U.S. Securities and Exchange Commission
                             Washington, D.C. 20549
                                   FORM 10-KSB
(Mark One)
[X]      Annual Report under Section 13 or 15(d) of the Securities
         Exchange Act of 1934 [Fee Required]
         For the fiscal year ended December 31, 1996

[ ]      Transition report under Section 13 or 15(d) of the Securities
         Exchange Act of 1934
         [No Fee Required]
         For the transition period from ________ to __________

         Commission file number      0-24610

                            GOLD CAPITAL CORPORATION
                  --------------------------------------------
                 (Name of small business issuer in its charter)

          Colorado                                          84-1251798
 ------------------------------                         -----------------
 (State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                         Identification No.)
                  

 5525 Erindale Drive, Suite 201, Colorado Springs, Colorado        80918
 ----------------------------------------------------------        -----
      (Address of principal executive office)                     (Zip Code)

                    Issuer's telephone number (719) 260-8509
                                              ---------------

      Securities registered pursuant to Section 12(b) of the Exchange Act:
     Title of each class                         Name of each exchange on which
                                                        registered
           None                                              N/A
     --------------------                             -------------------


      Securities registered pursuant to Section 12(g) of the Exchange Act:

                         Common Stock, $0.0001 par value
                         -------------------------------
                                (Title of class)

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months (or for, such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X  No
                                                                       ---   ---
Check if there is no  disclosure of  delinquent  filers  pursuant to Itsm 205 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}.

State  issuer's  revenues for its most recent  fiscal year. No revenues for year
ended December 31, 1996.

The aggregate  market value (at the mean of the bid and asked price of $0.85 per
share) of the 2,039,496 shares of Common Stock of Gold Capital  Corporation held
by nonaffiliates as of March 25, 1997 was approximately  $1,723,400. As of March
19,  1997,  there were  9,073,653  shares of Common  Stock,  par value  $0.0001,
outstanding.

Transitional Small Business Disclosure Format (check one): yes      no   x
                                                               ----    -----




<PAGE>



                                TABLE OF CONTENTS

                                                                 Page Number
                                                                 -----------

                                     PART I.

ITEM 1. DESCRIPTION OF BUSINESS.................................      1

ITEM 2. DESCRIPTION OF PROPERTIES...............................      7


ITEM 3. LEGAL PROCEEDINGS.......................................     10


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....     12


ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND
        RELATED STOCKHOLDER MATTERS.............................     12


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
        PLAN OF OPERATIONS, FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS...............................     13


ITEM 7. FINANCIAL STATEMENTS INDEX..............................     20

        CONSOLIDATED FINANCIAL STATEMENTS.......................    F-1 to
                                                                    F-25

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE.....................     21



                                    PART II.

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......     21


ITEM 10. EXECUTIVE COMPENSATION.................................     23


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT.........................................     26


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
         TRANSACTIONS...........................................     28

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.......................     31
                                                     



                                       ii

<PAGE>

                                    PART I.

ITEM 1. DESCRIPTION OF BUSINESS.
        ------------------------

General

     Gold Capital  Corporation  (the  "Company") was organized under the laws of
the State of  Colorado on December  10,  1993 to engage in  development  of gold
mining  projects.  The Company's  activities since inception have been primarily
limited to  organizational  activities,  obtaining  financing,  acquisition  and
evaluation of interests in mining  properties  and  management of a mining joint
venture.  For the period from inception to December 31, 1996, the Company had no
revenues.

     Effective  December  31, 1993,  the Company  acquired a 60% interest in the
Tonkin  Springs  Project  (the  "Project")  and assumed  management  and funding
responsibilities  related to the Project.  The Company acquired its 60% interest
in the Project from Tonkin Springs  Venture  Limited  Partnership  ("TSVLP"),  a
partnership  owned  by  wholly-owned   subsidiaries  of  U.S.  Gold  Corporation
("USGL"), a Colorado Corporation with shares publicly traded on the NASDAQ small
cap market under the symbol "USGL."

     At present,  the Project  represents the Company's only property,  although
additional  properties may be acquired in the future. The Project consists of an
open-pit  gold  mine,  integrated  milling  facility,   and  support  facilities
encompassing  approximately  21,100 acres of unpatented mining claims on Federal
land.  The  Project  is  located  along  the  Battle   Mountain-   Cortez  Trend
approximately 45 miles northwest of the town of Eureka in Eureka County, Nevada.

     The Company  completed  its initial  public  offering in April,  1994,  and
received proceeds of $450,000. The Company's Common Stock is currently traded in
the  over-the-counter  market  and is quoted  in the OTC  Bulletin  Board.  From
inception  through  December  31,  1996,  the Company  has raised  approximately
$6,742,660 through the public and private sale of its Common Stock.

     Effective June 22, 1995, the Company completed  transactions with Royalstar
Resources Ltd. ("Royalstar") whereby Royalstar purchased, in the aggregate,  2.5
million  shares of Common Stock of the Company for an aggregate of $2.5 million,
including  2.2  million  shares  for $2.2  million  in a  private  placement  to
Royalstar,  and 300,000 shares for $300,000 under the private placement offering
dated March 9, 1995. These  transactions  resulted in a change in control of the
Company whereby  Royalstar  acquired voting control of the Company  representing
approximately 49.6% of the then issued and outstanding voting stock.  Commencing
in the  fourth  quarter  of 1995  and for most of 1996,  the  Company  continued
operations funded largely by advances from Royalstar (the "Royalstar Advances".)
In August,  1996, the Company approved the conversion of $1,919,110 in Royalstar
Advances, being the balance as of July 30, 1996, into 1,919,110 shares of common
stock at $1.00 per share. In the fourth quarter of 1996,  Royalstar informed the
Company of Royalstar's  inability to continue to fund Company operations.  As of
December  31,  1996,  Royalstar  owned  4,419,110  common  shares of the Company
representing 48.7% of the voting shares of the Company.

                                       1

<PAGE>

     On December 4, 1996, Mr. John Young, the former president,  chief executive
officer and a director of the Company, resigned his positions. Mr. Young is also
president  and  chief  executive  officer  of  Royalstar.  Prior to Mr.  Young's
resignation,  three  other  directors  who had  also  been  nominated  to  their
positions by Royalstar  had tendered  their  resignations.  The three  remaining
directors of the Corporation,  which include  two of the original founders, have
assumed  responsibilities  for the  affairs of the  Corporation,  with Mr.  Bill
Conrad  serving as President.  While  individuals  representing  Royalstar  have
resigned their positions with the Company, Royalstar, by virtue of the amount of
Common Stock owned, is still in a position to exert controlling influence on the
Company.

     On  December  20,  1996,   the  Company  and  Globex   Mining   Enterprises
Inc.("Globex"),  a publicly traded corporation  organized and existing under the
laws of the Province of Quebec,  Canada,  entered into an agreement in principal
regarding a conditional offer by Globex to finance the Company and merge it into
a  subsidiary  of Globex.  Effective  March 13,  1997,  the Company  executed an
agreement (the "Merger  Agreement" or "Merger") to merge with Globex.  By virtue
of the Merger,  and subject to certain  conditions,  the Company  would become a
wholly-owned subsidiary of Globex. (See - "Developments During 1996").

Narrative Description

     On December 31, 1993, the Company  acquired its 60% interest in the Project
which is located along the Battle Mountain - Cortez Trend approximately 45 miles
northwest  of the town of  Eureka,  in Eureka  County,  Nevada.  The  Company is
currently  preparing for gold  production  at the Project,  although no revenues
have been received to date.

     The  Company  acquired  its  interest in the  Project  from Tonkin  Springs
Venture Limited Partnership,  a Nevada limited partnership ("TSVLP"). TSVLP owns
the  remaining  40%  interest  in the  Project  and  is  owned  by  wholly-owned
subsidiaries  of U.S. Gold  Corporation  ("USGL").  USGL,  with its ownership in
TSVLP, presently owns 2,287,547 shares of Common Stock of the Company, and holds
a  promissory  note  from the  Company  in the  remaining  principal  amount  of
$1,501,076 as of December 31, 1996.

     During 1994,  the Company  evaluated and initiated the process  required to
obtain  various  Federal,  state and other  permits  necessary to commence  gold
production at the Project, undertook various metallurgical studies, and obtained
a  feasibility  study  from an  independent  engineering  firm  on the  economic
viability  of  producing  gold from a milling  and heap leach  operation  at the
Project.   In  August,   1995,  the  Company   received  the  necessary   permit
authorizations   to  commence   construction   of  a  leach  pad  and  commenced
construction  on the pad during 1996.  Construction  on the pad was suspended in
October,  1996 due to  financial  constraints.  The  Company  is  continuing  to
finalize permits necessary to begin mining and operations,  although at a slower
pace due to funding  limitations.  Upon  securing  necessary  funding  and final
permits and  authorization,  it is the Company's  present  intention to commence
gold production at the Project.

                                       2
<PAGE>

     The Project consists of unpatented mining claims, an open-pit gold mine and
integrated  milling  facility and support  facilities  located on Federal  land.
Certain of the claims are leased  from  unaffiliated  third  parties.  From 1985
through  1987,  an aggregate of 873,000 tons of ore were mined at the Project by
USGL,  yielding  approximately  25,460  ounces of gold  through  the heap  leach
process.  Prior to the Company's  acquisition  of its  interest,  USGL and joint
venture  partners spent in excess of $57,000,000 for construction of facilities,
exploration and other  development  costs at the Project.  The mill facility was
operated in a start-up  mode from March,  1990 through June,  1990,  but did not
reach  commercial  production  during that time.  Due to  liquidity  constraints
encountered  by USGL during that period,  the mine and milling  facilities  were
placed on stand-by  status in June,  1990 and have not been in  operation  since
that time.  (See "Item 2.  Properties"  for a more complete  description  of the
Project).

     The  Project  is  managed  by the  Company  pursuant  to a  Mining  Venture
Agreement  entered  into between the Company and TSVLP on December 31, 1993 (the
"Venture").  Pursuant  to the terms of the  Venture  Agreement,  the  Company is
obligated  to fund all  holding,  administrative,  development  and other  costs
associated with the Project until commercial production is achieved. The Company
is entitled to recoup  such  costs,  up to a maximum of $6 million  ("Recoupable
Costs"),  from a preferential  distribution  of net cash flows, if any, from the
Project.  Through  December  31, 1996,  the Company has  expended  approximately
$3,725,000 of Recoupable  Costs to the Venture.  The Venture  Agreement has been
amended in  connection  with the  Merger,  effective  upon  consummation  of the
Merger.  (See  "Item  6.  Management's   Discussion  and  Analysis  or  Plan  of
Operations, Financial Condition and Results of Operations").

Developments during 1996

     During 1996, the principal  activities of the Company  involved  efforts to
obtain  additional  funding,  obtaining a technical  audit of the Tonkin Springs
Project,  obtaining  an  updated  open-pit  ore  reserve  estimate,   activities
necessary to obtain or reactivate the necessary permits for the Project,  and to
commence  construction  efforts on the new pad. The Company  spent  considerable
efforts in  contacting  investment  bankers  and others to secure  funding in an
effort to commence  production  at the Project.  These  efforts  resulted in the
proposed merger with Globex  discussed  below.  (See also "Item 6.  Management's
Discussion and Analysis or Plan of Operations,  Financial  Condition and Results
of Operations").

     Proposed  Merger.  On March 13, 1997,  subsequent  to year end, the Company
executed an agreement to merge with a subsidiary  of Globex  Mining  Enterprises
Inc. of Quebec.  The Merger is part of two separate,  but related,  transactions
pursuant to which Globex  proposes to acquire 100% of the  Company's  issued and
outstanding  Common Stock.  Pursuant to the terms of the Merger  Agreement,  the
Company  would be merged  with GME Merger  Corporation,  a Colorado  corporation
wholly owned by Globex, and the Company would survive the Merger (the "Surviving
Corporation").  The  4,654,543  shares of the Company  Common  Stock  issued and
outstanding  prior to the Merger and not owned by  Royalstar  would be converted
into the right to receive  1,285,067  shares of Globex Common Stock.  The shares
proposed to be issued by Globex would be registered under relevant provisions of
the Securities Act of 1933, as amended,  and qualified  under  applicable  state
Blue Sky laws.  The Common Stock owned by Royalstar  would be acquired by Globex


                                       3

<PAGE>


in a separate  transaction  (the  "Acquisition"),  anticipated  to be  completed
contemporaneously  with the Merger. If both  transactions are completed,  Globex
would own 100% of the  issued  and  outstanding  shares  of Common  Stock of the
Company.

     Both the Merger and Acquisition are subject to certain conditions. Prior to
consummation  of the Merger,  the following  conditions,  among others,  must be
satisfied:  i) approval  of a  registration  statement  covering  Globlex  stock
proposed to be issued in connection with the Merger; ii) receipt of financing by
Globex;  iii)  approval of the Merger by the  Company's  shareholders;  and (iv)
approval of various regulatory agencies.  The consummation of the Acquisition is
subject to shareholder approval and other conditions  precedent.  The respective
Boards of Directors of the Company and Globex intend to proceed promptly and use
their reasonable best efforts to complete the Merger and Acquisition.

     Pending completion of the Merger, Globex has acquired an option to purchase
the 2,287,547  shares of Common Stock of the Company owned by USGL and TSVLP and
an  irrevocable  proxy to vote all of those  shares in favor of the Merger.  The
Common  Stock  owned by USGL and  TSVLP  and  subject  to the  option  and proxy
represents  approximately  25.2% of the currently issued and outstanding  Common
Stock of the Company.  (See "Item 11. Security  Ownership of Certain  Beneficial
Ownership and Management").

     Upon satisfaction of the conditions precedent and completion of the Merger,
it is  contemplated  that the Board of Directors of the Company will be changed.
The officers and directors of the GME Merger Corporation, all of which have been
nominated  by  Globex,  will be the  officers  and  directors  of the  Surviving
Corporation after the Merger.

     In  connection  with the  Merger  Agreement,  Globex has agreed to fund the
financial  obligations  of the  Company  pending  completion  of the Merger (the
"Globex  Loan").  Subject  to the terms  and  conditions  of the Loan  Agreement
between  the  parties,  Globex has  agreed to make  advances  to the  Company to
maintain, preserve and protect the assets of the Tonkin Springs Project, service
the  promissory  note payable to U.S.  Gold and pay other  necessary  and proper
obligations and commitments of the Company. As of December 31, 1996, the balance
of borrowings under the Globex Loan totaled  $20,000.  As of March 18, 1997, the
principal  balance of the Globex  Loan is  $697,493.  The  Globex  Loan  accrues
interest  at 2% over  prime,  is secured by all the assets of the Company and is
due on or before  August  30,  1997.  TSVLP has  agreed to share its  collateral
position  in the  Company's  60%  interest  in the assets of the Tonkin  Springs
Project and interest in the Venture,  pari passu, with Globex under the terms of
an Intercreditor  Agreement dated January 16, 1997.  Continued funding under the
Globex Loan is subject to the right of Globex to accept or reject  each  funding
request  made by the  Company,  as well as the right of  Globex  to  discontinue
funding  altogether.  In that event,  the Company has the right to terminate the
Merger  Agreement.  Without  continued  funding  from the  Globex  loan or other
sources of funding,  the Company is not able to meet its current obligations nor
to  provide  for  development  costs  associated  with  future  obligations  and
operations relating to the Venture and other corporate objectives.  (See "Item 6
Management's Discussion and Analysis or Plan of Operations,  Financial Condition
and Results of Operations").

                                       4

<PAGE>

Competitive Business Conditions

     The Company  competes with other  companies and individuals to acquire gold
mining  projects,  to recruit  and  retain  qualified  personnel,  and to obtain
development   capital  for  its  projects.   Many  of  these   competitors   are
substantially  larger and have greater financial resources than the Company. The
Company also  competes  with other  companies  seeking  personnel to operate and
manage gold mines. Given its size, limited capitalization, and limited personnel
resources,  there can be no assurance that the Company can successfully  compete
under these competitive conditions.

Major Customers

     Future  sales of refined  gold and silver  bullion,  if any,  derived  from
operating  properties  will be  made  to  unaffiliated  companies.  The  Company
believes  that the loss of any one of  these  customers  would  not  affect  its
business.

Patents, Trademarks, Licenses, Franchises, Concessions

     The  Company  does  not  own  any  trademarks,   licenses,   franchises  or
concessions,  except mining  interests  granted by governmental  authorities and
private  landowners.  No portion of its business is subject to re-negotiation of
profits or  termination  of  contracts  or  subcontracts  at the election of the
government.

Government Regulations

     In connection  with its mining,  milling and  exploration  activities,  the
Company is  required to comply with  various  federal,  state and local laws and
regulations  pertaining  to the  protection of the  environment.  The Company or
joint venture  participants  have obtained,  or are in the process of obtaining,
environmental  permits,  licenses  or  approvals  required  for its  operations.
Management  of  the  Company  is  not  aware  of  any  material   violations  of
environmental  permits,  licenses  or  approvals  issued  with  respect  to  the
Company's operations.

     The Company's proposed  operations and activities will be subject to mining
and reclamation requirements which apply to all surface mining operations in the
State of Nevada.  Among  other  requirements,  such laws  establish  permitting,
reclamation and financial assurance requirements. TSVLP had previously submitted
an operating plan regarding the existing and proposed  surface  disturbances  at
the Project and proposed a reclamation plan. Based upon this plan, the Bureau of
Land  Management  requires a bonding  obligation of $1.3 million for reclamation
prior to commencement of mining.  The Company believes that funding to partially
satisfy this  obligation may be available  through  state-sponsored  programs or
commercial bonding.  However,  there is no assurance that the Company can obtain
the funds necessary to satisfy the obligation if required.  Failure or inability
of the Company to satisfy the obligation could result in denial or revocation of
permits necessary to operate the Project.

                                       5

<PAGE>

     The Tonkin Springs Project is located in an area that contains  habitat for
a variety of wildlife species,  and is subject to various Federal and state laws
and regulations intended to protect wildlife.  Compliance with any such laws and
regulations may necessitate  significant  capital outlays,  which may materially
affect the economics of the project or may cause  material  changes or delays in
the Company's intended activities.

     Numerous,  and in some regards  conflicting,  bills have been introduced in
the U.S.  Congress which would supplant or radically alter the provisions of the
Mining Law of 1872. If enacted,  such legislation could  substantially  increase
the cost of holding  unpatented  mining  claims and could  impair the ability of
companies to develop mineral  resources on unpatented  mining claims.  Under the
terms of these bills,  the ability of companies to obtain a patent on unpatented
mining  claims would be nullified or  substantially  impaired,  and most contain
provisions for the payment of royalties to the federal government for production
from unpatented  mining claims,  which could adversely  affect the potential for
development  of such claims and the  economics of operating new or even existing
mines on federal unpatented mining claims. The Company's  financial  performance
could therefore be affected adversely by passage of such legislation.  It is not
possible to predict  whether any change in the Mining Law of 1872 will, in fact,
be enacted or, if enacted, the form that the changes may take.

     In connection with its ownership of the Project, the Company may be subject
to potential liabilities for environmental cleanup or damages in connection with
any  contamination  associated  with the site. The  Comprehensive  Environmental
Response,  Compensation  and Liability Act of 1980 ("CERCLA" or "Superfund") and
certain state laws and regulations  impose liability for cleanup of waste sites,
and in some circumstances,  attorney's fees, damages and/or trebling of damages.
Existing  violations,  even though not  directly  caused by the  Company,  could
potentially  subject  the  Company  to  fines  and  penalties,  as well as other
administrative  sanctions.   While  management  is  not  aware  of  any  adverse
conditions,  such  violations  could  have  a  material  adverse  effect  on the
Company's future stability and profitability.

Costs and Effects of Compliance with Environmental Laws

     The Company or Venture participants have obtained, or are in the process of
obtaining,  environmental  permits,  licenses  or  approvals  required  for  its
operations. Management of the Company is not aware of any material violations of
environmental  permits,  licenses  or  approvals  issued  with  respect  to  the
Company's  operations.  The  Company has not made a separate  estimation  of any
capital costs associated  primarily with  environmental or related issues except
the  reclamation  bond;  however the Company  estimates that such amounts may be
material.  The Company has obtained an estimate  with the  assistance  of a firm
experienced  with such  matters of the time  required to activate and obtain the
necessary permits and approvals to operate the Project and has incorporated such
estimates in its plan of development.

Employees

     The Company currently has three (3) employees,  including its two executive
officers and the manager of the Tonkin Springs Project.  The executive  officers
currently  serve  part-time  and without  compensation.  The manager is employed
full-time at the Project.

                                       6

<PAGE>


     The Company  retains other  individuals and entities on a contract basis to
fulfill  specific  needs  of  the  Company,  including  financial,   geological,
environmental,  title,  metallurgical,   accounting  and  legal  services.  Such
individuals  are  retained by the Company on an hourly basis as the needs of the
Company dictate. Management anticipates that when it receives funding sufficient
for commencement of commercial  production at the Project,  additional employees
will be required.  It is anticipated that the Company will be able to fill those
requirements when necessary.

ITEM 2. DESCRIPTION OF PROPERTIES.
        --------------------------

General

     The Tonkin Springs Project  consists of unpatented  mining claims,  an open
pit gold  mine and  integrated  milling  facility,  and  support  facilities  on
approximately  21,100 acres of Federal land  located  along the Battle  Mountain
-Cortez Trend  approximately  45 miles northwest of the town of Eureka in Eureka
County,  Nevada. A total of 207 claims,  constituting  approximately  20% of the
total claims at the Project,  are leased from unaffiliated third parties,  while
the  remaining  claims are held  jointly by the Company  and TSVLP.  USGL or its
wholly-owned  subsidiaries  have owned  interests  in the  Project,  directly or
indirectly, since 1984.

     Access to the Project is provided by a county  maintained road.  Electrical
power is provided  through a  substation  located  near the mill and operated by
Sierra Pacific Power Company.  Water is available through production wells which
have been established on the site. The Project also contains an assay laboratory
and  metallurgical  pilot plant testing lab. In addition to the heavy  equipment
shop for repair and maintenance of mining equipment, a repair shop and warehouse
building is situated adjacent to the mill building.

Claims

     The Tonkin  Springs  Project  consists of a total of 1,059 claims.  Of that
amount,  an aggregate  of 207 of the  unpatented  mining  claims are leased from
unaffiliated third parties pursuant to two mining leases assigned to the Venture
by TSVLP.  Record ownership of undivided  interests in the claims is held by the
Company (60%) and TSVLP (40%) in the same  proportions as their interests in the
Venture.  The  Campbell/Simpson  Lease,  which covers 197 claims, has an initial
term which  expires  December 31, 2006 and may be extended from year to year, up
to a  maximum  term of 99 years,  by  production  from the  leased  claims.  The
Buffington  Lease,  which covers 10 claims,  has an initial  term which  expires
August 9, 1996,  and may be extended  from year to year by  production  from the
leased claims or by continued payment of advance royalties.  Each lease contains
certain conditions and other  requirements for annual payments,  expenditures or
work to be performed in order to retain the leased claims.

     The Campbell/Simpson lease, upon which the bulk of the oxide mineralization
is  presently  located at  Rooster,  requires an annual  advance  royalty in the
greater amount of $150,000, or the value of 455 ounces of gold, which royalty is
payable in January of each year.  Payment of the 1997 annual advance  royalty of
$166,780 was due and paid in January,  1997, bringing the balance of net advance
royalties  paid to  approximately  $1,680,290.  The  lease  requires  production
royalties  of 5% of the gross  sales  price of gold or silver but  provides  for
deduction  of advance  royalties  previously  paid.  The  Company is required to
perform an annual  work  commitment  in the amount of the greater of $300,000 or
the value of 909 ounces of gold toward which the Company  currently  maintains a
carry-forward  excess of approximately  $95,000 available to cover future annual

                                       7

<PAGE>


work  commitments.  The  Campbell/Simpson  lease  includes  an area of  interest
extending 1.5 miles from the boundaries of certain  claims.  In addition,  these
claims  also  are  subject  to  a  royalty  to  Precambrian  Exploration,   Inc.
("Precambrian")  of 1% of  net  smelter  returns  which  becomes  payable  after
$15,000,000 in gross revenues is realized from the claims.

     The Buffington lease requires  payment of an insignificant  initial advance
royalty and 5% of all net returns following commencement of production.

     An aggregate of 848 of the unpatented mining claims covered by the Project,
as well as 4 millsites,  are owned jointly by the Company and TSVLP.  A total of
317 of these  claims  are  subject  to a royalty  of 2% of net  smelter  returns
(defined  as  gross  revenues  from  sales of  minerals,  less  refining  costs,
transportation  costs,   severance,   production  and  sales  taxes,  and  sales
commissions),  which becomes  payable to Precambrian  after $50 million in gross
revenues  is  realized  from the  claims.  Precambrian  Exploration,  Inc. is an
unaffiliated third party and predecessor in interest to the claims.  Precambrian
may elect to receive such royalty "in kind," upon proper  notice to the Venture.
The remaining claims and the millsites are not subject to any royalties.

     The Company owns also  additional 215 claims covering  approximately  4,400
acres in the vicinity of the Tonkin Springs Project. The claims are subject to a
royalty of 1% of net smelter  returns for gold when the indexed price of gold is
$350 per ounce or more,  and a royalty of 1% of net  smelter  returns for silver
when the indexed  price of silver is $3.50 per ounce or more.  No royalties  are
payable at lower indexed  prices.  The indexed prices shall reflect  adjustments
based on the Producer's Price Index,  sub-index  Finished Goods Excluding Foods,
as published by the United States Department of Commerce.

Reserves

     At various times,  the venture has engaged the consulting firm Ore Reserves
Engineering  ("ORE") to provide  estimates of the open pit minable reserves from
the Project. An open-pit reserve estimate was completed by ORE in October, 1996,
and is summarized in the table below:



                        (SPACE INTENTIONALLY LEFT BLANK)


                                        8

<PAGE>
<TABLE>
<CAPTION>


                                Tons above         Grade above      Ounces Contained      Strip
                Cutoff          Cutoff             Cutoff              Gold               Ratio      
                ------          ------             ------              ----               -----      
Deposit        (opt Au)        (1,000's)          (opt Au)           (1,000's)            (W:O)
-------
<S>             <C>             <C>                <C>                <C>                  <C>
TSP-1
 Milling         0.055          1,470              0.099               146                 3.4
 Bioheap         0.025          1,159              0.040                46                 2.0
                                -----                                  ---
                                2,629                                  192

Rooster
 Oxide Heap      0.015          3,692              0.037               136                 1.3
 Bioheap         0.027          1,805              0.051                92                 1.3
                                -----                                  ---
                                5,496                                  228

O-15
 Milling         0.055            969              0.107               103                  11
 Bioheap         0.025            601              0.040                24                   3
                                -----                                  ---
                                1,570                                  127


TSP-6
 Milling         0.055             90             0.117                  11                 2.4
 Bioheap         0.025             86             0.039                   3                 2.4
                                -----                                   ---
                                  176                                    14

TSP-8
 Milling         0.055             48             0.081                   4                 8.2
 Bioheap         0.025             61             0.041                   2                 8.2
                                -----                                   ---
                                  109                                     6

F-Grid
  Milling        0.055            247             0.094                  23                 7.0
  Bioheap        0.025            407             0.037                  15                 7.0
                                -----                                   ---
                                  654                                    38


Total                          10,635             0.057                 605                 3.1
</TABLE>

Definitions

     As used herein,  the term "reserves" means those estimated  quantities of a
mineral deposit that, under present anticipated conditions,  may be economically
and legally mined and sold or processed for the extraction of their  constituent
values. Estimated quantities of a mineral deposit involve quantity computed from
dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or
quantity  computed  from the  results  of  detailed  sampling  and the sites for
inspection,  sampling  and  measurement  spaced  so  closely  and  the  geologic
character  so well  defined  that  size,  shape,  depth and  mineral  content of
reserves are well established.

     The  1996 ORE  reserve  estimate  utilized  certain  data  and  assumptions
provided by the Company including digitized topographical files, drill-hole data
base, pit slope, tonnage factors, process recoveries and gold price assumptions.
Estimates of operating costs were provided by an independent  engineering  firm.
ORE did not  make  independent  review  of those  data.  In the  opinion  of the
Company, the data and assumptions used by ORE are reasonable.

                                       9

<PAGE>


     In April, 1996, the Company obtained an audit and updated feasibility study
with expanded  development  plan to include  bio-oxidation  followed by milling,
bio-oxidation followed by conventional heap leach recovery for lower grade ores,
and an oxide  heap  leach  from the  mining  industry  consulting  firm of Behre
Dolbear & Company,  Inc. ("Behre  Dolbear.")  Subject to certain  conditions and
assumptions set forth therein,  including,  but not limited to, gold prices, ore
grade,  metallurgical  recovery  and  operating  costs,  the  feasibility  study
concludes  that gold can be  economically  mined  over the  estimated  five-year
initial phase of the Project.

Geology

     Host rocks for gold  mineralization at Tonkin Springs consist of a sequence
of Paleozoic rocks that were  subsequently  faulted,  intruded and  mineralized.
Gold-bearing  solutions  originated  at depth  and  migrated  up along  fracture
systems until reaching fractured rock or chemically  favorable rock suitable for
ore deposition.  Later volcanism,  faulting,  erosion and sedimentation affected
the ore deposits.

History

     As   previously   noted,   the   Project  is   located   along  the  Battle
Mountain-Cortez  trend in  Nevada.  Gold  mines  located  along  this trend have
historically produced significant quantities of gold by various companies.

     The properties  constituting  the Tonkin  Springs  Project were acquired by
USGL in  December  1984.  In  November,  1985,  USGL  commenced  open pit mining
operations, using conventional heap leach extraction technology to process oxide
ore mined from the properties. Through 1987, an aggregate of 873,000 tons of ore
were mined and processed, yielding approximately 25,460 ounces of gold.

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

     The  Company  and  its  subsidiary  are  party  to  certain  pending  legal
proceedings,  primarily  related to claims  from  contractors  and  vendors  for
payment related to work performed  and/or  services  provided the Tonkin Springs
Project, as follows:

A.   Canyon  Construction  Co.,  a Nevada  corporation,  Plaintiff,  vs.  Tonkin
     Springs  Gold  Mining  Company,  a  Colorado   corporation;   Gold  Capital
     Corporation,  a Colorado  corporation;  and Does I through  V,  Defendants,
     Civil  Action  No.  28416  in the  District  Court of the  Fourth  Judicial
     District of the State of Nevada, in and for the County of Elko.

     Plaintiff  Canyon  Construction Co. brought this action against the Company
and Tonkin Springs Gold Mining  Company,  a wholly-owned  subsidiary of USGL and
the general partner of TSVLP, the Company's joint venture partner, for breach of
contract for the value of labor and materials allegedly provided by Plaintiff at
the Tonkin Springs  Project.  The Complaint seeks damages in an amount in excess
of $10,000,  together with interest,  reasonable attorneys fees and court costs.
Plaintiff  has also  delivered  notice to the Company of its intention to file a
lien against the Project in connection with this claim.

                                       10

<PAGE>


     Plaintiff's claim arises from work performed at the Tonkin Springs Project.
Plaintiff  alleges that Defendants,  including the Company,  contracted with the
Plaintiff for  construction and materials as part of the Defendants' gold mining
operations.  Plaintiff  further contends that it performed work pursuant to that
contract,  and that  there is  currently  due and owing the  amount of  $191,957
pursuant to that agreement.  Plaintiff  alternatively  contends that Defendants,
and each of them,  are liable for the reasonable  value of services  provided at
the Project in a similar amount.

     An Answer has been filed with the Court on Defendants' behalf,  denying the
material  allegations  of  the  Complaint.  Defendants  admit  execution  of the
contract but are unable to determine the amount of money,  if any, due and owing
to the Plaintiff.  Defendants  further allege that a condition  precedent of the
contract,  a survey of the Project site,  has not been  completed.  Accordingly,
Defendants denied that the amount allegedly due was properly payable.

     The Company intends to defend this action pending receipt of a final survey
as to the  appropriate  amount  due,  if  any.  Upon  receipt  of  documentation
confirming  the amount due,  the Company  may seek to  negotiate a  satisfactory
settlement  with the  Plaintiff.  The Company has included the amount claimed by
Plaintiff  in its  financial  statements,  without  admitting  any  liability to
Plaintiff.

B.   Sea Gull Leasing,  Ltd. and Budget  Rent-A-Car B.C. Ltd.,  Plaintiffs,  vs.
     Gold Capital  Corporation,  Defendant,  District Court,  City and County of
     Denver, Civil Action No. 97-CV-997.

     Plaintiffs,  both Canadian  corporations,  allegedly advanced the amount of
$207,549  to the  Company  in  November,  1996.  The  action  was filed with the
District Court on February 20, 1997 and delivered to the Company on February 21,
1997.  The  Complaint  seeks  damages in that amount,  together  with  interest,
attorneys fees, costs and exemplary damages.

     Claims of the two Plaintiffs are similar,  but for different amounts.  Such
claims  include  money  had  and  received,  unjust  enrichment  and  promissory
estoppel.  Plaintiff  Sea Gull seeks  recovery of the amount of $187,266,  while
Budget seeks recovery of $20,284, plus interest, costs and fees.

     Due to the recency of this action, the Company has yet to file an Answer on
its behalf.  Unless extended, an Answer will be due not sooner than April, 1997.
However,  the Company intends to vigorously defend this action.  The Company may
also assert claims against certain  third-party  entities to recover the amounts
claimed by Plaintiffs.  In addition, by letter dated January 14, 1997, Royalstar
has promised to  indemnify  the Company  against  certain  losses  incurred as a
result of this action.

     The  Company  and its  subsidiary  are not a party  to any  other  material
pending  legal  proceedings,  nor is  its  property  the  subject  of  any  such
proceedings.  However,  the Company has been notified of a potential  claim by a
former officer and director.  Mr. John Young, former president,  chief executive

                                       11

<PAGE>

officer and a director of the Company,  recently notified current  management of
his claim to an  aggregate  of 340,000  shares of Common Stock of the Company in
consideration  for services  rendered to the Company prior to his resignation in
December  1996.  Since no formal  action  has been  commenced  to  recover  such
amounts,  the  Company  is unable  to  formally  evaluate  the  claim.  However,
management  believes  the claim to be  without  merit and  intends to defend any
action subsequently commenced.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
         ----------------------------------------------------

     No matters were  submitted to a vote of security  holders during the fiscal
year ended December 31, 1996.


                                     PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
         ------------------------------------------------------------------

     The Company's Common Stock is traded in the over-the-counter  market and is
quoted in the OTC Bulletin  Board under the symbol  "GOCP." The following  table
sets forth the range of high and low bid  quotations  as reported for the Common
Stock of the  Company.  Quotations  represent  prices  between  dealers,  do not
include  retail  markups,  markdowns  or  commissions  and  do  not  necessarily
represent prices at which actual transactions were effected.

                  Fiscal Year Ended
                  December 31, 1996          High     Low
                  -----------------          ----     ---

                  First Quarter             $ 1.63   $ 1.00
                  Second Quarter            $ 1.50   $ 0.81
                  Third Quarter             $ 1.88   $ 0.63
                  Fourth Quarter            $ 1.94   $ 0.56

                  Fiscal Year Ended
                  December 31, 1995          High     Low
                  -----------------          ----     ---

                  First Quarter             $ 2.50   $ 1.38
                  Second Quarter            $ 1.88   $ 1.25
                  Third Quarter             $ 1.88   $ 1.38
                  Fourth Quarter            $ 1.44   $ 0.88

     As of March 20,  1997,  there  were 200  record  holders  and  street  name
accounts for the Company's common stock.  The Company  estimates that there were
300 beneficial owners.

     No dividends have been paid with respect to the Company's  common stock and
the Company does not  anticipate  the payment of  dividends  in the  foreseeable
future.

                                       12

<PAGE>


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

Plan of Operation

Introduction.  The  Company's  plan of  operation  ("Plan")  for the twelve (12)
months  ending  December  31, 1997 is to obtain  sufficient  capital to commence
production  of gold at its Tonkin  Springs  Project.  Prior to and during  1996,
management believes that the Company had conducted sufficient testing to warrant
commencement  of efforts to produce  gold at the Project.  To that end,  efforts
were  undertaken  during late 1996 to commence  construction  of the asphalt pad
necessary  to  begin   bio-oxidation  of  the  sulfide  ore.  The  Company  also
commissioned  preparation  of an  updated  feasibility  study to  confirm  early
estimates  and expand the  Company's  development  plan with  regard to Project.
However, the Company's Plan may be modified as the result of the proposed Merger
with Globex.

     Effective  March 13,  1997,  the  Company  and Globex  executed  the Merger
Agreement which, if successfully concluded, would result in the Company becoming
a  wholly-owned  subsidiary  of  Globex.  The  Merger is  subject to a number of
contingencies,  including approval by the Company's shareholders.  If the Merger
is completed,  Globex has advised the Company that it intends to conduct further
development  drilling on the Project  prior to  undertaking  efforts to commence
production of gold. Accordingly, pending completion of the Merger, management is
unable to predict  with any degree of  certainty a specific  plan with regard to
development  of  the  Project.   The  following   discussion  includes  possible
alternatives, depending upon whether the Merger is completed as proposed.

     The Company's current Plan calls for treatment of sulfide ore in a modified
acid heap  leach  process,  followed  by  conventional  carbon in leach  ("CIL")
process.  An important  part of the ore reserves at the Project are in the oxide
form and are amenable to conventional heap leach extraction methods. Mining will
be by open pit methods through independent contractors.

     Pursuant to the Plan,  ore bearing  material will be crushed by an existing
crusher,  which will need to be modified,  and  pre-treated  on a heap leach pad
which must be completed.  Construction  of the heap leach pad  commenced  during
1996, but construction efforts have been suspended pending funding of additional
working capital to continue the efforts. In February,  1996, the Company engaged
the  minerals  industry  consulting  firm of Behre  Dolbear & Company,  Inc.  to
prepare an updated  feasibility  study with expansion of the development plan to
included definition of the economic feasibility of incorporating  milling, oxide
heap leach, and low grade sulfide  bio-oxidation  with  conventional  heap leach
recovery. This report was issued in April, 1996, and concluded that "the project
economics  and  technical   factors  indicate  the  project  should  proceed  to
commercial   production."   (See  "Item  2.  Properties"  for  a  more  complete
description of the Behre Dolbear Report.)

                                       13

<PAGE>

     Through approximately September, 1996, the costs of these efforts have been
paid with the proceeds of a private and two public offerings as well as advances
from  Royalstar.  Royalstar  informed  the  Company in  November,  1996,  of its
inability  to  continue to fund  operations  of the  Company  through  Royalstar
Advances.  Pre-operating  activities are anticipated to be accelerated  upon the
Company obtaining additional funding.

     If the Merger is completed, Globex has notified the Company that it intends
to conduct additional development drilling in an effort to estimate the presence
of  additional  ore.  Management  has been advised that  additional  testing and
evaluation could extend the time prior to commencement of commercial  production
at the Project,  but could enable  Globex to obtain  sufficient  financing in an
effort to accomplish that objective.  In addition,  the Mining Venture Agreement
to which the  Company and TSVLP are parties  has been  amended,  effective  upon
consummation of the Merger, to expand the definition of commercial production to
include acid heap leach  oxidation of both high grade and low grade  sulfide ore
followed by conventional  heap leach  processing as well as the ability to start
the project on oxide ore by conventional heap leach processing.

Pre-Operating  Activities.  The  Company's  plan of  operation  for the  Project
entails  significant  expenditures  before  commencement  of gold production and
receipt of revenue. Additional engineering,  construction,  holding and start-up
costs  are  currently   projected  at  approximately  $8.5  million.   The  most
significant  of these  remaining  pre-operating  costs are  finalization  of the
bio-heap leach pad to process sulfide ore and acquisition of ancillary machinery
and  equipment.  Additional  pre-production  expenses  include  acquisition  and
installation of a portable crusher and necessary plant modification,  as well as
consulting fees for engineering and reactivation of various permits necessary to
operate the Project.  An independent  consultant has been retained to assist the
Company  regarding  permitting.  All of these expenses will need to be paid from
the proceeds of future financings.

     Various  permits must be in place from various  state and Federal  agencies
before mining can commence.  Although many of these permits are current, some of
the more important  require  amending  prior to  commencement  of operation.  In
August,  1995 the Company received the necessary  permits and  authorizations to
construct  the  bio-heap  pad,  and  commenced  construction  efforts  in  1996.
Management  does not presently  anticipate any special  obstacles to issuance of
any of these permits.

Mining and Processing.  Mining and processing of the ore will represent the most
significant expense of the Company's proposed operations. In an effort to manage
these expenses,  the Company anticipates utilizing the services of a third party
contractor  to  accomplish  mining  of the  ore.  Management  believes  that the
utilization of a third party contractor  offers several  advantages  compared to
the Company's  participation,  including the  elimination of front end equipment
capital costs, reduced general and administrative  expenses,  quick mobilization
and reduction of available labor and training issues.

     Processing of the bio-oxidized ore will be conducted in facilities in which
the Company has an interest,  and, although some modification will be necessary,
should not require a substantial  additional capital outlay. The carbon in leach
process will be conducted in the milling and  processing  facilities  previously
constructed  by USGL  prior to  acquisition  of the  Company's  interest  in the

                                       14

<PAGE>

Project. Significant expenses anticipated in this phase of production include
personnel costs  associated with operation of the mill,  chemicals  necessary to
process the  oxidized  material  and spare parts and tools  necessary to support
processing operations.

     In addition to the acid heap  leach/carbon in leach process proposed by the
Company,  Globex has suggested  additional  alternatives  which might be used to
process sulfide ore at the Project. It would involve modification of the bioheap
recovery such that both  high-grade  and low-grade  sulfide ore can be processed
simultaneously  through acid heap leach pre- oxidation  followed by conventional
heap leach processing.  The other process would involve  processing of oxide ore
in a  conventional  heap process prior to  commencement  of treatment on sulfide
ore.  Determination  of these methods will  necessarily  await completion of the
Merger and additional testing by Globex.

Operating  Revenue and Expenses.  Under the Mining Venture Agreement between the
Company  and  TSVLP,  the  Company  is  responsible  for  funding  all  holding,
administrative,  development  and other costs  associated with the Venture until
commercial production is achieved. The Company is entitled to recoup such costs,
up to a maximum of $6,000,000,  from a preferential  distribution  from net cash
flow,  entitling  the  Company to receive 84% of net cash flows from the Venture
prior  to  payback.   Through  December  31,  1996,  the  Company  has  advanced
approximately  $3,725,000 of Recoupable Costs to the Venture.  After recovery of
Recoupable Costs, the cash flows will be distributed to the Company and TSVLP in
proportion to their interests in the Venture.

     Subject to completion  of the Merger,  TSVLP and the Company have agreed to
modify the Joint Venture Agreement.  These  modifications  include,  but are not
limited to, i) increase of the Recoupable Amount to $8.05 million, ii) the right
to pledge TSVLP's share of cash flow from the project for use in debt service of
project financing arranged by the Company, if any, iii) expanded  definitions of
Commencement  of  Commercial  Production  to  include  two  additional  possible
property development  alternatives (heap pre-oxidation  followed by conventional
heap leach  processing  of sulfide ores, or  development  and  processing of the
oxide ore reserves),  and iv) a commitment by the Company to TSVLP to a) pay off
the TSVLP Secured Note within 5 days of approval of the Globex Merger,  b) agree
to pay to TSVLP  certain  minimum  distributions  of cash flow during a 24 month
period  commencing 12 months after the effective date of the  amendment,  and c)
agree to  finance  capital  requirements  on  behalf  of  TSVLP,  if any,  after
Commencement of Commercial Production.

     Operation  of a gold  processing  facility is  dependent  on many  factors,
including the presence and grade of the ore reserves,  gold recovery  rates from
the ore and operating  costs  associated  with extracting the gold from the ore.
The audit of the feasibility  study  completed in April,  1996, by Behre Dolbear
represents  an estimate  of the  economic  viability  of  producing  gold from a
milling  and heap leach  operation  at Tonkin  Springs  and,  subject to certain
conditions  and  assumptions  set  forth  therein,  concludes  that  gold can be
economically mined over the estimated  five-year initial operations phase of the
Project (see "Item 2.  Description  of  Properties,  Tonkin  Springs  Properties
-Reserves").

     Gold prices  depend on many  factors,  including  worldwide  demand and the
prevailing economic and political climate.  Gold prices fluctuate widely and are
affected  by  numerous   factors   beyond  the  Company's   control,   including
expectations  regarding  inflation,  global and regional  demand,  political and
economic  conditions and production costs in major gold producing regions.  Such


                                       15

<PAGE>

risks affect all participants in the mining  industry,  although the Company may
encounter  special  risks  due to its  development  stage.  Once  production  is
achieved,  management  will endeavor to reduce the risk of  fluctuation  in gold
prices through  evaluation of periodic sales of a portion of its gold production
at fixed future prices.  However,  hedging transactions can result in additional
risk to the Company.

Liquidity and Capital Resources

     The Company has  historically  relied on capital  from  outside  sources to
finance its  activities,  and continues to be reliant on outside sources for the
foreseeable future.

     For much of 1996,  Royalstar,  a principal shareholder of the Company and a
corporation organized and existing under the laws of Canada with shares publicly
traded on the Vancouver Stock Exchange, funded operations of the Company through
informal and unsecured advances. In August, 1996, Royalstar converted $1,919,110
in cash advances into 1,919,110 shares of common stock ($1.00 per share).  Those
advances  ceased in November,  1996.  As of December  31,  1996,  the balance of
remaining  Royalstar  Advances total  $856,821.  The Royalstar  advance  accrues
interest at the published  prime rate.  Prior to its  relationship to Royalstar,
the Company  relied on the  proceeds of two private and one public  offerings to
finance ongoing  activities.  The  acquisition of the Company's  interest in the
Project  was  completed  through  a  combination  of debt and  equity  financing
facilitated by TSVLP.

     On January 16, 1997, and in connection  with  negotiations  for the Merger,
the  Company  consummated  a Loan  Agreement  with Globex to provide the Company
additional  operating capital.  Subject to the terms and conditions of that Loan
Agreement,  Globex  has agreed to make  advances  to the  Company  to  maintain,
preserve  and protect the assets of the  Project,  service the  promissory  note
payable  to U.S.  Gold and pay other  necessary  and proper  obligations  of the
Company  pending  completion  of  the  Merger.   Continued  funding  under  that
arrangement  is subject to the right of Globex to accept or reject each  funding
request made by the  Company,  as well as the right to  discontinue  funding all
together.  As of December 31, 1996,  the balance of borrowings  under the Globex
loan totaled $20,000.  As of March 18, 1997, the principal  balance of that loan
is $697,493.  The Globex loan accrues  interest at the rate of 2% over prime, is
secured by all assets of the Company, and is due and payable on or before August
30, 1997 if the Merger is not  completed.  If the Merger is not  completed,  the
Company will be forced to solicit other sources of financing.

     At  December  31,  1996,  the  Company  had  negative  working  capital  of
approximately  $2,342,080,  consisting  of current  assets of $1,914 and current
liabilities  of  $2,343,994.  The primary  components of the  Company's  current
liabilities  are the Company's  promissory  note and accrued  interest due TSVLP
($690,982)  related to the Company's  acquisition  of its interest in the Tonkin
Springs Project, accounts payable to creditors ($644,697),  primarily related to
vendors and  contractors  for to the Tonkin Springs  Project,  and advances from
Royalstar ($856,821).

     The Company's financial  condition has deteriorated during 1996.  Liquidity
and working  capital both  decreased as a result of continued  expenditures  for
holding and development costs at the Project,  coupled with a lack of sufficient
financing.  Working  capital  decreased from a deficit of $1,253,642 at December
31, 1995 to a deficit of $2,342,080  at December 31, 1996.  Although the Company
was able to reduce the  principal  balance on the note  payable to TSVLP,  other


                                       16

<PAGE>

current  liabilities  increased  substantially.  Accounts  payable  and  accrued
expenses  increased  almost  $300,000,   while  advances  payable  to  Royalstar
increased  to  $856,821,   accounting  for  most  of  the  increase.  Management
anticipates that the Company's  financial condition will continue to deteriorate
pending finalization of an agreement for sufficient financing.  It is hoped that
the Merger will satisfy that objective.

     The Company's obligations under the promissory note to TSVLP and certain of
the Company's  obligations  under the Mining Venture  Agreement are subject to a
Security Agreement in favor of TSVLP,  pursuant to which the Company has granted
a security interest in the assets constituting its interest in the Project.  The
Globex Loan also includes a security interest in the assets of the Company,  and
TSVLP  has  agreed  to share  its  senior  secured  collateral  position  in the
Company's 60% interest in the assets of the Tonkin Springs  Project with Globex,
pari passu, as provided in the Intercreditor Agreement.

     In  addition  to  start-up  and  other   capital  costs   associated   with
recommencement  of operations at the Project,  the Company will require  capital
for ongoing operating  expenses,  debt service,  and general and  administrative
expenses.  Total capital required including  recommencement of operations at the
Project,   acquisition   debt   repayment   and  working   capital  needs  total
approximately $10 million. These circumstances raise substantial doubt about the
Company's ability to continue as a going concern.  The ability of the Company to
continue  operations  as a going  concern is  dependent  upon its success in (1)
obtaining  additional capital; (2) paying its obligations timely; (3) developing
its properties to the commercial  production stage; and (4) ultimately achieving
profitable  operations.  The financial statements do not include any adjustments
which might result from the outcome of these uncertainties.

     On November 1, 1996,  the Company  received funds in the amount of $185,350
from Sea Gull Leasing Ltd., a private company ("Sea Gull"). The November 1, 1996
transaction  with Sea Gull was  arranged  on behalf of the Company by its former
president  and chief  executive  officer,  Mr. John Young,  who resigned all his
positions with the Company effective  December 4, 1996. On November 1, 1996, the
Company  disbursed a portion of the  proceeds of the Sea Gull funds  directly to
Attwood Gold Corporation  ("Attwood") in the amount of approximately $74,140. In
addition to the funds directly  received by the Company from Sea Gull, a payment
by Sea Gull  directly  to a vendor  of the  Venture  was made on  behalf  of the
Company in the  approximate  amount of  $20,284.  Sea Gull has  initiated  legal
actions  to recover  from the  Company in the  stated  amount of  $205,634  plus
interest  and costs.  Royalstar  provided  the Company a written  commitment  of
indemnity  dated  January  14,  1997,  concerning  and  related  to the Sea Gull
Obligation (the  "Indemnity").  The Company has given  Royalstar  notice that it
intends to invoke the  Indemnity  with regards to the legal action  initiated by
Sea Gull and has further requested Royalstar and Attwood to resolve the claim.

     Other  than  the  Globex  Loan,  the Sea  Gull  funding  and the  Royalstar
Advances,  the Company has not to date secured the necessary funding required to
meet its current  obligations  nor to provide for development  costs  associated
with  future  obligations  and  operations  relating  to the  Venture  and other
corporate  objectives.  If the  potential  merger of the  Company  and Globex is
consummated,  Globex  will be  responsible  for funding  the  operations  of the
Company.  If the Globex  Merger is not  consummated  the  Company  will  require

                                       17

<PAGE>

significant  additional  working capital as well as funds to pay back the Globex
Loan, of which there is no assurance.  The Company requires  approximately  $8.5
million,  primarily to construct the bio-heap leach pad and otherwise prepare to
commence  mining and  processing  of  mineralized  material  and  arranging  for
reclamation bonding,  and a minimum of $697,493 plus accrued interest,  to repay
the Globex Loan. The note to TSVLP, as amended June 22, 1995,  requires payments
by the  Company of $50,000  per month until the Company has raised $4 million in
new  financing,  which  payments  increase to $75,000  after such  additional $4
million in new financing is secured.

     The Company's  only current  sources of limited  working  capital are funds
under the Globex  Loan as  discussed  above,  or, upon if the plan to merge with
Globex were to be terminated, other possible equity offerings, short-term and/or
project debt financings,  as well as anticipated cash from future operations and
possible  receipt of proceeds  from the  exercise of the  Company's  options and
warrants.

Results of Operations

     For the fiscal year ended  December 31, 1996,  the Company  remained in the
development stage, as it had no revenues from operations. It is anticipated that
the Company will remain in the  development  stage until such time as sufficient
financing to commence production can be obtained.

     1996 Compared to 1995.  For the year ended  December 31, 1996,  the Company
recorded a net loss of $1,606,332 or $(0.28) per share compared to a net loss of
$1,638,830 or $(0.51) per share for year 1995. After reflecting the mandatory 9%
dividend on the Series A Preferred Stock (which  dividends  terminated  November
30, 1995) of $247,500 for 1995, the net loss  applicable to common  shareholders
was  $1,606,332  for 1996 and  $1,886,330 for 1995. The Company had no operating
revenues for either year as the Tonkin Springs Project is not in production.

     General and  administrative  expenses  totaled $532,651 in 1996 compared to
$669,388 in 1995,  reflecting  generally  lower  expenses for legal and investor
relation  activities,  while  interest  expense  primarily  related to the TSVLP
Promissory Note and Royalstar Advance totaled $231,421 during 1996,  compared to
$192,941 for 1995. During 1996 the Company was also credited with  approximately
$1,191,442  of Tonkin  Springs  net  Recoupable  Costs  bringing  the balance of
Recoupable Costs to $3,725,000.  Property maintenance cost at the Tonkin Springs
Project totaled $844,133 for 1996 compared to $609,424 for 1995,  reflecting the
increased  activities at the property during 1996. The Company  anticipates that
it will  continue  to incur  losses  until such time,  if ever,  that it obtains
sufficient working capital to commence operations of the Tonkin Springs Project.

     Net cash used in  operating  activities  amounted to $599,057  for the year
ended December 31, 1996,  compared to $1,346,701 in 1995,  primarily  reflecting
1996  expenses  satisfied by the  issuance of common  stock.  During  1996,  the
Company issued an aggregate of 2,281,139  shares of Common Stock to creditors at
a price of $1.00  per  share  to  satisfy  liabilities  incurred  for  operating
activities.  Cash flow used in investing  activities  totaled  $797,806 in 1996,
compared  to  $614,122  for  1995.  Cash  flow from  financing  activities  were
$1,387,749 and $1,935,224, respectively, in 1996 and 1995.

                                       18

<PAGE>

     Inflation.  Management believes that inflation can affect the profitability
of the Company if production is commenced through changes in operating  expenses
and  prices  for sale of gold.  Inflation  could  adversely  affect  the cost of
production,  including third party contractors,  labor,  equipment and chemicals
used in  conjunction  with  mining  operations.  However,  management  does  not
anticipate  substantial cost increases in the immediate future.  Inflation could
also  significantly  affect the price of gold.  During  times of rising  prices,
demand for gold and other  precious  metals  historically  have  increased  as a
perceived  hedge  against  inflationary  pressure.  The Company will have little
control over price fluctuations,  as inflation will be affected by worldwide and
domestic  economic  and  political  conditions  and  other  factors  beyond  the
Company's control.

Other

     Except for the historical  information  contained herein, the statements in
this  report  which  relate  to  the  Company's  plans,   objectives  or  future
performance may be deemed to be forward-looking  statements. Such statements are
based on current  expectations of management.  Actual strategies and results may
differ  materially from those currently  expected  because of factors  including
gold  price,  ore  grades,   metallurgical  recovery,  operating  costs,  market
valuation,  and project operator's  performance under the Project Joint Venture,
as well as other risks and uncertainties.

ITEM 7.  FINANCIAL STATEMENTS
         ---------------------

     See complete Financial Statements,  including the Index thereto,  beginning
at Page F-1 of this Report.



                                       19


<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Index to Consolidated Financial Statements                          Page


Independent Auditors Report                                         F-1

Consolidated Balance Sheet as of December 31, 1996                  F-2

Consolidated  Statement of Operations  for the Years
Ended December 31, 1996 and 1995 and for the period
from December 10, 1993 (Inception) to December 31, 1996             F-3

Consolidated  Statement of Stockholders' Equity for
the Period from December 10, 1993 (Inception)
to December 31, 1996                                                F-4 to F-5

Consolidated  Statements of Cash Flows for the Years
Ended December 31, 1996 and 1995, and for the Period
from December 10, 1993 (Inception) to December 31, 1996             F-6 to F-7

Notes to Consolidated Financial Statements                          F-8 to F-24

                                       20
<PAGE>







                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Gold Capital Corporation

We have  audited the  accompanying  consolidated  balance  sheet of Gold Capital
Corporation as of December 31, 1996 and the related  consolidated  statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1996 and 1995 and for the period December 10, 1993 (inception)  through December
31, 1996. These consolidated  financial statements are the responsibility of the
Corporation's  management.  Our responsibility is to express an opinion of these
consolidated financial statements based upon our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
December 31, 1996, and the results of their  operations and their cash flows for
the years ended December 31, 1996 and 1995 and for the period  December 10, 1993
(inception)  through  December 31, 1996, in conformity  with generally  accepted
accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
the Company will continue as a going concern.  As discussed further in Note B to
the consolidated financial statements,  the Company has significant  obligations
related to its  acquisition  of certain  mining  properties,  and its  continued
existence  is  dependent  upon its  ability  to  raise  additional  capital  and
ultimately  achieve  profitable  operations.  In the past,  the Company has been
unable  to  remain  current  on  these   obligations.   These  conditions  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The consolidated  financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

As of December 31, 1996,  the Company has a  substantial  investment  in mineral
properties and equipment.  The ability of the Company to recover this investment
is dependent  upon meeting  their  development  and  financing  obligations  and
achieving profitable operations. Management's plans in this regard are discussed
in Note B.

STARK TINTER & ASSOCIATES, LLC

March 18, 1997
Englewood, Colorado


<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)


Consolidated Balance Sheet
December 31, 1996

ASSETS
CURRENT ASSETS, Cash                                          $     1,914

PROPERTY, PLANT AND EQUIPMENT
 Milling,  plant and production equipment                       7,234,110
 Buildings                                                      2,232,963 
 Vehicles and trailers, net of depreciation                       152,115 
 Property development and mineral claim costs                   3,170,200
                                                              -----------
                                                               12,789,388
                                                              -----------
OTHER ASSETS
  Prepaid royalties                                               527,823
  Deposits and organization costs                                  42,750
                                                              -----------
                                                                  570,573
                                                              -----------
                                                              $13,361,875
                                                              ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable and accrued expenses                       $   644,697
  Accrued interest-TSVLP                                          129,569
  Notepayable-TSVLP, current portion                              561,413
  Advances  payable-Royalstar Resources                           856,821
  Other obligations, net                                          151,493
                                                              -----------
                                                                2,343,993

NOTE PAYABLE-TSVLP, LONG-TERM                                     939,663
RECLAMATION RESERVE                                             1,469,900
MINORITY INTEREST IN JOINT VENTURE                              2,435,178
                                                              -----------
                                                                7,188,734
                                                              -----------

COMMITMENTS AND CONTINGENCIES
(Notes D, E, F and K)

STOCKHOLDERS' EQUITY
  Preferred stock; 5,000,000 shares authorized;
   none outstanding                                                   
  Common Stock $.0001 par value; 25,000,000 shares                         
   authorized; 9,073,653 shares issued and
   outstanding                                                       922
  Additional paid-in capital                                   9,973,741
  Deficit accumulated during development stage                (3,801,522)
                                                             ----------- 
                                                               6,173,141
                                                             -----------
                                                             $13,361,875
                                                             ===========


          See accompanying notes to consolidated financial statements.

                                      F-2

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage company)


Consolidated  Statements of Operations
For the Years Ended December 31, 1996 and 1995, and from
December 10, 1993 (Inception) to December 31, 1996

<TABLE>
<CAPTION>

                                                                       For the Period from
                                      Year Ended     Year Ended        December 10, 1993
                                     December 31,    December 31,         (Inception) to
                                         1996           1995            December 31, 1996
                                         ----           ----            -----------------
                                                     
<S>                                     <C>             <C>                  <C>   
Costs and expenses:

General and administrative             $ 532,651       $669,388             $1,528,108

Property maintenance                     844,133        609,424              1,453,557

Write off of Argentina
  Mineral Claims                               -        167,077                167,077

Interest expense, net                    299,548        192,941                652,780
                                       ---------       --------              ---------

Net loss                              (1,606,332)    (1,638,830)            (3,801,522)

Preferred stock dividend                       -        247,500                517,500
                                      ----------     ----------              ---------

Net loss applicable to
common shareholders                  $(1,606,332)   $(1,886,330)           $(4,319,022)
                                     ===========    ===========            ===========
 
Net loss per common share            $     (0.28)   $     (0.51)
                                     ===========    =========== 

Weighted average of common
  shares outstanding                   5,758,543      3,672,684
                                       =========      =========


           See accompanying notes to consolidated financial statements.

                                      F-3
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)


Consolidated Statement of Stockholders' Equity
From December 10, 1993 (Inception) to December 31, 1996
                                                                                                                      Deficit
                                                                                                                    Accumulated
                                              Common                                                 Additional       During
                                   Stock     Subscribed    Preferred    Stock    Common     Stock      Paid-In       Development
                                  Shares      Amount         Shares     Amount   Shares     Amount     Capital          Stage
                                  ------      ------         ------     ------   ------     ------     -------          -----

<S>                                <C>        <C>             <C>        <C>      <C>        <C>        <C>           <C>
December 10, 1993 (Inception)         -       $    -             -       $  -         -      $   -      $    -       $       -

Issuance of stock to officers
for cash, December 22, 1993,
$.04/share                            -            -             -          -    300,000        30       11,970              -

Issuance of Series A Convertible
Preferred Stock for mining
properties, at $10.00/share           -            -          300,000   3,000          -         -    2,997,000              -

Common stock subscribed by
officers and affiliates,
$1.00/share                     200,000           20                -       -          -         -      199,980              -
                                -------           --          -------   -----    -------      ----    ---------       --------- 

December 31, 1993               200,000           20          300,000   3,000    300,000        30    3,208,950              -

Issuance of stock for cash,
$1.00/share                    (200,000)         (20)               -       -  1,350,000       135    1,134,285              -

Issuance of stock for cash,
$2.00/share                           -            -                -       -    248,396        25      483,499              -

Issuance of stock as dividend
on Series A Convertible
Preferred Stock, $2.11/share          -            -                -       -    127,702        13          (13)             -

Net loss                              -            -                -       -          -         -            -       (556,360)
                               --------          ---           -------  -----  ---------      ----   ----------      ---------

December 31, 1994                     -            -           300,000  3,000  2,026,098       203    4,826,721       (556,360)


continued on next page


                                                                  F-4
</TABLE>




<PAGE>
<TABLE>
<CAPTION>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)


Consolidated Statement of Stockholders' Equity
From December 10, 1993 (Inception) to December 31, 1996
                                                                                                                      Deficit
                                                                                                                    Accumulated
                                              Common                                                 Additional       During
                                   Stock     Subscribed    Preferred    Stock    Common     Stock      Paid-In       Development
                                  Shares      Amount         Shares     Amount   Shares     Amount     Capital          Stage
                                  ------      ------         ------     ------   ------     ------     -------          -----

<S>                                <C>          <C>        <C>          <C>    <C>          <C>      <C>             <C>      
Balance, December 31, 1994             -            -       300,000      3,000  2,026,098    203      4,826,721       (556,360)

Issuance of stock for cash,
$1.00/share (net of
issuance cost)                         -            -             -          -  2,776,100    278      2,770,822              -

Issuance of stock to short-term
lender, $1.00/share                    -            -             -          -      2,500      -          2,500              -

Exercise of stock option for
cash, $1.00/share                      -            -             -          -     75,000      8         74,992              -

Issuance of stock for legal fees,
$1.00/share                            -            -             -          -     15,000       1        14,999              -

Issuance of stock as dividend on
Series A Convertible Preferred
Stock, $1.67/share                     -            -             -          -    147,816      15           (15)             -

Net loss                               -            -             -          -          -       -             -      (1,638,830)
                                   -----        -----        ------      -----   --------     ---        ------      -----------

December 31, 1995                      -       $    -       300,000     $3,000  5,042,514    $505    $7,690,019     $(2,195,190)

Issuance of stock in conversion
of accounts payable to affiliates,
$1.00/share                            -            -             -          -  2,281,139     242     2,280,897               -

Conversion of Preferred Stock
into Common Stock, $1.72/share         -            -      (300,000)    (3,000) 1,750,000     175         2,825               -     

Net loss                               -            -             -          -          -       -             -      (1,606,332)
                                   -----        -----       -------      -----  ---------     ---     ---------     -----------

December 31, 1996                      -       $    -             -      $   -  9,073,653    $922    $9,973,741     $(3,801,522)
                                   ======       =====        =======      ===== ==========   ====    ==========     ===========
 
                                        See accompanying notes to consolidated financial statements.

                                                                 F-5


</TABLE>

<PAGE>
<TABLE>
<CAPTION>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)


Consolidated  Statements of Cash Flows
For the Years Ended December 31, 1996 and
1995, and from December 10, 1993 (Inception)
to December 31, 1996

                                                                                                            For the Period from
                                                         For The Year                For The Year            December 10, 1993
                                                            Ended                       Ended                 (Inception) to
                                                         December 31,                December 31,              December 31,
                                                             1996                        1995                      1996
                                                         ------------                ------------           --------------------
<S>                                                      <C>                          <C>                       <C> 
Cash flows from operating activities:
  Interest income                                            1,873                     $    11,591               $    17,331
  Cash paid to suppliers                                  (600,930)                     (1,358,292)               (2,249,248)
                                                          --------                      ----------                ---------- 
   Cash used in operating activities                      (599,057)                     (1,346,701)               (2,231,917)
                                                          --------                      ----------                ---------- 
Cash flows from investing activities:
  Capital expenditures                                    (797,806)                     (1,173,333)               (2,693,989)
  Sale of surplus equipment, net                                 -                         630,000                   630,000
  Investment in Argentina claims                                 -                         (70,789)                 (167,077)
                                                          --------                      ----------                 ---------
    Cash used in investing activities                     (797,806)                       (614,122)               (2,231,066)
                                                          --------                      ----------                ---------- 

Cash flow from  financing  activities:
  Net advances from  Royalstar                           2,107,379                         387,204                 2,494,583
  Borrowings                                               154,294                               -                   154,294
  Funding of bank overdraft                                      -                               -                  (138,000)
  Cash received from sale of common stock                        -                       2,846,100                 4,676,024
  Obligations paid with common stock                      (423,080)                              -                  (423,080)
  Principal payments on note payable                      (450,844)                     (1,298,080)               (2,298,924)
                                                          --------                      ----------                ---------- 
    Cash provided by financing activities                1,387,749                       1,935,224                 4,464,897
                                                         ---------                       ---------                 ---------

Increase (decrease) in cash                                 (9,114)                        (25,599)                    1,914
Cash, beginning                                             11,028                          36,627                         -  
                                                         ---------                       ---------                 --------- 
    
Cash, ending                                             $   1,914                       $  11,028                 $   1,914
                                                         =========                       =========                 =========
Reconciliation of net loss to cash used
in operating activities:
  Net loss                                             $(1,606,332)                    $(1,638,830)              $(3,801,522)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Amortization and depreciation                           21,143                           4,541                    28,642
    Interest expense                                       231,420                         195,573                   661,151
    Expenses paid with common stock                        514,293                               -                   514,293
    Write-off of investment in mineral claims                    -                          70,789                    70,789  
    (Decrease) in other assets                             (26,780)                       (554,240)                 (598,363)
    Increase in current liabilities related to
     operations                                            267,199                         115,064                    432,691
    Increase in liabilities, long-term                           -                         460,402                    460,402
                                                       -----------                     -----------                -----------

  Net cash used in operating activities                $  (599,057)                    $(1,346,701)               $(2,231,917)
                                                       ===========                     ===========                =========== 


                                 See accompanying notes to consolidated financial statements.

                                                          F-6
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Consolidated  Statements of Cash Flows
For the Years Ended December 31, 1996 and
1995, and from December 10, 1993 (Inception)
to December 31, 1996, continued

                                                                                                            For the Period from
                                                         For The Year                For The Year            December 10, 1993
                                                            Ended                       Ended                 (Inception) to
                                                         December 31,                December 31,              December 31,
                                                             1996                        1995                      1996
                                                         ------------                ------------           --------------------
<S>                                                       <C>                        <C>                      <C>   
Supplemental Cash Flow Information:

  Non-cash investing and financing activities
  excluded above-
    Preferred stock issued for property, plant
     and equipment                                         $       -                  $        -                $3,000,000
    Note issued for property, plant and
     equipment                                                     -                           -                 3,800,000  
    Reclamation reserve assumed for property,
      plant and equipment                                          -                           -                   829,900         
    Bank overdraft and other payables incurred
      to acquire property, plant and equipment
      and other assets                                             -                           -                   156,232  
    Common stock subscription receivable                           -                           -                   150,000
    Common stock issued for legal services                         -                      15,000                    15,000
    Common stock issued to short term lender                       -                       2,500                     2,500
    Common stock issued for amounts due
      affiliated creditors                                   362,029                           -                   362,029
    Common stock issued for Series A                    
      Preferred Stock dividend                                     -                     247,500                   517,500
    Common stock issued for conversion of
      Series A Preferred Stock                               300,000                           -                 3,000,000
                                                             -------                  ----------               -----------

Net Non-Cash Investing and Financing Activities           $3,362,029                  $  265,000               $11,833,161
                                                          ==========                  ==========               ===========





                                   See accompanying notes to consolidated financial statements.

                                                           F-7

</TABLE>

<PAGE>


GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         ------------------------------------------

Organization Gold Capital Corporation (the "Company") was incorporated under the
laws of the state of Colorado on December 10, 1993 to engage in  development  of
gold mining projects.  The Company's  activities have been primarily  limited to
its formation,  obtaining financing,  acquisition of certain interests in mining
properties  and  management  of a mining  joint  venture.  For the  period  from
inception to December 31, 1996, the Company had no operations.

Consolidation The accompanying  consolidated  financial  statements  include the
accounts  of the Company  and 100% of the assets and  liabilities  of the Tonkin
Springs  Project Joint Venture (the  "Venture") of which the Company holds a 60%
interest  and  is  the  manager.  All  significant   intercompany  accounts  and
transactions have been eliminated.

Exploration  and  Development  Costs General  exploration  costs are expensed as
incurred  while  exploration  and  acquisition  costs  related to  projects  are
deferred  until the  properties  are put into  commercial  production,  sold, or
abandoned.  Mine development  costs incurred either to develop new ore deposits,
expand the capacity of operating  mines, or to develop mine areas  substantially
in advance of current  production are also deferred.  Costs incurred to maintain
current  production or to maintain  properties on a standby basis are charged to
operations.   Costs  of  abandoned  projects  are  charged  to  operations  upon
abandonment.

The Company  periodically  evaluates the carrying  value of  capitalized  mining
costs and related  property,  plant and  equipment  costs to  determine if these
costs are equal to or in excess of their net  realizable  value.  Net realizable
value is defined as the estimated sales price in the ordinary course of business
less reasonably  predictable costs of completion and disposal.  If such periodic
evaluation  indicates an impairment  has  occurred,  write downs are made to the
carrying  value of  capitalized  mining  costs and related  property,  plant and
equipment to the net realizable value.

Equipment  Vehicles and trailers are recorded at cost and depreciated  using the
straight-line  method  principally  over estimated useful lives of three to five
years.

Property  Reclamation  Costs The estimated  reclamation  costs  associated  with
mineral  properties are accrued and charged to operations over the expected life
of each property using the units of production method. Ongoing environmental and
reclamation  expenditures  are either charged  against the  reclamation  reserve
related to each  property,  or  expensed  as  incurred  if  unrelated  to an ore
reserve.

                                      F-8

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)


NOTE A  -   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
            -----------------------------------------------------

Income Taxes The Company  accounts for income taxes under Statement of Financial
Accounting  Standards  No. 109  ("SFAS  No.  109.")  Temporary  differences  are
differences  between the tax basis of assets and  liabilities and their reported
amounts in the  financial  statements  that will result in taxable or deductible
amounts in future years.

Loss Per Share Loss per share is based on the weighted  average number of shares
outstanding during the period. Convertible preferred stock, options and warrants
have not been  included in the  computation  of earnings per share because their
effect would be antidilutive.

Use of  Estimates  The  preparation  of  the  Company's  consolidated  financial
statements in conformity with generally accepted accounting  principles requires
the Company's  management  to make  estimates  and  assumptions  that affect the
amounts of assets and  liabilities,  the  disclosure  of  contingent  assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.


NOTE B  -   CONTINUED OPERATIONS AND RECOVERABILITY OF MINING PROPERTIES AND
            EQUIPMENT
-----------------------------------------------------------------------------

During 1996, the Company was in the  development  stage and had not realized any
revenues from its planned  operations.  The Company does not expect any revenues
will be derived until a significant  amount of additional  capital is raised for
further development and start-up costs. The Company's  financial  statements are
presented  on the  basis  that  it is a going  concern  which  contemplates  the
realization of assets and  liquidation of liabilities in the ordinary  course of
business.  In connection  with its  acquisition  and future  development  of the
mining properties  discussed above and in Notes D, F and H, the Company incurred
significant obligations and the Company's continued existence and recoverability
of mining  properties  and  equipment  is  dependent  upon its  ability to raise
additional  capital or alternative  funding,  and ultimately  achieve profitable
operations. Future development costs are expected to be significant and include,
among other costs,  property  holding costs,  project  engineering,  capital and
start-up  costs,  as well as  costs  to  secure  environmental  bonding  for the
project.


                                      F-9

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)

NOTE B  -   CONTINUED OPERATIONS AND RECOVERABILITY OF MINING PROPERTIES AND
EQUIPMENT, continued
--------------------------------------------------------------------------------

For much of 1996,  Royalstar,  a principal  shareholder  of the Company,  funded
operations of the Company through  informal and unsecured  advances.  In August,
1996,  Royalstar converted  $1,919,110 of cash advances into 1,919,110 shares of
common stock ($1.00 per share). As of December 31, 1996, the Royalstar  Advances
are $856,658.  During 1996, the Royalstar Advances accrued interest at an annual
rate  reflecting the monthly prime rate as reported in the Wall Street  Journal,
totaling $87,808.

In connection  with the Merger  Agreement  with Globex Mining  Enterprises  Inc.
("Globex"),  a publicly traded corporation organized and existing under the laws
of the  Province of Quebec,  Canada (See Note C),  Globex has agreed to fund the
financial  obligations  of the  Company  pending  completion  of the Merger (the
"Globex Loan"). Subject to the terms and conditions of the Agreement between the
parties, Globex has agreed to make advances to the Company to maintain, preserve
and protect the assets of the Tonkin  Springs  Project,  service the  promissory
note payable to U.S.  Gold and pay other  necessary and proper  obligations  and
commitments  of the Company.  As of December 31, 1996, the balance of borrowings
under the Globex Loan  totalled  $20,000.  As of March 18, 1997,  the  principal
balance of the Globex Loan is $697,493.  The Globex Loan accrues  interest at 2%
over prime,  is secured by all the assets of the Company and is due on or before
August  30,  1997.  TSVLP has  agreed to share its  collateral  position  in the
Company's 60% interest in the assets of the Tonkin Springs  Project and interest
in the  Venture,  pari passu,  with Globex  under the terms of an  Intercreditor
Agreement  dated  January 16, 1997.  Continued  funding under the Globex Loan is
subject to the right of Globex to accept or reject each funding  request made by
the Company,  as well as the right of Globex to discontinue  funding altogether.
In that  event,  the Company has the right to  terminate  the Merger  Agreement.
Without  continued  funding  from the Globex  loan or finding  other  sources of
funding,  the Company is not able to meet its current obligations nor to provide
for development costs associated with future obligations and operations relating
to the Venture and other corporate objectives.

These  circumstances  raise  substantial  doubt about the  Company's  ability to
continue as a going concern.  The ability of the Company to continue  operations
as a going  concern is dependent  upon its success in (1)  obtaining  additional
capital; (2) paying its obligations timely; (3) developing its properties to the
commercial production stage; and (4) ultimately achieving profitable operations.
The financial  statements do not include any adjustments which might result from
the outcome of these uncertainties.

                                      F-10

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)

Note C  -  PROPOSED MERGER
--------------------------

On December  20,  1996,  the Company and Globex  entered  into an  agreement  in
principal  regarding  a  conditional  offer by Globex to finance the Company and
merge it with a subsidiary of Globex.  Effective March 13, 1997, the Company and
Globex executed an agreement (the "Merger  Agreement" or "Merger") to merge with
Globex. By virtue of the Merger, and subject to certain conditions,  the Company
would become a wholly-owned subsidiary of Globex.

The Merger is part of two separate, but related,  transactions pursuant to which
Globex proposes to acquire 100% of the Company's  issued and outstanding  Common
Stock. Pursuant to the terms of the Merger Agreement, GME Merger Corporation,  a
Colorado  corporation wholly owned by Globex,  would be merged with and into the
Company (the  "Surviving  Corporation"),  which  corporation  would  survive the
Merger.   The  4,654,543  shares  of  the  Company's  Common  Stock  issued  and
outstanding  prior to the  Merger  and not  owned by  Royalstar  Resources  Ltd.
("Royalstar")  would be converted into the right to receive  1,285,067 shares of
Globex  Common  Stock.  The  shares  proposed  to be issued  by Globex  would be
registered under relevant  provisions of the Securities Act of 1933, as amended,
and qualified  under  applicable  state Blue Sky laws. The Common Stock owned by
Royalstar, the Company's single largest shareholder, would be acquired by Globex
in a separate  transaction  (the  "Acquisition"),  anticipated  to be  completed
contemporaneously with the Merger. When both transactions are completed,  Globex
would own 100% of the  issued  and  outstanding  shares  of Common  Stock of the
Company.

Both the Merger and  Acquisition  are  subject to certain  conditions.  Prior to
consummation  of the Merger,  the following  conditions,  among others,  must be
satisfied:  i)  receipt  of an  effective  date  by  Globex  for a  registration
statement  covering  its stock  proposed  to be issued  in  connection  with the
Merger;  ii) receipt of financing by Globex;  iii) approval of the Merger by the
Company's  shareholders;  and (iv) approval of various regulatory agencies.  The
consummation  of the  Acquisition  is subject to  finalization  of an  agreement
between  Globex and  Royalstar,  in addition to  shareholder  approval and other
conditions  precedent.  The  respective  Boards of  Directors of the Company and
Globex  intend to proceed  promptly  and use their  reasonable  best  efforts to
complete the Merger and Acquisition.

Pending completion of the Merger,  Globex has acquired an option to purchase the
2,287,547  shares of Common Stock of the Company owned by U.S. Gold  Corporation
and TSVLP and an  irrevocable  proxy to vote all of those shares in favor of the
Merger.  The Common Stock owned by U.S. Gold and subject to the option and proxy
represents  approximately  25.2% of the currently issued and outstanding  Common
Stock of the Company.

                                      F-11

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)


Note C  -  Proposed Merger, continued
-------------------------------------

Upon  satisfaction of the conditions  precedent and completion of the Merger, it
is contemplated that the Board of Directors of the Company will be changed.  The
officers  and  directors  of GME  Merging  Corporation,  all of which  have been
nominated  by  Globex,  will be the  officers  and  directors  of the  Surviving
Corporation after the Merger.


NOTE D  -  MINING PROPERTIES
----------------------------

Tonkin Springs:
---------------

On December 31, 1993 (the  "Closing"),  the Company  entered into a Purchase and
Sale  Agreement  (Purchase   Agreement)  with  Tonkin  Springs  Venture  Limited
Partnership  ("TSVLP") whereby the Company acquired a 60% undivided  interest in
certain properties and obligations of the Project (the "Properties")  located in
Eureka County, Nevada. At closing the Company and TSVLP entered into the Venture
agreement to manage and develop mining operations on the Properties. The Company
was  designated  the  manager  under the  Venture  and is  allowed to charge the
Venture  $5,000  per month to cover its  overhead  and  expenses  related to the
conduct of operations of the Venture.  During 1996 and 1995, the Company charged
the Venture a total of $120,000. This amount is eliminated in consolidation.

The  Company  acquired  its 60%  interest  in the  Properties  from  TSVLP for a
purchase price and other consideration of approximately  $7,830,000 representing
the  estimated  fair market  value of the assets.  The purchase  price  included
$200,000 in cash at Closing;  delivery of a mortgage  note in the amount of $3.8
million (the  "Promissory  Note") (see Note F);  300,000 shares of the Company's
Series A Preferred  Stock  ("Preferred  Stock")  having an assigned  value of $3
million  (see  Note I) and the  assumption  of 60% of a  reclamation  obligation
recorded at $829,900 (see Note E).

As part of the Purchase and Venture Agreements,  the Company agreed to fund 100%
of the holding,  development and administrative costs relating to the Properties
up until commencement of commercial production.  The Company shall be reimbursed
for expenditures,  up to $6 million ("Reimbursable  Costs"), from a preferential
portion of cash flows from the operations of the Venture,  if any.  Expenditures
in excess of $6 million will be considered contributions to the Venture. Through
December 31,  1996,  the Company has incurred  approximately  $3,725,000  in net
Reimbursable Costs.

                                      F-12

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)

NOTE D  -  MINING PROPERTIES, continued
----------------------------------------

Until the Company recovers its Reimbursable  Costs, the Company will be entitled
to receive 84% of net cash flows of the Venture upon  commencement of commercial
production.  After recovery of such costs, the cash flows will be distributed to
the Company based upon its 60%  interests in the Venture.  In the event that the
Company  has  advanced  any  portion  of  TSVLP's   funding   obligation   after
commencement of commercial production,  the Company shall be entitled to receive
92% of the  Venture's  net cash  flows  available  for  distribution  until such
advances are recovered by the Company.

Activities on the Properties are subject to laws and regulations controlling not
only the  exploration and mining of mineral  properties,  but also the effect of
such  activities on the  environment.  Compliance with such laws and regulations
may necessitate  significant  capital  outlays,  affect the economics of a given
project,  and  cause  material  changes  or  delays  in the  Company's  intended
activities.

The  Property  includes  several  blocks of  unpatented  mining  claims that are
subject  to certain  production  royalties  through  mining  leases or  previous
property  acquisitions from third parties.  The royalty payment  obligations are
based on percentages  ranging from 1% to 5% of production  revenues and the spot
prices of metals at the time of production.  One lease requires  advance minimum
royalty ("AMR") payments of the greater of $150,000 or the dollar  equivalent of
455 ounces of gold and annual work  commitment  expenditures  of $300,000 or the
dollar equivalent of 909 ounces of gold. However, this lease also allows the AMR
payments to be recouped from subsequent  production royalty  obligations and for
work commitment  expenditure overages to be carried forward and credited against
subsequent years obligations. All leases require the Company to pay annual claim
fees to hold the claims.

During 1995, the Tonkin Springs Project made a distribution to the  participants
of $640,000 in net  proceeds  from the sale of a surplus sag mill at the Project
with the Company  receiving  $384,000 and TSVLP receiving  $256,000.  No gain or
loss was recognized related to the sale.

In March 1995, the Financial  Accounting  Standards Board issued a new statement
titled  "Accounting  for  Impairment of Long-Lived  Assets" (FAS 121).  This new
standard is  effective  for years  beginning  after  December 15, 1995 and would
change the Company's method of determining  impairment of long-lived assets. The
Company does not believe the impact of this standard on the Company's  financial
statements to be material.

                                      F-13

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)

NOTE D  -  MINING PROPERTIES, continued
---------------------------------------

Argentina Mineral Claims:
-------------------------

During 1994, the Company entered into an agreement  whereby the Company acquired
a 100%  interest in various  mineral  claims in Argentina,  which  agreement was
amended in 1995. Under the amended agreement,  the Company acquired its interest
for  $120,000,  and an agreement to pay the seller 15% of any net profits and 1%
of any net  revenues  derived  from  these  claims as  defined  by the  purchase
agreement.  In order to maintain the validity of these exploration claims during
1995 and beyond, additional expenditures were required.

Given the limited  financial  resources  available  to the  Company  during this
period,  the  decision  was  made  not to  maintain  these  exploration  claims.
Therefore,  an expense  charge of $167,077  was taken in 1995  representing  the
write-off of the investment associated with the exploration claims in Argentina.

NOTE E  -   RECLAMATION OBLIGATION
----------------------------------

In addition to the funding requirements  relating to the Company's investment in
the Venture  (Note D), the  Company  agreed to assume a  proportionate  share of
certain  obligations  of TSVLP related to the  Properties.  Included among these
obligations is the estimated cost of the reclamation of the Properties described
in Note D. The total cost is approximately $1.47 million, of which the Company's
share is approximately  $829,900. The total obligation has been reflected in the
accompanying  consolidated  financial  statements  of the  Company.  In order to
secure the reclamation of the Properties,  the Federal Bureau of Land Management
and the State of Nevada have required a $1.3 million bond to be provided  before
mining  operations are recommenced.  If mining  operations at the Properties are
recommenced,  which is the intent of the Venture,  the agencies  described above
may increase the bonding  requirement,  the extent of which cannot be determined
at this time.



                                      F-14

<PAGE>


GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)


NOTE F  -   NOTE PAYABLE
------------------------

At December  31, 1996 the Company has a  $1,501,076  amended  note  payable (the
"Note) to TSVLP as a result of its purchase of a 60% interest in the  Properties
(Note D).  The Note is  collateralized  by the  Company's  60%  interest  in the
Properties  and the Venture and accrues  interest at a fixed rate of 7.5% on the
unpaid principal balance, with interest payments due at the end of each calendar
year. Accrued interest for 1996 of $129,569 was paid January 16, 1997 along with
$11,431 applied to the principal balance under the Note from partial proceeds of
borrowings  under the Globex  Loan.  TSVLP also agreed in  conjunction  with the
Globex  Loan,  that  monthly  note  payments  commencing  February 1, 1997 would
continue  at $50,000  per month  until the  earlier  of August 1,  1997,  or the
completion of the Globex  Merger,  after which monthly  payments  under the Note
would be subject to the existing terms of the Note.

The principal balance of $1,501,076 is payable as follows:

(1) Monthly installments of $11,431 in January,  1997, and thereafter at $50,000
per month until the Company has raised an aggregate of  $4,000,000  in financing
subsequent to the June, 1995  transaction with Royalstar as discussed in Note I,
or until the Note is paid in full.

(2)  Monthly  installments  of  $75,000  subsequent  to the  Company  raising an
aggregate  of  $4,000,000  in new  financing  (approximately  $3  million in new
financing has been arranged through December 31, 1996).

The Company's obligations under the promissory note and certain of the Company's
obligations under the Venture  agreement are subject to a Security  Agreement in
favor of TSVLP, pursuant to which the Company has granted a security interest in
the assets constituting its interest in the Project. The Company is in technical
default in its  performance  as manager of the  Venture.  The  inability  of the
Company to satisfy the terms of the promissory note and the Venture agreement in
the future could, if not cured  subsequent to written notice,  cause the Company
to forfeit its interest in the Project.



                                      F-15

<PAGE>


GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)


NOTE F  -   NOTE PAYABLE, continued
------------------------------------

The future  annual  minimum  principal  payments as of December  31, 1996 are as
follows:

         1997                        $  561,413
         1998                           600,000
         1999                           339,663
                                     ----------
                                     $1,501,076
                                     ==========

Note G  -   ROYALSTAR ADVANCES
------------------------------

During the fourth quarter of 1995, the Company  required  additional  funding to
maintain its operations and to meet its immediate financial obligations. Certain
limited funding was provided the Company by Royalstar on an unsecured  basis. In
August 1996,  the Company  approved the  conversion  of  $1,919,110 in Royalstar
Advances  into  1,919,110  shares of  common  stock at $1.00  per  share.  These
advances continued until the fourth quarter of 1996, when Royalstar informed the
Company of the inability of Royalstar to continue funding of the Company.  As of
December 31, 1996, the balance of the Royalstar Advances are $856,821,  which is
classified as a current liability.

Note H  -   OTHER OBLIGATIONS
-----------------------------

Sea Gull Obligation
-------------------

On  November  1, 1996,  the  Company  received  funds in the amount of  $185,350
(Canadian $250,000) from Sea Gull Leasing Ltd., a private company (the "Sea Gull
Obligation").  This  transaction  with Sea Gull was  arranged  on  behalf of the
Company by its former president and chief executive officer, Mr. John Young, who
resigned  all his  positions  with the Company  effective  December 4, 1996.  On
November 1, 1996, the Company disbursed  $74,140 (Canadian  $100,000) of the Sea
Gull proceeds directly to Attwood Gold Corporation  ("Attwood").  In addition to
the funds  directly  received by the Company from Sea Gull, a payment of $20,284
by Sea Gull  directly  to a vendor  of the  Venture  was made on  behalf  of the
Company.  No  note  or  other  documentation  exists  related  to the  Sea  Gull
Obligation.  Sea Gull has  initiated  legal  actions  to recover  $205,634  plus
interest and costs from the Company (See Note K).

Royalstar provided the Company a written but conditional commitment of indemnity
dated January 14, 1997,  concerning and related to the Sea Gull  Obligation (the
"Indemnity").  The Company has given Royalstar  notice that it intends to invoke
the  Indemnity  with regard to the legal  action  initiated  by Sea Gull and has
further requested Royalstar and Attwood to resolve the claim. The Company has


                                      F-16

<PAGE>
GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)


Note H  -   Other Obligations, continued
-----------------------------------------

included the Sea Gull  Obligation,  reduced by the claim of the Company  against
Attwood, on the balance sheet as of December 31, 1996 in Other obligations, net.

Globex Mining Enterprises, Inc.
-------------------------------

As  discussed  in more detail in Notes B and C, the  Company and Globex  entered
into the Globex Loan,  which as of December 31, 1996 had an outstanding  balance
of $20,000.  This amount is included in the Globex Loan agreement  dated January
16, 1997.

NOTE I  -   STOCKHOLDERS' EQUITY
--------------------------------

Common Stock:
-------------

On August 20,  1996,  the Company  issued  1,919,110  shares of common  stock to
Royalstar at $1.00 per share, as conversion of $1,919,110 in Royalstar Advances.
Effective  December 19, 1996,  the Company issued 242,029 shares of common stock
to U.S.  Gold  Corporation  ("U.S.  Gold") at $1.00 per share,  as conversion of
$242,029 in amounts due to U.S.  Gold for staff  support,  overhead and expenses
charged  the  Company  under  a  month-to-month   office  services  and  support
agreement. U.S. Gold is the effective parent of TSVLP. On December 19, 1996, the
Company issued 120,000  shares of common stock to MCM Capital  Management,  Inc.
("MCM") at $1.00 per share, as conversion of $120,000 in amounts due MCM under a
secretarial and management  services  agreement  dated. MCM is controlled by two
directors of the Company.

Effective  December 31, 1996,  TSVLP  converted  its 300,000  shares of Series A
Preferred  Stock of the  Company  into  1,750,000  shares of Common  Stock at an
effective conversion price of $1.72 per share.

On March 9, 1995,  the Company  commenced sale of up to 600,000 shares of common
stock at a price of $1.00 per share under a private  placement  offering limited
to accredited  investors.  The shares were offered pursuant to an exemption from
the registration  requirements imposed by the Securities Act of 1933, as amended
("1933 Act"), and applicable  state security laws, and  accordingly,  may not be
resold without registration or an exemption from such registration.  The Company
has agreed to register the shares included in this private  placement  offering.
Through the termination  date of this offering,  May 8, 1995, the Company sold a
total of 576,100 shares and received gross proceed of $576,100 thereunder.

                                      F-17

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)


NOTE I  -   STOCKHOLDERS' EQUITY, continued
-------------------------------------------

Common Stock:, continued
-------------------------

On April 13, 1995, the Company  entered into an option  agreement with Royalstar
whereby Royalstar purchased, effective June 22, 1995, 2,200,000 shares of common
stock of the Company for an aggregate of $2.2 million (the "Option.") Concurrent
with the  Option,  Royalstar  purchased  300,000  shares of common  stock of the
Company  under the March 9, 1995 private  placement  offering  discussed  above.
Effective June 22, 1995, the Company  completed the sale of 2,200,000  shares of
its common stock in a private  placement  to Royalstar  pursuant to the terms of
the Option. This private placement was completed pursuant to Regulation D of the
Securities Act of 1933, as amended,  and the shares sold in the transaction were
"restricted"  within the meaning of the 1933 Act and bore a restrictive  legend.
However,  the Company  undertook  to register the shares of common stock sold to
Royalstar.  The price per share  received  by the  Company in the  offering  was
determined in the Option  agreement of April 13, 1995 which price  represented a
discount from the trading price of the Company's  common stock at that time. The
June 22, 1995 transaction resulted in a change in control of the Company whereby
Royalstar  acquired  voting  control  of the  Company.  At  December  31,  1996,
Royalstar  owns an aggregate of 4,419,110  shares of common stock,  representing
approximately 48.7% of the issued and outstanding voting stock of the Company.

During the year ended  December 31, 1994,  the Company  completed an offering of
450,000  units,  to which  200,000  units were  subscribed to as of December 31,
1993.  Each unit  consisted  of two shares of common  stock and one common stock
purchase  warrant,  at a price of $2.00  per  unit.  During  1994,  all  related
warrants to purchase 450,000 shares of common stock were exercised.  The Company
received net proceeds of  $1,134,420  from this offering and the exercise of the
related  warrants.  Two related  entities  with common  officers and  directors,
purchased 50,000 units of the offering.

On August 5, 1994, the Company  commenced sale under a public  offering of up to
500,000  units  consisting  of one share of common  stock and one  common  stock
warrant to purchase one share of common stock for $5.00 per share.  The warrants
are  exercisable  through  August 31,  1997 and  callable  upon 30 days  written
notice.  Through the termination  date of this offering,  November 29, 1994, the
Company sold a total of 248,396 units and received net proceeds of $483,524.

                                      F-18

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)

NOTE I  -   STOCKHOLDERS' EQUITY, continued
------------------------------------------

Preferred Stock:
----------------

As discussed in Note D, the Company  issued 300,000 shares of Series A Preferred
Stock having an assigned value of $10 per share, or $3 million, to TSVLP as part
of the purchase  price of its 60% interest in the  Properties.  The value of the
Series A Preferred Stock was determined based on the estimated fair market value
of the  properties  of  approximately  $7.9  million,  exclusive  of  the  cash,
promissory  note and  liabilities  assumed by the Company in connection with the
transaction.  The fair market value of the assets,  in turn,  was  determined in
negotiations between the parties. While no single factor was determinative,  the
factors  considered  included the historical  cost of the leases and facilities,
expenditures  for  exploration  and  development of the Properties  prior to the
acquisition by the Company,  anticipated  future  expenses for  exploration  and
development,  the  prior  sale of a  majority  interest  in the  Properties  and
economic forecasts for production from the assets.

The Series A Preferred Stock called for cumulative preferred dividends of 9% per
annum payable  annually in cash or, at the discretion of the Company,  in common
stock of the Company  (based upon the average  stock price for the prior  year),
through  November 30, 1995.  For fiscal years 1995 and 1994,  the Company issued
147,816  and 127,702  shares,  respectively,  of  unregistered  common  stock in
satisfaction   of  the  preferred  stock  dividend  of  $247,500  and  $270,000,
respectively.  As noted  above,  the Series A Preferred  shares  were  converted
effective  December 31, 1996 into 1,750,000  shares of common stock. The Company
has granted U.S. Gold and TSVLP a one time registration  right for all shares of
Common Stock then owned by U.S. Gold and TSVLP.

The Company has  5,000,000  authorized  but unissued  shares of preferred  stock
which  may be  issued  in such  series  and  preferences  as  determined  by the
Company's Board of Directors.

Stock Option Plan:
------------------

During 1994, the Company adopted its Non-Qualified  Stock Option and Stock Grant
Plan (the "Plan") for the benefit of its officers, directors and other personnel
and has reserved an aggregate of 1,500,000 common shares, subsequently increased
in 1995 to 2,500,000  common shares,  for issuance under the Plan.  During 1996,
options to purchase  100,000  shares at $1.00 per share were granted and options
to purchase  262,500 shares at $1.37 to $1.44 per share expired.  As of December
31, 1996, the Company has outstanding options to purchase up to 1,962,500 common
shares under the Plan at prices of $1.00 per share (for 650,000  shares),  $1.25
per share (for 1,050,000 shares),  and $1.44 per share (for 262,500 shares) with
various  expiration dates from year 2000 to 2005. As of March 27, 1997,  options
to purchase 862,500 shares have expired.

                                      F-19

<PAGE>
GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)


NOTE I  -   STOCKHOLDERS' EQUITY, continued
-------------------------------------------

Stock Option Plan (continued)
-----------------------------

SFAS No. 123, "Accounting for Stock-Based Compensation," requires the Company to
provide pro forma  information  regarding net income as if compensation cost for
the Company's stock option plans had been determined in accordance with the fair
value based method  prescribed  in SFAS No. 123. The Company  estimates the fair
value  of  each  stock  option  at  the  grant  date  using  the   Black-Scholes
option-pricing  model with the following  weighted-average  assumptions used for
the 1995 grants:  dividend yield of 0%; expected volatility of 32.16%; risk free
interest rate of 5.56%; and expected life of 9.43 years.

The Company applies APB Opinion 25 in accounting for the Plan.  Accordingly,  no
compensation  expense has been  recognized  for 1996 or 1995.  Had  compensation
expense been determined on the basis of fair value pursuant to SFAS No. 123, net
loss and net loss per share would have been reduced as follows:

                                       1996                       1995
                                       ----                       ----
         Net loss:
           As reported              $(1,606,332)              $(1,886,330)
                                    ============              ============
           Pro forma                $(1,620,542)              $(3,032,503)
                                    ============              ============

         Net loss per share:
           As reported              $(0.28)                   $(0.51)
                                    =======                   =======
           Pro forma                $(0.28)                   $(0.83)
                                    =======                   =======

                                      F-20

<PAGE>


NOTE I  -   STOCKHOLDERS' EQUITY, continued
--------------------------------------------

Stock Option Plan (continued)
-----------------------------

Under the  accounting  provisions  of SFAS No. 123, the Company's net income and
net  income  per share  would  have been  adjusted  to the  following  pro forma
amounts:
<TABLE>
<CAPTION>

                                                 1996                                         1995
                                    ------------------------------              -----------------------------

                                                         Range of                                  Range of
                                                         Exercise                                  Exercise
                                      Shares              Prices                   Shares           Prices                     
                                      ------              ------                   ------           ------                      

<S>                                  <C>              <C>                        <C>                <C>    
Outstanding, beginning
  of year                            2,125,000         $1.00-1.44                1,050,000        $1.00-2.00
  Granted                              100,000         $1.00                     1,575,000        $1.25-1.44
  Exercised                                  -          -                           75,000        $1.00
  Canceled or expired                  262,500         $1.37-1.44                  425,000        $1.00-2.00
                                   -----------        -----------               ----------        ----------
Outstanding, end of year             1,962,500         $1.00-1.44                2,125,000        $0.28-$0.47
                                   ===========                                  ==========

Options exercisable,
  end of year                        1,895,833         $1.00-1.44                2,058,333        $1.00-1.44

Weighted average fair
  value of option
  granted during year               $0.75                                        $1.33
                                    =====
                                    
</TABLE>

The following table summarizes  information  about stock options  outstanding at
December 31, 1996:
<TABLE>
<CAPTION>



                           Options Outstanding                             Options Exercisable
                           -------------------                             -------------------
                                          Weighted
                                          Average
                                          Remaining                           
         Exercise                         Contractual        Exercise                          Exercise
         Price               Number         life              Price               Number         Price
         ------            -----------      ----              -----             -----------      -----
         <S>              <C>           <C>               <C>                  <C>                <C>  
         $1.00                650,000       7.6 years         $1.00                583,333       $1.00
         $1.25              1,050,000       8.0 years         $1.25              1,050,000       $1.25
         $1.44                262,500       8.5 years         $1.44                262,500       $1.44
</TABLE>


                                      F-21

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)


NOTE J  -  INCOME TAXES
-----------------------

The components of net deferred tax assets,  all of which are  long-term,  are as
follows at December 31, 1996:

    Net operating loss                                           $   847,841
    Tax differences from property
     development expenditures and
     from depreciation of Project assets                           2,166,689
    Less valuation allowance                                      (3,014,530)
                                                                  ---------- 
                                                                 $         -
                                                                 ===========

The  long-term  deferred  tax assets  are  principally  attributable  to the net
operating loss carryforwards and property  development  expenditures  deductible
for taxes but  capitalized  for book  purposes.  A valuation  allowance has been
established  for the entire  amount of the deferred tax asset,  which  increased
$1,099,530  from December 31, 1995.  The net operating loss  carryforward  as of
December 31, 1996 is  approximately  $6,373,000,  which will expire through year
2011.  In the  transaction  entered into June 22, 1995 (see Note I), the Company
believes it had an ownership  change,  as that term is defined under IRC Section
382 (g). As a result,  the tax net operating loss carry forwards will be subject
to  annual  limitations  under  IRC  Section  382,  following  the  date of such
ownership change.

NOTE K  -  COMMITMENTS AND CONTINGENCIES
----------------------------------------

The Company and the Tonkin Springs  Project Joint Venture are parties to certain
litigation  primarily involving claims that the Company has not paid contractors
and  creditors  for amounts  due,  and a lawsuit by Sea Gull for return of funds
provided to the Company (See Note H).

An action entitled  "Canyon  Construction  Company  ("Canyon") v. Tonkin Springs
Gold Mining  Company,  and Does I-V," was filed in the Nevada State Court,  Case
No.  28416 on  December  19,  1996.  Tonkin  Springs  Gold  Mining  Company is a
wholly-owned subsidiary of U.S. Gold Corporation.  The Canyon action was amended
to include the Company as a named  defendant.  The  complaint  alleges  that the
Company  has failed and  refused to pay  amounts  due to Canyon for  performance
under a  construction  contract  dated  August 9,  1996,  and Canyon has filed a
Notice of Claim of Lien dated March 7, 1997, on the Tonkin Springs Project Joint
Venture.  The Canyon  contract  was entered into by the Company on behalf of the
Tonkin  Springs  Project  Joint  Venture.  Canyon  claimed  that  they  are owed
approximately  $191,956.72 plus interest and damages. The Company is responsible
for  funding  of all  costs of the  Project  until  Commencement  of  Commercial
Production,  and is obligated to keep the Tonkin Springs Project and assets free
and clear of any liens.


                                      F-22

<PAGE>
GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)


NOTE K - COMMITMENTS AND CONTINGENCIES, continued
-------------------------------------------------

In addition, there are a number of creditors who are owned monies by the Company
which  creditors  could bring various legal actions  against the Company and the
Tonkin Springs Project Joint Venture,  some of which could involve the filing of
liens.

NOTE L  -   RELATED PARTY TRANSACTIONS
--------------------------------------

Royalstar
---------

Effective June 22, 1995, the Company  completed the sale of 2,200,000  shares of
its common stock in a private placement to Royalstar, which resulted in a change
in control, as discussed in Note I. Through October, 1996, the Company continued
essential  operations through unsecured advances from Royalstar.  For the period
from  January 1 to November  30,  1996,  the  Company  was  charged  $134,912 by
Royalstar for staff and office  support.  During 1995, the Company was charges a
total  of  $30,000  for  Mr.  Young,  and  $10,000  for  Mr.  Berry  under  this
arrangement,  as well as $17,500 in office and staff  support.  At December  31,
1996, the Company had advances payable to Royalstar of $856,821.

U.S. Gold
---------

The Company has a month-to-month agreement with U.S. Gold to provide the Company
secretarial  and  administrative  assistance,  for  $1,850  per month  totalling
$22,200 during 1996 and 1995. The Company also contracts for consulting services
from certain  employees of U.S. Gold on an as-needed  basis. The Company accrued
an  aggregate  of  $199,944  during 1996 and  $107,426 in 1995  pursuant to this
arrangement.  Effective December 19, 1996, U.S. Gold converted $242,029 owned by
the Company  under these  arrangements  into  242,029  shares of Common Stock at
$1.00 per share. At December 31, 1996, the Company had accounts  payable to U.S.
Gold of $946.

Other
-----

The Company  entered  into an  agreement  to pay $2,000 per month with a related
party, MCM Capital Management, Inc. (MCM), for financial consulting services for
the Company in Colorado  Springs,  Colorado,  which  agreement  was  modified to
$10,000 per month  effective  July 1, 1995,  as well as  out-of-pocket  expenses
incurred by MCM on behalf of the Company.  MCM is a  stockholder  and has common
directors  with the Company.  The Company paid or accrued a total of $114,285 to


                                      F-23

<PAGE>

GOLD CAPITAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)

NOTE L  -   RELATED PARTY TRANSACTIONS, continued
--------------------------------------------------

MCM during 1996 and $106,362 in 1995 under this arrangement.  Effective December
19, 1996, MCM converted  $120,000 owned by the Company under these  arrangements
into 120,000 shares of Common Stock at $1.00 per share.

NOTE M  -   Selected Quarterly Financial Information (unaudited)
----------------------------------------------------------------

                                                     Per share data-
                                    Net Loss         Loss Per Share
         1996
         First Quarter              $ 380,133        $0.08
         Second Quarter             $ 414,632        $0.09
         Third Quarter              $ 470,978        $0.09
         Fourth Quarter             $ 340,589        $0.02

         1995
         First Quarter              $ 163,797        $0.08
         Second Quarter             $ 265,726        $0.10
         Third Quarter              $ 367,060        $0.08
         Fourth Quarter             $ 842,247        $0.17

     During the fourth quarter of 1995,  certain year-end  adjustments were made
to expense property maintenance costs. The aggregate effect of these adjustments
was to increase net loss for the fourth quarter by $609,424 ($0.17 per share).


                                      F-24




<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE.
         -------------------------------------------------

     None.

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS
         --------------------------------

     The  following  table sets  forth the names and ages of the  members of the
Company's Board of Directors and its executive officers:

      Name                    Age               Position
      ----                    ---               --------

   Bill M. Conrad              40              President and Director
   Raymond E. McElhaney        40              Secretary, Treasurer and Director
   William W. Reid             48              Director

     Each  director is serving a term of office which shall  continue  until the
next  annual  meeting  of  Shareholders  and until his  successor  has been duly
elected  or  appointed  and  qualified.  Officers  of the  Company  serve at the
pleasure of the Board of Directors.

     No family  relationships exist between any of the officers and directors of
the Company.

                                       21

<PAGE>

     BILL M.  CONRAD.  Mr.  Conrad has been a director of the Company  since its
inception  and was  elected  as  President  in  December,  1996,  following  the
resignation  of Mr. John Young.  Mr.  Conrad also held the position of Treasurer
from the Company's  inception in 1993 until June 22, 1995. Since July, 1996, Mr.
Conrad has also been Vice President and Director of Wallstreet  Racing  Stables,
Inc., a Colorado corporation engaged in the acquisition,  training and racing of
thoroughbred race horses. From September,  1989 to January, 1997, Mr. Conrad was
also Vice  President of  Corporate  Development  and a director of  Consolidated
Capital of North America,  Inc., a publicly  traded  corporation  engaged in the
real estate industry.  Concurrent with those positions,  Mr. Conrad is also Vice
President  and a director  of MCM Capital  Management,  Inc.,  a privately  held
financial  consulting  and  investor  relations  firm,  a position  which he has
occupied since September,  1989. From August, 1991 to October,  1992, Mr. Conrad
was a registered  representative  for Rocky Mountain  Securities,  a NASD member
firm located in Denver, Colorado.

     RAYMOND E.  McELHANEY.  Mr.  McElhaney  has been a Director  of the Company
since its  inception  and was elected to the  position of Secretary in December,
1996. He also served as Secretary  from the Company's  inception to June,  1995.
From July, 1995 to the present,  Mr. McElhaney has been President and a director
of Wallstreet Racing Stables, Inc. and from 1984 to the present, President and a
director  of MCM.  From 1987 to  January,  1997,  he  served  as the  president,
treasurer,  chief executive and financial officer and a director of Consolidated
Capital of North America,  Inc. From July, 1992 to October,  1992, Mr. McElhaney
was affiliated  with Rocky Mountain  Securities,  Inc., a NASD member firm, as a
sales representative.

     WILLIAM W. REID. Mr. Reid has been a director of the Company since December
31, 1993.  Mr. Reid was  appointed as a director of the Company  pursuant to the
terms of the Company's Series A Convertible  Preferred Shares. Mr. Reid has been
president,  chief executive officer and a director of U.S. Gold  Corporation,  a
publicly-traded  Colorado  corporation  since  its  inception  in 1979.  USGL is
engaged in the business of acquiring and developing  gold mining projects in the
United  States.  Through  wholly-owned  subsidiaries,  USGL  owns 100% of Tonkin
Springs  Venture  Limited  Partnership,  from  which the  Company  acquired  its
interest  in the  Tonkin  Springs  Project  in  December,  1993.  TSVLP owns the
remaining 40% interest in the Tonkin Springs Project and TSVLP and U.S. Gold are
the owner of an aggregate of 2,287,547 shares of the Company's common stock.

     The Company also has the following significant employee:

     George Newell,  Project  Manager,  Tonkin Springs  Project.  Mr. Newell was
employed as the project  manager of Tonkin  Springs in May, 1996. Mr. Newell has
held various positions in mining and processing  operating  management including
plant superintendent at the Buckskin Operation, in Yerington,  Nevada, from 1988
through 1995.

                                       22

<PAGE>


Compliance with Section 16(a) of the Securities Exchange Act of 1934.

     The following sets forth each officer, director or beneficial owner of more
than  ten  percent  (10%) of any  class  of  equity  securities  of the  Company
registered  pursuant  to  Section  12 of the 1934 Act that  failed  to file on a
timely basis Forms 3, 4 or 5 as required by Section 16(a) during the last fiscal
year, based solely upon copies of Forms 3, 4 and 5 received by the Company:

   Name of Entity             No. of Transactions          Required Form
   --------------             -------------------          -------------

   John M. Young                      1                      Form 4 (1)
   
----------        
(1)  The reporting person never filed on a Form 4 for transactions dated August,
     1996.

     All members of the Board of Directors have attended a minimum of 75 percent
of all meetings of the Board.

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

     Neither Mr. Conrad nor Mr.  McElhaney  receive any direct  compensation for
their services as officers of the Company. However, Mr. Conrad and Mr. McElhaney
are reimbursed for  out-of-pocket  expenses  incurred on behalf of the interests
and activities of the Company. The following table summarizes total compensation
of the Executive Officers of the Company for the Company's last three years:




                      (THIS SPACE INTENTIONALLY LEFT BLANK)


                                       23

<PAGE>
<TABLE>
<CAPTION>
                                                Summary Compensation Table

                                Annual Compensation             Long Term Compensation
                                -------------------             ----------------------
                                                 Other                  Awards              All
Name and Principal                              Annual                  ------              Other
Position                   Year     Salary      Compensation      Stock Options Granted     Compensation
--------                   ----     ------      ------------      ---------------------     ------------

<S>                        <C>       <C>              <C>                      <C>            <C>     
Bill M. Conrad,            1996      $0               $0                       0              $      0
President and CEO          1995       0                0                 100,000                     0
                           1994       0                0                  75,000                     0

Raymond E. McElhaney       1996       0                0                       0                     0
Secretary/Treasurer        1995       0                0                 100,000                     0
                           1994       0                0                  75,000                     0

John Young,                1996       0(1)             0                       0                     0(1)
President and CEO (1)      1995       0(1)             0                 600,000                     0(1)
                           1994       0(1)             0                       0                     0

Charles E. Stott, Jr.      1995      55,000            0                       0                90,436(2)
President and CEO (2)      1994      91,000            0                 400,000                     0

Kenneth Berry,             1996       0(1)             0                       0                     0
Treasurer and              1995       0(1)             0                 162,500                     0(1)
Secretary (1)              1994       0(1)             0                       0                     0
----------------
</TABLE>

(1)  The Company had an informal  agreement under which the Company pays a fixed
     allocation  to  Royalstar  for Mr.  Young  and Mr Berry of which  the named
     individuals are or were executive  officers.  This agreement was terminated
     effective  December  4, 1996,  with the  resignation  of Mr.  John Young as
     president,  chief executive officer,  chairman of the board, and a director
     of the  Company.  Effective  September  30, 1996,  Mr.  Berry  resigned his
     positions with the Company. During 1996, the Company was charged a total of
     $66,000 for Mr.  Young,  and $20,000 for Mr. Berry under this  arrangement,
     while  during  1995,  the  Company  was  charged a total of $30,000 for Mr.
     Young, and $10,000 for Mr. Berry.

(2)  Effective June 22, 1995, and related to the transaction with Royalstar, Mr.
     Stott  resigned as  President  and Chief  Executive  Officer,  as well as a
     member  of  the  Board  of  Directors.   Mr.  Stott  received   $90,436  in
     cancellation of his employment contract with the Company.

Option Grants in Last Fiscal Year

     The Company granted no options to its officers and directors  during fiscal
1996.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values

     Shown  below is  information  at  December  31,  1996 with  respect  to the
unexercised options to purchase the Company's common stock to the Named Officers
under the Non-  Qualified  Stock Option and Stock Grant Plan. The Named Officers
did not exercise any stock options during 1996.


                                       24

<PAGE>
<TABLE>
<CAPTION>

                               Shares          Number of Unexercised        Value of Unexercised
                               Acquired        Options Held at              In-the-Money Options at
    Name                       on Exercise     December 31, 1996            December 31, 1996
    ----                       -----------     -----------------            -----------------

<S>                                <C>              <C>                         <C> 
Bill M. Conrad                     0                175,000                     $  0
Raymond E. McElhaney               0                175,000                     $  0
John M. Young                      0                600,000                     $  0
Kenneth Berry                      0                162,500                     $  0
Charlie Stott                      0                      0                     $  0
</TABLE>


(1)  Based upon the mean of the closing bid and ask price as reported by certain
     market makers on that date.

Compensation of Directors

     The  Company  reimburses  the outside  directors  for  reasonable  expenses
incurred  by  them  in  attending  meetings  of the  Board  of  Directors  or of
Committees of the Board. No such expenses were incurred or reimbursed during the
year ended December 31, 1996.  Directors do not receive  compensation  for their
director  responsibilities  over their normal  compensation  if also  employees,
although the Company may provide such  compensation in the future.  In addition,
during 1996, the Company was charged $74,603 by U.S. Gold under a month-to-month
agreement  for a  portion  of time  spent by  William  W.  Reid on behalf of the
Company.

     No grants of stock  options were made pursuant to the  Non-Qualified  Stock
Option and Stock Grant Plan during 1996 to directors.

     During 1996, the Company  granted  options for a total of 100,000 shares at
an  exercise  price of  $1.00  per  share,  and  options  for  262,500  expired.
Subsequent  to December  31, 1996,  but prior to filing this Report, options for
862,500 also expired.

Non-Qualified Stock Option and Stock Grant Plan

     The Company has adopted a  Non-Qualified  Stock Option and Stock Grant Plan
(the "Plan") for the benefit of key personnel and others  providing  significant
services to the Company.  An  aggregate of 2,500,000  shares of Common Stock has
been  reserved  for  issuance  under the Plan.  As of March 5, 1997,  options to
acquire a total of 1,100,000  shares of Common Stock at exercise  prices ranging
from $1.00-$1.25 per share had been granted and are outstanding  pursuant to the
Plan.

     The Plan is administered by the Board of Directors, which selects optionees
and  recipients  of any stock  grants,  the  number of shares  and the terms and
conditions  of any  options or grants to key  persons  defined  in the Plan.  In
determining the value of services rendered to the Company,  the Board considers,
among other things,  such person's employment position and relationship with the
Company,  his  duties and  responsibilities,  ability,  productivity,  length of
service or  association,  morale,  interest in the  Company,  recommendation  by
supervisors  and the  value of  comparable  services  rendered  by others in the
community.  All options  granted  pursuant to the Plan shall be exercisable at a
price not less than the fair market  value of the shares of Common  Stock on the
date of grant.

                                       25

<PAGE>

     There is no  taxable  income to an  optionee  as a result of the grant of a
Non-Qualified  Stock Option  unless the grant is at less than fair market value.
However,  an optionee incurs taxable income upon the exercise of a Non-Qualified
Stock Option based on the difference  between the fair value of the stock at the
time of exercise  and the option  price.  The  Company is not  entitled to a tax
deduction upon the grant of a Non-Qualified  Stock Option,  but is entitled to a
tax deduction upon exercise corresponding to the optionee's taxable income.

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

     As of December 31, 1996, a total of 9,073,653  shares of Common Stock,  the
Company's  only class of voting  securities,  were issued and  outstanding.  The
following  table sets forth as of December 31, 1996,  certain  information  with
respect to the  Company's  Common Stock owned of record or  beneficially  by (i)
each officer or director of the  Company,  (ii) each person known by the Company
who owns beneficially more than five percent of the Company's outstanding Common
Stock,  and  (iii) all  directors  and  officers  as a group.  Unless  otherwise
indicated, the type of ownership is direct.









                      (THIS SPACE INTENTIONALLY LEFT BLANK)

                                       26

<PAGE>
<TABLE>
<CAPTION>

Name and Address of                     Number of                     Percent of Class
Beneficial Owner                         Shares                      Beneficially Owned 
----------------                         ------                      ------------------ 
  
Officers and Directors
----------------------

<S>                                     <C>                                <C> 
Bill M. Conrad                          399,700(1)(2)                       4.3%
  5525 Erindale Drive
  Colorado Springs, CO 80918

Raymond E. McElhaney                    407,500(1)(2)                       4.4%
  5525 Erindale Drive
  Colorado Springs, CO 80918

William W. Reid                       2,739,547(3)                         28.6%
  55 Madison, Suite 700
  Denver, CO 80206
 
Principal Shareholders
----------------------

Royalstar Resources Limited           4,419,110                            48.7%
  1055 West Hastings Street
  Vancouver, British Columbia
  CANADA V6E 2E9

Tonkin Springs Venture Limited        2,287,547(4)                         25.2%
Partnership and
U.S. Gold Corporation
  55 Madison, Suite 700
  Denver, Colorado 80206

Globex Mining Enterprises Inc.        2,287,547(5)                         25.2%
 146 14th Street
 Rouyn-Noranda
 Quebec, CANADA J9  2J3


All Directors and Executive                
Officers as a Group (3 persons)       3,401,747(1)(2)(3)                   34.4%
</TABLE>

----------
(1)  Includes  75,000 shares of Common Stock  underlying  options at an exercise
     price of $1.00 per share,  and 100,000  shares  underlying  options with an
     exercise price of $1.25 per share, exercisable through February 6, 2004.

(2)  Includes  145,000  shares of Common Stock owned by MCM Capital  Management,
     Inc.,  of which Messrs.  McElhaney  and Conrad are officers,  directors and
     principal  shareholders.  Messrs.  McElhaney and Conrad disclaim beneficial
     ownership of said shares.

(3)  Includes   2,287,547  shares  owned  by  TSVLP,  owned  by  a  wholly-owned
     subsidiaries  of U.S.  Gold of which Mr. Reid is an officer  and  director;
     300,000  shares of Common Stock  underlying  options from the Company at an
     exercise price of $1.00 per share; 150,000 shares underlying an option with
     an exercise  price of $1.25,  and 2,000  shares of Common Stock held by Mr.
     Reid's wife.

                                       27

<PAGE>


(4)  Tonkin  Springs  Venture  Limited  Partnership  is  owned  by  wholly-owned
     subsidiaries of U.S. Gold Corporation.

(5)  Includes  2,287,547 shares of Company Common Stock over which the reporting
     person has voting power by virtue of an Option  Agreement with USGL,  dated
     January 16, 1997.

Change in Control

     Effective  December 4, 1996, Mr. John Young,  the former  president,  chief
executive office and director of the Company  resigned his positions.  Mr. Young
is also  president and chief  executive  officer of  Royalstar.  At December 31,
1996,  Royalstar  owned an  aggregate  of  4,419,110  shares  of  common  stock,
representing  approximately 48.7% of the presently issued and outstanding voting
stock of the Company.  Prior to Mr. Young's  resignation,  three other directors
who had also been  nominated to their  positions by Royalstar had tendered their
resignations.  The three remaining directors of the Corporation,  which includes
two of the original founders,  have assumed  responsibilities for the affairs of
the  Corporation,  with Mr.  Conrad  serving  as  president.  While  individuals
representing   Royalstar  have  resigned  their   positions  with  the  Company,
Royalstar, by virtue of number of common shares owned, is still in a position to
exert controlling influence on the Company, should it determine to do so.

     If the  Merger  with the  Company  and  acquisition  of Common  Stock  from
Royalstar are completed, Globex would acquire 100% of the issued and outstanding
Common Stock of the Company.  Such events would effectively eliminate the voting
majority  presently  held by Royalstar  and result in a change of control in the
Company.  However,  the Merger is subject to certain  conditions.  (See "Item 1.
Business")

ITEM 12.  Certain Relationships and Related Transactions
          ----------------------------------------------

Royalstar Resources Ltd.

     During  the years  ended  December  31,  1996 and  1995,  the  Company  was
essentially  funded by  advances  from  Royalstar  Resources  Ltd.,  its largest
shareholder.  Royalstar acquired that position during April and June, 1995, when
it acquired an aggregate of 2,500,000 shares of the Company's Common Stock for a
total purchase price of $2,500,000.  Mr. John Young,  formerly president,  chief
executive  officer and  director of the  Company,  is also the  president  and a
director of Royalstar.  Mr. Ken Berry,  formerly secretary and a director of the
Company,  was also a director of Royalstar.  As of December 31, 1996,  Royalstar
owned  an  aggregate  of  4,419,110   shares  of  Common   Stock,   representing
approximately 49% of the Company's issued and outstanding Common Stock.

     During the years ended December 31, 1996 and 1995,  Royalstar  advanced the
Company  amounts of  $2,315,529  and $460,402,  respectively,  for operating and
other  expenses  incurred in connection  with the Company's  business.  Of those

                                       28

<PAGE>

amounts,  $856,821  remained  outstanding at December 31, 1996. In addition,  on
August  20,  1996,  the  Company  issued  1,919,110  shares of  Common  Stock to
Royalstar at a price of $1.00 per share,  in  conversion of all advances made by
Royalstar through July 31, 1996.

     The Company also had an informal arrangement with Royalstar under which the
Company paid a fixed  allocation  for the  services of Mr. John Young,  formerly
president  and chief  executive  officer  of the  Company,  and Mr.  Ken  Berry,
formerly secretary of the Company.  The Company was charged $6,000 per month for
the services of Mr.  Young and $2,000 per month for the  services of Mr.  Berry.
During the years  ended  December  31,  1996 and 1995,  the  Company was charged
$86,000 and $40,000, respectively,  under those arrangements. Mr. Young resigned
his  position as  president  of the  Company on  December 4, 1996 and Mr.  Berry
resigned  effective  September 30, 1996.  Also during 1996 and 1995, the Company
was charged  $134,912 and $57,500,  respectively,  for office and staff  support
provided by Royalstar during the period of Mr. Young's tenure as president.

TSVLP and U.S. Gold Corporation

     Effective  December  31,  1996,  TSVLP  converted  its  300,000  shares  of
Preferred Stock into 1,750,000 shares of Common Stock of the Company pursuant to
the  terms of the  Preferred  Stock  Designation,  as  amended  by the  parties.
Effective  December 19, 1996,  U.S. Gold converted a receivable from the Company
in the amount of $242,029 into 242,029 shares of the Company. As of December 19,
1996,  U.S. Gold and TSVLP  collectively  own 2,287,547  shares of Common Stock,
representing  approximately 25.2 percent of the presently issued and outstanding
voting stock.  The Company  understands  that TSVLP and U.S. Gold have granted a
proxy on its Common Stock to Globex  along with a first right to purchase  those
shares, until August 30, 1997.

     At December 31, 1996 the Company has a $1,501,076 amended note payable (the
"Note) to TSVLP as a result of its purchase of a 60% interest in the  Properties
effective  December 31, 1993.  The Note is  collateralized  by the Company's 60%
interest in the Properties and the Venture and accrues  interest at a fixed rate
of 7.5%  on the  unpaid  principal  balance.  TSVLP  has  agreed  to  share  its
collateral  position in the  Company's  60% interest in the assets of the Tonkin
Springs Project and interest in the Venture,  pari passu,  with Globex under the
terms of an  Intercreditor  Agreement  dated January 16, 1997.  During the years
ended  December  31,  1996 and 1995,  TSVLP was paid  $450,844  and  $1,298,080,
respectively, under the Note.

     The Company has a  month-to-month  agreement  with U.S. Gold, the parent of
TSVLP, to provide the Company with  secretarial and  administrative  assistance,
for $1,850 per month  totaling  $22,200  during both 1996 and 1995.  The Company
also contracts for consulting services from certain employees of U.S. Gold on an
as-needed  basis.  The Company  accrued an aggregate of $199,944 during 1996 and
$107,426  in 1995  pursuant  to this  arrangement.  As  noted  above,  effective
December 19, 1996, U.S. Gold converted  $242,029 owed by the Company under these
arrangements into 242,029 shares of common Stock at $1.00 per share.

                                       29

<PAGE>

Globex Mining Enterprises Inc.

     During the year ended  December 31, 1996,  the Company  borrowed funds from
Globex, a beneficial owner of the Company's Common Stock under the provisions of
Rule 13(d) of the Securities and Exchange Act of 1934.  Pursuant to the terms of
a Loan Agreement executed between the parties, the Company borrowed an aggregate
of $20,000 as of December 31, 1996.  That amount was increased to $697,493 as of
March 18, 1997.  Such advances are secured by a first lien security  interest on
the  Company's  interest in the  Project,  and are due and payable in full on or
before August 30, 1997.

Miscellaneous

     The  Company  entered  into an  agreement  to pay  $2,000  per month with a
related  party,  MCM  Capital  Management,   Inc.  (MCM),  for  secretarial  and
management  services  for the  Company  in  Colorado  Springs,  Colorado,  which
agreement was modified to $10,000 per month  effective  July 1, 1995, as well as
out-of-pocket  expenses  incurred  by MCM on  behalf  of the  Company.  MCM is a
stockholder  of the  Company and  Messrs.  Bill  Conrad and  Raymond  McElhaney,
officers  and  directors  of the  Company,  are  also  officers,  directors  and
principal  shareholders  of MCM. The Company paid or accrued a total of $114,285
to MCM  during  1996 and  $106,362  in 1995 under  this  arrangement.  Effective
December  19,  1996,  MCM  converted  $120,000  owed by the Company  under these
arrangements into 120,000 shares of common Stock at $1.00 per share.




                        (SPACE LEFT INTENTIONALLY BLANK)

                                       30

<PAGE>

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

Exhibit No.
-----------

 3.1     Articles of  Incorporation  of the Company as filed  December  10, 1993
         with the Secretary of State of the State of Colorado  (incorporated  by
         reference from the Registration  Statement on Form SB-2 dated April 29,
         1994, Exhibit 3.1).

 3.1.1   Certificate  of Designation  of Series A Convertible  Preferred  Shares
         (incorporated by reference from the Registration Statement on Form SB-2
         dated April 29, 1994, Exhibit 3.1.1).

 3.2     Bylaws  (incorporated by reference from the  Registration  Statement on
         Form SB-2 dated April 29, 1994, Exhibit 3.2).

*3.3     Form of Amendment to Bylaws effective as of December 6, 1996.

 4.1     Specimen  certificate  for  Common  Shares,  $.0001 par value per share
         (incorporated by reference from the Registration Statement on Form SB-2
         dated April 29, 1994, Exhibit 4.1).

 10.1    Purchase and Sale  Agreement  between the Registrant and Tonkin Springs
         Venture Limited  Partnership  dated December 31, 1993  (incorporated by
         reference from the Registration  Statement on Form SB-2 dated April 29,
         1994, Exhibit 10.1).

 10.2.1  Promissory Note with Tonkin Springs Venture Limited Partnership,  dated
         December  31, 1993  (incorporated  by reference  from the  Registration
         Statement on Form SB-2 dated April 29, 1994, Exhibit 10.2).

 10.2.2  Form of Amended  Promissory Note dated July 13, 1994  (incorporated  by
         reference from the Registration  Statement on Form SB-2 dated August 5,
         1994 Exhibit 10.2.2).

 10.2.3  Form of Amended  Promissory Note dated October 18, 1994,  (incorporated
         by  reference  from the Report on Form 10-KSB for  December  31,  1994,
         Exhibit 10.2.3).

 10.2.4  Form of Amended Promissory Note dated March 27, 1995,  (incorporated by
         reference from the Report on Form 10-KSB for December 31, 1994, Exhibit
         10.2.4).

 10.2.5  Form of  Registration  Rights  Agreement  dated March 27, 1995 with
         Tonkin Springs Venture Limited Partnership, (incorporated by reference
         from the Report on Form 10-KSB for December 31, 1994, Exhibit 10.2.5).

 10.3    Mining  Venture   Agreement  with  Tonkin   Springs   Venture   Limited
         Partnership dated December 31, 1993 (incorporated by reference from the
         Registration  Statement  on Form SB-2  dated  April 29,  1994,  Exhibit
         10.3).

 10.4    Security  Agreement with Tonkin  Springs  Venture  Limited  Partnership
         dated   December  31,  1993   (incorporated   by  reference   from  the
         Registration  Statement  on Form SB-2  dated  April 29,  1994,  Exhibit
         10.4).

 10.5    Campbell/Simpson  Mining Lease dated January 1, 1986  (incorporated  by
         reference from the Registration  Statement on Form SB-2 dated April 29,
         1994, Exhibit 10.5).

 10.6    Buffington  Mining  Lease  dated  August  10,  1986   (incorporated  by
         reference from the Registration  Statement on Form SB-2 dated April 29,
         1994, Exhibit 10.6).

                                       31

<PAGE>



 10.7    Stock  Option Plan  (incorporated  by reference  from the  Registration
         Statement on Form SB-2 dated April 29, 1994, Exhibit 10.7).

 10.8    Intentionally omitted.

 10.9    Bargain  Grant and Sale Deed  dated  March 28,  1994  (incorporated  by
         reference from the Registration  Statement on Form SB-2 dated August 5,
         1994, Exhibit 10.9).

10.10    Subscription Agreement between the Company and Royalstar dated June 22,
         1995 (incorporated by reference from report on Form 8-K dated June 22,
         1995, Exhibit 1).

10.11    Amended  and  Restated  Secured  Promissory  Note dated June 22,  1995,
         (incorporated by reference from report on Form 8-K dated June 22, 1995,
         Exhibit 3).

10.12    Loan Agreement between the Company and Globex Mining Enterprises, Inc.
         dated January 16, 1997, (incorporated by reference from report on Form
         8-K dated March 13, 1997).

*10.13   Deed of Trust, Security Agreement, Financing Statement and Assignment
         of Production and Proceeds Agreement between the Company and Globex
         Mining Enterprises, Inc. dated January 16, 1997.

*10.14   Intercreditor Agreement between the Company, Globex Mining Enterprises,
         Inc.,  Tonkin  Springs Gold Mining  Company and U.S. Gold  Corporation,
         dated January 16, 1997.

10.15    Agreement and Plan of Merger between the Company and Globex Mining
         Enterprises, Inc. dated March 13, 1997, (incorporated by reference from
         report on Form 8-K dated March 13, 1997).

*11      Computation of Weighted Average Shares Outstanding Used in Earnings Per
         Share Calculations for the two years ended December 31, 1996.

 21      Subsidiaries of the Company  (incorporated by reference from the Report
         on Form 10-KSB for December 31, 1994, Exhibit 21).

*23.1    Consent of Behre  Dolbear and Company,  Inc., to the  incorporation  by
         reference of their report dated  April,  1996,  Technical  Audit of the
         Tonkin Springs Gold Property.

*23.2    Consent of Ore Reserves Engineering,  to the incorporation by reference
         of the report dated October,  1996,  Open-Pit Ore Reserve Estimates for
         the Tonkin Springs Project.


--------------------------

*        Filed herewith.
 --------------------------

         (b)      Reports on Form 8-K.
                  --------------------

          The  Company  filed a report on Form 8-K  effective December  4, 1996,
         under  Item  1.,  Change  in  Control  of  Registrant,  related  to the
         resignation of Mr. John Young, as president,  chief executive  officer,
         chairman and member of the board of directors.


                                       32

<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
Company  caused  this  Report  to be signed  on its  behalf by the  undersigned,
thereunto duly authorized.

                                               GOLD CAPITAL CORPORATION


April 11, 1997                                  By /s/ Bill M. Conrad     
                                                  ------------------------------
                                                  Bill M.Conrad, President,
                                                  and Chief Financial Officer

April 11, 1997
                                                 By /s/ Raymond E. McElhaney  
                                                    ----------------------------
                                                    Raymond E. McElhaney,
                                                    Secretary and Treasurer


     In  accordance  with the Exchange Act, this Report has been signed below by
the following  persons on behalf of the Company and in the capacities and on the
dates indicated.




April 11, 1997                               By /s/ Bill M. Conrad
                                               ---------------------------------
                                             Bill M. Conrad, President and
                                             Director


April 11, 1997                               By /s/ Raymond E. McElhaney
                                               ---------------------------------
                                             Raymond E. McElhaney, Secretary,
                                             Treasurer and Director



April 11, 1997                               By /s/ William W. Reid
                                               ---------------------------------
                                             William W. Reid, Director