**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

 

**FORM 10-K/A**

**(AmendmentNo. 2 to Form 10-K)**

 

**(Mark One)**

**ý****   ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year ended December 31,2004**

 

**OR**

 

**o****   TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition period from                                   to                                                         .**

 

**Commission file number 0-11226**

 

**GOLDEN CYCLE GOLD CORPORATION**

(Exact name ofregistrant as specified in its charter)

 
| **Colorado**                                                    | ** ** | **84-0630963**                        |   |
|-----------------------------------------------------------------|------------|---------------------------------------|--------|
| State or other  jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification No.) |   |
|                                                            |       |                                  |   |
| **Suite 201,  1515 South Tejon,**                          | ** ** | ** **                            |   |
| **Colorado  Springs, CO**                                       | ** ** | **80906**                             |   |
| (Address of  principal executive offices)                       |       | (Zip Code)                            |   |

 

Registrant’stelephone number, including area code:   **(719) 471-9013**

 

Securities registeredpursuant to Section 12 (g) of the Act:

 

| **(Title  of Each Class)**  | ** ** | **(Name of  Each Exchange on which registered)** |
|-----------------------------|------------|--------------------------------------------------|
| Common Stock, No  Par Value |       | Pacific Exchange                                 |

 

Securities RegisteredPursuant To Section 12 (b) of the Act:  None

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed by Section 13or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12months (or such shorter period that the Registrant was required to file suchreports), and (2) has been subject to such filing requirements for thepast 90 days.

ý   Yes                o  No

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K(§229.405 of this chapter) is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K.     ý

 

Indicate by check markwhether the Registrant is an accelerated filer (as defined in Rule 12b-2of the Act).

Yes  o                 No ý

 

State the aggregatemarket value of the voting and non-voting common equity held by non-affiliatescomputed by reference to the price at which the common equity was last sold, orthe average bid and asked price of such common equity, as of the last businessday of the registrant’s most recently completed second fiscal quarter:$14,705,087

 

The number ofshares of the Registrant’s Common Stock outstanding as of March 28, 2005was 9,669,250.

 

 

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Documentsincorporated by reference:

 

Portions of theDefinitive Proxy Statement for the 2005 Annual Meeting of Shareholders (the “2005Proxy Statement”) are incorporated by reference into Part III of thisAnnual Report on Form 10-K.

 

Explanatory Note:

 

This Amendment No. 2to Form 10-K for the fiscal year ended December 31, 2004 isbeing filed to include the Consent of Independent Registered Public AccountingFirms, Ehrhardt Keefe Steiner & Hottman, P.C. and KPMG LLP to theincorporation by reference of their reports in the Registrations Statements ofCompany.  There are no other changes.

 

**ITEM 8.****     FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

 

The financial statementsand supplementary data required by this item are included herein in Item 15.

 

**ITEM15.****  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES**

 

(a)  Documents filedas part of this report:

 
| (1) Financial  Statements |                                                                                                                  |   |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------|--------|
|                           |                                                                                                                  |   |
|                           | Report  of Independent Registered Accounting Firm, Ehrhardt Keefe Steiner &  Hottman, P.C.              |   |   |
|                           |                                                                                                                  |   |   |
|                           | Independent Auditors’ Report, KPMG LLP                                                                           |   |   |
|                           |                                                                                                                  |   |   |
|                           | Consolidated Balance Sheets,  December 31, 2004 and 2003                                                         |   |   |
|                           |                                                                                                                  |   |   |
|                           | Consolidated  Statements of Operations for the Years Ended December 31, 2004, 2003 and  2002                |   |   |
|                           |                                                                                                                  |   |   |
|                           | Consolidated  Statements of Shareholders’ Equity for the Years Ended December 31, 2004, 2003 and  2002 |   |   |
|                           |                                                                                                                  |   |   |
|                           | Consolidated  Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and  2002                |   |   |
|                           |                                                                                                                  |   |   |
|                           | Notes to Consolidated  Financial Statements                                                                           |   |   |

 

2

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(2) FinancialStatement Schedules.  Financialstatement schedules are omitted because they are not applicable or the requiredinformation is shown in the financial statements or notes thereto.

 

(3)  Exhibits.

 

(Exhibit Numberreferenced to Item 601 of Regulation S-K).

 

Exhibit Index

 

23.3 Consent of EKS&HPC.

 

23.4 Consent of KPMG LLP.

 

31.4  Certification of Chief Executive Officerpursuant to the Sarbanes-Oxley Act of 2002, Section 302.

 

31.5  Certification of Chief Financial Officerpursuant to the Sarbanes-Oxley Act of 2002, Section 302.

 

32.4 Certification ofChief Executive Officer pursuant to the Sarbanes-Oxley Act of 2002, Section 906.

 

32.5  Certification of Chief Financial Officerpursuant to the Sarbanes-Oxley Act of 2002, Section 906.

 

3

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SIGNATURES

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereto duly authorized.

 

 
|                       | /s/ R. Herbert Hampton                       |   |
|----------------------------|----------------------------------------------|--------|
|                       | R. Herbert Hampton,  President, Chief        |
|                       | Executive Officer, and  Treasurer            |
|                       | (Principal Executive  Officer, Principal     |
|                       | Financial Officer, and  Principal Accounting |
|                       | Officer)                                     |
|                       |                                         |
| Date: April 28,  2005 |

 

4

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

Board of Directors and StockholdersGolden Cycle Gold CorporationColorado Springs, Colorado

 

Wehave audited the consolidated balance sheets of Golden Cycle Gold Corporationand Subsidiaries (a Colorado corporation) as of December 31, 2004 and2003, and the related consolidated statements of operations, changes instockholders’ equity, and cash flows for the two years in the period ended December 31,2004. These consolidated financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audit.  We conducted our audits in accordance withthe standards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the consolidated financial statementsare free of material misstatement. ******The Company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting.Our audit included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion.  An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe consolidated financial statements, assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overallconsolidated financial statement presentation.  We believe that our auditprovides a reasonable basis for our opinion.

 

Inour opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the consolidated financial position of GoldenCycle Gold Corporation and Subsidiaries as of December 31, 2004 and 2003,and the consolidated results of its operations and its cash flows for the twoyears in the period ended December 31, 2004, in conformity with accountingprinciples generally accepted in the United States of America.

 

 
|   |   | /s/ Ehrhardt Keefe Steiner & Hottman P.C. |
|--------|--------|----------------------------------------------------|

 

 

February 9, 2005

Denver, Colorado

 

5

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**Report****of Independent Registered PublicAccounting Firm**

 

Boardof DirectorsGolden Cycle Gold Corporation:

 

Wehave audited the accompanying consolidated statements of operations,shareholders’ equity and comprehensive income (loss), and cash flows of GoldenCycle Gold Corporation and subsidiaries for the year ended December 31,2002.  These consolidated financialstatements are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these consolidated financial statements based on our audit.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that our auditprovides a reasonable basis for our opinion.

 

Inour opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the results of operations and the cash flowsof Golden Cycle Gold Corporation and subsidiaries for the year ended December 31,2002, in conformity with U.S. generally accepted accounting principles.

 

 
|   | /s/ KPMG LLP |   |
|--------|--------------|--------|

 

 

Denver,Colorado

March 21,2003

 

6

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**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

 

ConsolidatedBalance Sheets

 
| ** **                                                                                                                             | ** ** | **December 31,  2004** | ** ** | **December 31,  2003** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **Assets**                                                                                                                             | ** ** | ** **                  | ** ** | ** **                  | ** ** |
| ** **                                                                                                                             | ** ** | ** **                  | ** ** | ** **                  | ** ** |
| Current  assets:                                                                                                                       |       |                        |       |                        |       |
| Cash  and cash equivalents                                                                                                             |       | $                           | 457,000    |                        | $          | 202,099 |   |
| Short-term  investments (note 2)                                                                                                       |       | 1,120,273                   |       | 923,669                     |       |
| Interest  receivable and other current assets                                                                                          |       | 13,524                      |       | 7,014                       |       |
| Prepaid  insurance                                                                                                                     |       | 24,380                      |       | 24,580                      |       |
| Account  receivable from sale of water rights (note 3)                                                                                 |       | —                      |       | 679,098                     |       |
| Total  current assets                                                                                                                  |       | 1,615,177                   |       | 1,836,460                   |       |
|                                                                                                                                   |       |                        |       |                        |       |
| Property  and equipment, at cost:                                                                                                      |       |                        |       |                        |       |
| Land                                                                                                                                   |       | 2,025                       |       | 2,025                       |       |
| Mineral  claims                                                                                                                        |       | 20,657                      |       | 20,657                      |       |
| Furniture  and fixtures                                                                                                                |       | 10,030                      |       | 10,037                      |       |
| Machinery  and equipment                                                                                                               |       | 31,819                      |       | 33,806                      |       |
|                                                                                                                                   |       | 64,531                      |       | 66,525                      |       |
| Less  accumulation depreciation and depletion                                                                                          |       | (33,126                     | )          | (30,601                     | )          |
|                                                                                                                                   |       | 31,405                      |       | 35,924                      |       |
| Total  assets                                                                                                                          |       | $                           | 1,646,582  |                        | $          | 1,872,384 |   |
|                                                                                                                                   |       |                        |       |                        |       |
| **Liabilities  and Shareholders’ Equity**                                                                                         |       |                        |       |                        |       |
| ** **                                                                                                                             |       |                        |       |                        |       |
| Current  liabilities:                                                                                                                  |       |                        |       |                        |       |
| Accounts  payable and accrued liabilities                                                                                              |       | $                           | 56,868     |                        | $          | 58,479 |   |
| Total  current liabilities                                                                                                             |       | 56,868                      |       | 58,479                      |       |
|                                                                                                                                   |       |                        |       |                        |       |
| Commitments  and contingencies (note 8)                                                                                                |       |                        |       |                        |       |
|                                                                                                                                   |       |                        |       |                        |       |
| Shareholders’  equity (note 6):                                                                                                   |       |                        |       |                        |       |
| Common  stock, no par value. Authorized 100,000,000 shares; issued and outstanding  9,669,250 shares in 2004; 9,542,250 shares in 2003 |       | 7,406,317                   |       | 7,307,854                   |       |
| Additional  paid-in capital                                                                                                            |       | 1,927,736                   |       | 1,927,736                   |       |
| Accumulated  deficit                                                                                                                   |       | (7,712,526                  | )          | (7,389,944                  | )          |
| Accumulated  other comprehensive loss                                                                                                  |       | (31,813                     | )          | (31,741                     | )          |
| Total  shareholders’ equity                                                                                                       |       | 1,589,714                   |       | 1,813,905                   |       |
| Total  liabilities and shareholders’ equity                                                                                       |       | $                           | 1,646,582  |                        | $          | 1,872,384 |   |

 

See accompanyingnotes to consolidated financial statements.

 

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**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

 

Consolidated Statements of Operations

 
| ** **                                                                         | ** ** | **For the Year Ended December 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                         | ** ** | **2004**                                 | ** ** | **2003** | ** ** | **2002** | ** ** |
| Revenue:                                                                           |       |                                     |       |   |   |   |   |
| Distributions  from mining joint venture in excess of carrying value (note 4) |       | $                                        | 250,000    |   | $ | 250,000 |   | $ | 250,000 |   |
|                                                                               |       |                                     |       |   |   |   |   |
| Expenses:                                                                          |       |                                     |       |   |   |   |   |
| General  and administrative expense                                                |       | 542,510                                  |       | 464,348 |   | 345,209 |   |
| Depreciation  expense                                                              |       | 5,286                                    |       | 1,217 |   | 3,759 |   |
| Exploration  expense                                                               |       | 54,372                                   |       | 141,851 |   | 153,934 |   |
|                                                                               |       | 602,168                                  |       | 607,416 |   | 502,902 |   |
| Operating  loss                                                                    |       | (352,168                                 | )          | (357,416 | ) | (252,902 | ) |
|                                                                               |       |                                     |       |   |   |   |   |
| Other  income (expense):                                                           |       |                                     |       |   |   |   |   |
| Interest  and other income                                                         |       | 21,545                                   |       | 15,405 |   | 29,847 |   |
| Gold  bullion mark-up to market                                                    |       | 8,041                                    |       | 24,229 |   | — |   |
| Gain  (loss) on assets sold (net)                                                  |       | —                                   |       | 541,917 |   | (375 | ) |
|                                                                               |       | 29,586                                   |       | 581,551 |   | 29,472 |   |
| Net  income (loss)                                                                 |       | $                                        | (322,582   | ) | $ | 224,135 |   | $ | (223,430 | ) |
| Basic  earnings (loss) per share                                                   |       | $                                        | (0.03      | ) | $ | 0.02 |   | $ | (0.02 | ) |
|                                                                               |       |                                     |       |   |   |   |   |
| Diluted  earnings (loss) per share                                                 |       | (0.03                                    | )          | 0.02 |   | (0.02 | ) |
|                                                                               |       |                                     |       |   |   |   |   |
| Basic  weighted average shares outstanding                                         |       | 9,597,231                                |       | 9,529,100 |   | 9,442,250 |   |
|                                                                               |       |                                     |       |   |   |   |   |
| Diluted  weighted average shares outstanding                                       |       | 9,597,231                                |       | 10,364,100 |   | 9,442,250 |   |

 

See accompanyingnotes to consolidated financial statements.

 

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**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

 

Consolidated Statements of Shareholders’ Equity and ComprehensiveIncome (Loss)

 

For the Years ended December 31, 2004, 2003, and 2002

 
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **Accumulated**         | ** ** | ** ** | ** ** |
|------------------------------------------|------------|------------------|------------|-------------|------------|-----------------|------------|-----------------|------------|-------------------------|------------|------------|------------|
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **other**               | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **comprehensive**       | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **      | ** ** | ** **      | ** ** | **loss – foreign** | ** ** | ** ** | ** ** |
| ** **                               | ** ** | ** **       | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **      | ** ** | **currency**            | ** ** | ** ** | ** ** |
| ** **                               | ** ** | **Common stock** | ** ** | **paid-in** | ** ** | **Accumulated** | ** ** | **translation** | ** ** | ** **              | ** ** |
| ** **                               | ** ** | **Shares**       | ** ** | **Amount**  | ** ** | **capital**     | ** ** | **deficit**     | ** ** | **adjustment**          | ** ** | **Total**  | ** ** |
| Balance  at December 31, 2001       |       | 9,442,250        |       | $           | 7,116,604  |            | $          | 1,927,736       |       | $                       | (7,390,649 | )          | $          | (30,715 | ) | $ | 1,622,976 |   |
| Net  loss                                |       | —           |       | —      |       | —          |       | (223,430        | )          | —                  |       | (223,430   | )          |
| Foreign  currency translation adjustment |       | —           |       | —      |       | —          |       | —          |       | (823                    | )          | (823       | )          |
| Comprehensive  loss                      |       |             |       |        |       |            |       |            |       |                    |       | (224,253   | )          |
| Balance  at December 31, 2002       |       | 9,442,250        |       | 7,116,604   |       | 1,927,736       |       | (7,614,079      | )          | (31,538                 | )          | 1,398,723  |       |
| Stock  options exercised                 |       | 100,000          |       | 191,250     |       | —          |       | —          |       | —                  |       | 191,250    |       |
| Net  income                              |       | —           |       | —      |       | —          |       | 224,135         |       | —                  |       | 224,135    |       |
| Foreign  currency translation adjustment |       | —           |       | —      |       | —          |       | —          |       | (203                    | )          | (203       | )          |
| Comprehensive  income                    |       |             |       |        |       |            |       |            |       |                    |       | 223,932    |       |
| Balance  at December 31, 2003       |       | 9,542,250        |       | 7,307,854   |       | 1,927,736       |       | (7,389,944      | )          | (31,741                 | )          | 1,813,905  |       |
| Stock  options exercised                 |       | 127,000          |       | 98,463      |       | —          |       | —          |       | —                  |       | 98,463     |       |
| Net  loss                                |       | —           |       | —      |       | —          |       | (322,582        | )          | —                  |       | (322,582   | )          |
| Foreign  currency translation adjustment |       | —           |       | —      |       | —          |       | —          |       | (72                     | )          | (72        | )          |
| Comprehensive  net loss                  |       |             |       |        |       |            |       |            |       |                    |       | (322,654   | )          |
| Balance  at December 31, 2004       |       | 9,669,250        |       | $           | 7,406,317  |            | $          | 1,927,736       |       | $                       | (7,712,526 | )          | $          | (31,813 | ) | $ | 1,589,714 |   |

 

See accompanyingnotes to consolidated financial statements.

 

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**GOLDEN CYCLE GOLD CORPORATION**

**AND SUBSIDIARIES**

 

Consolidated Statements of Cash Flows

 
| ** **                                                                            | ** ** | **For the Year Ended December 31,** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                            | ** ** | **2004**                                 | ** ** | **2003** | ** ** | **2002** | ** ** |
| Cash  flows from operating activities:                                                |       |                                     |       |   |   |   |   |
| Net  income (loss)                                                                    |       | $                                        | (322,582   | ) | $ | 224,135 |   | $ | (223,430 | ) |
| Adjustments  to reconcile net income (loss) to net cash used in operating activities: |       |                                     |       |   |   |   |   |
| Depreciation  expense                                                                 |       | 5,286                                    |       | 1,217 |   | 3,759 |   |
| Increase  in market value of gold asset                                               |       | (8,041                                   | )          | (24,229 | ) | — |   |
| (Gain)  loss on disposal of assets                                                    |       | —                                   |       | (541,817 | ) | 375 |   |
| Decrease  (increase) in interest receivable and other current assets                  |       | (6,510                                   | )          | 5,605 |   | 9,994 |   |
| Decrease  (increase) in prepaid insurance                                             |       | 200                                      |       | (5,436 | ) | 505 |   |
| Increase  (decrease) in accounts payable and accrued liabilities                      |       | (1,611                                   | )          | 40,227 |   | (7,680 | ) |
| Net  cash used in operating activities                                                |       | (333,258                                 | )          | (300,298 | ) | (216,477 | ) |
|                                                                                  |       |                                     |       |   |   |   |   |
| Cash  flows from investing activities:                                                |       |                                     |       |   |   |   |   |
| Decrease  (increase) in short-term investments, net                                   |       | (188,563                                 | )          | (258,652 | ) | 236,516 |   |
| Proceeds  from account receivable on sale of water rights                             |       | 679,098                                  |       | — |   | — |   |
| Purchases  of property and equipment                                                  |       | (767                                     | )          | (8,210 | ) | (11,846 | ) |
| Net  cash provided by (used in) investing activities                                  |       | 489,768                                  |       | (266,862 | ) | 224,670 |   |
|                                                                                  |       |                                     |       |   |   |   |   |
| Cash  flows provided by financing activity:                                           |       |                                     |       |   |   |   |   |
| Proceeds  on exercise of stock options                                                |       | 98,463                                   |       | 191,250 |   | — |   |
| Net  cash provided by investing activities                                            |       | 98,463                                   |       | 191,250 |   | — |   |
|                                                                                  |       |                                     |       |   |   |   |   |
| Effect  of exchange rate changes on cash                                              |       | (72                                      | )          | (203 | ) | (823 | ) |
| Net  increase (decrease) in cash and cash equivalents                                 |       | 254,901                                  |       | (376,113 | ) | 7,370 |   |
| Cash  and cash equivalents, beginning of year                                         |       | 202,099                                  |       | 578,212 |   | 570,842 |   |
| Cash  and cash equivalents, end of year                                               |       | $                                        | 457,000    |   | $ | 202,099 |   | $ | 578,212 |   |

 

Supplementaldisclosure of non-cash activity:

During 2003, theCorporation sold assets held for sale for $679,098 which was recorded as areceivable at December 31, 2003.

During 2004,77,900 shares were surrendered in cashless exercise of stock options.

 

See accompanyingnotes to consolidated financial statements.

 

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**(1)**                     Summary of Significant Accounting Policies

 

GoldenCycle Gold Corporation (the Company), a Colorado corporation, acquires andexplores mining properties in Colorado, Nevada, and the Republic of thePhilippines. The Company’s principal investment consists of its joint ventureparticipation in the Cripple Creek and Victor Gold Mining Company (the JointVenture), a precious metals mining company in the Cripple Creek Mining Districtof Teller County, Colorado. In addition, during 1997 the Companyestablished Golden Cycle Philippines, Inc. (GCPI), a wholly ownedsubsidiary of the Company, in the Republic of the Philippines in order toparticipate in potential mining opportunities. In January 2002, the Company established Golden Cycle GoldExploration, Inc. (GCGE), a wholly owned subsidiary, to conductexploration activities for the Company.

 

***(a)***                      Use of Estimates

 

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makevarious estimates and assumptions in determining the reported amounts ofassets, liabilities, revenues, and expenses for each period presented, and inthe disclosure of commitments and contingencies. Actual results could differsignificantly from those estimates. Changes in these estimates and assumptionswill occur based on the passage of time and the occurrence of future events.

 

***(b)***                      Principles of Consolidation

 

Theconsolidated financial statements include the accounts of the Company and itswholly owned subsidiaries. All significant intercompany transactions andbalances have been eliminated in consolidation.

 

***(c)****                     ****Cash and Cash Equivalents***

 

TheCompany considers all highly liquid instruments purchased with an originalmaturity of three months or less to be cash equivalent.

 

***(d)***                      Short-Term Investments

 

Short-terminvestments consist of U.S. Treasury Bills and certificates of deposit. U.S.Treasury Bills that the Company has both the intent and ability to hold tomaturity are carried at amortized cost.  Short-term investments also includes 310 troyounces of gold bullion purchased by the Company in 2002.  Interest revenue and the increase or decreasein the value of the gold bullion is included in the consolidated statement ofoperations.

 

***(e)***                       Investment in Mining Joint Venture

 

TheCompany accounts for its investment in the Joint Venture on the equity method.In prior years, the Company’s share of Joint Venture losses exceeded theremaining carrying value of the investment and, accordingly, the investment wasreduced to zero. Joint Venture distributions in excess of the investmentcarrying value are recorded as income. The Company does not record its share ofJoint Venture losses incurred subsequent to the reduction of its investmentbalance to zero, as the Company has no obligation to fund operating losses. Tothe extent the Joint Venture is profitable, the Company does not record itsshare of equity income until the cumulative amount of previously unrecordedJoint Venture losses have been recouped.

 

***(f)***                         Mineral Exploration and Development Costs

 

Mineralexploration costs are expensed as incurred. Mineral property development costsare capitalized and depleted based upon estimated proven and probable recoverable

 

11

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reserves. The Company has no capitalized mineral propertydevelopment costs at December 31, 2004 or December 31, 2003.

 

TheCompany assesses the carrying value of its long-lived assets for impairmentwhenever changes in facts or circumstances indicate that they may beimpaired.  Potential impairment isestimated by comparing estimated future undiscounted cash flows expected to begenerated from such assets with their net book value. If net book value exceedsestimated cash flows, the asset is written down to fair value.  The Company has not recorded impairment costsat December 31, 2004 or December 31, 2003.

 

***(g)***                      Property and Equipment

 

Officefurniture, fixtures, and equipment are stated at cost and aredepreciated using the straight-line method over estimated useful lives rangingfrom three to ten years.

 

***(h)***                      Foreign Currency Translation

 

TheGCPI operations’ functional currency is the local currency and, accordingly,the assets and liabilities of its Philippines operations are translated intotheir United States dollar equivalent at rates of exchange prevailing at eachbalance sheet date. Revenue and expenses are translated at average exchangerates prevailing during the periods in which such items are recognized inoperations.

 

Gainsand losses arising from translation of the consolidated financial statements ofGCPI operations are included in the accumulated other comprehensive income(loss) in shareholders’ equity. Amounts in this account are recognized in theconsolidated statements of operations when the related net foreign investmentis reduced. Gains and losses on foreign currency transactions are included inthe consolidated statements of operations.

 

***(i)***                         Stock Options

 

In December 2002, theFinancial Accounting Standards Board issued SFAS No. 148, *Accounting for Stock-Based Compensation – Transition and Disclosure*(“SFASNo. 148”).  SFAS No. 148 amendsSFAS No. 123 to provide alternative methods of transition for a voluntarychange to the fair value based method of accounting for stock-based employeecompensation.  In addition, SFAS No. 148amends the disclosures requirements of SFAS No. 123 to require prominentdisclosures in both annual and interim financial statements about the method ofaccounting for stock-based employee compensation and the effect of the methodused on reported results.  The amendmentsto SFAS No. 123 are effective for financial statements for fiscal yearsending after December 15, 2002.  Hadcompensation cost been determined under the provisions of SFAS No. 123,the following pro forma net loss and per share amounts would have beenrecorded. net loss and per share amounts would havebeen recorded.

 

12

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| ** **                                                                                                         | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|--------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                                               |       |     |       |     |       |     |       |
| Net  income (loss):                                                                                                |       |     |       |     |       |     |       |
| As  reported                                                                                                       |       | $        | (322,582   | )        | $          | 224,135  |       | $ | (223,430 | ) |
| Deduct:  Total stock-based employee compensation expense, determined under fair value  based method for all awards |       | (182,398 | )          | (69,600  | )          | (230,916 | )          |
| Pro  forma                                                                                                         |       | (504,980 | )          | 154,535  |       | (454,346 | )          |
|                                                                                                               |       |     |       |     |       |     |       |
| Basic  and diluted earnings (loss) per share:                                                                      |       |     |       |     |       |     |       |
| As  reported                                                                                                       |       | $        | (0.03      | )        | $          | 0.02     |       | $ | (.02 | ) |
| Pro  forma                                                                                                         |       | (0.05    | )          | 0.02     |       | (.04     | )          |

 

The fair value of eachoption grant was estimated on the date of grant using the Black-Scholesoption-pricing model with the following weighted average assumptions used foroptions granted:

 
| ** **               | ** ** | **Dividend  yield** | ** ** | **Expected  volatility** | ** ** | **Risk-free  interest  rate** | ** ** | **Expected  life (in  years)** | ** ** | **Weighted-  average  fair value  of option** | ** ** |
|--------------------------|------------|---------------------|------------|--------------------------|------------|-------------------------------|------------|--------------------------------|------------|-----------------------------------------------|------------|
|                     |       |                |       |                     |       |                          |       |                           |       |                                          |       |
| Options  granted in 2002 |       | 0                   | %          | 48                       | %          | 4.61                          | %          | 10                             |       | $                                             | 1.84       |   |
| Options  granted in 2003 |       | 0                   | %          | 38                       | %          | 4.10                          | %          | 10                             |       | $                                             | 1.39       |   |
| Options  granted in 2004 |       | 0                   | %          | 55                       | %          | 4.77                          | %          | 10                             |       | $                                             | 1.82       |   |

 

***(j)***                         Income Taxes

 

The Company utilizes theasset and liability method of accounting for income taxes. Under the asset andliability method, deferred tax assets and liabilities are recognized for thefuture tax consequences attributable to differences between the financialstatement carrying amounts and the tax basis of existing assets and liabilitiesusing enacted tax rates expected to apply in the years in which such temporarydifferences are expected to be recovered or settled. Changes in tax rates arerecognized in the period of the enactment date. A valuation allowance isrecognized unless tax assets are more likely than not to be realized.

 

***(k)***                      Comprehensive Income

 

In 1998, we adopted SFAS No. 130,*Reporting Comprehensive Income*.  SFAS No. 130 requires that allcomponents of comprehensive income (loss), including net income (loss), be reportedin the financial statements in the period they are recognized.  Comprehensive income (loss) is defined as thechange in equity during a period from transactions and other events andcircumstances from non-owner sources. Net income (loss) and other comprehensive income (loss), includingforeign currency translation adjustments, shall be reported, net of theirrelated tax effect, to arrive at comprehensive income (loss).  We have disclosed comprehensive income (loss)in our consolidated financial statements accordingly.

 

***(l)***                         Revenue Recognition

 

The Company recognizesrevenue as advanced distributions from the Joint Venture are received.

 

13

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***(m)***                   Per Share Information

 

 Basic earnings (loss) per common share arecomputed as net income (loss) divided by the weighted average number of commonshares outstanding during the period. Diluted earnings (loss) per common share are computed as net income(loss) divided by the weighted average number of common shares and potentialcommon shares, using the treasury stock method, outstanding during the period.

 

**(2)**                     Short-Term Investments

 

TheCompany held certificates of deposit of approximately $985,000 and $696,000 at December 31,2004 and 2003, respectively. All certificates of deposit held at December 31,2004 mature within one year. Short-term investments also include 310 troyounces of gold bullion purchased by the Company in 2002 at a cost of $102,859and is carried at market value of $135,129 at December 31, 2004 whichincludes an unrealized gain of $32,270.

 

**(3)**                     Accounts Receivable From Saleof Water Rights

 

TheCompany completed the sale of certain Water Rights it owned in Fremont County,Colorado to the City of Cripple Creek on December 31, 2003, for $679,098in the form of a receivable and resulted in a $546,418 gain.  The Company does not have any further WaterRights.

 

** (4)**                  Investment in Mining Joint Venture

 

TheCompany owns an interest in the Joint Venture with AngloGold Colorado(AngloGold). AngloGold manages the Joint Venture. The Joint Venture conductsexploration, development, and mining of certain properties in the Cripple CreekMining District, Teller County, Colorado. The Joint Venture owns or controlssurface and/or mineral rights in the Cripple Creek Mining District, certainportions of which are being actively explored and developed.

 

TheJoint Venture Agreement, as amended, generally requires AngloGold to financeoperations and capital expenditures of the Joint Venture. The Joint Venture iscurrently operating in an Initial Phase that will end when (i) the InitialLoans (defined below) have been repaid and (ii) Net Proceeds (defined inthe Joint Venture Agreement generally as gross revenues less costs) in theamount of $58 million have been distributed to the joint venturers in theproportion of 80% to AngloGold and 20% to the Company.  The Joint Venture Agreement provides that,during the period from January 1, 1991 until the end of the Initial Phase,all funds required for operations and mine development by the Joint Venturewill be loaned (the “Initial Loans”) to the Joint Venture by either AngloGoldor, if such loans are available at a lower cost than from AngloGold, financialinstitutions.  As of December 31,2004, Initial Loans were approximately $365.7 million and no Net Proceedshave been distributed. Initial Loans must be repaid prior to Net Proceeds beingdistributed to the venturers. After the Initial Phase, the Joint Venturewill distribute metal in kind, 67% to AngloGold and 33% to the Company. TheAgreement also provides for the Company to receive a minimum annualdistribution of $250,000 during the Initial Phase. Beginning in 1994, suchminimum annual distributions are recoupable against the Company’s future shareof Net Proceeds, if any.

 

Whetherfuture gold prices and the results of the Joint Venture’s operations will reachand maintain a level necessary to repay the Initial Loans, complete the InitialPhase, and thereafter generate net income cannot be assured due touncertainties inherent within any mining operation. Based on the amount ofInitial Loans payable to the manager and the uncertainty of future operatingrevenues, there is no assurance that the Company will receive more than theMinimum Annual Distribution from the Joint Venture in the foreseeablefuture.

 

TheCompany’s share of 2004 Joint Venture net income which has not been recorded inits consolidated financial statements is approximately $1,538,000. The Company’sshare of the 

 

14

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2003and 2002 Joint Venture losses, which have not been recorded in itsconsolidated financial statements is approximately $93,800 and $2,863,600,respectively. As of December 31, 2004, the Company’s accumulatedunrecorded losses from the Joint Venture are approximately $17,480,000.

 

Thecondensed balance sheets of the Joint Venture as of December 31, 2004 and2003 are summarized as follows:

 
| ** **                                     | ** ** | **2004**           | ** ** | **2003**   | ** ** |
|------------------------------------------------|------------|--------------------|------------|------------|------------|
| ** **                                     | ** ** | **(In thousands)** | ** ** |
| ** **                                     | ** ** | ** **         | ** ** |
| **Assets**                                     | ** ** | ** **         | ** ** | ** ** | ** ** |
| Inventory                                      |       | $                  | 103,235    |       | 98,433     |   |
| Other  current assets                          |       | 662                |       | 5,002      |       |
|                                           |       |               |       |       |       |
| Total  current assets                          |       | 103,897            |       | 103,435    |       |
|                                           |       |               |       |       |       |
| Fixed  assets and mine development costs, net  |       | 245,106            |       | 250,310    |       |
|                                           |       |               |       |       |       |
| Total  assets                                  |       | $                  | 349,003    |       | 353,745    |   |
|                                           |       |               |       |       |       |
| **Liabilities  and Venturers’ Deficit**   | ** ** | ** **         | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** **         | ** ** | ** ** | ** ** |
| Current  liabilities                           |       | $                  | 13,473     |       | 14,377     |   |
| Payable  to AngloGold                          |       | 365,698            |       | 376,515    |       |
| Capital  lease obligations                     |       | 10,451             |       | 12,772     |       |
| Asset  retirement obligation                   |       | 16,716             |       | 14,786     |       |
| Other  long-term liabilities                   |       | 1,691              |       | 1,763      |       |
|                                           |       |               |       |       |       |
| Total  liabilities                             |       | 408,029            |       | 420,213    |       |
|                                           |       |               |       |       |       |
| Venturers’  deficit                       |       | (59,026            | )          | (66,468    | )          |
|                                           |       |               |       |       |       |
| Total  liabilities and Venturers’ deficit |       | $                  | 349,003    |       | 353,745    |   |

 

The condensed statements of operations of the Joint Venture for each ofthe years in the three-year period ended December 31, 2004 are summarizedas follows:

 
| ** **                                                                | ** ** | **2004**           | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|---------------------------------------------------------------------------|------------|--------------------|------------|------------|------------|------------|------------|
| ** **                                                                | ** ** | **(In thousands)** | ** ** |
| ** **                                                                | ** ** | ** **         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                                                   |       | $                  | 135,673    |       | $          | 102,645    |       | $ | 70,462 |   |
| Operating  expenses                                                       |       | (104,356           | )          | (85,138    | )          | (63,123    | )          |
| Gross  profit                                                             |       | 31,317             |       | 17,507     |       | 7,339      |       |
| Interest  expense                                                         |       | (23,813            | )          | (22,378    | )          | (20,905    | )          |
| Other  income (expense)                                                   |       | 188                |       | (514       | )          | (752       | )          |
| Income  (loss) before cumulative effect of change in accounting principle |       | 7,692              |       | (5,385     | )          | (14,318    | )          |
| Cumulative  effect of change in accounting principle                      |       | —             |       | 4,916      |       | —     |       |
|                                                                      |       |               |       |       |       |       |       |
| Net  income (loss)                                                        |       | $                  | 7,692      |       | $          | (469       | )          | $ | (14,318 | ) |

 

15

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**(5)**                     Income Taxes

** **

The tax effects of temporary differences that give rise to significantportions of the deferred tax assets at December 31, 2004 and 2003 arepresented below:

 
| ** **                        | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|
|                              |       |     |       |     |       |
| Deferred  tax assets:             |       |     |       |     |       |
| Net  operating loss carryforwards |       | $        | 801,000    |     | 664,000    |   |
| Exploration  expenditures         |       | 67,000   |       | 96,000   |       |
| Other                             |       | 5,000    |       | —   |       |
|                              |       |     |       |     |       |
|                              |       | 873,000  |       | 760,000  |       |
|                              |       |     |       |     |       |
| Valuation  allowance              |       | (873,000 | )          | (760,000 | )          |
|                              |       |     |       |     |       |
| Net  deferred tax assets          |       | $        | —     |     | —     |   |

 

Areconciliation of the statutory federal income tax rate to the effective taxrate follows:

 
| ** **                         | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Statutory  federal income tax rate |       | 34.0     | %          | 34.0     | %          |
| Effect  of:                        |       |     |       |     |       |
| State  and local income taxes      |       | 3.30     |       | 3.30     |       |
| Other  - net                       |       | (1.96    | )          | 0.40     |       |
| Change  in valuation allowance     |       | (35.34   | )          | (37.70   | )          |
| Effective  tax rate                |       | 0.00     | %          | 0.00     | %          |

 

AtDecember 31, 2004, the Company has net operating loss carryforwards forincome tax purposes of approximately $2,148,000 which expire beginning in 2005through 2025.

 

TheCompany has not recorded an income tax benefit in 2004 or 2003 as it does notbelieve it is more likely than not that the benefit of the deferred tax assetswill be realized in the future.

 

**(6)**                     Common Stock Options

 

During1992, the Company’s Board of Directors adopted a Directors’ Stock Option Plan(the Directors’ Plan) and a 1992 Stock Option Plan (the 1992 Plan).  All options available under the Directors’Plan were granted prior to December 31, 1994.  During 1997, shareholders approved the 1997Officers’ and Directors’ Stock Option Plan, and during 2002, shareholdersapproved the 2002 Stock Option Plan pursuant to which 1,000,000 and 625,000shares, respectively, of the Corporation’s common stock were reserved forissuance pursuant to options to be granted. The 1992 Plan provided for the grant of options on a discretionary basisto certain employees and consultants. Under each plan, the exercise price cannot be less than the fair market valueof the common stock on the date of the grant. The expiration of the options is ten years from the date of the grant.

 

During2004, the Company granted 100,000 options to directors of the Corporation, andduring 2003 and 2002 the Company granted 50,000 and 125,000 optionsrespectively to directors of the Corporation under the above plans.

 

16

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Changes in stock options for each of the years in the three-year periodended December 31, 2004 are as follows:

 
| ** **                                             | ** ** | **Shares** | ** ** | **Option price  per share** | ** ** | **Weighted  average  exercise price** | ** ** |
|--------------------------------------------------------|------------|------------|------------|-----------------------------|------------|---------------------------------------|------------|
|                                                   |       |       |       |                        |       |                                  |       |
| Outstanding  and exercisable at December 31, 2001 |       | 760,000    |       | $                           | 1.41       |                                  | $          | 1.41 |   |
| Granted                                                |       | 125,000    |       | 2.33                        |       | 2.33                                  |       |
|                                                   |       |       |       |                        |       |                                  |       |
| Outstanding  and exercisable at December 31, 2002 |       | 885,000    |       | 1.19 – 2.33            |       | 1.52                                  |       |
| Granted                                                |       | 50,000     |       | 2.60                        |       | 2.60                                  |       |
| Exercised                                              |       | (100,000   | )          | 1.50 – 2.05            |       | 1.91                                  |       |
|                                                   |       |       |       |                        |       |                                  |       |
| Outstanding  and exercisable at December 31, 2003 |       | 835,000    |       | 1.04 – 2.60            |       | 1.46                                  |       |
| Granted                                                |       | 100,000    |       | 2.60                        |       | 2.60                                  |       |
| Exercised                                              |       | (204,900   | )          | 1.33 – 1.80            |       | 1.44                                  |       |
| Expired                                                |       | (320,100   | )          | 1.04 – 2.33            |       | 1.63                                  |       |
| Outstanding  and exercisable at December 31, 2004 |       | 410,000    |       | 1.04 – 2.60            |       | 1.92                                  |       |
|                                                        |            |            |            |                             |            |                                       |            |  |  |

 

Theweighted average remaining term of options outstanding was 6.81 and 6.35 yearsat December 31, 2004 and 2003, respectively.

 

**(7)**                     Recently Issued Financial Accounting Standards:

 

InDecember 2004, the FASB issued SFAS No. 153, *“Exchanges of Non-monetary Assets an amendment of APBNo. 29”*. This Statement amends APB Opinion No. 29, *“Accounting for Non-monetary Transactions”*toeliminate the exception for non-monetary exchanges of similar productive assetsand replaces it with a general exception for exchanges of non-monetary assetsthat do not have commercial substance. This Statement is effective for fiscal years beginning after June 15,2005. We do not believe that the adoption of SFAS No. 153 will have amaterial impact on our financial position, net earnings or cash flows.

 

InDecember 2004, the FASB issued SFAS No. 123 revised 2004, *“Share-Based Payment”*. This Statement is arevision of SFAS No. 123, *“Accountingfor Stock-Based Compensation”*, and supercedes APB No. 25, “Accountingfor Stock Issued to Employees”. The Statement requires companies to recognizein the income statement the grant-date fair value of stock options and otherequity based compensation issued to employees. This Statement is effective asof the beginning of the first interim or annual period that commences after June 15,2005. The Company cannot yet determine the impact that the adoption of SFAS No. 123revised 2004 will have on our financial position, net earnings or cash flows.

 

InNovember 2004, the FASB issued SFAS No. 151, *“Inventory Costs – An Amendment of ARB No. 43,Chapter 4”*(“SFAS 151”). SFAS 151 amends the guidance in ARB No. 43,Chapter 4, *“Inventory Pricing*,”to clarify the accounting for abnormal amounts of idle facility expense,freight, handling costs, and wasted material (spoilage). Among otherprovisions, the new rule requires that items such as idle facilityexpense, excessive spoilage, double freight, and rehandling costs be recognizedas current-period charges regardless of whether they meet the criterion of “soabnormal” as stated in ARB No. 43. Additionally, SFAS 151 requires thatthe allocation of fixed production overhead to the costs of conversion be basedon the normal capacity of the production facilities. SFAS 151 is effective forfiscal years beginning after 

 

17

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June 15,2005. We are currently evaluating the effect that the adoption of SFAS 151 willhave on our results of operations or financial position, but do not expect SFAS151 to have a material effect.

 

InSeptember 2004, the FASB issued EITF Issue No. 03-1, *“The Meaning of Other-Than-Temporary Impairment andIts Application to Certain Investments”*(EITF No. 03-1).The guidance in EITF No. 03-1 was effective for other-than-temporaryimpairment evaluations made in reporting periods beginning after June 15,2004. However, certain provisions regarding the assessment of whether an impairment is other than temporary have been delayed.Although the disclosure requirements continue to be effective in annualfinancial statements for fiscal years ending after December 15, 2003, forinvestments accounted for under SFAS No. 115 and 124. For all otherinvestments addressed by EITF No. 03-1, the disclosures continue tobe effective in annual financial statements for fiscal years ending after June 15,2004. We do not believe that the adoption of EITF No. 03-1 will havea material impact on our financial position, net earnings or cash flows.

 

**(8)**                     Commitments and Contingencies

 

Aspreviously reported, the Sierra Club and Mineral Policy Center filed twocomplaints in U.S. District Court for the District of Colorado against CrippleCreek & Victor Gold Mining Company (CC&V) and its Joint Venturepartners, including the Company, alleging certain violations of the U.S. CleanWater Act (CWA).

 

1.                  The first ten Causes of Action in the firstof these two cases allege un-permitted discharges of pollutants into FourmileCreek and from the Roosevelt Tunnel into Cripple Creek, and discharges ofpollutants exceeding permitted amounts from the Carlton Tunnel and Arequa Gulchoutfalls; the eleventh and twelfth causes of action in that case concern adischarge permit issued by the Colorado Water Quality Control Division in 1996for an outfall in Arequa Gulch.  Apre-trial conference was held on March 25, 2005, in this case, and itshould be ready by mid-summer for trial, though no trial date has yet been set.

 

2.                  The second of these two cases relates toseeps asserted to be point-source discharges of Cresson Project drainage fromthe Moffat Tunnel Cribbing Wall and the Squaw Gulch Pond to Cripple Creek and atributary thereto in Squaw Gulch.  Plantiffsassert and Defendants deny that the law requires a permit for these seeps.  This case was set for trial on April 12,2005, but that setting was vacated and the two cases consolidated for trial ona date not yet set.

 

Managementis contesting both of these cases, and is coordinating its own efforts withthose of the owner and operator, Cripple Creek & Victor Gold Company (“CC&V”),and the majority owners thereof, AngloGold North America, Inc., andAngloGold Colorado Corp.  The Company isneither the owner nor operator and its interest is limited to its minorityinterest in CC&V.  Therefore, thelikelihood of an unfavorable outcome to the Company cannot be evaluated, and noestimate can be made of the amount or range of potential loss, if any, which mightresult either to the Company or to its interest in CC&V.

 

Thesuit pending at the end of 2003 in Madison County, Illinois, was recentlydismissed on stipulation.

 

TheCompany expended approximately $17,000 and $12,500 during the years 2004 and2003, respectively, defending against these suits.

 

**(9)**                     Selected quarterly financial data

 

(unaudited)

 

18

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| ** **                                                                    | ** ** | **2004**           | ** ** |
|-------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                                    | ** ** | **First  Quarter** | ** ** | **Second  Quarter** | ** ** | **Third  Quarter** | ** ** | **Fourth  Quarter** | ** ** |
| Distributions  from mining joint venture in excess of carrying value (note 4) |       | $                  | 250,000    |   | $ | — |   | $ | — |   | $ | — |   |
|                                                                          |       |               |       |   |   |   |   |   |   |
| Operating  income (loss)                                                      |       | 158,252            |       | (157,013 | ) | (214,486 | ) | (138,921 | ) |
|                                                                          |       |               |       |   |   |   |   |   |   |
| Net  income (loss)                                                            |       | 162,975            |       | (151,885 | ) | (207,868 | ) | (125,804 | ) |
| Net  income (loss) per share                                                  |       | 0.02               |       | (0.02 | ) | (0.02 | ) | (0.01 | ) |
| Pro  forma net income (loss) per share                                        |       | 0.02               |       | (0.04 | ) | (0.02 | ) | (0.01 | ) |
|                                                                               |            |                    |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                                                    | ** ** | **2003**           | ** ** |
|-------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                                    | ** ** | **First  Quarter** | ** ** | **Second  Quarter** | ** ** | **Third  Quarter** | ** ** | **Fourth  Quarter** | ** ** |
| Distributions  from mining joint venture in excess of carrying value (note 4) |       | $                  | 250,000    |   | $ | — |   | $ | — |   | $ | — |   |
|                                                                          |       |               |       |   |   |   |   |   |   |
| Operating  income (loss)                                                      |       | 119,524            |       | (192,563 | ) | (163,950 | ) | (120,427 | ) |
|                                                                          |       |               |       |   |   |   |   |   |   |
| Net  income (loss)                                                            |       | 124,689            |       | (188,316 | ) | (160,193 | ) | 447,955 |   |
| Net  income (loss) per share                                                  |       | 0.01               |       | (0.02 | ) | (0.02 | ) | 0.05 |   |
| Pro  forma net income (loss) per share                                        |       | 0.01               |       | (0.03 | ) | (0.02 | ) | 0.05 |   |
|                                                                               |            |                    |            |  |  |  |  |  |  |  |  |  |  |

 

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