<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB/A
                                 Amendment No. 1

[X]     Annual Report Pursuant to Section 13 or 15 (d) of the Securities
          Exchange Act of 1934 for the Fiscal Year Ended June 30, 1996

[ ]       Transition Report Under Section 13 or 15(d) of the Securities
               Exchange Act of 1934 for the Transition Period from
                         ____________ to _______________

                           Commission File No. 0-12761

                  BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
              ----------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

            Nevada                                    88-0180496
--------------------------------------------------------------------------------
(State or Other Jurisdiction of         (I.R.S. Employer Identification Number)
 Incorporation or Organization)

         970 East Main Street, Suite 200, Grass Valley, California 95945
--------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)

Registrant's Telephone Number Including Area Code:  (916) 477-5961

Securities Registered Pursuant to Section 12(b) of the Act:

    Title of Each Class                Name of Each Exchange on Which Registered
    -------------------                -----------------------------------------
            None                                         None

Securities Registered Pursuant to Section 12(g) of the Act:

                           Common Stock, No Par Value
                           --------------------------
                                (Title of Class)

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
requirement in the past 90 days.   X  Yes      No
                                  ---      ---

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will 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-KSB
or any amendment to this Form 10-KSB. [X]

The issuer's total revenues for its most recent fiscal year were $42,160.

The  aggregate  market  value of the voting stock held by  nonaffiliates  of the
Registrant as of September 23, 1996, was approximately $13,525,526.

Shares of common stock outstanding as of September 23, 1996:  16,913,681

Documents  incorporated by reference:  Portions of the  registrant's  proxy
statement  for the  annual  meeting  of  shareholders  to be  held  in 1997  are
incorporated by reference into Part III of this report.

Transitional Small Business Disclosure Format            X  Yes       No
                                                       -----     -----

                                       -1-


<PAGE>


        The Registrant hereby amends the following items,  financial statements,
exhibits or other  portions  of its Annual  Report on Form 10-KSB for the fiscal
year ended June 30, 1996, as set forth herein:

                                     PART I
                                     ------

ITEM 1 -  BUSINESS
          --------
                                  RISK FACTORS

Lack of Profitability;  Continuing Losses; and Doubtful Ability to Continue
as a Going Concern.

        The Company has incurred  losses of  $34,991,002  from inception to June
30, 1996 and had not realized  economic  production  as of June 30,  1996.  As a
result of the Company's cumulative losses from operations, and the fact that the
Company has not realized economic  production from its mineral  properties,  the
Company's independent auditor's report, dated August 9, 1996, for the year ended
June 30, 1996,  states that these conditions raise  substantial  doubt about the
Company's ability to continue as a going concern.  Management  expects losses to
continue  until mining  operations  are  sufficient  to process not less than 35
ounces of gold per day.  When and if mining  operations  reach that  level,  the
ability of the  Company to achieve net income is  dependent  on the grade of the
ore and on the price of gold.  See "Risk  Factors - Volatile  Market  Prices for
Gold." In response  to the  auditor's  report,  the Company is seeking to reopen
certain mining areas and increase production. However, there can be no assurance
that the Company's efforts will be successful.

Need for Additional Financing; Lack of Liquidity; No Material Revenues

        The mining industry is capital  intensive.  On or about the beginning of
the 1995-1996  fiscal year,  the Company  estimated its mining  development  and
operating  costs  in the  Lawry,  Irene  and Wolf  sites at the Ruby  mine to be
approximately $4 million for the fiscal year ended June 30, 1996.  However,  due
to increased costs associated with litigation the Company's operating costs were
higher than  originally  estimated at $4,010,966  for the fiscal year ended June
30,  1996.  During the  fiscal  year ended June 30,  1996,  the  Company  raised
$6,875,416  from the sale of  securities  pursuant  to  Regulation  S under  the
Securities Act of 1933 as amended ("Securities Act"). The shares of Common Stock
sold in such  offerings  were sold at a discount  of between  35% and 50% at the
closing  bid price of the Common  Stock on the day before the sale.  At June 30,
1996,  the  Company  had a working  capital  deficit  of  $2,328,674  and had no
material revenues from mining operations.  Additional financing will be required
in order for the  Company to cover its mining  and  development  costs in fiscal
1996-97 and to engage in full scale mining operation.  At this time, the Company
has no definitive  plans regarding  additional  financing,  but believes that it
will likely be obtained  through  equity  financing  such as stock  offerings or
joint  ventures.  No  assurances  can be given that the Company  will be able to
raise cash from additional  financing  efforts and, even if such cash is raised,
that it will be sufficient to satisfy the Company's capital requirements. If the
Company is unable to obtain  sufficient  funds  from  future  financings  and/or
operations,  the Company may not be able to achieve its business  objectives and
may have to scale back its development plans. In addition,  the Company may have
to sell its  assets  in order to meet its  obligations  and may lose some of its
properties for failure to make lease payments. In such event, the Company may be
required to seek protection under the bankruptcy laws which will have a material
adverse impact on the Company and the market value of the Common Stock.

Possible  Delisting of Securities  from Nasdaq  System;  Risks  Relating to
Low-Priced Stocks

The Company's Common Stock is currently  eligible for listing on Nasdaq. In
order to continue to be listed on Nasdaq,  however,  the Company  must  maintain
$2,000,000  in total  assets,  a $200,000  market  value of the public float and
$1,000,000 in total  capital and surplus.  In addition,  continued  inclusion on
Nasdaq  requires two  market-makers  and a minimum bid price of $1.00 per share.
Recently,  the  Company's  Common Stock has fallen below such minimum bid price;
however,  the Company will remain eligible for continued  inclusion in Nasdaq if
the market value of the public float is at least  $1,000,000 and the Company has
$2,000,000  in capital and  surplus.  As of June 30,  1996,  the Company met the
foregoing  public float and capital  surplus  requirements.  The failure to meet
these  maintenance  criteria  in the future may result in the  delisting  of the
Company's  securities  from  Nasdaq,  and  trading  if  any,  in  the  Company's
securities  would  thereafter  be conducted in the  non-Nasdaq  over-the-counter
market. As


                                       -2-


<PAGE>


ITEM 1 - BUSINESS - (Continued)
         --------

a result of such  delisting,  an investor  could find it more  difficult to
dispose  of, or to obtain  accurate  quotations  as to the market  value of, the
Company's  securities.  In addition, if the Common Stock were to become delisted
from trading on Nasdaq and the trading  price of the Common Stock were to remain
below $5.00 per share,  trading in the Common Stock would also be subject to the
requirements of certain rules promulgated  under the Securities  Exchange Act of
1934, as amended,  which require  additional  disclosure  by  broker-dealers  in
connection with any trades involving a stock  (generally,  any non-Nasdaq equity
security  that has a market  price of less than  $5.00  per  share,  subject  to
certain exceptions).  Such rules require the delivery,  prior to any penny stock
transaction,  of a disclosure schedule explaining the penny stock market and the
risks associated  therewith,  and impose various sales practice  requirements on
broker-dealers who sell penny stocks to persons other than established customers
and  accredited   investors  (generally   institutions).   For  these  types  of
transactions,  the broker-dealer must make a special  suitability  determination
for the  purchaser  and have  received the  purchaser's  written  consent to the
transaction prior to sale. The additional burdens imposed upon-broker-dealers by
such requirements may discourage  broker-dealers from effecting  transactions in
the Common Stock,  which could severely limit the market liquidity of the Common
Stock.

Lack of Proven or Probable Ore Reserves of Commercial Quantity at the Mines

        Although the Company has begun preliminary exploration activities on its
mining  properties,  the Company has not yet established  proven or probable ore
reserves.  Consequently, the Company has been unable to ascertain with certainty
whether  adequate ore  reserves  sufficient  for  profitable  operations  exist.
Management  believes,  however,  that  an  evaluation  of  the  Company's  mines
completed in May 1991  indicates the existence of sufficient  mineralization  to
warrant continued exploration. There can be no assurance that proven or probable
ore reserves will be established.

Government Regulation;  Environmental Matters

        The  Company's   mining   facilities   and  operations  are  subject  to
substantial  government  regulation,  including  federal,  state and local  laws
concerning mine safety, land use and environmental protection.  The Company must
comply  with  local,  state  and  federal  requirements   regarding  exploration
operations,  public safety,  employee health and safety, use of explosives,  air
quality,  water pollution,  noxious odor, noise and dust controls,  reclamation,
solid waste,  hazardous waste and wildlife as well as laws protecting the rights
of other property owners and the public.  Although the Company  believes that it
is in substantial  compliance with such regulations,  laws and requirements with
respect to the mines  currently  in  operation,  failure to comply  could have a
material adverse effect on the Company,  including substantial  penalties,  fees
and expenses,  significant delays in the Company's  operations and the potential
shutdown of the Company's operations.

        The Company  must also  obtain and comply with local,  state and federal
permits,  including waste discharge  requirements,  other environmental permits,
use  permits,  plans of  operation  and other  authorizations.  Obtaining  these
permits can be very costly and take  significant  amounts of time.  Although the
Company foresees no material problems or delays, no assurances can be given that
the Company can obtain the necessary permits or commence mining  operations,  or
that, if permits are obtained,  there will be no delay in the Company operations
or the Company can maintain economic production in compliance with the necessary
permits.

Competition

        The Company  operates in an industry  that is  characterized  by intense
competition  for  resources,  equipment  and  personnel.  Some of the  Company's
principal  competitors are  substantially  larger,  have  substantially  greater
resources,  and expend  considerably larger sums of capital than the Company for
exploration, rehabilitation and development.


                                       -3-


<PAGE>


ITEM 1 - BUSINESS - (Continued)
         --------

Risks in Mining Operations, Insurance Coverage and Uninsured Losses

        The  Company's  activities  are  subject  to all the  risk  and  hazards
commonly  associated  with  mining  operations,  including,  but not  limited to
unforeseen geological formations,  cave-ins, environmental concerns and personal
injury.   The  Company  has  insurance   covering   personal  injury,   workers'
compensation  and damage to property and  equipment,  although in view of recent
trends in damage  awards in personal  injury  lawsuits,  such  insurance  may be
insufficient  to  satisfy  large  losses  or  judgments   against  the  Company.
Furthermore,  certain  types of insurance  coverage  (generally  against  losses
caused  by  natural  disasters  and  Acts of God)  are  either  unattainable  or
prohibitively  expensive.  Substantial  damage  awards  against  the  Company or
substantial  damages not covered by insurance will affect the Company's  ability
to  continue as a going  concern  and may force the  Company to seek  protection
under the federal bankruptcy laws.

Volatile Market Prices for Gold

        The  price of gold has a  material  effect  on the  Company's  financial
operations.  Following  deregulation,  the market price for gold has been highly
speculative  and volatile.  Since the end of 1987 the price of gold has declined
from a high of approximately  $500 per ounce to approximately  $390 per ounce at
September  15,  1996.   Instability   in  the  price  of  gold  may  affect  the
profitability of the Company's  operations.  No assurances can be given that the
Company's  mines contain ore in commercial  quantities  or, if ore in commercial
quantities  is  discovered,  that gold could be produced  at a profit  given the
recent market price range for gold.

Litigation; Administrative Proceedings

     The Company is involved in various litigation matters and is the subject of
an informal inquiry being conducted by the staff of the Commission in connection
with the  Company's  financing  activities  pursuant to  Regulation  S under the
Securities  Act. An adverse  determination  of one or more of such matters could
have a material adverse effect on the Company. See "Legal Proceedings."

Proposed Changes to Mining Laws

        Both the United  States  House of  Representatives  and the Senate  have
passed bills that seek to reform the General  Mining Law of 1872,  which governs
exploration  and mining  activities on federal  lands.  The pending  legislation
contains  strict  new   environmental   protection   standards  and  conditions,
additional  reclamation  requirements  and extensive new procedures.  Both bills
would also impose  royalties on gold production from currently  unpatented mines
rather than the current annual  assessment  work  requirement  ($100 per claim).
Although  the  Company  expects  its initial  production  to come from  patented
(rather  than  unpatented)  claims,  any future  production  from the  Company's
unpatented  mining  claims may be subject to an  additional  royalty  payment or
other costs, if revisions to the 1872 Mining Law are implemented.

        Brush  Creek  Mining  and  Development   Co.,  Inc.  (the  Company)  was
incorporated  in 1982 and is engaged in the  exploration and development of gold
mining  properties.  The Company  currently owns the Brush Creek,  Carson,  High
Commission,  Gardner's Point and Pioneer Mines. The Company also has leases with
options to purchase the Ruby,  Rising Sun and Kate Hardy and Omega Mines. All of
these mines,  except for the Gardner's  Point and Pioneer Mines,  are located in
the  Allegheny-Forest-Downieville  mining  districts on the western slope of the
Sierra Nevada mountain range in northern  California and comprise  approximately
6,300 acres.  Because of the  proximity of the mines to each other,  the Company
believes it can efficiently  mine and operate these  properties since it will be
able to take  advantage  of  economies  of  scale  by  sharing  personnel,  mill
facilities  and  equipment.  Because the  Gardner's  Point and Pioneer Mines are
located outside the  Allegheny-Forest-Downieville  mining districts, the Company
will most likely seek to enter into a joint venture to operate these mines.

     Based on previous studies completed in December 1990,  management  believed
that the Company's mines had sufficient  mineralization  to warrant  feasibility
studies and in January 1991 engaged Keewatin Engineering to conduct and


                                       -4-


<PAGE>


ITEM 1 - BUSINESS - (Continued)
         --------

document those studies.  The Company  received Phase I and Phase II reports
from Keewatin  Engineering,  the Phase II report being dated  October 1992.  The
Phase I and Phase II reports were  exploration  and  development  reports of the
Allegheny-Forest-Downieville  mining  district  and  mining  properties  of  the
Company, including an evaluation of the underground hard-rock system and surface
geology studies to identify precious metal rock units, and additional structural
geology  studies within the district.  The Ruby Mine was the Company's  original
focus because of its rich  production  history and because permits were in place
for placer production and hard rock exploration.

        The Company  filed its plan of  operation  for the Ruby and Carson Mines
with the United  States  Forestry  Department,  and has obtained  all  necessary
permits for continued  production and milling at the Ruby Mine of up to 225 tons
of material per day. In order to continue  the  underground  development  of the
Carson vein system, a more extensive geologic  evaluation using diamond drilling
on surface and subsurface  should be completed.  As this was a capital intensive
expense the Company  decided to detain  further  development  of the Carson Mine
until the Company decides to integrate this program into its future  development
budget.

        From February 1992 when the Company began limited production at the Ruby
Mine to  December  1992 when the  Company  ceased  production  due to  inclement
weather,  the Company  milled  approximately  7,300 tons of  mineralized  placer
material  and  recovered  approximately  200 ounces of gold,  an amount which is
inconsistent  with  historical  production at the Ruby Mine in the early 1940's.
However,  the Company's  management  believes that these preliminary results are
too small to be a reliable  representative sample of the expected placer grades.
More important, the Company has decided to focus on the lode deposits, which are
readily  accessible  and of  considerably  higher  grade.  The  Company  has not
completed  sufficient  drilling and sampling to establish proven or probable ore
reserves  at the Ruby Mine.  This is partly due to a lava cap of between 210 and
950 feet of overburden,  which makes surface drilling inappropriate,  and partly
due to a lack of sufficient capital to fund a systematic drilling program.

Focus on Core Business

        Management  believes that the future of the Company's mining lies in the
Downieville-Allegheny  area of northern  California  where the Company  controls
nine gold mines.

        During  fiscal  1996,  the Company  focused  its mining and  exploration
efforts  in  three  areas.  The  Lawry  side  of the  Ruby  mine  was  reopened.
Exploratory  mining and milling of small guts in the gravel proved  uneven.  One
day, 36 yards of material yielded more than twenty ounces of gold, including two
large nuggets, which were over two ounces each. Other days, the runs were nearly
blank.  In an effort to intersect the main  channels in the area,  the Pilot and
Mt.  Vernon,  the Company began  driving a drift toward the east.  Seismic tests
indicate the potential for a depression  in the bedrock  approximately  260 feet
from the start of the drift.

        The Wolf and Irene veins in the Ruby Mine were also explored. Due to the
presence of visible  gold,  the Company began sinking on the Irene vein from the
two-hundred foot level. After sinking approximately 15 feet, significant visible
gold was  encountered on the left-hand rib of the vein.  However,  40 feet down,
the vein split into several  separate  smaller  veins.  The decision was made to
focus  hard-rock  mining on the Wolf vein which appears to be the main structure
in the area.

        The Wolf vein was mined from track  level to a depth of first,  65 feet,
and  then  200  feet in the  late  1930's.  The  published  grade of the ore was
approximately .37 ounces of gold per ton of ore. The advent of World War II, and
U.S. Government limiting orders, ultimately caused mining in the vein to stop.

     The Company  followed a  previously  begun winze from the 200 foot level of
the vein  heading  for the 275 foot level while  simultaneously  mining the left
over ore  between  the 200 foot level and 65 foot  level.  Because  all the high
grade  pockets and the best of the mill rock had been mined on that level in the
1930's,  the  Company  did not  expect to match the ore grade  published  in the
1930's. Seventy-four ounces of gold were extracted from 817 tons of ore.


                                       -5-


<PAGE>


ITEM 1 - BUSINESS - (Continued)
         --------

     The Company  began to sink on the Wolf vein in June 1996.  As the winze got
deeper, the vein widened indicating a stronger structure. The 275 foot level and
virgin ore was reached in August 1996.  The Company is working at that level and
hopes to duplicate the published grade of the 1930's.  There can be no assurance
that the Company will be successful in its efforts.  See "Risk  Factors--Lack of
Proven or Probable Ore Reserves of Commercial Quality at the Mines."

     Al Wasley, a seasoned mine  superintendent with a long history of mining in
the Mother-Lode district,  was hired as mine superintendent.  His first task was
to replace a poorly designed hard-rock mill with one appropriate for Mother-Lode
ore. As a result of Mr. Wasley's  efforts,  the Company now has a hard-rock mill
circuit that includes: a jaw crusher,  cone crusher, ball mill, jig, centrifugal
force bowls and tables.  The Company also uses its own  equipment to  amalgamate
and pour the gold.

Subsequent Events

     In July 1996, the Company  successfully  obtained an order on its motion to
pierce the corporate veil of  Consolidated  Sierra Gold Mines,  Inc. in Case No.
52943 in the Superior  Court of the State of California in and for the County of
Nevada.  As a result, F. James and Simone Anderson are personally liable for the
judgment  obtained by the Company in the case against  Consolidated  Sierra Gold
Mines,  Inc.  (see "Legal  Proceedings").  A judgment on the order  piercing the
corporate veil was entered on August 5, 1996.

     The  Company  began  crosscutting  the 265 foot  level of the wolf  vein on
strike  in  late  July  1996.  Heading  south,   favorable   mineralization  was
encountered, including the presence of galena, pyrite and arsenopyrite. A sample
of the  arsenopyrite  was assayed  and found to contain  more than two ounces of
gold per ton. Heading north, visible gold was encountered. Seven six foot rounds
taken in that  direction  showed  increases in the amount and  coarseness of the
gold.  The Company  expects to begin running the hard-rock mill 12 hours per day
to process the ore.

     On  September  13,  1996, a raise was run from 255 feet in the Lawry placer
drift into the gravel overhead.  Samples will be run through the placer mill and
the grade is expected to be available in November 1996.

     In July 1996, the Company  issued  695,652  shares of the Company's  Common
Stock in  connection  with an offering in May 1996  pursuant to  Regulation S in
which the Company  entered into an  investment  agreement  containing a purchase
price  adjustment  clause that  required the Company to issue such shares if the
Company's low bid price fell below one dollar during the valuation  period.  The
Company was also required to place the 695,652 shares with an escrow agent
until the end of the valuation  period.  The valuation  period  expired on
September 27, 1996 and the Company has received notice that the purchaser claims
it is entitled  to 661,569  shares of the  695,652  shares  held in escrow.  The
Company is  evaluating  the  purchaser's  claim to  determine  if the Company is
required to issue the claimed shares to the purchaser.

     Also in July 1996,  the Company was required to issue 57,523  shares of the
Company's  Common Stock in connection with an offering in May 1996,  pursuant to
Regulation  S in which the Company  entered  into an  agreement  with a purchase
price adjustment clause.

     In September 1996, the Company  received  $250,000 from the sale of 757,576
shares of the Company's Common Stock,  pursuant to Regulation S. The shares were
sold at 50% of the closing bid price on the day before the sale.

Employees

        The  Company  has 59  full-time  employees,  and  operates  in only  one
industry segment.

                                       -6-


<PAGE>


ITEM 2 - PROPERTIES
         ----------

     The  following is a discussion of the mining  properties  controlled by the
Company.  The Company began  geological  and  engineering  studies on all of its
mining  properties in January 1991.  The Company  received  Phase I and Phase II
Reports,  the  most  recent  of which is dated  October  1992,  following  these
studies.  The Company has not completed  sufficient  geological  activities  and
drilling to establish proven or probable ore reserves for its mines. The Company
has no present  intention  of  conducting  further  geological  exploration  and
drilling to establish ore reserves for its mining properties.

     The Company began limited production at the Wolf vein and Lawry area placer
gravels at the Ruby Mine during the fiscal year ended June 30, 1996.  Production
of  approximately  100 tons of ore per day is expected in the fiscal year ending
June 30, 1997.  Ore taken from the Wolf and Lawry will be milled on site.  
However,  there can be no assurance that production  levels will reach 100 tons 
per day in the 1997  fiscal  year.  Further  work at these  mines is  subject to
the Company receiving additional financing. The Company expects that if the 
required financing is obtained,  it  estimates it will cost  approximately  $4 
million to perform the intended work and to continue operations at the Ruby 
Mine. There can be no assurance that the Company will obtain the required  
financing or any part thereof. In the event the Company is unable to raise the 
required financing, the Company will scale back its operations.  See "Risk  
Factors--Need For Additional Financing; Lack of Liquidity; No Material 
Revenues."

Brush Creek Mine

     The Brush  Creek Mine is an  underground  lode gold mine  located in Sierra
County,  California,  approximately eight miles west of the town of Downieville,
California. It consists of eight patented mining claims comprising approximately
245 acres and 45 unpatented  mining claims  comprising  approximately 960 acres.
The  Company's  investment  in this  property is  $2,062,629  at June 30,  1996,
consisting  of  $408,496 of land and land  options,  $1,460,669  of  development
costs, and $193,464 of mining equipment.

     All of the unpatented  claims in the property  package are in good standing
with  assessment  work  documents  for 1996  filed  with both the Bureau of Land
Management  (BLM) in Sacramento and Sierra County in  Downieville.  The patented
claims  of the  Brush  Creek  Mine  are  not  fully  permitted  for  underground
exploration,  development and production.  A waste discharge  permit is required
and a plan of operation  must be filed with the U.S.  Department of Forestry and
Sierra  County  before full scale  mining may begin.  The Company has no current
plans to obtain such a permit or file a plan.

     The Brush  Creek Mine was opened in 1868 when the old Brush Creek Shaft was
sunk to a depth of  approximately  600 feet.  Reports indicate that between 1868
and 1870 it produced approximately 19,632 ounces of gold. Between 1870 and 1944,
operations at the Brush Creek Mine were  limited.  In 1870, it was closed due to
poor ground conditions, flooding of the shaft and a fatal accident. In 1922, the
Ante Up Mining Company drove a 2,200 foot drift which eventually  connected with
the old Brush  Creek  tunnel.  In 1927,  shafts were driven into the Brush Creek
Mine by the Kate Hardy Mining Company. Between 1870 and 1994, production records
are sparse.  Reports  during this period  indicate  that 223 ounces of gold were
produced in April of 1929.  Between 1944 and 1950, A.L.  Merritt made additional
improvements  to the Brush Creek Mine  including  the sinking of the Golden Gate
Shaft to a depth of  approximately  647 feet.  Mining activity  occurred between
1978 and 1979 when new equipment was installed and a new level was started. This
activity  ended when the Brush Creek Mine was flooded due to a power  failure in
1979.

     In April of 1982,  the Company leased the Brush Creek Mine and, in February
of 1984,  it purchased  all patented  and  unpatented  claims of the Brush Creek
Mine. The Company continued limited  development and production until the end of
1985 when the Brush Creek Mine was closed. Until the Brush Creek Mine was closed
in 1985,  work was carried out on an  extension of the old Brush Creek Shaft and
ore  pockets  were  exploited  between  the  410 and 465  foot  level.  A new 60
tons-per-day mill was assembled near the portal of the Brush Creek tunnel and 14
holes  totaling  4,950  feet were  cored  from  various  underground  locations.
Subsequent mining produced approximately 700 to 1,000 ounces of gold.


                                       -7-


<PAGE>


ITEM 2 - PROPERTIES - (Continued)
         ----------

     Both upper and lower  adits are  reinforced  with  concrete  and have steel
security  doors.  The Brush Creek Mine has 30-pound rail, and electrical and air
lines  on both  levels.  The  rail is in good  condition.  There is also a steel
corrugated  equipment  building and a small  changing room for miners located on
the property.

     Water  normally  accumulates  from  underground  sources in the Brush Creek
Mine.  This water can be pumped in  sufficient  quantity  and quality for mining
operations  and the Company  anticipates  that it will be sufficient to meet its
mining and milling needs. In addition to underground water, two streams flow all
year on the property.

     The Brush Creek Mine is accessible by a graveled road  maintained by Sierra
County.  Snow removal is performed during the winter by the Company.  Electrical
power is supplied by Pacific Gas and Electric Company, a public utility.

Gardner's Point and Pioneer Mines

     The  Gardner's  Point and Pioneer Mines include two placer mines located on
the same  parcel of land  comprising  approximately  700 acres.  These mines are
approximately  10 air miles northwest of Downieville and three air miles east of
La Porte in Sierra County,  California in the Port Wine Gold Mining Region.  The
Gardner's  Point and  Pioneer  Mines are  approximately  12.5 air miles from the
Company's  other  mines.  These  mines  consist of three  patented  claims,  the
Pioneer, the Comet, and the Challenge,  and two unpatented claims. The Company's
investment  in this  property is  $1,084,325  at June 30,  1996,  consisting  of
$185,477 of land and land options,  $770,327 of development  costs, and $128,521
of mining equipment.

     All of the unpatented  claims in the property  package are in good standing
with  assessment  work  documents for 1996 filed with both the BLM in Sacramento
and Sierra County in Downieville.  A new operating  permit and a waste discharge
permit are required  before full scale mining may begin at the Pioneer Mine. The
Company has no current plans to obtain such a permit.

     Gold was first  discovered in the area of the  Gardner's  Point and Pioneer
Mines on Rabbit Creek in 1850 at the approximate location of the present town of
La Porte.  After 1885,  drift mining  continued  along portions of the Port Wine
Tertiary Channel, but progressively diminished after the turn of the century. In
1934,  renewed activity occurred as a result of an increase in the price of gold
mandated  by the federal  government.  Following  the  outbreak of World War II,
however, the federal government brought a halt to gold mining activities.

     In 1980,  the higher price of gold led to the search for and leasing of the
Gardner's  Point and pioneer Mines by Mr. L.F.  Goodson and the Gardner's  Point
Mine,  a  California  Limited  Partnership.  Appealing  characteristics  of  the
Gardner's  Point and  Pioneer  Mines  were the  unusually  large  amount of flat
working space and areas of low overburden.

     In 1985, the Brush Creek Joint  Venture,  consisting of the Company and two
other companies,  purchased all patented and unpatented  claims of the Gardner's
Point and Pioneer Mines, and it produced approximately 2,800 ounces of gold from
its operations  before  deciding in August of 1988 to suspend  operations at the
Gardner's  Point  and  Pioneer  Mines  and  reduce  operations  to  a  care  and
maintenance  level.  The  Gardner's  Point and Pioneer  Mines were  subsequently
purchased by the Company in connection with the change of control of the Company
in 1989.

     The  Gardner's  Point and  Pioneer  Mines have a  Yuba-Lowe  trommel  which
contains new interior screens and a water hutch. Additionally,  the property has
a two-story  gold  recovery  building  which  houses a large  Deister  table and
associated equipment for gold recovery. The Company spent approximately $100,000
to upgrade and improve water quality measures on these mines.

     The Gardner's  Point and Pioneer Mines are  accessible  year round by roads
maintained  by Sierra  County.  However,  the  Company is  responsible  for snow
removal in the winter.  Existing access to the Gardner's Point and Pioneer Mines
is from La Porte, California through the site of Queen City. It is also possible
to reach these mines


                                       -8-


<PAGE>


ITEM 2 - PROPERTIES - (Continued)
         ----------

from  Challenge,  California  through  Union Hill.  Access to the Gardner's
Point and Pioneer Mines for heavy  equipment is by United States Forest  Service
Roads from Strawberry Valley, California.  Power is generated on the site of the
Gardner's Point and Pioneer Mines.

     The Brush Creek Joint Venture  submitted  applications to Sierra County and
the U.S. Forest Service in March of 1987 to initiate  production activity at the
Pioneer Mine. However,  the authorities  determined that an Environmental Impact
Report (EIR) was necessary before exploration  permits could be granted.  Sierra
County,  acting  as the lead  agency,  contracted  with an  engineering  firm to
complete the study. The draft EIR has been completed,  distributed to the public
and  interested  agencies,  and comments have been returned and addressed by the
Company.  A final EIR must be submitted to and approved by Sierra  County before
production  at the Pioneer  Mine may begin.  The Company has not  submitted  the
request to continue the EIR process,  and does not intend to do so at this time.
Currently, the property is in a care and maintenance status.

Ruby Mine

     In December of 1989,  the Company issued 100,000 shares of its Common Stock
which it used to  purchase  an option  to lease  the Ruby  Mine and to  purchase
equipment  located on the site.  In March of 1990,  the Company  paid $50,000 to
extend the option period to April 30, 1990. In April of 1990, the Company issued
an additional  125,000  shares of its common stock in order to extend the option
period to June 30, 1990.  The Company  exercised  the option on June 30, 1990 by
paying the owner $150,000 cash, which represents lease  consideration of $50,000
and a $100,000  down payment on the purchase of the  equipment.  To complete the
equipment purchase,  the Company agreed to pay an additional $100,000 in cash in
three  equal  semi-annual  installments,  which  have been paid.  The  Company's
investment  in this  property is  $4,554,575  at June 30,  1996,  consisting  of
$327,336  of land  and  land  options,  $2,251,714  of  development  costs,  and
$1,975,525 of mining equipment.

     Pursuant  to the terms of the lease,  which was most  recently  modified on
November  1, 1994,  the  Company  must pay a 7-1/2% net  smelter  royalty on all
minerals  produced from lode  deposits and 10% on minerals  produced from placer
deposits  with a minimum  lease  payment of $10,000 per month  through  June 30,
2000,  subject to an adjustment based on the Consumer Price Index. The lease may
be  extended  for  two  additional  five-year  periods  or the  property  may be
purchased for $4,000,000 subject to adjustment based on the Consumer Price Index
payable by June 30,  2000.  All payments  made  subsequent  to July 1, 1995,  to
acquire the  lease/option  and all payments  made under the lease  subsequent to
July 1, 1995, will be credited  against the option  purchase price.  Performance
under the lease purchase agreement is secured by the Company's equipment used in
the mining operations on the leased premises.

     The Ruby  Mine is an  underground  placer  and lode  mine  located  between
Downieville and Forest City, California in Sierra County. The Ruby Mine consists
of two patented  claims  comprising  approximately  435 acres and 37  unpatented
claims comprising  approximately 1,150 acres. The mine encompasses four distinct
underground river channels and three known lode gold veins.

     All of the unpatented  claims in the property  package are in good standing
with  assessment  work  documents for 1996 filed with both the BLM in Sacramento
and Sierra County in Downieville. The patented claims of the Ruby Mine are fully
permitted for underground  exploration,  small scale development and small scale
production.  However,  a  waste  discharge  permit  is  required  and a plan  of
operation must be filed with the U.S.  Department of Forestry before  operations
can be expanded beyond the current 225 tons-per-day.

     Production  began at the Ruby Mine in the late  1870's  when  approximately
50,000  ounces of gold were  extracted  from what  became  known as the Old Ruby
Channel.  In the 1930's,  the Ruby Mine was  purchased by Clarence L. Best,  who
produced gold from the mine until it was closed in 1942 by War Production  Board
Order L- 208.  High labor rates and a gold price  freeze kept the Ruby Mine from
re-opening.  In the 1950's, the Ruby Mine was sold and was subsequently mined by
small operators  until the mid-1970's.  In 1979, the mine was leased to 

                                       -9-


<PAGE>


ITEM 2 - PROPERTIES - (Continued)
         ----------

Alhambra Mines,  Inc. After limited  rehabilitation,  Alhambra Mines,  Inc.
failed to make lease payments and the Ruby Mine reverted to its owner.

     The majority of the  historical  production  at the Ruby Mine has come from
underground placers. Since 1942 virtually no new ground has been opened and most
of the  attention  has been directed at the Wolf lode vein and the Big Bend area
of the Black Channel, a famous underground  placer. Due to extensive  overburden
of up to 700 feet on the property, the only way new reserves will be established
is from underground, utilizing mapping, sampling, and drilling techniques and by
opening new ground.

     The Ruby Mine  hosts a gold  recovery  washing  plant  with all  associated
equipment,  a  mill  building,  and  a  separate  compressor  building  in  good
condition. The Ruby Tunnel has been rehabilitated,  retimbered and refitted. The
underground  workings  include 30-pound mine rail and electrical and ventilation
equipment. The Ruby Mine has compressors,  generators and an electric train with
sufficient  haulage capacity to feed a 200 ton  per-day-mill.  There are 21 mine
ore cars and a Mancha locomotive in good condition on the property.

     The Ruby Mine is  accessible  via State  Highway 49 to Pliocene Road to the
Henness Pass paved road then via five miles of paved and gravel  road.  Power is
generated on the site.

     The Company  filed its plan of operation for the Ruby and Carson Mines with
the United States Forestry  Department,  and has obtained all necessary  permits
for  production  and milling at the Ruby Mine of up to 225 tons of material  per
day. The mine, if operated, however, has been operating at less than 225 tons of
material per day. From  February 1992 when the Company began limited  production
at the Ruby Mine to December  1992 when the  Company  ceased  production  due to
inclement weather,  the Company milled  approximately  7,300 tons of mineralized
material  and  recovered  approximately  200 ounces of gold,  an amount which is
inconsistent  with  historical  production at the Ruby Mine in the early 1900's,
and is insufficient in total quantity to be a reliable  representative sample of
the expected grade of the mineralized gravel. Consequently, no assurances can be
given that  future  production  will  result in grades of similar or  historical
amount.  Furthermore,  the  Company  has  not  completed  sufficient  geological
activities and drilling to establish proven or probable ore reserves at the Ruby
Mine.  The Company has no present  intention of  conducting  further  geological
exploration  and  drilling to  establish  ore  reserves at the Ruby Mine at this
time.

     From  December  1992 when the Company  ceased  production  at the Ruby Mine
until  July 2,  1993,  when the  Company  recommenced  production,  the  Company
rehabilitated  and  re-timbered  approximately  one  and  one-quarter  miles  of
horizontal  haulage  tunnel  supports  and a 210 foot  vertical  shaft  for mine
safety,  built underground roads for use by diesel loaders recently purchased by
the Company, constructed a new sixty-foot steel head frame and installed a hoist
over  the  Lawry  Shaft at the  Ruby  Mine,  installed  a  complete  underground
ventilation  system and electrical system at the Lawry Shaft,  constructed a new
waste water treatment system for use at the mill site, modified and enlarged the
structures  and ore  bins at the  mill  site,  and  removed  two  main  mill and
warehouse structures at the Carson Mine.

     The Company commenced production in the Lawry Shaft, a new area of the Ruby
Mine, on July 2, 1993,  and in August 1993  recommenced  production in the Black
Channel of the Ruby Mine where most of the production  occurred between February
1992 and  December  1992.  The Company has  completed  the sixty foot steel head
frame at the Lawry Shaft and set-up  electrical  lines and  constructed  a hoist
house, with associated hoist equipment.

        The Company recommenced  production in the Lawry Shaft on June 26, 1994.
Underground  programs consisted of driving  exploration drifts towards potential
primary  channels.  Sampling  programs  were  undertaken  to allow the mining of
approximately 5,000 tons of material. The Company drove a total of approximately
430 feet downstream and 520 feet upstream in the Lawry Channels. The Lawry shaft
is currently under care and maintenance as the Company  concentrates on its hard
rock targets.

                                      -10-


<PAGE>


ITEM 2 - PROPERTIES - (Continued)
         ----------

Rising Sun Mine

     In December of 1989,  the Company  issued 10,000 shares of its common stock
for an option to lease  the  Rising  Sun Mine.  On June 30,  1990,  the  Company
exercised  the option upon  payment of $20,000 cash and entered into a five year
lease with an option to purchase.  Pursuant to the terms of the lease, which was
most recently  modified on November 11, 1994, the Company must pay a net smelter
royalty  of 8% on all  minerals  produced  with a minimum  royalty of $4,590 per
month,  through June 30, 2000,  subject to an  adjustment  based on the Consumer
price index.  The property may be purchased for $1,000,000  payable on or before
June 30, 2000,  subject to  adjustment  based on the Consumer  Price Index.  All
payments made to acquire the  lease/option and all payments made under the lease
will be credited against the option purchase price. The Company's  investment in
this  property is $139,091 at June 30,  1996,  consisting  of $9,111 of land and
land options and $129,980 of development costs.

     The Rising Sun Mine is an underground lode gold mine located  approximately
three miles  southeast of  Allegheny,  California.  It consists of four patented
claims  comprising  approximately 52 acres,  three unpatented  claims comprising
approximately 60 acres, and one placer claim comprising 10 acres.

     All of the unpatented  claims in the property  package are in good standing
with  assessment  work  documents for 1996 filed with both the BLM in Sacramento
and Sierra County in  Downieville.  There are  currently no existing  permits to
mine either the patented or unpatented claims.

     The Rising Sun Mine produced gold as early as 1882. By 1883 two tunnels had
been driven and  production is estimated to have exceeded  3,000 ounces of gold.
The Rising Sun Mine  closed  after an  attempt  to design and  construct  a mill
failed  in  the  1890's.   During  the  early  1960's  the  Mine  re-opened  and
considerable  drilling and raising was  conducted in an effort to intersect  the
Rising  Sun  Vein and  Cedar  Vein.  Mining  ceased  as  custom  milling  became
prohibitively expensive. In 1960, the Rising Sun Mine was acquired by the Rising
Sun Development  Company.  In 1973, G.R. Beechel completed a mapping program and
compiled a list of recommendations for further work.

     There is a generator, compressor, rock drills, and a mucking machine on the
property.  The overall  ground  condition  of the mine is good.  Since the early
1960's,  the Rising Sun Mine has operated on a care and maintenance  level only.
Currently,  however, the Company is driving around a caved in area in an attempt
to get to the face of the drift where high-grade assays have been reported.  The
Company also is attempting to find the  potentially  high grade  intersection of
the Belmont and Rising Sun veins.

     The Rising Sun Mine is accessible  via Kanaka Creek Road, a graveled  road.
The property will require on-site generators to supply power.

Carson Mine

     The Carson  Mine is located in Sierra  County,  California,  on the western
slope of the Sierra Nevada Mountain Range. Access to the Carson Mine is by a two
mile dirt road, which connects the Henness Pass Road, an all weather paved road.
The nearest large population center is Grass Valley, about 40 miles south of the
site.  Downieville  is located  two miles north of the Carson  Mine.  Allegheny,
California  is  approximately  four miles south of the Carson  Mine.  The Carson
Mine, also known as the City of Six Mine, is an underground mine and consists of
21  unpatented  lode  claims  and  two  unpatented   placer  claims   comprising
approximately 550 acres. The Company's investment in this property is $3,294,424
at June 30, 1996, consisting of $2,199,858 of land and land options,  $1,051,731
of development costs, and $42,835 of mining equipment.

     The City of Six gravel  deposit  was  discovered  at the site of the Carson
Mine in the 1850's.  The property  was  operated as a hydraulic  pit until 1886,
when hydraulic mining was stopped in California by judicial  mandate.  From 1860
to 1879, the gravel was worked  underground  by drift mining.  Reports from 1879
indicate  that a  channel  had  been  tunneled  from the City of Six pit to Rock
Creek, a distance of about one mile.


                                      -11-


<PAGE>


ITEM 2 - PROPERTIES - (Continued)
         ----------

     Work began on the Carson  Mine in the mid  1920's.  By 1930,  two adits had
been driven on the Carson Mine vein;  the upper adit 925 feet and the lower adit
about 2,600 feet. The two adits are separated  vertically by 460 feet and on the
dip by 500 feet.  From 1932 to 1942, a 500 foot raise was  constructed  from the
lower level to the upper level. The raise was used as an ore pass,  allowing ore
mined on the upper level to be transported from the lower level.

     A 30 foot  winze is  operable  in the same  areas as the  raise.  The winze
accesses the vein about 25 feet downdip from the upper level.  The vein has been
drifted on for 60 feet to the south from the winze. A 14-foot cross cut connects
the main raise  with the winze sub  level.  The main rise is open from the winze
sub level  downward,  for about 350 feet on the vein. The bottom 125 feet of the
raise  above the lower  level is plugged  with ore and muck as is that above the
upper level.  The underground  portion of the property has 20-pound mine rail in
good condition.

     In the  early  1980's,  the  Carson  Mine was sold to  Golden  Lion  Mining
Corporation.  Golden Lion's work consisted of  rehabilitation of the upper adit,
construction  of a 30 foot winze in the upper adit,  and limited  stopping  both
above  and  below  track  level in the upper  workings.  In 1986 and 1987,  a 50
tons-per-day  gravity  circuit mill was  constructed  on the property.  In 1988,
Golden Lion  Mining  Corporation  leased the Carson  Mine to the Ireland  Mining
Corporation, which operated the Carson Mine to July of 1990 when it was acquired
by the Company.

     On July 31, 1990, the Company  acquired the Carson Mine,  together with the
improvements,  inventory and equipment located on the property, from Golden Lion
Mining for a total consideration of approximately $2,299,000.  The consideration
paid to Golden Lion Mining consisted of $50,000 cash, an $89,000 promissory note
due August 15, 1990, 502,070 shares of common stock, and an agreement to deliver
61.3 ounces of gold bullion by August 1, 1992.  In addition,  Golden Lion Mining
had  forward  sold  2,000  ounces  of  gold  to  four  individuals.  As  further
consideration,  the Company assumed Golden Lion Mining's forward sell obligation
by issuing a total of 781,072 shares of its common stock.  Finally,  the Company
issued  976,000  shares  of  common  stock  to  Ireland  Mining  Corporation  in
consideration for Ireland Mining Corporation terminating its lease and option to
purchase the property with Golden Lion Mining.

     All of the unpatented  claims in the property  package are in good standing
with  assessment  work  documents for 1996 filed with both the BLM in Sacramento
and Sierra County in Downieville.  However, a waste discharge permit is required
and a plan of  operation  must be filed  with the U.S.  Department  of  Forestry
before full scale mining may begin.

     The Carson Mine previously had a 50 tons-per-day gravity flow mill and mill
housing which was in need of  engineering  and  structural  work to meet current
building  codes.  A large  seven-bedroom  cabin,  a smaller  cabin that has been
improved and a mobile home are  currently  located on the Carson Mine  property.
Although not currently  planned for production in the next fiscal year, when the
Company does begin  production  at the Carson Mine it intends to mill the ore at
the Ruby mill site.  Power at the Carson  Mine is  supplied  by Pacific  Gas and
Electric Company, a public utility.

     The upper level of the Carson Mine is fully  supplied and  operational  for
small  scale  operations.  Air and water  lines  are  installed  throughout  and
adequate  natural  ventilation  is  assisted  by a 12 foot  fan.  This  level is
serviced by a 925 foot traced adit, the entire length of which is open. A raise,
which was once open to the surface  (125 ft.),  is present  about 600 feet in by
the portal. A north-south subdrift is present off the raise for 150 feet.

     On  July  24,  1990,  the  Company  obtained  from  an  independent  mining
laboratory 64 channel  samples of ore from the Carson Mine.  Each sample weighed
approximately 25 pounds and had an average width of over 4.6 feet. Samples taken
yielded an overall uncut weighted  average of 5.45 ounces of gold per ton. These
substantial-grade  ore shoots  were  tested in two levels with a distance of 400
feet vertical  separation.  All of the assays occurred within a strike length of
125 feet.  On August  29,  1990,  the  Company  received  confirmation  of these
substantial  grades  from  a  separate   independent   mining  laboratory.   The
confirmation report consisted of nine channel sample checks of ore

                                      -12-


<PAGE>


ITEM 2 - PROPERTIES - (Continued)
         ----------

taken from the Carson Mine.  Although no assurances can be given that these
substantial  grades will  continue  through the length of the entire  vein,  the
strike length potential of this vein is believed to be 4,100 feet and is thought
to extend into additional ground currently  controlled by the Company.  In order
to determine the magnitude of its discovery and to evaluate its findings further
the  Company  has  completely  mapped and sludge  drilled the vein system in the
exposed  portions  of the Carson  vein.  Because  the  Company  decided to begin
production at the Ruby Mine, the Company  postponed  further  development at the
Carson Mine.

     The Company  also has 16 lode claims  named the BC Claims which are located
on the northern border of the Carson Mines.

High Commission Mine

     In September of 1990, the Company entered into an agreement to purchase the
High Commission Mine for 50,000 shares of the Company's common stock and $30,000
in cash. The Company's investment in this property is $107,993 at June 30, 1996,
consisting  of  $101,875  of land and land  options,  and $6,118 of  development
costs.

     The High  Commission  Mine is located  in the  Allegheny-Forest-Downieville
mining  districts in Sierra County,  California,  approximately  one-half to two
miles northeast of Downieville.  The High Commission Mine is an underground mine
and  consists  of 22  unpatented  lode  claims  comprising  440  acres  and five
unpatented  placer claims  comprising 500 acres.  The  unpatented  claims in the
property  package are in good standing with assessment work documents filed with
both the BLM in  Sacramento  and  Sierra  County  in  Downieville.  Its  current
configuration  is a  consolidation  of four past producing gold mines.  The High
Commission, the Big Ledge, the Mexican, and the Golden Star.

     The High Commission Mine was discovered in 1888 and produced  approximately
1,234 ounces in a bunch of arsenopyrite from the sinking of an 18-foot shaft. In
addition, approximately 177 ounces were produced about 1914.

     Three veins were developed on the property, the High Commission, Big Ledge,
and  Mexican.  The High  Commission  has a 280-foot  tunnel  with a quartz  vein
averaging 4.5 feet and carries free gold and  arsenopyrite.  The strike was over
three miles on the  surface.  The Big Ledge vein is 11 feet wide,  carries  free
gold and no sulphide,  and parallels the High Commission  vein. The subsequently
developed Mexican vein parallels and is 300 feet in length. Both tunnels were in
pay shoots,  with open cuts occurring over 900 feet.  Quartz fissure veins occur
along a slate foot wall and porphyry hanging wall contact which carry free gold,
arsenopyrite and pyrite mineralization.  The veins vary from two to fifteen feet
in width and the parallel vein 40 feet west averages four to five feet in width.
The strike is north,  dips 70 to 80 degrees east, and has a length on surface of
3,000 feet.

     The geology of the property  consists  mainly of the Calaverous  Formation,
Carboniferous  Period,  comprised of slate,  quartzite and porphyry.  The quartz
veins  carrying  the free gold  mineralization  occur  along  the  porphyryslate
contact within a 300 to 400-foot shear zone  associated  with the Melonese Fault
Zone.  The High  Commission,  Big Ledge and Mexican  veins all occur within this
wide contact rock  formation.  The veins vary from a few inches up to 20 feet in
width,  striking  mainly a  north-south  direction  and dipping 70 to 80 degrees
east.  Another vein formation strikes  northeast and dips 60 degrees  northwest.
The zone appears to be altered and mineralized.

     The High  Commission  Mine is  accessible by State Highway 49. The property
will require on-site generators for power.  Because of the Company' focus on the
Ruby Mine,  the Company has put the High  Commission  on a care and  maintenance
program.

Kate Hardy Mine

     The Kate Hardy Mine was discovered in 1860 and is an underground  lode gold
mine located in Sierra  County,  California,  and is  approximately  three miles
south of the Brush Creek Mine. The Kate Hardy Mine consists

                                      -13-


<PAGE>


ITEM 2 - PROPERTIES - (Continued)
         ----------

of two patented claims comprising  approximately 42 acres and 15 unpatented
claims  comprising  approximately  320 acres.  The Company's  investment in this
property is $156,456 at June 30,  1996,  consisting  of $58,667 of land and land
options, and $97,789 of development costs.

     All of the unpatented  claims in the property  package are in good standing
with  assessment  work  documents for 1996 filed with both the BLM in Sacramento
and Sierra County in Downieville.  The Kate Hardy Mine has no permits for mining
operations.

     In 1957, Richmond Flatland, Sr. acquired the Kate Hardy Mine. In the mid to
late 1970's,  various attempts were made to rehabilitate the Kate Hardy Mine. On
June 30, 1992, the Company entered into a lease effective March 23, 1992, in the
form of a mining option  agreement for a term of five years  expiring  March 22,
1997.  The Company paid a $50,000  payment  (initial  option  payment)  upon the
execution of the  agreement;  and during the term of the lease,  must pay $5,500
per month for each month  during  the first  year;  $6,500 per month  during the
second year; $7,500 per month during the third year; $8,500 per month during the
fourth  year;  and $9,500 per month  during the fifth  year.  In  addition,  the
Company must pay a 6% net smelter royalty on all minerals  produced.  The option
purchase price for the mine is $1,500,000  less 75% of all option  payments paid
up to a maximum of $750,000.

     The Kate Hardy Mine contains a quartz vein on a reverse fault.  The vein is
traceable along the surface for  approximately  1,500 feet and disappears  under
tertiary  lava both to the north and the south.  The vein varies in width from a
few  inches  to over 55  feet.  Dykes  of  gabbro  and  serpentine  cut the vein
irregularly.  Considerable  slate has been  replaced by carbonate  close to, and
within,  the vein.  Mariposite is erratic in distribution and is not necessarily
confined to the exposed serpentine zones. Historically, the best gold production
has come from the foot wall and hanging wall portions of the vein. The vein core
is largely barren bull quartz.  Sulphide  minerals  associated  with gold in the
vein include arsenopyrite, pyrite, galena and trace sphalerite.

     Development  has been  carried out over 2,700 feet of strike  length on the
Principal  No. 1 North and South  Drifts.  The vein has been  developed  on five
levels,  two of which are  accessed  by an  internal  shaft.  Stopping  has been
carried out with three principal blocks over a vertical range of 600 feet.

     The Kate Hardy mine has been in a care and  maintenance  level  since 1975.
The site has a 100 tons-per-day  gravity flow mill which requires some upgrading
and repair.  The  underground  workings in the south adit are in fair  condition
with appropriate 20-pound mine rail and all electrical and ventilation utilities
installed. The north adit is caved-in for approximately 75 feet and will have to
be  rehabilitated  with new timbering  before access to the north section of the
property is permitted. There is a corrugated mill building in fair condition and
an equipment building in fair condition on the property.

     The Company  has been  permitted  to dewater the mine.  This will allow the
Company access to  approximately  16,000 tons of ore and will enable the Company
to explore the O'Donnell winze and the five existing ore shafts.

     The Kate Hardy Mine is accessible by Mountain  House Road, a graveled road.
Power is supplied by Pacific Gas and Electric Company, a public utility.

Omega Mine

     The Omega  Mine is an  underground  drift  placer  mine in  Sierra  County,
California,  and is  contiguous  with the Kate  Hardy Mine and is covered by the
Kate Hardy lease referred to above.  The Omega mine consists of seven unpatented
claims comprising approximately 440 acres.

     All claims in the property  package are in good  standing  with  assessment
work  documents for 1996 filed with both the BLM in Sacramento and Sierra County
in  Downieville.  However,  a waste  discharge  permit is required and a plan of
operation must be filed with the U.S.  Department of Forestry  before full scale
mining  operation  may begin.  The Company has no current plans to obtain such a
permit or file such a plan.

                                      -14-


<PAGE>


ITEM 2 - PROPERTIES - (Continued)
         ----------

     The Omega Mine was active during the 1920's and 1930's when a labyrinth 9of
tunnels  exceeding 2,000 feet was driven in the underlying  serpentine mainly in
pursuit of high grade pay streaks.  Raises were driven to access  stopping areas
in the gravel. In 1957,  Richmond  Flatland,  Sr. acquired the Omega mine. There
was no activity on the claims until 1980, at which time the underground workings
were completely  remapped.  Most of the gravel was found to be of igneous origin
containing a small  percentage of white quartz cobbles.  Cobbles vary from a few
inches to twelve inches in diameter and are tightly cemented by sand and silt.

     Before any production may begin at the Omega Mine, the underground workings
will  have to be  retimbered.  There is no  equipment  at the  mine  site at the
present time.

     The Omega Mine is accessible by Mountain House Road, a graveled road. Power
is supplied by Pacific Gas and Electric Company, a public utility.

Unpatented Property Interests

     The Company  has  acquired  rights to explore  for and produce  minerals on
federally  owned lands and paid all  required  fees to maintain  the  unpatented
claims.  The Company acquired these rights through the acquisition of previously
located  mining  claims from the claimant or through the location of  unpatented
mining   claims  upon   unappropriated   federal  land  pursuant  to  procedures
established  by the  General  Mining Law of 1872,  the  Federal  Land Policy and
Management Act of 1976, and various state laws.  These referenced laws generally
provide  that a citizen of the  United  States,  including  a  corporation,  may
acquire a  possessory  right to explore for and to develop and produce  valuable
mineral deposits  discovered upon  unappropriated  federal lands,  provided that
such lands have not been withdrawn from mineral location.  Withdrawn lands would
include, for example, lands included in national parks and military reservations
and lands  designated  as part of the National  Wilderness  Preservation  System
(NWPS).

     The  location  of a valid  mining  claim  on  federal  lands  requires  the
discovery of a valuable mineral deposit, the erection of appropriate  monuments,
the posting of a location  notice at the point of discovery,  the marking of the
boundaries of the claim in accordance with federal law and the laws of the state
in which it is located,  and the filing of a notice or  certificate  of location
and a map with the BLM and the real property recording official of the county in
which the claim is located. Failure to follow the required procedures may render
the mining claim void.  If the statutes  and  regulations  for the location of a
mining claim are complied with, the locator obtains a valid  possessory right to
explore for,  develop and produce  minerals from the claim.  This property right
can  be  freely  transferred  and  is  protected  against  appropriation  by the
government without just compensation. Also, the claim locator acquires the right
to obtain a patent (or deed)  conveying  fee title to his claim from the federal
government  upon  payment  of  fees  and  compliance  with  certain   additional
procedures.

     Unpatented  mining claim interests  possess certain unique  vulnerabilities
not associated with other types of property interests.  For example, in order to
maintain each unpatented  mining claim,  the claimant must annually  perform not
less than $100 worth of work or  improvements on or for the benefit of the claim
and must file with state and federal  authorities an affidavit  attesting to the
performance  of such work.  Although  currently not a  requirement,  the Company
feels it should  continue to file proofs of labor to prevent  adverse  claimants
from  occupation  of the claim and to have a proper  chain of title  should  the
Company decide to apply for patents. In addition,  the Bureau of Land Management
currently  assesses  a $100 per claim  rental fee  which,  if not paid  annually
before August 31 of each year,  invalidates the unpatented claims. In the fiscal
year ended June 30, 1996, the Company paid approximately  $16,000 of rental fees
to the Bureau of Land  Management  to validate  said claims.  Failure to perform
such work will  render the claim  subject to  relocation  by third  parties  and
constitutes  abandonment of the claim. Further,  because mining claims are often
located with less then sophisticated surveying techniques,  great difficulty may
arise in  determining  the validity and  ownership  of specific  mining  claims.
Moreover,  under  applicable  regulations  and  court  decisions,  in order  for
unpatented  mining  claims to be valid  against a  governmental  challenge,  the
claimant  must be able to prove that the  mineral  deposit on which the claim is
based can be mined at a profit.  Thus, it is conceivable  that,  during times of
declining metal prices, claims that were valid when located could be invalidated
by the federal government.


                                      -15-


<PAGE>


ITEM 3 - LEGAL PROCEEDINGS
         -----------------

     During the fiscal year ended June 30,  1996,  the Company  entered into two
significant  settlement  agreements.  The settlement  agreements  resolve claims
against the Company  made by Zuri Invest  A.G.,  et. al.,  and the Royal Bank of
Scotland,  et. al. The Company has filed  complaints  against the  Andersons and
parties and entities  related to the Andersons which were allegedly  involved in
the transactions related to the settlements with Zuri Invest A.G. and Royal Bank
of Scotland.

     Additionally  the Company went to trial  against  Consolidated  Sierra Gold
Mines,  Inc.  ("CSGM"),  and won a $30,000 jury  verdict in its  cross-complaint
against CSGM.

     With that result, all material litigation against the Company was resolved.

     The Company has been requested pursuant to a non-public informal inquiry by
the staff of the Securities and Exchange  Commission,  to provide information to
the staff of the  Commission  regarding  the Company's  financing  activities in
reliance upon  Regulation S under the Securities Act. The Commission has advised
the Company that the inquiry  should not be construed  as an  indication  by the
Commission or its staff that any violations of law have occurred,  nor should it
be considered a reflection upon any person.

     The following is a detailed  historical  perspective of significant actions
involving the Company, including those summarized above.

     On August 9, 1991,  Zuri Invest A.G.,  Andre  Michaels and Peter  Woodfield
(the  "Plaintiffs")  filed  a  complaint  against  the  Company,  Euro  Canadian
Securities  Limited,  Georges  Benarroch,  Simone  Anderson,  James Anderson and
Capitol Bank  Sacramento  and were  seeking  1,500,000  shares of the  Company's
Common Stock previously  owned by Simone Anderson and subsequently  sold to Euro
Canadian,  which were  allegedly  promised to Plaintiffs in connection  with the
Company's  equity financing in 1990. In a stipulated  settlement,  Euro Canadian
and Georges  Benarroch agreed to defend and indemnify the Company in any lawsuit
filed by the Plaintiffs claiming title to such shares. Accordingly,  the Company
tendered its defense in this lawsuit to Euro Canadian and Georges  Benarroch who
agreed to provide the Company with such defense.  Mr. Benarroch defaulted in the
proceeding and although the Company had the commitment from Mr.  Benarroch,  the
Company  engaged  its  own  counsel  and  vigorously  defended  itself  in  this
litigation.

     Simone Anderson also filed a counterclaim in the Zuri Invest action against
the Royal Bank of Scotland,  seeking  rescission of 3,250,000 shares (pre-split)
of Common Stock  transferred to the Royal Bank of Scotland by Simone Anderson in
connection with certain financing on behalf of the Company. After the Royal Bank
of  Scotland  was served  with the  complaint,  an order of default  was entered
against  it.  Based on the  order of  default,  representations  made by  Simone
Anderson,  Ms.  Anderson's  agreement  with the Company to indemnify it from any
adverse  claims,  and the  deposit  of  $200,000  with  the  Company  to  secure
performance under the indemnity agreement, the Company transferred the 3,250,000
(pre-split)  shares into the name of Simone  Anderson and reserved an additional
3,250,000  shares of Common Stock as a contingency  for future  adverse  claims.
Thereafter, the Company, its transfer agent, and Simone Anderson received notice
from the Royal Bank of Scotland,  as nominee,  demanding return of the 3,250,000
shares and further threatening legal action if the shares were not returned.

     On December 14,  1995,  the Company  entered  into an agreement  (the "Zuri
Agreement")  with Zuri  Invest  A.G.,  Andre  Michaels  and Peter  Woodfield  in
connection  with the Zuri  Invest  action  to  partially  satisfy  the joint and
several  judgment  entered in the Zuri  Invest  action  against  the Company and
Simone Anderson and James Anderson  (collectively,  the  "Andersons") on October
31, 1995 (the "Judgment"). The Zuri Plaintiffs agreed, subject to the receipt of
the  consideration  described below,  not to seek any further recovery  directly
from the Company on the  Judgment,  and to release the Company  from any further
liability  thereunder.  The Zuri  Plaintiffs  also agreed not to pursue recovery
against the  Andersons on the Judgment if it is judicially  determined  that the
Andersons  have  indemnification  rights against the Company with respect to the
Judgment.  The Company  issued and  delivered to each of Woodfield  and Michaels
250,000 shares of the Company's  Common Stock. The Company issued 600,000 shares
of the  Company's  Common  Stock to Zuri  Invest and  delivered  200,000 of such
shares to Zuri Invest on or about 


                                      -16-


<PAGE>


ITEM 3 - LEGAL PROCEEDINGS - (Continued)
         -----------------

April 10, 1996, and 200,000 shares on or about June 11, 1996. The remaining
200,000  shares  were held in escrow  for  delivery  to Zuri  Invest on or about
September 9, 1996.

     As security for the  Company's  obligations  to issue and deliver the above
described  shares of Common Stock,  the Company issued a promissory  note in the
amount of $1.2 million payable to the Zuri Plaintiffs.  The note is secured by a
deed of trust on all real  property and patented and  unpatented  mining  claims
owned by the Company.  Pursuant to the Zuri Agreement,  the principal  amount of
the note shall be reduced as the shares issued to the Zuri  Plaintiffs are sold,
dollar for dollar by the gross proceeds generated from such sales.

     Pursuant  to the Zuri  Agreement,  the  Company  also  assigned to the Zuri
Plaintiffs an interest  (33% of the  Company's 60% interest) in claims  asserted
against the Andersons and their  controlled  corporations in the action entitled
Brush Creek  Mining and  Development  v. F. James  Anderson,  et al.,  currently
pending in the United States District Court, Northern District of California.

     On December 13,  1995,  the Company  entered into an agreement  (the "Royal
Bank  Agreement")  to  settle  the  action  by the  Royal  Bank of  Scotland  by
delivering to the plaintiffs in such suit (the "Royal Bank Plaintiffs")  216,667
shares of the  Company's  Common Stock and cash in the amount of  $241,000.  The
Company also assigned to the Royal Bank  Plaintiffs a portion of its interest in
any total  recovery from claims  against the law firm formerly  known as Bartel,
Eng, Miller & Torngren,  the Company's formal legal counsel ("Bartel,  Eng"). On
December  13,  1996,  the Company is further  required to deliver to each of the
Royal Bank Plaintiffs,  at his or her option, additional shares of the Company's
common  stock or  additional  cash.  The number of shares of Common Stock or the
amount of cash each Royal Bank  Plaintiff is entitled to receive is based on the
amount of his or her pro rata  interest in amounts paid by the Company  pursuant
to the Royal  Bank  Agreement.  If all Royal  Bank  Plaintiffs  elect to receive
Common  Stock the  Company  will be  required  to issue and deliver a maximum of
300,000  shares in the  aggregate  and if all  Royal  Bank  Plaintiffs  elect to
receive  cash,  the  Company  will be  required  to deliver  cash in the maximum
aggregate amount of $600,000.

     The Company's obligations under the Royal Bank Agreement are secured by (1)
a deed of trust on all real property and patented and unpatented  mineral claims
owned by the  Company;  (2) a first  priority  security  interest  in all of the
Company's  right,  title and  interest  in and to any and all  goods,  products,
yield,  receivables,  inventory (including any gold from any mines), any and all
exploration and drilling  information,  data, maps, reports or surveys,  and any
and all income and proceeds  derived from the  Company's  mining  operations  on
property  which the Company  presently  or  subsequently  owns or leases;  (3) a
first-priority  security interest in the Company's right,  title and interest in
and to any total recovery by the Company on the claims against Bartel,  Eng; and
(4) a stipulated  judgment in the amount of  $3,250,000.  The priority and other
matters related to the enforcement of the respective  deeds of trust executed by
the Company  pursuant to the Zuri  Agreement  and the Royal Bank  Agreement  are
determined by an  intercreditor  agreement  between the Zuri  Plaintiffs and the
Royal Bank Plaintiffs.

     The Royal Bank  Agreement  provides that an uncured  default under the Zuri
Agreement  constitutes  a default  under the Royal  Bank  Agreement  and that an
uncured  default under the Royal Bank Agreement  constitutes a default under the
Zuri Agreement.

     The Company has registered the 1,616,667  shares of Common Stock issued and
delivered  pursuant to the Zuri  Agreement and the Royal Bank  Agreement,  which
represents  approximately  10  percent  of the total  outstanding  shares of the
Company's  Common  Stock as of June 30, 1996.  This number  includes the 300,000
additional shares that may be issued pursuant to the Royal Bank Agreement.

     On June 18,  1996,  Hinton & Alfert was  substituted  in as counsel for the
Company in the case  Royal Bank of  Scotland  et.  al. v. Brush  Creek  Mining &
Development,  et.  al. in the  United  States  District  Court  for the  Eastern
District,  Case  Number  CV-S-94-0962  GEB GGH.  Hinton & Alfert  represent  the
Company in its cross-complaint  against attorneys Bartel, Miller, Eng & Torngren
for  professional   negligence  and  against  Simone  Anderson  for  contractual
indemnity.


                                      -17-


<PAGE>


ITEM 3 - LEGAL PROCEEDINGS - (Continued)
         -----------------


     On October 24,  1994,  the Company  filed an amended  complaint  against F.
James Anderson,  Simone  Anderson,  Edward M. Lawson,  Consolidated  Sierra Gold
Mines, Inc. ("CSGM"), Independent Sierra Gold Mines, Inc. ("ISGM"), Bartel, Eng,
Miller & Torngren,  attorneys,  Robert Sibthorpe,  Coopers & Lybrand and Yorkton
Securities as defendants in an action to recover damages.  The suit was filed in
the United States District Court for the Northern District of California as Case
No.  C94-3487 (the  "Federal  Action").  On April 28, 1995,  the Company filed a
third amended  complaint which seeks to recover damages against James and Simone
Anderson for breach of fiduciary  duty,  for violations of Rule 10b-5 and 16(b),
and for violations of California  Corporations Code Section 25400(d) and Section
25401.  The lawsuit seeks to recover  damages  against Edward M. Lawson,  Robert
Sibthorpe and Yorkton Securities, Inc. for breach of fiduciary duty. The lawsuit
seeks to recover damages against James and Simone Anderson,  ISGM, CSGM,  Robert
Sibthorpe,   and  Yorkton   Securities,   Inc.  for  intentional  and  negligent
misrepresentation.  The  lawsuit  seeks to recover  damages  against the firm of
Bartel,  Eng,  Miller  &  Torngren  based  upon  breach  of  fiduciary  duty and
negligence  claims.  The law  firm  of  Bartel,  Eng,  Linn &  Schroder  has (as
successor in interest to Bartel, Eng, Miller & Torngren) filed a counterclaim in
this  litigation  seeking  recovery  from the  Company  of legal  fees  totaling
approximately  $95,000.  The  accounting  firm of  Coopers  &  Lybrand  has been
dismissed as a defendant from the litigation without prejudice.

     As to the progress of the case to date,  an initial  round of discovery has
been completed.  On August 12, 1996,  defendants  Yorkton  Securities and Robert
Sibthorpe filed a joint Motion for Summary Judgment.  The hearing on that motion
is set for October 11, 1996. There has been no trial date set.

     On November 3, 1994,  the Company was served a complaint  filed in Superior
Court of the  State of  California  in and for the  County of  Nevada,  Case No.
52943,  by CSGM for  amounts  claimed  to be due and owing by the  Company.  The
complaint seeks to recover $335,000 pursuant to an alleged open book account and
$950,000  pursuant to fees and expenses which CSGM allegedly  incurred on behalf
of the Company for general  financial advice and advice  concerning  mergers and
acquisitions.

     On April 4, 1996, a jury  returned a verdict in favor of the Company in the
action by CSGM. In addition,  the jury returned a verdict  against CSGM in favor
of the Company in the amount of $30,000 on the Company's cross-action. Following
the verdict,  the Company filed a motion to pierce the  corporate  veil of CSGM,
which  motion was heard on June 7, 1996.  The  Company's  motion was granted and
judgment on the verdict was entered.  As a result,  F. James and Simone Anderson
are  personally  liable  for  the  judgment  obtained  by  the  Company  against
Consolidated Sierra Gold Mines, Inc.

     On November 7, 1994,  the Company was served with a complaint  filed in the
Superior  Court of the State of California in and for the County of  Sacramento,
Case No. 543926, by James Anderson and Simone Anderson for amounts claimed to be
due and owing by the  Company.  The  complaint  sought to  recover  $58,821  and
unspecified  further  sums they have  incurred  or will  incur in legal fees and
costs in  providing  a defense in the Zuri  Invest  litigation.  The Company has
entered into a settlement  in this matter  whereby the Company has paid the past
legal fees  incurred  by Mr. and Mrs.  Anderson  and has agreed to pay the legal
fees  they  continue  to  incur  in  defending  themselves  in the  Zuri  Invest
litigation.  On February 16, 1996, this agreement  became a stipulated  judgment
which concluded the action.

     On  February  8,  1996,  the  Company  filed a  complaint  against F. James
Anderson and Simone  Anderson in Superior Court of the State of  California,  in
and for the County of Sacramento, Case No. 96AS 00513 (the "Sacramento Action").
The complaint seeks (a) judicial determination and declarations that the Company
(1) has no further obligations to advance defense fees and costs incurred by the
Andersons in connection  with the Zuri  litigation,  including on the Andersons'
appeal  of that  judgment;  (2) is  entitled  to recoup  defense  fees and costs
allocable to the Andersons'  defense of claims in the Zuri Invest litigation for
which they were found liable; (3) is not required to indemnify the Andersons for
their liability in the Zuri Invest litigation;  (4) has no duty or obligation to
the Andersons to account for, replenish, and/or return monies to or pay interest
on the  $200,000  provided by the  Andersons as partial  indemnification  to the
Company in  connection  with the Royal Bank  litigation;  and (5) is entitled to
have all amounts  returned to the Company from the $200,000 which were disbursed
for the purposes other than to indemnify


                                      -18-


<PAGE>


ITEM 3 - LEGAL PROCEEDINGS - (Continued)
         -----------------

the  Company  such that the  Company  receives  the full net benefit of the
$200,000, and (b) equitable  indemnification to collect from the Andersons their
proportionate share of the judgment in the Zuri Invest litigation.

     On April 4, 1996, the Company was served with the Andersons'  answer to the
Sacramento  Action and their  cross-complaint  against the  Company.  The answer
generally denied the allegations of the Company's complaint and asserted various
affirmative  defenses.  The  cross-complaint  seeks judicial  determination  and
declarations that the Company (1) is obligated to advance the Andersons' defense
costs  (including  costs of appeal) in the Zuri  litigation and defense costs in
the Federal  Action and (2) is obligated to indemnify  them from the judgment in
the Zuri Invest  litigation and any judgment that might be rendered against them
in the Federal Action.

     Also,  on April 4,  1996,  the  Company  was  served  with a motion  by the
Andersons for summary adjudication of two of their cross claims which would have
forced the Company to advance the Andersons' defense cost in the Zuri litigation
and the Federal Action.  On May 3, 1996, the Andersons'  motion was heard by the
superior court and denied.

     The  Company  answered  the  Andersons'  cross  complaint  on May  6,  1996
generally denying the allegations and asserting  various  defenses.  The Company
also anticipates  amending its original  complaint to assert an additional claim
to hold the Andersons liable for the entire amount of the Royal Bank of Scotland
settlement.

     The Company has been requested pursuant to a non-public informal inquiry by
the staff of the  Securities  and  Exchange  Commission  (the  "Commission")  to
provide  information  to the staff of the  Commission  regarding  the  Company's
financing activities in reliance upon Regulation S under the Securities Act. The
Commission  has advised the Company that the inquiry  should not be construed as
an  indication by the  Commission  or its staff that any  violations of law have
occurred, nor should it be considered a reflection upon any person.

     The  Company  is a  party  to  other  various  claims,  legal  actions  and
complaints  arising  in the  ordinary  course of  business.  In the  opinion  of
management,  the ultimate  disposition of these matters will not have a material
adverse effect on the business or financial position of the Company.


ITEM 6 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          ---------------------------------------------------------------
          RESULTS OF OPERATIONS
          ---------------------

Fiscal Year Ended June 30, 1996 Compared with Fiscal Year Ended June 30, 1995

Liquidity and Capital Resources

     At June 30, 1996, the Company had working capital deficit of $2,328,674,  a
decrease in working  capital of $2,181,751  as compared to a working  capital of
$146,923  at June 30,  1995.  The  decrease  in working  capital  was due to the
expenses  associated  with  opening  several  new  areas  of the  Ruby  Mine for
hard-rock mining,  litigation fees and expenses,  and a litigation settlement of
$2,389,668.

     The mining industry is capital intensive.  On or about the beginning of the
1995-1996  fiscal  year,  the  Company  estimated  its  mining  development  and
operating  costs  in the  Lawry,  Irene  and Wolf  sites at the Ruby  mine to be
approximately $4 million for the fiscal year ended June 30, 1996.  However,  due
to increased costs associated with litigation the Company's operating costs were
higher than originally  estimated  $4,010,966 for the fiscal year ended June 30,
1996.  During the fiscal year ended June 30, 1996, the Company raised $6,875,416
from the sale of securities pursuant to Regulation S under the Securities Act of
1933 as amended  ("Securities  Act").  The  shares of Common  Stock sold in such
offerings  were sold at a discount  of between  35% and 50% of the  closing  bid
price of Common Stock on the day before the sale. At June 30, 1996,  the Company
had a working  capital  deficit of $2,328,674 and had no material  revenues from
mining  operations.  Additional  financing  will be  required  in order  for the
Company to cover its  mining  and  development  costs in fiscal  1996-97  and to
engage  in full  scale  mining  operation.  At this  time,  the  Company  has no
definitive plans regarding additional financing, but believes that it will


                                      -19-


<PAGE>


ITEM 6 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          ---------------------------------------------------------------
          RESULTS OF OPERATIONS - (Continued)
          ---------------------

likely be obtained  through  equity  financing  such as stock  offerings or
joint  ventures.  No  assurances  can be given that the Company  will be able to
raise cash from additional  financing  efforts and, even if such cash is raised,
that it will be sufficient to satisfy the Company's capital requirements. If the
Company is unable to obtain  sufficient  funds  from  future  financings  and/or
operations,  the Company may not be able to achieve its business  objectives and
may have to scale back its development plans. In addition,  the Company may have
to sell its  assets  in order to meet its  obligations  and may lose some of its
properties for failure to make lease payments. In such event, the Company may be
required to seek protection under the bankruptcy laws which will have a material
adverse impact on the Company and the market value of the Common Stock.

     During the fiscal year ended June 30, 1996; the Board of Directors approved
options to purchase 747,000 shares of the Company's  Common Stock,  ratified the
settlement  for the  Zuri-Invest  and the Royal Bank of  Scotland  matters,  and
raised  $6,875,446 from the sale of 6,788,800  shares pursuant to Regulations S.
Such  shares  were sold at a discount  of between 35% and 50% of the closing bid
price of the Common Stock on the day before the sale.

     The Company  estimates its mining  development  and  operating  costs to be
approximately  $4 million for the fiscal year ending June 30, 1997. The majority
of the funds will be used for  operations  in the Ruby  Mine,  and at the Lawry,
Irene and Wolf  sites.  Additional  financing  will be  required  to perform the
intended work at the Ruby Mine.  There can be no assurance that the Company will
be able to obtain such  financing  or that  financing  will be obtained on terms
favorable  to the  Company.  In the  event  the  Company  is  unable  to  obtain
additional  financing,  the Company may scale back its operations or sell assets
which could adversely affect production and the Company's business objectives.

Results of Operations

     The  Company had a  $9,270,102  net loss for the fiscal year ended June 30,
1996,  compared to a net loss of  $4,671,396  for the fiscal year ended June 30,
1995.  This loss was due to an  increase  in  mining  expenses,  legal  fees and
expenses and a litigation settlement of $2,389,668.

Fiscal Year Ended June 30, 1995 Compared with Fiscal Year Ended June 30, 1994

Liquidity and Capital Resources

     At June 30, 1995, the Company had working  capital of $146,923,  a decrease
in working capital of $1,125,341 as compared to working capital of $1,272,264 at
June  30,  1994.  The  decrease  in  working  capital  was  due to the  expenses
associated with opening several new areas of the Ruby Mine for hard-rock  mining
in several of the Company's existing mines.

     The Company  estimated its mining  development  and  operating  costs to be
approximately $3 to $3.5 million for the fiscal year ended June 30, 1995. Actual
development and operating costs were $4,010,966.  The Company raised  $6,875,416
from the sale of securities  pursuant to Regulation S under the Securities  Act.
The  majority of the funds were used for the  operations  of the Ruby,  Peavine,
Rising Sun and Kate Hardy mines,  with  emphasis on operations of the Ruby Mine.
The Company expected revenues from current operations to increase. Revenues from
operations  were not  sufficient.  Additional  funding was needed to perform the
intended  work at the  Ruby  Mine.  The  Company  was  able  to  fund  continued
operations  from  sales  of  Common  Stock,  so it met its  long-term  liquidity
requirements and kept its mining properties in production.

     During the fiscal  year ended  June 30,  1995;  (1) the Board of  Directors
approved  options to purchase  29,000 shares of Common Stock for key  employees;
(2) G. Michael  Pickering  resigned as  President as disclosed in the  Company's
Form 8-K filed September 26, 1994; (3) Senator Edward Lawson resigned as a board
member,  as disclosed in the  Company's  Form 8-K dated  November 22, 1994;  (4)
Michael Henrick, P.Geo., was appointed as President as disclosed


                                      -20-


<PAGE>


ITEM 6 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          ---------------------------------------------------------------
          RESULTS OF OPERATIONS - (Continued)
          ---------------------

in the Company's  Form 8-K filed October 19, 1994 and resigned as President
as disclosed in the Company's Form 8-K dated June 16, 1995; (5) two stockholders
and two  directors  loaned  funds  to the  Company  in an  aggregate  amount  of
$143,821,  which were  repaid in full;  and (6) the  Company  raised  $3,696,457
through the sale of Common Stock  pursuant to Regulation S under the  Securities
Act of 1933.

Results of Operations

     The Company  had a  $4,671,396  net loss for the year ended June 30,  1995,
compared to net income of $136,625 in the fiscal year ended June 30, 1994.  This
loss was due to an  increase  in  mining  expenses  and  also  the  fact  that a
$4,232,000 legal settlement was received in the prior year.

     General and administrative  expenses decreased by $856,109 due primarily to
the issuance in 1994 of 100,000  shares of the  Company's  Common Stock from the
prior fiscal year pursuant to a service  agreement with James Anderson which was
treated as an expense. General mining and exploration costs increased $1,070,398
due primarily to increased pre-production at the Ruby Mine.


                                      -21-


<PAGE>


                                    PART III


ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
         -----------------------------------------------

     James S. Chapin has been a director of Brush Creek since April 1994.  Since
April 1994,  Mr.  Chapin also  served as the Chief  Executive  Officer and Chief
Financial Officer of Brush Creek.  Prior to working with Brush Creek, Mr. Chapin
was a registered representative with the Hartford, Connecticut offices of Tucker
Anthony,  a  securities  broker-dealer  from 1988 to April 1994.  He  previously
served in executive  positions  from 1977 to 1983 with IBM and from 1983 to 1988
with the securities firm of Smith Barney.

     Howard I. Kalodner has been a director of Brush Creek since March 1994. Mr.
Kalodner is a  professor  of law and,  from 1977 to 1994,  served as the dean of
Western New England  College School of Law in  Springfield,  Massachusetts.  Mr.
Kalodner is a member of the American Law Institute.

     Albert  Miller has been a director of Brush  Creek  since March 1994.  From
1976 to 1991,  Mr. Miller was chairman and chief  executive  officer of Royalpar
Industries,  a publicly owned human resources company.  He retired from Royalpar
in July 1991 when it was acquired by another company.

     Kenneth Friedman has been a director of Brush Creek since January 1995. Mr.
Friedman has served as president of Nonlinear  Resource  Corp.  from 1993 to the
present and,  from 1991 to 1993,  served as director of research for Dickinson &
Co. He  served  as the  natural  resources  analyst  for  Kemper  Securities,  a
brokerage  firm,  from  1990 to 1991  and the  metal  and  mining  analyst  for
Boettcher Co., a brokerage firm, from 1989 to 1990.


ITEM 10 - EXECUTIVE COMPENSATION
          ----------------------

     The table below sets forth certain information with respect to compensation
for services in all capacities  paid by Brush Creek for the past three years, to
or on behalf of the  Chairman  of the Board and the Chief  Executive  Officer at
June 30,  1996.  No other  employee of Brush Creek made more than $60,000 in the
fiscal year 1996.

<TABLE>
<CAPTION>
                                             Annual Compensation             Long-Term Compensation
                                   ---------------------------------------  ------------------------
                                                                                     Awards             Payouts
                                                                            ------------------------   ---------
                                                                            Restricted    Securities   Long-Term
Name and Principal                                Bonus     Other Annual       Stock      Underlying   Incentive       All Other
     Position           Year        Salary($)      ($)     Compensation($)   Awards($)    Options(#)   Payouts($)    Compensation($)
------------------    ---------    -----------    -----    ---------------  ----------    ----------   ----------    ---------------

<S>                     <C>        <C>            <C>           <C>            <C>         <C>            <C>             <C>
James S. Chapin,        1996(1)    $   110,000    none          none           none         250,000       none            none
Chief Executive         1995(1)    $   110,000    none          none           none          25,000       none         $23,512(2)
Officer and Chi         1994       $    17,769    none          none           none         100,000       none            none


----------

(1)     Represents  compensation  for the period July 1, 1994,  through June 30,
        1996,  the time during  which Mr.  Chapin was employed by Brush Creek as
        Chief  Executive  Officer and Chief Financial  Officer.  Pursuant to Mr.
        Chapin's  employment  agreement,  Brush Creek is to pay him  $100,000 as
        severance  compensation if he is terminated other than "for cause." Upon
        completion of five (5) consecutive  years of employment with the Company
        this  obligation  terminates.  He was also  awarded  options  to acquire
        100,000  shares of Brush  Creek's  common  stock at $1.88 per share (the
        closing price for the stock on April 5, 1994, the date of the grant).

(2)     Represents payments made by the Company for living expenses.

</TABLE>

Incentive Stock Option Plan

        The Company has a nonqualified stock option plan, under which options to
purchase a total of 279,000 shares at prices ranging from $2.00 to $2.63 were 
outstanding and exercisable at June 30, 1996.


                                      -22-


<PAGE>


ITEM 10 - EXECUTIVE COMPENSATION - (Continued)
          ----------------------

     The following  tables set forth certain  information  with respect to stock
options  granted to the persons named in the Summary  Compensation  Table during
the fiscal year ended June 30, 1996.

<TABLE>
<CAPTION>
                                       Option Grants in Last Fiscal Year

                                                      Individual Grants
                      ------------------------------------------------------------------------------
                           Number of          Percent of Total
                           Securities        Options Granted to
                      Underlying Options         Employees in        Exercise or Base     Expiration
     Name                  Granted(#)            Fiscal Year            Price($/Sh)          Date
---------------       ------------------     ------------------      ----------------     ----------

<S>                        <C>                      <C>               <C>                 <C>  
James S. Chapin            250,000                  99.0%             $1.13 to $2.98      07/15/2000
                                                                                          12/14/2000
</TABLE>


<TABLE>

     The following  table sets forth certain  information as to each exercise of
stock  options  during the year ended June 30, 1996, by the persons named in the
Summary Compensation Table and the fiscal year-end value of unexercised options:

<CAPTION>
          Aggregated Option Exercises in 1996 and Year-End Option Value

                                                             Number of Securities               Value of Unexercised
                                                           Underlying Unexercised               In-The-Money Options
                          Shares                         Options at June 30, 1996(1)            at June 30, 1996(2)
                         Acquired         Value     ----------------------------------  ----------------------------------
        Name            on Exercise     Realized       Exercisable      Unexercisable     Exercisable       Unexercisable
---------------------  -------------  ------------  ----------------  ----------------  ----------------  ----------------

  <S>                        <C>            <C>          <C>                  <C>             <C>                  <C>
  James S. Chapin            -              -            375,000              -               (3)                  -

----------

(1)     Share figures have been calculated to reflect the number of shares which
        may be acquired, following the October 1993 15-to-1 reverse stock split.
(2)     Realizable  values are  reported  net of the option  exercise  price but
        before any  income  taxes that the  executives  may have to pay.  Actual
        gains,  if any, on stock option  exercises  are  dependent on the future
        performance of the common stock as well as the option holder's continued
        employment  through the vesting  period.  The amounts  reflected in this
        table may never be obtained.
(3)     Mr.  Chapin's stock options are not  in-the-money as 100,000 shares have
        an  exercise  price of $1.88 per share,  25,000  shares have an exercise
        price of $2.00 per share, 125,000 shares have an exercise price of $2.98
        and 125,000 shares have an exercise price of $1.13.
</TABLE>

Other Options

     Senator Edward Lawson,  who resigned as a Director of Brush Creek effective
November 22, 1994,  currently  has options to purchase up to 23,333 shares at an
exercise  price of $7.50 per share,  following the October 1993 15-to-1  reverse
stock split.

Long-Term Incentive Plans

     Other than the stock option  plans  described  above,  Brush Creek does not
have any plan providing  compensation to its executive  officers for performance
to occur over a period longer than one (1) fiscal year.

Pension Plans

     Brush  Creek does not have any  pension  plan  available  to its  executive
officers.

                                      -23-


<PAGE>


ITEM 10 - EXECUTIVE COMPENSATION - (Continued)
          ----------------------


Directors' Compensation

     The Independent  Directors of Brush Creek are compensated  $1,500 per month
for their services.  Certain expenses incurred in connection with such services,
including  travel to meetings,  may be  reimbursed.  In addition,  the Board has
awarded  options  to  acquire  common  stock of  Brush  Creek  to  directors  in
recognition  of  services.  During the  fiscal  year  ended  June 30,  1996,  an
aggregate amount of $48,500 in fees was paid to Directors.

Employment Agreements and Termination of Employment Arrangements

     Brush Creek has an  employment  agreement  with Mr. James S. Chapin,  which
provides that Mr. Chapin's  employment will commence April 4, 1994, and continue
through  April 3, 1996,  following  which his  employment  is to continue for an
indefinite term, subject to certain severance and notice provisions. Brush Creek
is to pay Mr.  Chapin  $100,000 as severance  compensation  if he is  terminated
other  than "for  cause."  The  $100,000  is held in trust and is  secured by an
irrevocable  letter of credit.  Upon completion of five (5) consecutive years of
employment  with  the  Company,  this  obligation  terminates.   The  employment
agreement  with Mr.  Chapin also  provides him with options to purchase  100,000
shares of Brush  Creek's  common stock at $1.88 per share (the closing bid price
for the stock on April 5, 1994). The options were fully vested in April 1996 and
may be exercised on or before  April 4, 2001.  The options are not  transferable
(other  than  by will  or the  laws of  descent  or  distribution)  and  must be
exercised in their entirety.

Repricing of Options

     During  the last  fiscal  year,  Brush  Creek  did not  adjust or amend the
exercise  price of  options  previously  awarded  to any of the named  executive
officers.


ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------

<TABLE>
     The following  table sets forth certain  information  regarding  beneficial
ownership of Brush  Creek's  common  stock as of September  30, 1996 by (i) each
person who is known by Brush Creek to own  beneficially  more than five  percent
(5%) of Brush Creek's  common  stock,  (ii) each person set forth in the Summary
Compensation Table, (iii) each of Brush Creek's directors and (iv) all directors
and executive officers as a group.

<CAPTION>
                                               Shares Beneficially
          Beneficial Owner                     Owned (Number)(1)      Percentage
----------------------------------------       -------------------    ----------

<S>                                               <C>                    <C> 
James S. Chapin                                   392,877 (1,2)          2.3%
Chief Executive Officer, Chief Financial 
  Officer and Director
970 E. Main Street, Suite 200
Grass Valley, CA 95945

Howard I. Kalodner                                227,005 (1,2)          1.3%
Director
55 Riverview Terrace
Springfield, MA 01108-1603

Albert Miller                                     209,834 (1,2)          1.2%
Director
250 Westmont
West Hartford, CT 06117
</TABLE>


                                      -24-

<PAGE>


ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------

<TABLE>
<CAPTION>
                                               Shares Beneficially
          Beneficial Owner                     Owned (Number)(1)      Percentage
----------------------------------------       -------------------    ----------

<S>                                               <C>                    <C> 
Kenneth Friedman                                  185,200 (1)            1.1%
Director
26 Willow Lane
Blackhawk, CO 80422

All Officers and Directors as a  
  group (four persons)                          1,014,916                5.9%

----------

(1)     Includes  shares  which may be acquired  within 60 days  pursuant to the
        exercise of  options,  as  follows:  Mr.  Chapin,  375,000  shares;  Mr.
        Kalodner,  200,000 shares;  Mr. Miller,  200,000 shares;  Mr.  Friedman,
        185,000  shares;  and all officers and  directors as a group,  1,014,916
        shares.
(2)     Figure includes shares owned by a spouse.
</TABLE>


ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

        None.


ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

1.      FINANCIAL STATEMENTS
        --------------------

        Brush Creek Mining and Development Company, Inc.
        ------------------------------------------------

        Independent  Auditor's  Report - Brown,  Armstrong,  Randall  and  Reyes
        Accountancy Corporation.

        Consolidated Balance Sheet as of June 30, 1996.

        Consolidated  Statements of Operations for the Years Ended June 30, 1996
        and 1995 and for the  period  from July 1, 1989 (date of  resumption  of
        development stage enterprise activities) through June 30, 1996.

        Consolidated Statements of Shareholders' Equity for the Years Ended June
        30,  1996  and  1995  and for the  period  from  July 1,  1989  (date of
        resumption of development stage enterprise  activities) through June 30,
        1996.

        Consolidated  Statements of Cash Flows for the Years Ended June 30, 1996
        and 1995 and for the  period  from July 1, 1989 (date of  resumption  of
        development stage enterprise activities) through June 30, 1996.

        Notes to Consolidated Financial Statements.

2.      EXHIBITS

        3.1    Articles  of   Incorporation   of  the  Company  with  Amendments
               thereto.*

        3.2    Amended and Restated Bylaws of the Company.*

        4.1    Specimen Certificate for the Company's common stock.*


                                      -25-


<PAGE>


ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K - (Continued)
          --------------------------------

        4.2    Form of Warrant Agreements.*

        10.1   Voting Agreement between the Company, Simone M. Anderson and Euro
               Canadian Securities Limited.*

        10.2   Agency Agreement between the Company and Euro Canadian Securities
               Limited.*

        10.3   Stock Purchase Agreement between the Company,  Simone M. Anderson
               and Euro Canadian Securities Limited.*

        10.4   Merger Agreement and Plan of Reorganization  between the Company,
               Sierra Gold Properties, Inc. and California Properties, Ltd., and
               Addendum thereto.*

        10.5   Lease  Purchase  Agreement for the Ruby Mine,  and  Modifications
               thereto.*

        10.6   Modification of Lease Purchase  Agreement for the Ruby Mine dated
               November 1, 1994.++

        10.7   Agreement  to Lease with  Option  for the  Rising  Sun Mine,  and
               Modifications thereto.*

        10.8   Agreements to Purchase Carson Mine.*

        10.9   Agreement to Purchase High Commission Mine.*

        10.11  Promissory Note between the Company and Consolidated  Sierra Gold
               Mines, Inc.*

        10.12  Promissory Note between the Company and  Independent  Sierra Gold
               Mines, Inc.*

        10.13  Consulting  Agreement between the Company and Consolidated Sierra
               gold Mines, Inc.**

        10.14  Revolving  Credit Facility  between the Company and  Consolidated
               Sierra Gold Mines, Inc.*

        10.15  Stock Option Agreements for G. Michael Pickering.*

        10.17  Credit   Facility   Agreement   between  the  Company  and  Epsom
               Investment Services N.V.*

        10.18  Settlement Agreement between the Company,  Simone Anderson,  Euro
               Canadian Securities Limited, and Georges Benarroch.*

        10.19  Agency Agreement  between Epsom Investment  Services N.V. and the
               Company.*

        10.20  Letter Agreement with Grande Portage.*

        10.21  Letter Agreement with the All-Union Research Institute of Geology
               of Foreign Countries (VZG).*

        10.22  Contract   for   Services   between  the  Company  and  F.  James
               Anderson.(1)

        10.23  Stock Option Agreement with Simone Anderson.(1)

        10.24  Stock Option Agreement with G. Michael Pickering.(1)

        10.25  Stock Option Agreement with Edward Lawson.(1)

        10.26  Stock Option  Agreement with Susan  Miller.(1) 

        10.27  Stock Option Agreement with Michael Skopos.(1)


                                      -26-


<PAGE>


ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K - (Continued)
          --------------------------------

        10.28  Stock Option Agreement with Dave Trueman.(1)

        10.29  Stock Option Agreement with Peter LeCoutier.(1)

        10.30   Lease on the Kate Hardy - Omega Mines.(1)

        10.31   Letter of Agreement with Morrison Knudsen.(2)

        10.32   Joint Venture Agreement with MK Gold Company.(3)

        10.33  Modification  of Lease  Purchase  Agreement  for  Rising Sun Mine
               dated November 1, 1994.++

        10.34  Letter agreements regarding option to lease Dreadnaught Mine.++

        10.35  Settlement  Agreement  between the Company,  Zuri  Invest,  A.G.,
               Andre Michaels and Peter Woodfield.+++

        10.36  Settlement Agreement between the Company, Werner Aeberhard, Chris
               Lambrianos, Mikis Theodosiou,  Andreas Samuel, as Executor of the
               Estate of Dinos N. Samuel,  Tania Bruntsfield,  Jacques Philippou
               and the Royal Bank of Scotland, A.G.+++

        11.1   Computation of per share earnings.++++

        16.1   Letter regarding change in certifying accountant.+

        21.1   List of Subsidiaries of the Company.++++

        23.1   Consent of Brown Armstrong Randall & Reyes, A.C.

*       Incorporated  by reference to the  Company's  Registration  Statement on
        Form S-1, File No. 33-39867, and pre-effective  amendments thereto which
        was  previously   filed  with  the  Commission  on  April  8,  1991.  

**      Incorporated  by reference to the  Company's  Registration  Statement on
        Form  S-8,  File No.  33-38646,  which  was  previously  field  with the
        Commission on January 23, 1991. 

(1)     Previously filed in connection with the  Registration  Statement on Form
        S-3, File No. 33-45174, and combined Registration Statement on Form S-3,
        File No. 33-63374.

(2)     Previously filed on Form 8-K on September 10, 1992.

(3)     Previously  filed on Form 8-K on June 15, 1994.  

+       Previously filed on Form 8-K on July 12, 1994.

++      Previously filed on Form 10-KSB on September 28, 1995.

+++     Previously filed in connection with the  Registration  Statement on Form
        S-3, File No. 333-286.

++++    Previously filed on Form 10-KSB on September 30, 1996.

3.      REPORTS ON FORM 8-K
        -------------------

        8-K filed July 12, 1994, change in Certifying Accountant.

        8-K filed September 26, 1994, James S. Chapin was appointed  Chairman of
        the Board,  replacing Edward M. Lawson. G. Michael Pickering resigned as
        President on September 22, 1994.

        8-K filed  October 19, 1994,  Michael  Henrick,  P.Geo.,  was  appointed
        President of Brush Creek.

        8-K filed November 22, 1994, Edward M. Lawson resigned as a director.


                                      -27-


<PAGE>


ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K - (Continued)
          --------------------------------

        8-K filed January 25, 1995,  Kenneth S.  Friedman  appointed a member of
        the Board of Directors.

        8-K filed, June 16, 1995, Michael Henrick, P.Geo., resigned as President
        of Brush Creek.

        8-K filed October 31, 1995, Zuri Invest verdict  rendered  against Brush
        Creek in the amount of $2,799,000.

        8-K filed December 8, 1995, Brush Creek loses appeal of jury verdict.

        8-K filed December 19, 1995,  Brush Creek  announces  settlement of Zuri
        Invest  judgment  of $2.8  million,  plus  interest.  Brush  Creek  also
        disclosed  that it had  come  to an  agreement  in  principle  with  the
        plaintiff's   representation  to  settle  the  Royal  Bank  of  Scotland
        litigation which is pending.

        8-K filed  February 14, 1996,  final  settlement of both the Zuri Invest
        litigation and the Royal Bank of Scotland litigation reached.

        8-K filed  April 8, 1996,  favorable  jury  verdict in the  consolidated
        Sierra Gold Mines $1 .4 million suit against Brush Creek.

        8-K filed April 15, 1996, Hard Rock Mill at the Ruby Mine site commenced
        operation.


                                      -28-


<PAGE>


                                   SIGNATURES



     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          Brush Creek Mining and Development 
                                          Company, Inc.



Date:      October 25, 1996                       /s/  James S. Chapin
     -----------------------------        --------------------------------------
                                                       James S. Chapin
                                                       Chief Executive Officer,
                                                       Chairman of the Board


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
Brush Creek Mining and Development Company, Inc.
Grass Valley, California


We have  audited  the  accompanying  consolidated  balance  sheet of Brush Creek
Mining and  Development  Company,  Inc.  and  Subsidiary  (a  development  stage
enterprise)  as of June 30, 1996,  and the related  consolidated  statements  of
operations,  shareholders'  equity,  and cash flows for each of the two years in
the period ended June 30, 1996,  and for the period from the date of  resumption
of  development  stage  activities  (July 1, 1989) through June 30, 1996.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting  principles used and the 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 consolidated financial position of Brush Creek Mining
and Development Company, Inc. and Subsidiary (a development stage enterprise) as
of June 30, 1996,  and the results of its operations and its cash flows for each
of the two years in the period ended June 30, 1996, and the period from the date
of resumption of development  stage  activities  (July 1, 1989) through June 30,
1996 in conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1, there
are  conditions  which raise  substantial  doubt about the Company's  ability to
continue as a going concern, including the Company's ability to raise additional
capital to fund its  operations  and  development  programs and to establish ore
reserves. Management's plans in regard to these matters are described in Note 1.
The consolidated financial statements do not include any adjustments relating to
the   recoverability   and   classification   of  reported   asset  amounts  and
classification  of  liabilities  that  might  result  from the  outcome of these
uncertainties.

                                            BROWN ARMSTRONG RANDALL & REYES
                                            ACCOUNTANCY CORPORATION


Bakersfield, California
August 9, 1996


                                      -30-


<PAGE>


<TABLE>
<CAPTION>
                BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
                                 AND SUBSIDIARY
                        (A Development Stage Enterprise)
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 1996

                                     ASSETS
<S>                                                           <C>
Current Assets
   Cash                                                       $        1,275,413
   Prepaid expenses                                                       51,290
   Inventory                                                              24,290
   Accounts receivable, employees                                         40,462
                                                              ------------------

        Total Current Assets                                           1,391,455

Office Furniture and Equipment, Net                                      115,837
Mineral Properties and Mining Equipment, Net                          10,600,827
Deposits                                                                 377,147
                                                              ------------------

        Total Assets                                          $       12,485,266
                                                              ==================

                      LIABILITIES AND SHAREHOLDERS' EQUITY

 Current Liabilities
   Accounts payable and accrued liabilities                   $        1,440,268
   Current portion of long-term debt                                   2,279,861
                                                              ------------------

        Total Current Liabilities                                      3,720,129

Other Liabilities                                                          3,700

        Total Liabilities                                              3,723,829

Shareholders' Equity
   Common stock, no par value; authorized 100,000,000
     shares; issued and outstanding, 14,963,369 shares                43,752,439

Accumulated Deficit                                                 (11,260,214)
Accumulated Deficit during the Development Stage                    (23,730,788)
                                                              -----------------

        Total Shareholders' Equity                                     8,761,437

        Total Liabilities and Shareholders' Equity            $       12,485,266
                                                              ==================


                   The accompanying notes are an integral part
                   of these consolidated financial statements.
</TABLE>


<PAGE>

<TABLE>
                BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
                                 AND SUBSIDIARY
                        (A Development Stage Enterprise)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND FOR
               THE PERIOD FROM JULY 1, 1989 (Date of Resumption of
                Development Stage Enterprise Activities) THROUGH
                                  JUNE 30, 1996

<CAPTION>
                                                                                            Development Stage
                                            --------------------------------------------------------------------
                                                                                               Period from
                                                                                               July 1, 1989
                                                                                                 Through
                                                    1996                 1995                  June 30, 1996
                                            -----------------     --------------------    ----------------------
<S>                                         <C>                   <C>                     <C>                   
Revenues
  Sale of Joint Venture                     $              -      $                 -     $            4,232,000
  Other Income                                             -                        -                    156,444
  Interest                                             42,160                   25,720                   165,513
                                            -----------------     --------------------    ----------------------

 Total Revenues                                        42,160                   25,720                 4,553,957
                                            -----------------     --------------------    ----------------------

Expenses
  General and Administrative
    Expenses                                        2,471,067                1,494,076                13,899,765
  General Mining and Exploration                    4,010,966                2,832,819                 8,914,025
  Loss on Lease Abandonments                               -                        -                    392,317
  Depreciation and Amortization                       373,443                  311,625                 1,063,260
  (Gain) Loss on Sale of
    Mining Equipment                                     (116)                  20,875                    86,910
  Interest Expense                                     67,234                    7,721                   375,668
  Litigation Settlement                             2,389,668                   30,000                 3,697,262
                                            -----------------     --------------------    ----------------------

 Total Expenses                                     9,312,262                4,697,116                28,429,207
                                            -----------------     --------------------    ----------------------

  Income (Loss) Before
    Extraordinary Item                             (9,270,102)              (4,671,396)             (23,875,250)

  Extraordinary Item, Net Gain
    (Loss) from Debt Extinguishment,
    Net of Tax                                                                                           144,462
                                            -----------------     --------------------    ----------------------

      Net Loss                              $      (9,270,102)    $         (4,671,396)   $          (23,730,788)
                                            =================     ====================    ====================== 


Loss per Common Share
  Before Extraordinary Item                 $            (.96)    $               (.97)
                                            =================     ====================

Net Loss per Common Share                   $            (.96)    $               (.97)
                                            =================     ====================

Weighted Average Common
  Shares Outstanding                                9,634,616                 4,799,311
                                            =================     =====================


                   The accompanying notes are an integral part
                   of these consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
                                 AND SUBSIDIARY
                        (A Development Stage Enterprise)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
          FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND FOR THE PERIOD
      FROM JULY 1, 1989 (Date of Resumption of Development Stage Enterprise
                        Activities) THROUGH JUNE 30, 1996


<CAPTION>
                                                                                      Accumulated
                                       Common Stock                                     Deficit
                                     ----------------                                  During the
                             Number of                             Accumulated         Development
                              Shares             Amount              Deficit              Stage                 Total
                             ---------       -------------      ----------------     --------------       ---------------

<S>                          <C>             <C>                <C>                  <C>                  <C>           
Balance,
  June 30, 1989              1,233,041       $  12,318,877      $   (11,260,214)     $           -        $    1,058,663

Issuance of stock
  for options
  on mining
  properties                    15,667             117,500                   -                   -               117,500
Sale of stock in
  private placement,
  net of offering
  costs                        150,000             434,000                   -                   -               434,000
Issuance of stock
  for services                  23,500              72,500                   -                   -                72,500
Sale of stock in
  private placement,
  net of offering
  costs                        131,727             828,110                   -                   -               828,110
Issuance of units
  for debt to
  affiliates                    73,766             553,242                   -                   -               553,242
Net loss                            -                   -                    -            (768,436)             (768,436)
                           -----------       -------------      ---------------      -------------        --------------


                   The accompanying notes are an integral part
                   of these consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
                                 AND SUBSIDIARY
                        (A Development Stage Enterprise)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
          FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND FOR THE PERIOD
      FROM JULY 1, 1989 (Date of Resumption of Development Stage Enterprise
                 Activities) THROUGH JUNE 30, 1996 - (Continued)


<CAPTION>
                                                                              Accumulated
                                    Common Stock                                Deficit
                            ---------------------------                        During the
                            Number of                        Accumulated       Development
                             Shares           Amount           Deficit            Stage             Total
                            ---------       ----------       ------------     -------------       --------

<S>                         <C>             <C>              <C>                 <C>              <C>      
Balance,
  June 30, 1990             1,627,701       14,324,229       (11,260,214)        (768,436)        2,295,579

Issuance of stock
  for options on
  mining properties           154,737        2,283,020                -                -          2,283,020
Sale of stock in
  private placement,
  net of offering costs       141,606          910,840                -                -            910,840
Exercise of
  warrants                      3,333           35,000                -                -             35,000
Issuance of stock
  for services                 64,122        1,097,258                -                -          1,097,258
Issuance of stock
  for debt                      5,150          114,560                -                -            114,560
Cancellation of
  units from CSGM             (73,766)              -                 -                -                  -
Issuance of shares
  to CSGM                     120,000               -                 -                -                  -
Issuance of stock
  for litigation
  settlement, net              33,334          875,000                -                -            875,000
Net loss                           -                -                 -        (2,558,381)      (2,558,381)
                        -------------    -------------   ---------------  ---------------    -------------


                   The accompanying notes are an integral part
                   of these consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
                                 AND SUBSIDIARY
                        (A Development Stage Enterprise)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
          FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND FOR THE PERIOD
      FROM JULY 1, 1989 (Date of Resumption of Development Stage Enterprise
                 Activities) THROUGH JUNE 30, 1996 - (Continued)

<CAPTION>
                                                                                            Accumulated
                                                 Common Stock                                  Deficit
                                              -------------------                            During the
                                     Number of                            Accumulated        Development
                                      Shares             Amount             Deficit             Stage                Total
                               -----------------   ----------------   ------------------  ------------------    ----------------

<S>                                   <C>                <C>                 <C>                  <C>                <C>    
Balance,
  June 30, 1991                        2,076,217         19,639,907          (11,260,214)         (3,326,817)         5,052,876
Issuance of stock
  for options on
  mining properties                      195,780            564,899                   -                   -             564,899
Sale of stock in
  private placement,
  net of offering costs                  142,100          2,298,451                   -                   -           2,298,451
Exercise of warrants
  and options                            124,834          1,250,750                   -                   -           1,250,750
Issuance of stock
  for services                           184,579          1,818,102                   -                   -           1,818,102
Issuance of stock for debt                24,440            336,617                   -                   -             336,617
Issuance of shares to CSGM                88,000            748,750                   -                   -             748,750
Capital contributions                         -             312,805                   -                   -             312,805
Net loss                                      -                  -                    -           (3,178,878)        (3,178,878)
                               -----------------   ----------------   ------------------  ------------------     --------------

Balance, 
  June 30, 1992                        2,835,950         26,970,281          (11,260,214)         (6,505,695)         9,204,372
Issuance of stock
  for mining properties
  and equipment                           37,290            255,238                   -                   -             255,238
Sale of stock                             10,664             80,000                   -                   -              80,000
Exercise of warrants
  and options                             95,404            707,105                   -                   -             707,105
Exchange of options
  for debt, CSGM                          33,334            250,000                   -                   -             250,000
Issuance of stock
  for services                           183,190          1,616,659                   -                   -           1,616,659
Issuance of stock
  for debt                               105,140            713,494                   -                   -             713,494
Issuance of shares
  for CSGM                               100,256            500,285                   -                   -             500,285
Issuance of stock
  for the acquisition
  of Trans-Russian                       539,402            (84,176)                  -                   -             (84,176)
Net loss                                      -                  -                    -           (3,420,220)        (3,420,220)
                               -----------------   ----------------   ------------------  ------------------    ---------------

                   The accompanying notes are an integral part
                   of these consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
                                 AND SUBSIDIARY
                        (A Development Stage Enterprise)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
          FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND FOR THE PERIOD
      FROM JULY 1, 1989 (Date of Resumption of Development Stage Enterprise
                 Activities) THROUGH JUNE 30, 1996 - (Continued)


<CAPTION>
                                                                                             Accumulated
                                                Common Stock                                   Deficit
                                               --------------                                 During the
                                   Number of                              Accumulated         Development
                                    Shares               Amount             Deficit              Stage                Total
                               ----------------    -----------------  ------------------  ------------------    -----------------


<S>                                   <C>                 <C>                <C>                  <C>                   <C>      
Balance,
  June 30, 1993                       3,940,630           31,008,886         (11,260,214)         (9,925,915)           9,822,757

Sale of stock                            82,485              241,139                  -                   -               241,139
Exercise of warrants
  and options                            58,319              608,925                  -                   -               608,925
Issuance of stock
  for services                          215,099              938,159                  -                   -               938,159
Net income                                   -                   -                    -              136,625              136,625
                               ----------------    -----------------  ------------------  ------------------    -----------------

Balance,
  June 30, 1994                       4,296,533           32,797,109         (11,260,214)         (9,789,290)          11,747,605

Sale of stock                         2,566,666            3,696,457                  -                   -             3,696,457
Net loss                                     -                    -                   -           (4,671,396)          (4,671,396)
                               ----------------    -----------------  ------------------  ------------------    -----------------

Balance,
  June 30, 1995                       6,863,199           36,493,566         (11,260,214)        (14,460,686)          10,772,666

Sale of stock                         6,783,503           6,875,416                   -                   -             6,875,416
Issuance of stock
  for partial settlement
  of Royal Bank agreement               216,667             223,436                   -                   -               223,436
Compensation recognized on
  stock options granted                      -              160,021                   -                   -               160,021
Issuance of stock for partial
  settlement of Zuri Invest
  litigation                          1,100,000                  -                    -                   -                     -
Net loss                                     -                   -                    -           (9,270,102)          (9,270,102)
                               ----------------    ----------------   ------------------  ------------------    -----------------

Balance,
  June 30, 1996                      14,963,369    $     43,752,439   $      (11,260,214) $      (23,730,788)   $       8,761,437
                               ================    ================   ==================  ==================    =================

                   The accompanying notes are an integral part
                   of these consolidated financial statements.
</TABLE>


<PAGE>

<TABLE>
                BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
                                 AND SUBSIDIARY
                        (A Development Stage Enterprise)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND FOR
         THE PERIOD FROM JULY 1, 1989 (Date of Resumption of Development
               Stage Enterprise Activities) THROUGH JUNE 30, 1996

<CAPTION>
                                                                                         Development Stage
                                                                                       --------------------
                                                                                               Period from
                                                                                              July 1, 1989
                                                                                                 Through
                                                    1996                   1995               June 30, 1996
                                           -----------------     ------------------    --------------------

<S>                                        <C>                   <C>                   <C>                  
CASH FLOWS FROM OPERATING ACTIVITIES
     Net Loss                              $      (9,270,102)    $       (4,671,396)   $        (23,730,788)
                                           -----------------     ------------------    --------------------

     Gain on debt restructuring                           -                      -                 (144,462)
     Depreciation and amortization                   373,443                311,625               1,063,260
     Loss on lease abandonments                           -                      -                  444,359
     Loss on litigation settlement                 2,389,668                     -                3,667,262
     Gain on sale of mining equipment                   (116)               (20,875)                (35,100)
     Other                                                -                      -                   43,576
     Shareholder payment of services                      -                      -                  105,055
     Stock and debt for services                          -                      -                  703,068
     Change in stock purchase price
       adjustment receivable                         284,749               (284,749)                      -
     Change in note receivable                         7,000                     -                    7,000
     Change in inventory                              41,282                (41,118)                (22,000)
     Change in prepaid expenses                       (4,530)                    34                 450,446
     Change in deposits and other
       current assets                                 (2,490)               (19,852)               (115,961)
     Change in deposits                             (115,500)                (5,050)               (134,117)
     Change in accounts payable and
       accrued liabilities                           495,065                315,681               3,992,725
                                           -----------------     ------------------    --------------------

          Total adjustment                         3,468,571                255,696              10,025,111
                                           -----------------     ------------------    --------------------

NET CASH USED IN OPERATING ACTIVITIES             (5,801,531)            (4,415,700)            (13,705,677)
                                           -----------------     ------------------    --------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Acquisition of mineral properties,
       equipment and deferred
       developments                                 (652,735)              (400,160)             (5,010,059)
     Acquisition of office equipment                 (69,460)               (39,442)               (260,101)
     Proceeds from sale of equipment                      -                   3,500                 294,356
     Proceeds from the acquisition of
       Trans-Russian                                      -                      -                   20,060
                                           -----------------     ------------------    --------------------

NET CASH USED IN INVESTING ACTIVITIES               (722,195)              (436,102)             (4,955,744)
                                           -----------------     ------------------    --------------------
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                                                                                      Development Stage
                                                                                                    --------------------
                                                                                                       Period from
                                                                                                       July 1, 1989
                                                                                                           Through
                                                              1996                   1995               June 30, 1996
                                                        -----------------     ------------------    --------------------

<S>                                                     <C>                   <C>                   <C>                  
CASH FLOWS FROM FINANCING ACTIVITIES
     Advances from affiliates                                          -                      -                2,009,127
     Payments made to affiliates                                       -                      -                (343,798)
     Proceeds from issuance of stock                            7,035,435              3,696,457              18,126,212
     Proceeds from warrant extensions                                  -                      -                  207,750
     Proceeds from issuance of notes payable                           -                 143,821                 870,043
     Payments on long-term debt                                  (220,449)              (145,777)            (1,236,348)
     Proceeds from convertible debenture                          300,000                     -                  300,000
                                                        -----------------     ------------------    --------------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                       7,114,986              3,694,501              19,932,986
                                                        -----------------     ------------------    --------------------

Net Increase (Decrease) in Cash                                   591,260             (1,157,301)              1,271,565

Cash at Beginning of Period                                       684,153              1,841,454                   3,848
                                                        -----------------     ------------------    --------------------

Cash at End of Period                                   $       1,275,413     $          684,153    $          1,275,413
                                                        =================     ==================    ====================



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

     Cash paid during the year for interest
       (net of amounts capitalized)                     $          67,234     $            7,721    $            220,976
                                                        =================     ==================    ====================


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES 
(See Note 15)


                   The accompanying notes are an integral part
                   of these consolidated financial statements.
</TABLE>


<PAGE>


                BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
                                 AND SUBSIDIARY
                        (A Development Stage Enterprise)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - OPERATIONS AND BASIS OF PRESENTATION
         ------------------------------------

Brush Creek Mining and Development Company,  Inc. (the Company) was incorporated
in 1982 and operated as a mining and mineral development company until April 17,
1989,  at which  time its  mining  operations,  all of which had been  conducted
through  the Brush  Creek Joint  Venture  (BCJV)  (40%  owned) were  terminated.
Shortly thereafter,  the Company became actively engaged in acquiring additional
mineral  properties,  raising  capital,  and  preparing  properties  for resumed
production.  The Company did not have any  significant  operations or activities
from April 17, 1989 through June 30, 1989 and  suspended  all mining  operations
and reduced its activities to a care and  maintenance  level.  Accordingly,  the
Company is deemed to have  reentered the  development  stage  effective  July 1,
1989.

In February 1992, the Company began limited  production at the Ruby Mine under a
permit that limited mill capacity to 225 tons per day. Production was terminated
due to adverse weather  conditions in December 1992. The Company resumed limited
production  in July 1993 and has continued to gradually  increase  production at
the Ruby Mine. However, the Company has not commenced economic production and is
therefore still considered to be in the development stage.

The Company's consolidated financial statements have been presented on the basis
that it is a going concern,  which  contemplates  the realization of the mineral
properties  and other assets and the  satisfaction  of liabilities in the normal
course  of  business.  The  Company  has  incurred  losses of  $34,991,002  from
inception to June 30, 1996.  The Company has not  realized  economic  production
from its mineral properties as of June 30, 1996. These factors raise substantial
doubt about the  Company's  ability to continue as a going  concern.  Management
continues  to actively  seek  additional  sources of capital to fund current and
future operations.  There is no assurance that the Company will be successful in
continuing  to raise  additional  capital,  establishing  probable or proven ore
reserves,  or determining if the mineral  properties can be mined  economically.
These  consolidated  financial  statements do not include any  adjustments  that
might result from the outcome of these uncertainties.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         ------------------------------------------

Principles of Consolidation
---------------------------

The consolidated  financial  statements  include the accounts of the Company and
its wholly  owned  subsidiaries,  B.  Creek  Acquisition  Corporation  and Alpha
Hardware.   All  material  intercompany  accounts  and  transactions  have  been
eliminated.

Use of Estimates
----------------

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amount of assets and  liabilities,  and
disclosure of contingent  liabilities  at the date of the financial  statements,
and the reported amount of revenues and expenses during the reporting period.

Mineral Properties and Mining Equipment
---------------------------------------

Mineral properties and mining equipment include land, mining claims, development
costs and mining  equipment  carried at cost.  Mining  equipment  including mill
facilities is depreciated using the  straight-line  method over estimated useful
lives of 5 to 15 years,  or the  units-of-production  method  based on estimated
tons of ore reserves


<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
         ------------------------------------------

if the  equipment  is located at a producing  property  with a shorter  economic
life. Mining equipment not in service is not depreciated.

The Company  defers direct costs  related to the  acquisition,  exploration  and
development  of  mineral  properties  pending  determination  of their  economic
viability  which  normally  entails   performing  an  in-depth   geological  and
geophysical study. If no minable ore body is discovered,  previously capitalized
costs are  expensed  in the  period  the  property  is  abandoned.  Any  revenue
generated from pre-production  activities is offset against the related deferred
development and  pre-production  costs.  When a property is placed in commercial
production,  such  deferred  costs are  depleted  using the  units-of-production
method.

Asset Impairment
----------------

In  accordance  with  Statement  of  Financial  Accounting  Standards  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" (SFAS 121),  management of the Company  reviews the net carrying
value of each mine and development property on a regular basis. Estimated future
net cash flows from each mine are  calculated  using  estimated  future  prices,
operating capital, and reclamation costs on an undiscounted basis. Reductions in
the carrying value of each mine are recorded to the extent the net book value of
the investment  exceeds the estimate of future  discounted net cash flows.  Upon
adoption  of SFAS  121 in  fiscal  year  1995-96,  there  was no  impact  to the
financial statements.

The  recoverability  of the carrying value of development  projects is evaluated
based upon  estimated  future net cash flows from each  property,  determined as
described  above,  using  estimates of contained  mineralization  expected to be
classified  as proven and probable  reserves  upon  completion  of a feasibility
study.  Reductions  in the carrying  value of each  property are recorded to the
extent that the Company's  carrying value in each property  exceeds its estimate
of future discounted net cash flows.

Management's estimates of gold prices, recoverable proven and probable reserves,
operating  capital,  and  reclamation  costs are  subject to  certain  risks and
uncertainties which may affect the recoverability of the Company's investment in
property,  plant, and equipment.  Although management has made its best estimate
of these factors  based on current  conditions,  it is reasonably  possible that
changes could occur in the near term which could adversely  affect  management's
estimate of the net cash flow expected to be generated from its operations.

Office Furniture and Equipment
------------------------------

Office furniture and equipment are recorded at cost. Depreciation is computed by
the straight-line method based upon the estimated useful lives of the respective
assets, generally three to five years.

Income (Loss) per Common Stock
------------------------------

Income  (loss)  per  share of common  stock is  computed  based on the  weighted
average  number  of  shares  outstanding.   Warrants,  options  and  convertible
debentures  have not been included in the  calculation  as their effect would be
anti-dilutive.  All common shares included in the financial statements reflect a
reverse stock split of 15:1, which the Board of Directors  approved November 29,
1993.

Reclamation and Environmental Costs
-----------------------------------

Reclamation costs and related accruals are based on the Company's interpretation
of  environmental  and  regulatory  requirements.  Minimum  standards  for  mine
reclamation have been established by various governmental agencies. Reclamation,
site restoration, and closure costs for each producing mine are accrued over the
life of the mine  using  the  units-of-production  method.  Ongoing  reclamation
activities are expensed in the period incurred.


<PAGE>


Income Taxes
------------

The Company  accounts for income taxes using the liability method which requires
recognition of deferred tax  liabilities  and assets for the expected future tax
consequences  of events that have been included in the  financial  statements or
tax returns.  Deferred tax assets and  liabilities  are determined  based on the
difference  between  the  financial  statements  and tax  basis  of  assets  and
liabilities  using  enacted  tax  rates in  effect  for the  year in  which  the
differences are expected to reverse.

Inventory
---------

Inventory is stated at net realizable value.

Stock Based Compensation
------------------------

In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation,"  (SFAS  123),  which is  effective  for periods  beginning  after
December  15,  1995.   SFAS  123  requires  that  companies   either   recognize
compensation  expense  for  grants of stock,  stock  options,  and other  equity
instruments based on fair value or provide proforma  disclosure of the effect on
net income and earnings per share in the Notes to the Financial Statements.  The
Company  intends to continue to account for its stock-based  compensation  under
Accounting  Principles  Board  No.  25;  however,  the  Company  will  adopt the
disclosure provisions of SFAS 123 during the fiscal year ending June 30, 1997.

Fair Value of Financial Instruments
-----------------------------------

Disclosure  of the  estimated  fair value of financial  instruments  is required
under SFAS No. 107, "Disclosure About Fair Value of Financial  Instruments." The
fair value  estimates  are made at  discrete  points in time  based on  relevant
market  information  and  information  about the  financial  instruments.  These
estimates may be subjective in nature and involve  uncertainties and significant
judgment and therefore cannot be determined with precision.

Cash,  cash  equivalents,  and  short-term  investments  are valued at cost plus
accrued interest,  which approximates  market value. The fair value of long-term
debt is estimated  based on quoted market prices for the same or similar  issues
with  similar  maturities.  The  amount  recorded  in the  financial  statements
approximates fair value for long-term debt at June 30, 1996.

Cash and Cash Equivalents
-------------------------

For purposes of reporting cash flows,  cash and cash equivalents  include highly
liquid debt instruments purchased with a maturity of five months or less. Of the
$1,275,413 cash balance at June 30, 1996,  $1,099,773 was not covered by Federal
Depository Insurance.


NOTE 3 - AFFILIATES AND RELATED PARTIES
         ------------------------------

Significant relationships with (1) companies affiliated through common ownership
and/or management, and (2) other related parties are as follows:

In  prior  years  the  Company  entered  into a  number  of  relationships  with
California  Properties,  Independent  Sierra Gold Mines (ISGM) and  Consolidated
Sierra Gold Mines (CSGM) at times when Ms.  Simone  Anderson was (i) an officer,
director  and  substantial  shareholder  of the  Company,  (ii) an  officer  and
director of California  Properties and its wholly owned  subsidiary  Sierra Gold
Properties,  Inc., and (iii) the sole  shareholder of ISGM and CSGM. The Company
has  terminated  its  relationships   with  these  entities,   and  the  Company
understands  that Ms.  Anderson and her  affiliates no longer hold 5% or more of
the Company's securities.


<PAGE>


NOTE 3 - AFFILIATES AND RELATED PARTIES - (Continued)
         ------------------------------

The former  chief  executive  officer and  director of the  Company,  Mr.  James
Anderson,  who is  the  spouse  of  the  individual  discussed  in the  previous
paragraph,  is a director of California Properties and director and president of
ISGM and CSGM.  Mr. James  Anderson is also the chief  executive  officer of the
Moscow Country Club.

On October 18, 1993, the Company  entered into a severance  agreement with James
Anderson,  the former chief  executive  officer and director of the Company.  In
total  satisfaction of all amounts owing Anderson,  the Company issued 1,500,000
shares of its common  stock to  Anderson,  800,000  shares of which have already
been  issued to  Anderson.  The  remaining  700,000  shares are being held in an
escrow account until certain conditions are met. Included in these conditions is
the payment of  approximately  $80,000 owed to the Company by entities under the
direct or indirect  control by  Anderson.  These  amounts  were not repaid.  The
700,000 shares remain in escrow.

Mr. Georges  Benarroch,  who previously served as a director of the Company from
August  1990 to May 1991 and was an officer of the  Company  during a portion of
that period, has a controlling interest in Euro Canadian, a Canadian corporation
(see Note 13).

During the year ended June 30,  1995,  the Company  borrowed a total of $143,821
from two  stockholders  and two  Directors.  The loans were used to provide  the
Company  with working  capital.  The loans were  secured by gold  inventory  and
equipment. The loans were repaid in full, including interest at 8.5% per annum.


NOTE 4 - STOCK PURCHASE PRICE ADJUSTMENTS
         --------------------------------

During  the year  ended June 30,  1996,  the  Company  entered  into  investment
agreements  in  connection  with  offerings  of its Common  Stock in reliance on
Regulations S under the  Securities  Act of 1933,  as amended.  Several of these
agreements  contained  purchase price adjustment  clauses which require that the
initial  purchase  price be adjusted up or down  depending on the average  share
price of the Company's  Common Stock during a stated period,  typically 45 days,
subsequent to the stock purchase closing date. As a result, the Company could be
required to issue up to an  additional  753,175  shares of Common Stock based on
the closing bid price at June 30, 1996.  The valuation  period ends on September
27, 1996 at which time the actual adjustment, if any, will be determined.

In addition to purchase price adjustments, shares of Common Stock were issued at
various  times during the year pursuant to  Regulation S of the  Securities  and
Exchange Act of 1933 at discounts of up to 50% from the closing bid price on the
day prior to the sales.


NOTE 5 - OFFICE FURNITURE AND EQUIPMENT
         ------------------------------

Office furniture and equipment consists of the following at June 30, 1996:

<TABLE>
      <S>                                      <C>            
      Office furniture and equipment           $       114,744
      Vehicles                                         165,050
                                               ---------------

                                                       279,794
      Less accumulated depreciation                  (163,957)
                                               ---------------

                                               $       115,837
                                               ===============
</TABLE>


<PAGE>



NOTE 6 - MINERAL PROPERTIES AND MINING EQUIPMENT
         ---------------------------------------

<TABLE>
The Company's net investment in mineral  properties  and mining  equipment as of
June 30, 1996 is as follows:

<CAPTION>
                                        Land and          Development            Mining
                                      Land Options           Costs              Equipment            Total
                                   ----------------   -----------------    -----------------   -----------------

<S>                               <C>                 <C>                  <C>                 <C>              
Carson Mine                       $       2,199,858   $       1,051,731    $         42,835    $       3,294,424
Brush Creek Mine                            408,496           1,460,669             193,464            2,062,629
Gardners' Point and
  Pioneer Mines                             185,477             770,327             128,521            1,084,325
Ruby Mine                                   327,336           2,251,714           1,975,525            4,554,575
High Commission Mine                        101,875               6,118                   -              107,993
Kate-Hardy Mine                              58,667              97,789                   -              156,456
Rising Sun Mine                               9,111             129,980                   -              139,091
                                   ----------------   -----------------    -----------------   -----------------

                                          3,290,820           5,768,328            2,340,345          11,399,493
Accumulated
  depreciation                                    -                   -             (798,666)           (798,666)
                                  -----------------   -----------------    -----------------   -----------------

                                  $       3,290,820   $       5,768,328    $       1,541,679   $      10,600,827
                                  =================   =================    =================   =================
</TABLE>


All of the Company's mineral  properties  contain mines which were in production
previously.  All such mines,  except for the Gardners's Point and Pioneer Mines,
are located in the Allegheny-Forest-Downieville  mining districts on the western
slope of the Sierra Nevada  mountain range in Northern  California and aggregate
approximately  6,300 acres.  Because of the close proximity of the mines to each
other, the Company plans to centralize milling  operations.  The Gardner's Point
and Pioneer  Mines are located  outside this  district and  management  has been
evaluating  alternatives  to  placing  them  into  current  production.  Current
developments and commitments related to certain properties follow:

Ruby Mine
---------

During 1992, the Company entered into an option agreement to lease this property
in exchange for a total of 225,000  shares of the Company's  common stock with a
value of $112,500. In 1990, the Company entered into a lease purchase agreement,
for this property.  This lease was modified on November 1, 1994. Pursuant to the
terms of this lease,  the Company  must pay a 7-1/2% net smelter  royalty on all
minerals  produced from lode  deposits and 10% on minerals  produced from placer
deposits  with a minimum  lease  payment of $10,000 per month  through  June 30,
2000,  subject to an adjustment based on the Consumer Price Index. The lease may
be  extended  for  two  additional  five-year  periods  or the  property  may be
purchased for $4,000,000 subject to adjustment based on the Consumer Price Index
payable by June 30,  2000.  All payments  made  subsequent  to July 1, 1995,  to
acquire the  lease/option  and all payments  made under the lease  subsequent to
July 1, 1995, will be credited  against the option  purchase price.  Performance
under the lease purchase agreement is secured by the Company's equipment used in
the mining operations on the leased premises.

The Rising Sun Mine
-------------------

In December of 1989, the Company issued 10,000 shares of its common stock for an
option to lease the Rising Sun Mine. On June 30, 1990, the Company exercised the
option upon  payment of $20,000  cash and entered into a five year lease with an
option to purchase.  Pursuant to the terms of the lease, which was most recently
modified on November 11, 1994, the Company must pay a net smelter  royalty of 8%
on all minerals  produced  with a minimum  royalty of $4,590 per month,  through
June 30, 2000,  subject to an adjustment  based on the Consumer price index. The
property may be  purchased  for  $1,000,000  payable on or before June 30, 2000,
subject to adjustment  based on the Consumer  Price Index.  All payments made to
acquire the  lease/option and all payments made under the lease will be credited
against the option purchase price.


<PAGE>


NOTE 6 - MINERAL PROPERTIES AND MINING EQUIPMENT - (Continued)
         ---------------------------------------


Merger with Sierra Gold Properties, Inc. - Kate-Hardy Mine
----------------------------------------------------------

In January 1992, the  shareholders  of California  Properties  approved a merger
between  its wholly  owned  subsidiary,  Sierra  Gold and B.  Creek  Acquisition
Corporation,  a wholly owned subsidiary of the Company.  The merger was recorded
effective  March 31, 1992. The Company issued  2,330,020  shares of common stock
with a value  of  $74,807  and  gave  up  certain  assets  and  assumed  certain
liabilities  totaling $175,193 in exchange for all of the common stock of Sierra
Gold.   Management   determined   the  value  of  Sierra  Gold's  assets  to  be
approximately  $250,000  at the time the letter of intent was  entered  into and
announced in April 1989. Pro forma results of operations for the interim periods
presented  are not shown as Sierra  Gold  conducted  no  significant  activities
during these periods.

The  primary  asset of  Sierra  Gold,  a lease  with an option  to  acquire  the
Kate-Hardy  Mine,  expired  on April  24,  1992,  and as a  result,  during  the
nine-months  ended  March  31,  1992,  the  Company  recognized  a  loss  on the
expiration of the lease of $250,000.  On June 30, 1992, the Company entered into
a new lease,  effective March 23, 1992, in the form of a mining option agreement
for a term of five years expiring March 22, 1997. During the term of the option,
the  Company  must pay a  $50,000  payment  (initial  option  payment)  upon the
execution  of the  agreement;  $5,500 per month for each month  during the first
year; $6,500 per month during the second year; $7,500 per month during the third
year;  $8,500 per month during the fourth year;  and $9,500 per month during the
fifth year.  In addition,  the Company must pay a 6% net smelter  royalty on all
minerals produced. The option purchase price for the mine is $1,500,000 less 75%
of all option payments paid up to a maximum of $750,000.


NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
         ----------------------------------------

<TABLE>
Accounts  payable and accrued  liabilities  consist of the following at June 30,
1996:

      <S>                                         <C>            
      Accounts payable                            $       947,745
      Performance deposit (Note 13)                       176,223
      Accrued payroll and other                           316,300
                                                  ---------------

                                                  $     1,440,268
                                                  ===============
</TABLE>


NOTE 8 - LONG-TERM DEBT
         --------------

<TABLE>
Long-term debt consists of the following at June 30, 1996:

      <S>                                                       <C>            
      Financed insurance premium, bearing interest at
      10%, payable in monthly installments of $6,079.           $        48,631

      Convertible  debenture payable,  7% interest
      due April 3, 1998, convertible 45 days after
      closing  on April 3,  1996  (see  Note  17).                      300,000

      Note  payable to Zuri  Invest,  interest  at
      9.75%,   Secured   by   mining   properties.
      Principal   balance  reduced  as  shares  of
      Company stock issued to Zuri Invest are sold
      to satisfy principal outstanding.  1,100,000
      shares   placed   in   escrow   to   satisfy
      obligation (see Note 13).                                       1,200,000
</TABLE>


<PAGE>

NOTE 8 - LONG-TERM DEBT - (Continued)
         --------------

<TABLE>

      <S>                                                       <C>            
      Zuri Invest litigation settlement totaled
      $1,306,250. Note payable entered for $1,200,000.
      Remaining balance payable at June 30, 1996
      (see Note 13).                                                    106,250

      Royal Bank of Scotland litigation settlement
      dated December 13, 1995. Settlement calls
      for a combination of cash and stock (see Note 13).                624,980
                                                                ---------------

                                                                      2,279,861
      Less current portion                                            2,279,861
                                                                ---------------

                                                                $             -
                                                                ===============
</TABLE>


NOTE 9 - INCOME TAXES
         ------------

At June 30, 1996, the Company had available net operating loss carryforwards for
financial   statement   and  federal   income  tax  purposes  of   approximately
$14,000,000. These loss carryforwards expire between 1998 and 2009.

The Company has reported income tax losses of approximately $25,000,000 in prior
years.  In  general,  income tax losses are carried  forward to future  years to
reduce future income taxes.

In the case of a loss corporation  which changes more than 50% of its ownership,
Internal  Revenue Code Section 382 limits the amount carried  forward to a small
percentage  of the fair  market  value of the  corporation's  stock  immediately
before the ownership  change.  The Company's 1989  ownership  change reduced the
amount of the  prechange  loss  carryforward  from  approximately  $6,000,000 to
approximately $70,000.

A valuation  allowance of  approximately  $4,760,000 has been provided to offset
the benefit of  approximately  $4,760,000  from the remaining  $14,000,000  loss
carryforwards.  This valuation  allowance is necessary because at June 30, 1996,
the  available  benefits  are more likely than not to expire  before they can be
used.  There was not a  material  change  in the tax  benefit  or the  valuation
allowance from 1995 to 1996.


NOTE 10 - SHAREHOLDERS' EQUITY
          --------------------

During Fiscal 1996, the following major equity transactions occurred:

o     The Company sold 6,783,503  shares of Common Stock for  $6,875,416.  These
      shares were sold pursuant to Regulation S of the Securities Act of 1933.

o     The Company  issued  1,100,000  shares as partial  settlement  of the Zuri
      Invest litigation.

o     The Company issued 216,667 shares as partial  settlement of the Royal Bank
      of Scotland litigation.

During fiscal 1995, the following major equity transactions occurred:

o     The Company sold 2,566,666  shares of Common Stock for  $3,696,457.  These
      shares were sold pursuant to Regulation S of the Securities Act of 1933.


<PAGE>

NOTE 10 - SHAREHOLDERS' EQUITY - (Continued)
          --------------------

During fiscal 1994, the following major equity transactions occurred:

o     The Company  issued 215,099 shares of Common Stock in exchange for certain
      legal,  engineering,  consulting,  and employment services rendered to the
      Company totaling $938,159.(*)

o     The Company  issued  shares of the  Company's  Common Stock  pursuant to a
      service agreement with James Anderson totaling $421,875.

o     The Board of Directors of the Company  approved a 15-for-1  reserve  stock
      split effective November 29, 1993.

During fiscal 1993, the following major equity transactions occurred:

o     The Company issued  539,402 shares of Common Stock in connection  with its
      acquisition of Trans-Russian. Total reduction in equity in relation to the
      acquisition was $84,176.(*)

o     In connection with its mining properties, the Company issued 37,290 shares
      of Common  Stock for accrued  lease  payments of $107,710,  prepayment  of
      certain lease expenses of $113,153, and acquisition of mining equipment of
      $34,375.(*)

o     The Company issued 105,140 shares of Common Stock with a value of $713,494
      in satisfaction of outstanding debt obligations amounting to $558,592.(*)

o     The Company issued 100,256 shares of Common Stock with a value of $500,285
      in satisfaction of the Company's obligation to CSGM of $574,750.(*)

o     The Company  issued 183,190 shares of Common Stock in exchange for certain
      legal,  engineering,  consulting,  and employment services rendered to the
      Company totaling $1,616,659.(*)

o     The  Company  sold  10,664  shares of stock at $7.50 per  share,  totaling
      $80,000.

o     The Company  issued 33,334 shares of Common Stock pursuant to the exercise
      of options in settlement of debt to CSGM of $250,000.(*)

During fiscal 1992, the following major equity transactions occurred:

o     The Company issued  155,335 shares of Common Stock in connection  with its
      acquisition of Sierra Gold and the related  options on mineral  properties
      for $74,807.(*)

o     The Company  issued 10,311  shares of Common Stock in connection  with its
      acquisition of the  Kate-hardy  Mine for $88,667 and prepayment of certain
      lease expenses of $66,000.(*)

o     In connection  with its lease on the Ruby Mine,  the Company issued 24,800
      shares of Common Stock for: accrued lease payments of $72,502,  prepayment
      of lease  obligation of $63,287,  and  modification and extension to lease
      term of $154,836.(*)

o     In connection  with its lease on the Rising Sun Mine,  the Company  issued
      5,333  shares of Common  Stock for  accrued  lease  payments  of  $22,002,
      prepayment of lease obligation of $18,687,  and modification and extension
      to lease term of $4,111.(*)

o     The  Company  issued  24,439  shares of Common  Stock in  satisfaction  of
      outstanding debt obligations amounting to $336,617.(*)


<PAGE>


NOTE 10 - SHAREHOLDERS' EQUITY - (Continued)
          --------------------

o     The Company  issued 88,000 shares of Common Stock with a value of $748,750
      to  CSGM  in  satisfaction   of  the  Company's   obligation  to  CSGM  of
      $900,000.(*)

o     The Company  issued 117,912 shares of Common Stock in exchange for certain
      legal,  engineering,  and  employment  services  rendered  to the  Company
      totaling $1,286,852.(*)

o     In May 1992,  the Company  entered into a three-year  consulting  contract
      with Mr.  Anderson in exchange for issuing  66,667  shares of Common Stock
      with a value of $531,250.(*)

o     Ms. Anderson paid expenses on behalf of the Company amounting to $105,055.
      This amount and the proceeds  received  from the  extension of warrants of
      $207,750 totaling $312,805 is accounted for as a contribution of capital.

o     The Company made several  private  placements of a total of 142,100 shares
      of its  Common  Stock at  prices  ranging  from  $.90 to $1.50  per  share
      totaling $2,298,451, net of offering costs of $177,974.

During fiscal 1991, the following major equity transactions occurred:

o     On June 29, 1990,  the Company sold 131,727 units for $987,955.  Each unit
      consisted of one share of Common Stock and a warrant to purchase one share
      of Common Stock. The Company's  previous chairman,  Mr. Benarroch,  is the
      president of the underwriter,  Euro Canadian,  in this transaction,  which
      received a commission of $98,796.  The underwriter also received  warrants
      to purchase  33,333 shares of the  Company's  Common Stock at $.50 through
      July 1992. In July 1990, the Company sold an additional 141,606 units. The
      Company  received  $910,840 after  offering  expenses.  Warrants  covering
      253,333  shares are  exercisable  at $.70 through June 1992,  and warrants
      covering 20,000 shares are exercisable at $.90 through June 1992.

o     On June 26, 1990, the Company's  Board of Directors  approved the issuance
      of 73,766 units to ISGM and CSGM in  satisfaction of the Company's debt of
      $553,242  to  these  entities.  Each  unit  consists  of one  share of the
      Company's  Common  Stock and one warrant to purchase one share of stock at
      $.50 per share,  exercisable  through July 1992.  As of December 31, 1990,
      these units had not been  delivered due to  administrative  delays.  As an
      inducement to the approval of the consulting  agreement  described  below,
      CSGM  and ISGM  agreed  to  cancel  the  units  approved  by the  Board of
      Directors on June 26, 1990.

o     On January 23, 1991,  the Company  entered into an agreement with CSGM and
      ISGM whereby CSGM and ISGM are obligated to render consulting  services to
      the Company to assist the Company in the acquisition of mining properties,
      identification of and negotiation with the Company's creditors,  and other
      day-to-day  business and  administrative  tasks. In exchange for rendering
      consulting  services,  the Company  agreed to issue 120,000  shares of its
      Common  Stock to  CSGM.  As the  market  value of the  shares  issued  was
      approximately  equal to that of the units  canceled,  the  issuance of the
      shares  has been  treated  as a  replacement  of the units for  accounting
      purposes.(*)

o     In January 1991,  an additional  49,272 shares of Common Stock were issued
      to third parties.  These shares,  valued at fair market value of $630,568,
      were issued for legal and consulting  services  rendered and the repayment
      of a note payable issued for services of $114,560.(*)

o     The Company  agreed to issue 20,000  shares of Common Stock valued at fair
      market  value of  $581,250  to an  engineering  firm  for past and  future
      services.(*)

o     The Company  entered  into a  litigation  settlement  with Mr.  Benarroch,
      whereby  66,667  shares of the  Company's  outstanding  Common  Stock were
      returned to the Company and,  simultaneously,  the Company  issued back to
      Mr.  Benarroch  100,000  shares,  valued at fair market value of $1.75 per
      share.  The  settlement  resulted in a net  issuance  of 33,333  shares of
      Common Stock valued at $875,000.(*)


<PAGE>


NOTE 10 - SHAREHOLDERS' EQUITY - (Continued)
          --------------------


o     During  fiscal  1990,  the Company  initiated a private  placement  of its
      Common Stock. In April 1990, the Company sold 150,000 shares for $450,000.

o     In March 1990, Ms.  Anderson sold 66,667 shares of Common Stock to Sungold
      Mining Corp.  (Sungold) for $10,000 as an  inducement  for an affiliate of
      Sungold to lend the Company $140,000.(*)

o     In March and May 1990,  the Company  issued 235,000 shares of Common Stock
      in exchange for legal services valued at $72,500.(*)

(*)   For each issuance  involving noncash  consideration,  the Company recorded
      the fair market value of the shares issued as the consideration received.


NOTE 11 - STOCK OPTIONS AND WARRANTS
          --------------------------

The Company has an  incentive  stock  option plan under which five and  ten-year
options may be granted to key  employees to purchase up to 33,333  shares of the
Company's  Common  Stock at the market  price on the date of grant.  At June 30,
1996,  no options had been granted  under this plan. A total of 33,333 shares of
the Company's unissued Common Stock has been reserved for this plan.

The  Company has a  nonqualified  stock  option  plan,  under  which  options to
purchase a total of  1,051,000  shares from $.85 to $4.13 were  outstanding  and
exercisable at June 30, 1996.

<TABLE>
The following is a summary of Common Stock options and warrants  outstanding  as
of June 30, 1996:

<CAPTION>
                                   Shares             Shares
                                   Under               Under                Price           Expiration
                                  Warrants            Options             Per Share             Date
                              --------------      --------------    -------------------     -----------

<S>                           <C>                 <C>               <C>                     <C>
Outstanding at
  June 30, 1994                      584,752             243,334          $1.94 - 16.80
      Expired                       (584,752)                 -            7.50 - 15.00
      Granted                             -               29,000                   2.63     July 29, 1999
      Cancelled                           -               (4,000)                  2.63     July 29, 1999
      Granted                             -               90,000                   2.00     February 10, 2000
      Expired                             -              (79,334)          1.94 - 16.80     Various
                              --------------      --------------    -------------------

Outstanding at
  June 30, 1995                           -              279,000            2.00 - 2.63
      Granted                             -              387,500                   3.03     July 15, 2000
      Cancelled                           -              (17,500)                  3.03     July 15, 2000
      Granted                             -                2,000                   4.13     August 4, 2000
      Granted                             -               25,000                   2.59     October 11, 2000
      Granted                             -              350,000                   1.13     December 14, 2000
      Granted                             -               25,000                    .85     January 1, 2001
                              --------------      --------------    -------------------

Outstanding at
  June 30, 1996                           -            1,051,000             .85 - 4.13
                              ==============      ==============    -------------------
</TABLE>


NOTE 12 - COMMITMENTS AND CONTINGENCIES
          -----------------------------

Lease  expense  consists  principally  of an operating  lease for the  Company's
office  building  which  calls for  monthly  payments  of $2,500  from June 1989
through  May 1994.  The rent is  subject  to annual  adjustment  based  upon the
Consumer  Price  Index.  Rent expense for the years ended June 30, 1996 and 1995
was approximately $30,000 and $31,000, respectively.

See Note 6 regarding mineral property commitments.


NOTE 13 - LEGAL PROCEEDINGS
          -----------------

     During the fiscal year ended June 30,  1996,  the Company  entered into two
significant  settlement  agreements.  The settlement  agreements  resolve claims
against the Company  made by Zuri Invest  A.G.,  et. al.,  and the Royal Bank of
Scotland,  et. al. The Company has filed  complaints  against the  Andersons and
parties and entities  related to the Andersons which were allegedly  involved in
the transactions related to the settlements with Zuri Invest A.G. and Royal Bank
of Scotland.

     Additionally  the Company went to trial  against  Consolidated  Sierra Gold
Mines,  Inc.  ("CSGM"),  and won a $30,000 jury  verdict in its  cross-complaint
against CSGM.

     With that result, all material litigation against the Company was resolved.

     The Company has been requested pursuant to a non-public informal inquiry by
the staff of the Securities and Exchange  Commission,  to provide information to
the staff of the  Commission  regarding  the Company's  financing  activities in
reliance upon  Regulation S under the Securities Act. The Commission has advised
the Company that the inquiry  should not be construed  as an  indication  by the
Commission or its staff that any violations of law have occurred,  nor should it
be considered a reflection upon any person.

     The following is a detailed  historical  perspective of significant actions
involving the Company, including those summarized above.

     On August 9, 1991,  Zuri Invest A.G.,  Andre  Michaels and Peter  Woodfield
(the  "Plaintiffs")  filed  a  complaint  against  the  Company,  Euro  Canadian
Securities  Limited,  Georges  Benarroch,  Simone  Anderson,  James Anderson and
Capitol Bank  Sacramento  and were  seeking  1,500,000  shares of the  Company's
Common Stock previously  owned by Simone Anderson and subsequently  sold to Euro
Canadian,  which were  allegedly  promised to Plaintiffs in connection  with the
Company's  equity financing in 1990. In a stipulated  settlement,  Euro Canadian
and Georges  Benarroch agreed to defend and indemnify the Company in any lawsuit
filed by the Plaintiffs claiming title to such shares. Accordingly,  the Company
tendered its defense in this lawsuit to Euro Canadian and Georges  Benarroch who
agreed to provide the Company with such defense.  Mr. Benarroch had defaulted in
the proceeding and although the Company had the commitment  from Mr.  Benarroch,
the  Company  engaged its own counsel  and  vigorously  defended  itself in this
litigation.

     Simone  Anderson  also  filed a  counter-claim  in the Zuri  Invest  action
against the Royal Bank of  Scotland,  seeking  rescission  of  3,250,000  shares
(pre-split) of Common Stock  transferred to the Royal Bank of Scotland by Simone
Anderson in connection  with certain  financing on behalf of the Company.  After
the Royal Bank of Scotland  was served with the  complaint,  an order of default
was entered against it. Based on the order of default,  representations  made by
Simone Anderson,  Ms. Anderson's agreement with the Company to indemnify it from
any  adverse  claims,  and the  deposit of  $200,000  with the Company to secure
performance under the indemnity agreement, the Company transferred the 3,250,000
(pre-split)  shares into the name of Simone  Anderson and reserved an additional
3,250,000  shares of Common Stock as a contingency  for future  adverse  claims.
Thereafter, the Company,


<PAGE>


NOTE 13 - LEGAL PROCEEDINGS - (Continued)
          -----------------

its transfer agent, and Simone Anderson received notice from the Royal Bank
of Scotland,  as nominee,  demanding  return of the 3,250,000 shares and further
threatening legal action if the shares were not returned.

     On December 14,  1995,  the Company  entered  into an agreement  ("the Zuri
Agreement")  with Zuri  Invest  A.G.,  Andre  Michaels  and Peter  Woodfield  in
connection  with the Zuri  Invest  action  to  partially  satisfy  the joint and
several  judgment  entered in the Zuri  Invest  action  against  the Company and
Simone Anderson and James Anderson  (collectively,  the  "Andersons") on October
31, 1995 (the "Judgment"). The Zuri Plaintiffs agreed, subject to the receipt of
the  consideration  described below,  not to seek any further recovery  directly
from the Company on the  Judgment,  and to release the Company  from any further
liability  thereunder.  The Zuri  Plaintiffs  also agreed not to pursue recovery
against the  Andersons on the Judgment if it is judicially  determined  that the
Andersons  have  indemnification  rights against the Company with respect to the
Judgment.  The Company  issued and  delivered to each of Woodfield  and Michaels
250,000 shares of the Company's  Common Stock. The Company issued 600,000 shares
of the  Company's  Common  Stock to Zuri  Invest and  delivered  200,000 of such
shares to Zuri Invest on or about April 10, 1996 and 200,000  shares on or about
June 11, 1996. The remaining  200,000 shares were held in escrow for delivery to
Zuri Invest on or about September 9, 1996.

     As security for the  Company's  obligations  to issue and deliver the above
described  shares of Common Stock,  the Company issued a promissory  note in the
amount of $1.2 million payable to the Zuri Plaintiffs.  The note is secured by a
deed of trust on all real  property and patented and  unpatented  mining  claims
owned by the Company.  Pursuant to the Zuri Agreement,  the principal  amount of
the note shall be reduced as the shares issued to the Zuri  Plaintiffs are sold,
dollar for dollar by the gross proceeds generated from such sales.

     Pursuant  to the Zuri  Agreement,  the  Company  also  assigned to the Zuri
Plaintiffs an interest  (33% of the  Company's 60% interest) in claims  asserted
against the Andersons and their  controlled  corporations in the action entitled
Brush Creek  Mining and  Development  v. F. James  Anderson,  et al.,  currently
pending in the United States District Court, Northern District of California.

     On December 13,  1995,  the Company  entered into an agreement  (the "Royal
Bank  Agreement")  to  settle  the  action  by the  Royal  Bank of  Scotland  by
delivering to the plaintiffs in such suit (the "Royal Bank Plaintiffs")  216,667
shares of the  Company's  Common Stock and cash in the amount of  $241,000.  The
Company also assigned to the Royal Bank  Plaintiffs a portion of its interest in
any total  recovery from claims  against the law firm formerly  known as Bartel,
Eng, Miller & Torngren,  the Company's formal legal counsel ("Bartel,  Eng"). On
December  13,  1996,  the Company is further  required to deliver to each of the
Royal Bank Plaintiffs,  at his or her option, additional shares of the Company's
Common  Stock or  additional  cash.  The number of shares of Common Stock or the
amount of cash each Royal Bank  Plaintiff is entitled to receive is based on the
amount of his or her pro rata  interest in amounts paid by the Company  pursuant
to the Royal  Bank  Agreement.  If all Royal  Bank  Plaintiffs  elect to receive
Common  Stock the  Company  will be  required  to issue and deliver a maximum of
300,000  shares in the  aggregate  and if all  Royal  Bank  Plaintiffs  elect to
receive  cash,  the  Company  will be  required  to deliver  cash in the maximum
aggregate amount of $600,000.

     The Company's obligations under the Royal Bank Agreement are secured by (1)
a deed of trust on all real property and patented and unpatented  mineral claims
owned by the  Company;  (2) a first  priority  security  interest  in all of the
Company's  right,  title and  interest  in and to any and all  goods,  products,
yield,  receivables,  inventory (including any gold from any mines), any and all
exploration and drilling  information,  data, maps, reports or surveys,  and any
and all income and proceeds  derived from the  Company's  mining  operations  on
property  which the Company  presently  or  subsequently  owns or leases;  (3) a
first-priority  security interest in the Company's right,  title and interest in
and to any total recovery by the Company on the claims against Bartel,  Eng; and
(4) a stipulated  judgment in the amount of  $3,250,000.  The priority and other
matters related to the enforcement of the respective  deeds of trust executed by
the Company  pursuant to the Zuri  Agreement  and the Royal Bank  Agreement  are
determined by an  intercreditor  agreement  between the Zuri  Plaintiffs and the
Royal Bank Plaintiffs.


<PAGE>


NOTE 13 - LEGAL PROCEEDINGS - (Continued)
          -----------------


     The Royal Bank  Agreement  provides that an uncured  default under the Zuri
Agreement  constitutes  a default  under the Royal  Bank  Agreement  and that an
uncured  default under the Royal Bank Agreement  constitutes a default under the
Zuri Agreement.

     The Company has registered the 1,616,667  shares of Common Stock issued and
delivered  pursuant to the Zuri  Agreement and the Royal Bank  Agreement,  which
represents  approximately  10  percent  of the total  outstanding  shares of the
Company's  Common  Stock as of June 30, 1996.  This number  includes the 300,000
additional shares that may be issued pursuant to the Royal Bank Agreement.

     On June 18,  1996,  Hinton & Alfert was  substituted  in as counsel for the
Company in the case  Royal Bank of  Scotland  et.  al. v. Brush  Creek  Mining &
Development,  et.  al. in the  United  States  District  Court  for the  Eastern
District,  Case  Number  CV-S-94-0962  GEB GGH.  Hinton & Alfert  represent  the
Company in its cross-complaint  against attorneys Bartel, Miller, Eng & Torngren
for  professional   negligence  and  against  Simone  Anderson  for  contractual
indemnity.

     On October 24,  1994,  the Company  filed an amended  complaint  against F.
James Anderson,  Simone  Anderson,  Edward M. Lawson,  Consolidated  Sierra Gold
Mines, Inc. ("CSGM"), Independent Sierra Gold Mines, Inc. ("ISGM"), Bartel, Eng,
Miller & Torngren,  attorneys,  Robert Sibthorpe,  Coopers & Lybrand and Yorkton
Securities as defendants in an action to recover damages.  The suit was filed in
the United States District Court for the Northern District of California as Case
No.  C94-3487 (the  "Federal  Action").  On April 28, 1995,  the Company filed a
third amended  complaint which seeks to recover damages against James and Simone
Anderson for breach of fiduciary  duty,  for violations of Rule 10b-5 and 16(b),
for violations of the  California  Corporations  Code S25400(d) and S25401.  The
lawsuit seeks to recover damages against Edward M. Lawson,  Robert Sibthorpe and
Yorkton  Securities,  Inc. for breach of fiduciary  duty.  The lawsuit  seeks to
recover damages against James and Simone Anderson, ISGM, CSGM, Robert Sibthorpe,
and Yorkton  Securities,  Inc. for intentional and negligent  misrepresentation.
The lawsuit seeks to recover damages  against the firm of Bartel,  Eng, Miller &
Torngren based upon breach of fiduciary duty and negligence claims. The law firm
of Bartel,  Eng, Linn & Schroder has (as  successor in interest to Bartel,  Eng,
Miller & Torngren) filed a counterclaim in this litigation seeking recovery from
the Company of legal fees totaling approximately $95,000. The accounting firm of
Coopers & Lybrand has been dismissed as a defendant from the litigation  without
prejudice.

     As to the progress of the case to date,  an initial  round of discovery has
been completed.  On August 12, 1996,  defendants  Yorkton  Securities and Robert
Sibthorpe filed a joint Motion for Summary Judgment.  The hearing on that motion
is set for October 11, 1996. There has been no trial date set.

     On November 3, 1994,  the Company was served a complaint  filed in Superior
Court of the  State of  California  in and for the  County of  Nevada,  Case No.
52943,  by CSGM for  amounts  claimed  to be due and owing to the  Company.  The
complaint seeks to recover $335,000 pursuant to an alleged open book account and
$950,000  pursuant to fees and expenses which CSGM allegedly  incurred on behalf
of the Company for general  financial advice and advice  concerning  mergers and
acquisitions.

     On April 4, 1996, a jury  returned a verdict in favor of the Company in the
action by CSGM.  In addition,  the jury  returned a verdict  against CSGM in the
amount of $30,000 on the  Company's  cross-action.  Following  the verdict,  the
Company  filed a motion to pierce the  corporate  veil of CSGM which  motion was
heard on June 7, 1996.  The  Company's  motion was granted  and  judgment on the
verdict was entered.  As a result,  F. James and Simone  Anderson are personally
liable for the judgment obtained by the Company against Consolidated Sierra Gold
Mines, Inc.

     On November 7, 1994,  the Company was served with a complaint  filed in the
Superior  Court of the State of California in and for the County of  Sacramento,
Case No. 543926, by James Anderson and Simone Anderson for amounts claimed to be
due and  owing by the  Company.  The  complaint  seeks to  recover  $58,821  and
unspecified  further  sums they have  incurred  or will  incur in legal fees and
costs in providing a defense in the Zuri Invest action.


<PAGE>


NOTE 13 - LEGAL PROCEEDINGS - (Continued)
          -----------------

The Company  has  entered  into a  settlement  in this  matter  whereby the
Company has paid the past legal fees  incurred by Mr. and Mrs.  Anderson and has
agreed to pay the legal fees they  continue to incur in defending  themselves in
the Zuri Invest  litigation.  On February  16,  1996,  this  agreement  became a
stipulated judgment which concluded the action.

     On  February  8,  1996,  the  Company  filed a  complaint  against F. James
Anderson and Simone  Anderson in Superior Court of the State of  California,  in
and for the County of Sacramento, Case No. 96AS 00513 (the "Sacramento Action").
The complaint seeks (a) judicial determination and declarations that the Company
(1) has no further obligations to advance defense fees and costs incurred by the
Andersons in connection  with the Zuri  litigation,  including on the Andersons'
appeal  of that  judgment;  (2) is  entitled  to recoup  defense  fees and costs
allocable to the Andersons'  defense of claims in the Zuri Invest litigation for
which they were found liable; (3) is not required to indemnify the Andersons for
their liability in the Zuri Invest litigation;  (4) has no duty or obligation to
the Andersons to account for, replenish, and/or return monies to or pay interest
on the  $200,000  provided by the  Andersons as partial  indemnification  to the
Company in  connection  with the Royal Bank  litigation;  and (5) is entitled to
have all amounts  returned to the Company from the $200,000 which were disbursed
for the  purposes  other than to  indemnify  the  Company  such that the Company
receives the full net benefit of the $200,000, and (b) equitable indemnification
to collect from the Andersons their  proportionate  share of the judgment in the
Zuri Invest litigation.

     On April 4, 1996,  the Company was served with the Andersons  answer to the
Sacramento  Action and their  cross-complaint  against the  Company.  The answer
generally denied the allegations of the Company's complaint and asserted various
affirmative  defenses.  The  cross-complaint  seeks judicial  determination  and
declarations that the Company (1) is obligated to advance the Andersons' defense
costs  (including  costs of appeal) in the Zuri  Invest  litigation  and defense
costs in the Federal  Action and (2) is  obligated  to  indemnify  them from the
judgment in the Zuri litigation and any judgment that might be rendered  against
them in the Federal Action.

     Also,  on April 4,  1996,  the  Company  was  served  with a motion  by the
Andersons for summary adjudication of two of their cross claims which would have
forced the Company to advance the Andersons' defense cost in the Zuri litigation
and the Federal Action.  On May 3, 1996, the Andersons'  motion was heard by the
superior court and denied.

     The  Company  answered  the  Andersons'  cross  complaint  on May  6,  1996
generally denying the allegations and asserting  various  defenses.  The Company
also anticipates  amending its original complaint to assert an additional claims
to hold the Andersons liable for the entire amount of the Royal Bank of Scotland
settlement.

     The Company has been requested pursuant to a non-public informal inquiry by
the staff of the  Securities  and  Exchange  Commission  ("the  Commission")  to
provide  information  to the staff of the  Commission  regarding  the  Company's
financing activities in reliance upon Regulation S under the Securities Act. The
Commission  has advised the Company that the inquiry  should not be construed as
an  indication by the  Commission  or its staff that any  violations of law have
occurred, nor should it be considered a reflection upon any person.

     The  Company  is a  party  to  other  various  claims,  legal  actions  and
complaints  arising  in the  ordinary  course of  business.  In the  opinion  of
management,  the ultimate  disposition of these matters will not have a material
adverse effect on the business or financial position of the Company.


NOTE 14 - AGREEMENT WITH MK GOLD COMPANY
          ------------------------------

     During 1993, the Company and MK Gold Company,  a wholly owned subsidiary of
Morrison  Knudsen  Corporation,  entered into a  nonbinding  letter of intent to
jointly  explore and develop  mineral  properties  in, among other  places,  the
Republic of  Kyrghyzstan.  The Company and MK Gold  Company  also entered into a
Joint  Development  Agreement to form a new corporation  called MKZ Gold Company
(MKZ  Gold) to  explore,  develop,  and mine  precious  and base  metals  in the
Republic of Kyrghyzstan. On May 10, 1993, MK Gold Company and the


<PAGE>


NOTE 14 - AGREEMENT WITH MK GOLD COMPANY - (Continued)
          ------------------------------

Concern  Kyrghyzstan  acting on behalf of the government of the Kyrghyzstan
Republic entered into a general agreement to explore, develop, operate, and mine
the  Jerooy  Gold  Project  located in the  Kyrghyzstan  Republic.  The  general
agreement  was a binding  agreement and called for the  preparation  of a mining
Joint Venture  Foundation  Document (the Venture Agreement) with the Kyrghyzstan
Republic.

     Under the terms of the Joint Development  Agreement,  MK Gold Company would
own 60% and the Company, through a wholly owned subsidiary, would own 40% of MKZ
Gold. Further, the board of directors of MKZ Gold would consist of five members,
three  nominated  by MK Gold Company and two  nominated by the Company.  MK Gold
Company and the Company  intended to capitalize  MKZ Gold with $400,000 based on
their percentage of ownership in MKZ Gold. MK Gold Company was to provide mining
operations and the Company was to provide geological services to MKZ Gold.

     On September 3, 1993,  the Company served MK Gold Company with a complaint,
seeking declaratory relief with regard to the Joint Development  Agreement.  The
Company  was seeking a  declaration  of its rights  under the Joint  Development
Agreement,  including a declaration  that the joint venture with MK Gold Company
exists  under Idaho law,  that the Company and MK Gold Company have equal rights
in the  management  of the  joint  venture,  and that MK Gold  Company  owes the
Company $150,000.  After serving the complaint,  the Company and MK Gold Company
had discussions  about  resolving the dispute.  MK Gold Company paid the Company
the $150,000 owed under the Joint Development Agreement.

     On November 10, 1993, the Company amended its complaint seeking dissolution
of the joint venture  between the Company and MK Gold Company and alleging fraud
and  deceit,  breach of  fiduciary  duty and breach of implied  covenant of good
faith and fair dealing by MK Gold Company.

     In December  1993,  the Company  settled the lawsuit  with MK Gold  Company
receiving:  (1)  $4,232,000  cash;  (2) a 4% net smelter  return on any interest
which MK Gold Company obtains in the Kumtor  project;  and (3) the assumption of
all the Company's obligations to the International Foundation for Privatization.
The  $4,232,000  is  shown  as  sale of  joint  venture  in the  June  30,  1994
consolidated statement of operations.


NOTE 15 - SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
          --------------------------------------------------------------------

<TABLE>
     Noncash investing and financing activities as of June 30, 1996 and 1995 are
as follows:

<CAPTION>
                                                  1996               1995
                                            -------------        -----------

<S>                                         <C>                  <C>        
Company stock issued for
  Partial settlement of litigation          $    223,436         $         -
Compensation recognized on stock
  options granted                                160,021                   -
Company stock issued for professional
  services                                             -             938,159
</TABLE>


NOTE 16 - SEGMENT INFORMATION
          -------------------

     The Company's activities have been devoted to the acquisition, development,
and production of mineral properties.  Accordingly, the Company is considered to
be in a single line of business.  To date,  substantially  all of the  Company's
identifiable assets and operating expenditures are in the United States.


<PAGE>

NOTE 17 - CONVERTIBLE DEBENTURE PAYABLE
          -----------------------------

     On April 3, 1996,  the Company  received  net proceeds of $400,000 on gross
proceeds  of $450,000  from an  offshore;  two year,  $450,000,  7%  convertible
debenture.  The  subscriber  has the  option  of  converting  all or part of the
principle to the Company's  Common Stock  forty-five days after the closing date
of the  transaction.  The note is  convertible  to shares at 70% of the  average
share price for the five days preceding  conversion.  On June 17, 1996, $150,000
of the note was converted to 161,360 shares.

     On July 8, 1996,  the  remaining  $300,000 of the note was  converted  into
439,560  shares  of the  Company's  Common  Stock.  The  convertible  debentures
outstanding at June 30, 1996 has been classified as current portion of long-term
debt.


NOTE 18 - SUBSEQUENT EVENTS
          -----------------

     In July 1996, the Company issued 695,652 additional shares of the Company's
Common Stock per a Regulation S investment agreement from the fiscal year 1996,
containing a purchase  price  adjustment  clause (see Note 4) that  required the
Company  to issue  such  shares if the  Company's  low bid price  fell below one
dollar during the valuation period.  The Company was also required to place such
shares with the Company's escrow agent until the end of the valuation period.

     Also in July 1996, the Company was required to issue 57,523  additional
shares of the Company's Common Stock per a Regulation S agreement with a 
purchase price adjustment clause (see Note 4).

     In September 1996, the Company  received  $250,000 from the sale of 757,576
shares of the Company's Common Stock per a Regulation S stock purchase 
agreement.  The shares were sold at 50% of the Company's closing bid prices on 
the day before the sale.


<PAGE>