, Inc., (United) entered into a joint venture agreement, whereby Celebration could acquire up to an 80% interest in the property. Under the terms of the agreement, United was to contribute real properties for an initial 75% interest in the joint venture, and Celebration was to remove all liens associated with the real properties by paying $175,000 to a bank which was the primary lien holder for its initial 25% interest in the venture. Celebration expended $175,000 to purchase the aforementioned promissory note. The property was auctioned in a public auction in May 1995 and by virtue of Celebration's first position lien, Celebration was able to successfully bid the full amount of the underlying promissory note.
Although additional expenditures have been made on the property through September 30, 1998, no further funds towards the joint venture have been expended by Celebration, which owns an undivided 25% interest in the property at the time of this report. However, the above joint venture agreement has been effectively dissolved and has ceased existence as a result to ongoing litigation which was initiated by Thomas Miller, a principal of United. The Company counterclaimed against Miller et. al. This litigation is more fully described below. See Item 3, "Legal Proceedings".
The Company has retained several groups of unpatented mining claims in the Coeur d'Alene Mining District of North Idaho. The Company, directly and through its subsidiary Celebration Mining Company, holds forty-three unpatented mining claims in four distinct groups called the Kil Group, West Mullan Group, South Galena Group, and Palisades Group. The Company has undertaken only minimal exploration and development work on these properties, such as general geological reconnaissance and claim-staking activities. Subsequent to the fiscal year end of the Company, on October 31, 2001, sold the Kil Group and West Mullan Group of claims to Caledonia Silver-Lead Mines, Inc. ("Caledonia"), in a transaction which is not considered arms-length because officers and directors of the Company are also officers and directors of Caledoniaicers of Caledonia.
-11-
In September, 2000 the Company, through its wholly owned subsidiary Celebration Mining Company, entered into a five-year lease agreement with an affiliated company, Oxford Metallurgical, Inc. on its eight-claim Palisades Group property. The lease calls for a semi-annual payment of $3,000, or alternatively, the semi-annual payment of 10,000 shares of the common stock of Oxford. Oxford has the right to explore and potentially develop the property under certain conditions.
The Company's proposed future mining activities will be subject to laws and regulations controlling not only the exploration and mining of mineral properties, but also the effect of such activities on the environment. Compliance with such laws and regulations may necessitate additional capital outlays, affect the economics of a project, and cause changes or delays in the Company's activities. The sections above titled "Competition", "Governmental Regulation" and "Environmental Regulations" are equally relevant to the minerals industry and investors are encouraged to carefully review these sections.
Company's Office
The Company's office is located at 6 East Rose Street, Walla Walla, WA 99362. The Company leases the space from Coldwell Banker Commercial at the monthly lease rate of $400. The Company signed a three year lease agreement commencing June, 2001.
Employees
The Company is a development stage company and currently has no employees other than its Officers and Directors. It employs a number of third party independent contractors on an "as-needed" day rate basis. It currently provides no medical or retirement benefits to its Officers and Directors, or to those engaged as consultants.
RISK FACTORS
Note: These risk factors are primarily focused on the oil & gas activities of the Company, since that is to be the primary focus of the Company in the future. However, most of the risk factors discussed below are applicable to the mineral industry as well since both industries are of an extractive nature and involve similar steps of exploration, discovery, facilities construction, and production.
1. The Company is an exploration stage company and has no known oil or gas reserves. The Company is currently incurring losses in its operations and may continue to sustain losses and accumulate deficits in the future.
2. The Company may not discover any oil or gas on its property. The search for oil and gas is risky. The Company will not know what is underground until it drills a well. As such, there may be no oil and gas under the Company's leases. Accordingly, the Company may not discover any oil or gas.
-12-
3. Volatility of Oil and Gas Markets. In the past few years, the price of oil and gas has been volatile and is likely to remain so. During the last five years the price of oil has fluctuated from a low of approximately $11.00 per barrel to a high of approximately $36.00 per barrel. The price of gas has fluctuated from a low of approximately $1.80 per 1,000 cubic feet to a high of approximately $9.00 per 1,000 cubic feet. At the present time the price of oil is near $17.75 per barrel. The price of natural gas is near $2.12 per 1,000 cubic feet. There is no assurance that in the future prices for oil and gas production will stabilize at current rates and not be much lower. Lower prices may make the Company projects described herein unprofitable, either on an operating basis, a capital cost basis, or both.
4. Availability of Suitable Prospects or Producing Properties. Competition for prospects and producing properties is intense. The Company will be competing with a number of other potential purchasers of prospects and producing properties, most of which will have greater financial resources than the Company. The state of the oil and gas industry, the bidding for prospects has become particularly intense with different bidders evaluating potential acquisitions with different product pricing parameters and other criteria that result in widely divergent bid prices. See"Business - Competition." The presence in the market of bidders willing to pay prices higher than are supported by the Company's evaluation criteria could further limit the ability of the Company to acquire prospects and low or uncertain prices for properties can cause potential sellers to withhold or withdraw properties from the market. In this environment, there can be no assurance that there will be a suf ficient number of suitable prospects available for acquisition by the Company, or that the Company can sell its current prospects, or that the Company can obtain financing for or find participants to join in the development of its prospects.
5. Title to Properties. It is customary in the oil and gas industry that upon acquiring an interest in a property, that only a preliminary title investigation be done at that time. The Company intends to follow this custom. If the title to the prospects should prove to be defective, the Company could lose the costs of acquisition, or incur substantial costs for curative title work.
6. Shut-in Wells and Curtailed Production. Production from gas wells in many geographic areas of the United States has been curtailed or shut-in for considerable periods of time due to a lack of market demand, and such curtailments may continue for a considerable period of time in the future. There may be an excess supply of gas in areas where the Company's operations will be conducted. In such event, it is possible that there will be no market or a very limited market for the Company's prospects. It is customary in many portions of Louisiana and Texas to shut-in gas wells in the spring and summer when there is not sufficient demand for gas.
7. Operating and Environmental Hazards. Hazards incident to the operation of oil and gas properties, such as accidental leakage of petroleum liquids and other unforeseen conditions, may be encountered by the Company if it participates in developing a well and, on occasion, substantial liabilities to third parties or governmental entities may be incurred. The Company could be subject to liability for pollution and other damages or may lose substantial portions of prospects or producing properties due to hazards which cannot be insured against or which have not been insured against due to prohibitive premium costs or for other reasons. The Company currently does not maintain any insurance for environmental damages. Governmental regulations relating to environmental matters could also increase the cost of doing business or require alteration or cessation of operations in certain areas. See"Business - Government Regulations."
-13-
8. Lack of Insurance. The Company does not maintain any insurance against losses or liabilities which may arise from operations. The Company also does not have a "key man" life insurance policy in place, or Errors and Omissions coverage. The Company will likely add these insurances if and when it achieves profitable cash flow from its projects if such insurance is available at a reasonable cost.
9. Federal and State Taxation. Federal and state income tax laws are of particular significance to the oil and gas industry. Recent legislation has eroded previous benefits to oil and gas producers, and any subsequent legislation may continue this trend. The states in which the Company may conduct oil and gas activities also impose taxes upon the production of oil and gas located within such states. There can be no assurance that the tax laws will not be changed or interpreted in the future in a manner which adversely affects the Company.
10. Government Regulation. The oil and gas business is subject to substantial governmental regulation, including the power to limit the rates at which oil and gas are produced and to fix the prices at which oil and gas are sold. It cannot be accurately predicted whether additional legislation or regulation will be enacted or become effective. See "Business - Governmental Regulations."
11. Because the Company's common stock is a"penny stock," investors may not be able to resell their shares and may have limited access to information about the Company. The Company's common stock is defined as a"penny stock," under the Securities Exchange Act of 1934, and its rules. Because the Company's common stock is a "penny stock," investors may be unable to resell their shares. This is because the Securities Exchange Act of 1934 and the penny stock rules impose additional sales practice and disclosure requirements on broker-dealers who sell the Company's securities to persons other than accredited investors. As a result, fewer broker-dealers are willing to make a market in the Company's common stock and investors may not be able to resell their shares. Further, news and analyst coverage regarding penny stock is extremely limited, if non-existent. As a result, investors may find that the only information about the Company will be from reports filed with the Securiti es and Exchange Commission. See "Market Price for Common Equity and Other Shareholder Matters."
12. Write-downs and Limits on Accuracy of Reserve Estimates. Although the Company currently has no reserves, if it develops or acquires such in the future, investors are cautioned that oil and gas reserve estimates are necessarily inexact and involve matters of subjective engineering judgment. In addition, any estimates of future net revenues and the present value of such revenues are based on the price and costs at the effective date of the estimate. These estimates may not prove to have been correct over time. Declines and/or swings in oil and gas prices may also require the Company to adjust, write-down, or write-off the value of oil and gas reserves it may develop or acquire in the future.
13. Need for Additional Key Personnel. At the present, the Company employs no full time employees. In order to drill a well on its property, the Company will have to hire a drilling contractor. The Company believes that it has sufficient funds to commence its drilling operations, but not enough money to complete its well, should oil and/or gas be discovered. At the present time the Company has insufficient revenues to hire a geologist or engineer on a permanent basis and must rely on consultants paid on a daily rate basis. There is no assurance that it will be able to hire and retain such personnel in the future. If the Company is unable to engage and retain the necessary personnel, its business could be materially and adversely affected.
-14-
14. Reliance Upon Directors and Officers. The Company is wholly dependent, at the present time, upon the personal efforts and abilities of its President and Chairman, Howard Crosby; its Director, Kevin Stulp; and, its Secretary/Treasurer and Director, John Ryan. The loss of any one of the foregoing could adversely effect the Company's operations. While the foregoing will exercise control over the day to day affairs of the Company, they will also be devoting limited time to the Company's activities, approximately 50% of their active work time. The Company does not have employment agreements with any of its officers and directors, nor does the Company maintain key-person insurance for any officer or director. Accordingly, while the Company may solicit business through its Officers, there can be no assurance as to the volume of business, if any, which the Company may succeed in obtaining, nor that its proposed operations will prove to be profitable. As of the date hereof, the Company does not have any commitments regarding its proposed operations and there can be no assurance that any commitments will be forthcoming.
15. Need for Subsequent Funding. The Company has an immediate need for additional funds in order to finance its proposed business operations. The Company believes that it has adequate funds available to drill and complete one well on its lease in Texas. It will need other funding to drill further wells in Texas and in Louisiana. The Company's continued operations therefore depend upon its ability to raise additional funds through bank borrowings, cash flow from production (if successful in its exploration) or equity or debt financing. There is no assurance that the Company will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to the Company. If the Company cannot obtain needed funds, it may be forced to curtail or cease its activities.
16. Non-Arms's Length Transaction. The purchase price of some of the stock issued to the Company's officers and directors was not at arm's length, but was determined by the Company's board of directors to be enough money to continue to fund the Company on a quarter-to-quarter basis. Subsequent sales of shares were arm's length and were intended to raise enough capital to acquire its current leases. See "Principal Shareholders."
17. Indemnification of Officers and Directors for Securities Liabilities. The Articles and Bylaws of the Company provide that the Company may indemnify any Director, Officer, agent and/or employee as to those liabilities and on those terms and conditions as are specified in the Utah Business Corporation Act. Further, the Company may purchase and maintain insurance on behalf of any such persons whether or not the corporation would have the power to indemnify such person against the liability insured against. The foregoing could result in substantial expenditures by the Company and prevent any recovery from such Officers, Directors, agents and employees for losses incurred by the Company as a result of their actions. Further, the Company has been advised that in the opinion of the Securities and Exchange Commission, indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.
18. Public Market for Securities. There is a limited public market for the Company's common stock. The Company's common stock is owned by several thousand persons and is well distributed. However, the Company's common stock is not traded on a national listed market or on the NASDAQ NMS or Small Cap market. Instead, it trades on the OTC Bulletin Board under the symbol "CDNR". The OTC Bulletin Board is operated by the NASD but is a thin market characterized by large spreads and lacks the liquidity with which many investors may be more familiar.
-15-
19. No Cumulative Voting or Preemptive Rights. There are no preemptive rights in connection with the Company's Common Stock and cumulative voting in the election of Directors is not provided for. Accordingly, the holders of a majority of the shares of common stock, present in person or by proxy, will be able to elect all of the Company's Board of Directors. Cumulative voting, in some cases, will allow a minority group to elect at least one director to the board. Because there is no provision for cumulative voting, a minority group will not be able to elect any directors. See "Description of the Securities."
20. No Dividends Anticipated. At the present time the Company does not anticipate paying dividends, cash or otherwise, on its Common Stock in the foreseeable future. Future dividends will depend on earnings, if any, of the Company, its financial requirements and other factors. Investors who anticipate the need of an immediate income from their investment in the Company's Common Stock should refrain from the purchase of the securities. See "Dividend Policy."
ITEM 2. DESCRIPTION OF PROPERTIES.
The Company's oil and gas leasehold properties are described above in Item 1. The Company's remaining mineral properties are also described in Item 1. The Company rents office space at 6 East Rose Street, Walla Walla, WA at the rate of $400 per month. Its lease on that office space expires June, 2004.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending or threatened litigation except that described below. To its knowledge, no action, suit or proceedings has been threatened against its officers and its directors.
Vipont Mine
The Company was a defendant in a lawsuit alleging that the Company failed to transfer common stock in exchange for a mining property interest. In June 1999, Box Elder County Superior Court rejected the plaintiff's lawsuit and let stand the Company's countersuit alleging fraudulent misrepresentation. Although the plaintiff filed an appeal (regarding the originally filed lawsuit), the Utah Supreme Court rejected the appeal in a judgment rendered on July 31, 2001. In its countersuit, the Company is seeking both full title to the aforementioned mineral property, compensatory damages as well as punitive damages. The Company believes its countersuit will prevail.
SETTLEMENT AGREEMENTS
Crescent Mine
In July 1998, the Company filed an action in Federal Court in Boise, Idaho for declaratory judgment regarding the validity of its Crescent Mine mineral lease. Defendants in the action included the U.S. Environmental Protection Agency, Shoshone County, and Fausett International. In 1999, the Company elected to write off its interest in the Crescent Mine mineral lease. A final settlement of this matter was reached on June 12, 2001 whereby the Company relinquished any claims it may have to the Crescent Mine under its mineral lease. In return, Fausett International agreed to return common shares it received pursuant to the lease which were then cancelled by the Company. The Company received a release and discharge of any claims related to the Crescent Mine from both Shoshone County and the United States Environmental Protection Agency.
-16-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting on April 23, 2001. At that meeting the following items were approved by its shareholders:
Approved a name change from "Royal Silver Mines, Inc." to "Cadence Resources Corporation".
Approved an amendment to the Articles of Incorporation increasing its authorized common stock to 100,000,000 shares of par value $0.01.
Approved an amendment to the Articles of Incorporation creating a class of preferred stock of 20,000,000 shares of par value $0.01. The terms of the preferred shares may be set by the Board of Directors without further shareholder approval.
Approved a 1-for-20 reverse split of the issued and outstanding shares of the Company.
Approved the accounting firm of Williams and Webster, P.S. of Spokane, WA as auditors of the Company until the next annual meeting.
Elected Howard Crosby, Kevin Stulp, and John Ryan to the Board of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
The Company's common shares are traded on the OTC Bulletin Board Operated by the National Association of Securities Dealers, Inc. Prior to the name change to Cadence Resources Corporation the shares traded under the symbol"RSMI." Since the name change was made effective in May, 2001 the stock has traded under the symbol "CDNR".
The prices listed below were obtained from the National Association of Securities Dealers, Inc., and are the highest and lowest bids reported during each fiscal quarter for the period September 30, 1999, through September 30, 2001. These bid prices are over-the-counter market quotations based on inter-dealer bid prices, without markup, markdown, or commission and may not necessarily represent actual transactions:
-17-
|
Fiscal Quarter Ended |
High Bid($) |
Low Bid ($) |
|
September 30, 1999 |
2.40 |
1.80 |
On January 4, 2002, the average of the high bid and low ask quotation for the Company's common shares as quoted on the Bulletin Board was $0.695.
The approximate number of holders of common stock of record on January 4, 2002, was approximately 374. A large number of additional shareholders hold their stock in "street name". The Company cannot ascertain the exact number of such shareholders.
Dividends
We have not declared any cash dividends, nor do we intend to do so. We are not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent. Dividend policy will be based on our cash resources and needs and it is
anticipated that all available cash will be needed for our operations in the foreseeable future.
SEC Rule 15g
The Company's shares are covered by Section 15g of the Securities Act of 1933, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell the Company's securities and also may affect the ability of purchasers to sell their shares in the secondary market.
-18-
Section 15g also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to understanding of the function of the penny stock market, such as"bid" and"offer" quotes, a dealers"spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data included in the following table have been derived from and should be read in conjunction with and are qualified by the Company's financial statements and notes set forth elsewhere in this report. Historical financial data for certain periods may be derived from financial statements not included herein.
|
|
09/30/01 |
09/30/00 |
09/30/99 |
09/30/98 |
09/30/97 |
|||||
|
Statement of Operations and Accumulated Deficit Data: |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
0 |
$ |
0 |
$ |
0 |
$ |
0 |
$ |
0 |
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
Work Capital (Deficit) |
$ |
(76,451) |
$ |
(78,422) |
$ |
(93,456) |
$ |
303,600 |
$ |
671,355 |
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company has not had revenues from operations during the last two years.
The Company intends to spend its existing cash on exploration on its existing oil and gas lease in Texas. The Company does not intend to acquire any additional oil and gas leases until it completes exploration operations on its existing leases in Texas and Louisiana. The Company intends to initiate its drilling operations within the next four months and believes that it will complete its drilling operations within the next eighteen months. This time schedule is dependant upon raising sufficient capital to fund its drilling and completion of successful wells, if any. Currently, the Company does not have adequate funds to commence drilling operations.
-19-
The Company will need additional capital to drill its wells. The amount of capital required is dependant on the success it has on its earliest wells because the Company anticipates funding some future drilling of wells from cash flow out of these earlier wells if they are commercially successful. The Company hopes to reduce its dependence on new finances by completing its initial drilling operation. Income from the sale of oil or gas will then be applied to the Company's plan to drill and complete other wells. There is no assurance, however, the Company's initial drilling operation will prove successful. If it does not prove successful, the Company will have to rely upon future new finances in order to continue its operations.
The Company may sell a portion of the working interest in each well to investors in order to raise the capital to drill the well. The Company is also able to raise the risk capital to drill the well from outside investors and thus the "dry hole risk" to the Company is reduced if not totally eliminated. The major disadvantage is that the Company will give up a percentage of its future cash flow to the working interest investors which will reduce Company revenues and profits in the future from successful wells. Because of the overall advantages and benefits of "working interest financing", the Board has chosen to make use of such technique on its initial wells, and may continue to use this tool on a broad scale in the future.
The Company's auditors have issued a going concern opinion. This means that the Company's auditors believe there is substantial doubt that it can continue as an on-going business for the next twelve months unless it obtains additional capital. This is because the Company has not generated any revenues and no revenues are anticipated until it successfully completes at least one producing oil or gas well. Accordingly, the Company must raise cash from sources other than the sale of oil or gas found on its property. That cash must be raised from other sources. The Company's only other source for cash at this time are investments or loans by others in the Company. The Company must raise cash to complete its well and stay in business.
The Company has inadequate cash to maintain operations during the next twelve months. In order to meet its cash requirements the Company will have to raise additional capital through the sale of securities or loans. As of the date hereof, the Company has not made sales of additional securities and there is no assurance that it will be able to raise additional capital through the sale of securities in the future. Further, the Company has not initiated any negotiations for loans to the Company and there is no assurance that the Company will be able to raise additional capital in the future through loans. In the event that the Company is unable to raise additional capital, it may have to suspend or cease operations.
The Company does not intend to conduct any research or development during the next twelve months other than as described herein. See"Business."
The Company does not intend to purchase a plant or significant equipment. The Company will hire employees on an as needed basis, however, the Company does not expect any significant changes in the number of employees.
The Company does not expect to earn revenues until it begins recovering oil and/or gas.
-20-
ITEM 8. FINANCIAL STATEMENTS.
CADENCE RESOURCES CORPORATION
(Formerly Royal Silver Mines, Inc.)
CONTENTS
|
Independent Auditor's Report |
F-1 |
|
Balance Sheets |
F-2 |
|
Notes to the Financial Statements |
F-9 |
-21-
The Board of Directors
Cadence Resources Corporation
(formerly Royal Silver Mines, Inc.)
(An Exploration Stage Company)
Walla Walla, Washington
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Cadence Resources Corporation (formerly Royal Silver Mines, Inc.) (an exploration stage company) as of September 30, 2001 and 2000, and the related statements of operations, stockholders' equity, and cash flows for the years then ended, and for the year ended September 30, 1999 and from inception of the exploration stage on July 1, 2001 through September 30, 2001. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in all material respects, the financial position of Cadence Resources Corporation (formerly Royal Silver Mines, Inc.) as of September 30, 2001 and 2000, and the results of its operations and cash flows for the years then ended and for the year ended September 30, 1999 and from inception of the exploration stage on July 1, 2001 through September 30, 2001 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 15 to the financial statements, the Company's significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
January 8, 2002
F-1
-22-
|
CADENCE RESOURCES CORPORATION |
|||||||
|
September 30, |
|||||||
|
2001 |
2000 |
||||||
|
ASSETS |
|||||||
|
CURRENT ASSETS |
|||||||
|
Cash |
$ |
191,684 |
$ |
15,915 |
|||
|
Notes receivable |
18,000 |
14,628 |
|||||
|
Prepaid mineral leases |
82,155 |
- |
|||||
|
Prepaid rent |
1,275 |
- |
|||||
|
Deposit |
425 |
150 |
|||||
|
|
TOTAL CURRENT ASSETS |
|
293,539 |
|
30,693 |
||
|
|
PROPERTY AND EQUIPMENT |
|
|
|
|
||
|
Furniture and equipment |
1,440 |
1,440 |
|||||
|
Less accumulated depreciation |
(1,440) |
(1,404) |
|||||
|
|
TOTAL PROPERTY AND EQUIPMENT |
|
- |
|
36 |
||
|
|
OTHER ASSETS |
|
|
|
|
||
|
Investments |
104,343 |
236,428 |
|||||
|
|
NONCURRENT ASSETS |
|
|
|
|
||
|
Net assets of discontinued operations |
266,757 |
702,097 |
|||||
|
|
TOTAL ASSETS |
$ |
664,639 |
$ |
969,254 |
||
The accompanying notes are an integral part of these financial statements.
F-2
-23-
|
CADENCE RESOURCES CORPORATION |
|||||||
|
September 30, |
|||||||
|
2001 |
2000 |
||||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
|
CURRENT LIABILITIES |
|||||||
|
Accounts payable |
$ |
158,857 |
$ |
109,115 |
|||
|
Payable to related party |
8,231 |
- |
|||||
|
Accrued compensation |
50,000 |
- |
|||||
|
|
TOTAL CURRENT LIABILITIES |
|
217,088 |
|
109,115 |
||
|
|
LONG TERM DEBT |
|
|
|
|
||
|
Notes payable - related parties |
135,000 |
- |
|||||
|
|
COMMITMENTS AND CONTINGENCIES |
|
- |
|
- |
||
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
||
|
Preferred stock, $0.01 par value; 20,000,000 shares authorized, -0- shares issued and outstanding |
|
|
|||||
|
Common stock, $0.01 par value; 100,000,000 shares authorized, 2,453,890 and 1,199,607 shares issued and outstanding, respectively |
|
|
|||||
|
Additional paid-in capital |
12,198,855 |
11,767,998 |
|||||
|
Pre-exploration stage accumulated deficit |
(11,102,595) |
(10,885,466) |
|||||
|
Deficit accumulated during exploration stage |
(658,086) |
- |
|||||
|
Accumulated other comprehensive loss |
(150,162) |
(34,389) |
|||||
|
|
TOTAL STOCKHOLDERS' EQUITY |
|
312,551 |
|
860,139 |
||
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
664,639 |
$ |
969,254 |
||
The accompanying notes are an integral part of these financial statements.
F-3
-24-
|
CADENCE RESOURCES CORPORATION |
||||||||||
|
|
Period From |
|||||||||
|
Year Ended September 30, |
||||||||||
|
2001 |
2000 |
1999 |
||||||||
|
REVENUES |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
||
|
GENERAL AND ADMINISTRATIVE EXPENSES |
|
|
|
|
|
|
|
|
||
|
Depreciation and amortization |
402 |
8,440 |
30,493 |
- |
||||||
|
Officers' and directors' compensation |
80,250 |
22,000 |
41,500 |
66,500 |
||||||
|
General and administrative |
245,432 |
112,361 |
279,529 |
92,718 |
||||||
|
|
|
Total expenses |
|
326,084 |
|
142,801 |
|
351,522 |
|
159,218 |
|
OPERATING LOSS |
|
(326,084) |
|
(142,801) |
|
(351,522) |
|
(159,218) |
||
|
|
Interest income |
|
100 |
|
324 |
|
24 |
|
23 |
|
|
Interest expense |
(25,711) |
- |
- |
(20,225) |
||||||
|
Loss on disposition and impairment of assets |
|
|
|
|
||||||
|
|
|
Total other income (expense) |
|
(108,093) |
|
(23,390) |
|
24 |
|
(59,259) |
|
LOSS BEFORE TAXES |
|
(434,177) |
|
(166,191) |
|
(351,498) |
|
(218,477) |
||
|
INCOME TAXES |
- |
- |
- |
- |
||||||
|
LOSS FROM CONTINUING OPERATIONS |
|
(434,177) |
|
(166,191) |
|
(351,498) |
|
(218,477) |
||
|
LOSS FROM DISCONTINUED OPERATIONS |
||||||||||
|
Loss from mining operations (net of income taxes of $0) |
|
|
|
|
||||||
|
NET LOSS |
|
(875,215) |
|
(428,320) |
|
(2,991,050) |
|
(658,086) |
||
|
OTHER COMPREHENSIVE INCOME (LOSS) |
||||||||||
|
Unrealized gain (loss) on market value of investments |
|
|
|
|
||||||
|
COMPREHENSIVE LOSS |
$ |
(990,988) |
$ |
(462,709) |
$ |
(2,991,050) |
$ |
(636,933) |
||
|
LOSS PER COMMON SHARE BASIC AND DILUTED: |
|
|
|
|
|
|
|
|
||
|
Net loss from continuing operations |
$ |
(0.27) |
|
(0.15) |
|
(0.36) |
(0.12) |
|||
|
Net loss form discontinued operations |
(0.28) |
(0.25) |
(2.69) |
(0.23) |
||||||
|
NET LOSS PER COMMON SHARE |
$ |
(0.55) |
$ |
(0.40) |
$ |
(3.05) |
$ |
(0.35) |
||
|
WEIGHTED AVERAGE NUMBER OF |
|
|
|
|
|
|
|
|
||
The accompanying notes are an integral part of these financial statements.
F-4
-25-
|
CADENCE RESOURCES CORPORATION |
|||||||||||||
|
Common Stock |
|
|
|
|
|
||||||||
|
Number |
|
||||||||||||
|
Balance, September 30, 1998 |
950,182 |
$ |
9,502 |
$ |
12,070,371 |
$ |
(700,000) |
$ |
(7,466,096) |
$ |
- |
$ |
3,913,777 |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
Balance, September 30, 1999 |
1,014,982 |
10,150 |
11,621,519 |
- |
(10,457,146) |
- |
1,174,523 |
||||||