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| GRMC.OB > SEC Filings for GRMC.OB > Form 10-K on 3-Apr-2009 | All Recent SEC Filings |
3-Apr-2009
Annual Report
General
Results of the 2008 Exploration Season
Chandalar, Alaska
In February 2008, we received the final drill results from our placer gold project of 113 drill holes for a total of 15,535 feet on the Little Squaw Creek, Spring Creek and Big Squaw Creek drainages. Based on our drill data we commissioned a study to determine the amount of mineralized material contained in our alluvial gold deposit on Little Squaw Creek, we retained Mr. Paul Martin to do this. Mr. Martin is a consulting, Nevada state licensed and registered mining engineer who has Alaska placer gold mining expertise.
In an internal letter memorandum dated February 9, 2009 and titled "Mineralized
Material Estimate and Data Analyses for Little Squaw Creek, Chandalar Project,
Alaska", Mr. Martin reported to us that his calculations show the Little Squaw
Creek alluvial deposit to contain an estimated 10.5 million bank cubic yards
(bcy) of "in place" material having an average grade of 0.0246 ounces of gold
per bank (in place) cubic yard. He further reports that the total amount of
unmineralized material that would need to be removed to access the mineralized
material is about 9.3 million bcy; making for an overburden to mineralized
material strip ratio of 0.89 to 1.00.
It is management's opinion that we have discovered a promising alluvial gold
deposit. We have defined an estimated 10.5 million bank cubic yards (bcy) of
near-surface gold-bearing gravels (mineralized material) where we believe
economies of scale could be gained that are typical of surface bulk-mining
operations elsewhere. We also believe the deposit can be substantially expanded
through additional drilling. We note that any attempt to mine this alluvial gold
deposit would not require the use and permitting of milling and chemicals in the
gold recovery process because the raw gold could be obtained by use of simple
gravity separation recovery methods that are standard to processing gold bearing
alluvial gravels. In making these statements, we do not purport to have a U.S.
Securities and Exchange Industry Guide 7 compliant mineral reserve at Chandalar.
We intend to fund further evaluation of this deposit either by a private
placement offering, selling some equity in the deposit, or through a joint
venture agreement with a funding partner. Should we be unsuccessful in our
financing efforts, our proposed drilling program will of necessity be deferred
until sufficient funds can be raised.
Marisol, Sonora State, Mexico
On November 27, 2007 we acquired the Marisol gold exploration property in Mexico near the U.S. border. It is located in northern Sonora State, 130 miles south of Tucson, Arizona, and 8 miles from the principal highway between Nogales and Hermosillo, Sonora.
On August 25, 2008, we reported the drill results on the Marisol property in
northern Sonora State, Mexico as reported in an 8-K filing made on August 29.
While analysis of the results showed some interesting areas of potential future
exploration work, we were financially unable to pursue further activities on
this property. Lease payments to secure the property to our benefit for an
additional six months were due on October 22, 2008. Due to lack of sufficient
funds to pursue all corporate priorities, we elected not to remit the next six
months' lease payments to the owners of the surface and mineral rights and wrote
off $74,276 of Mining claims associated with this property. By this action, we
relinquished our interests in the Marisol, Mexico property on October 15, 2008.
We had completed the reclamation of all our drill sites on the property and
received a letter of environmental reclamation requirement compliance and
liability release from the appropriate Mexican authority.
We undertook these measures to conserve our resources.
Livengood Bench, Alaska
We entered into an Exclusivity Agreement ("the Agreement") on the Livengood Bench placer gold mine in Alaska at the end of 2007. The Livengood Bench property is located 75 miles north of Fairbanks, Alaska and has paved-road access. The existing database indicates the presence of 12.8 million cubic yards of gold-bearing alluvium (gravel) believed to contain about 355,000 ounces gold. The exclusivity fee under the Agreement was $100,000, and it effectively tied the property up on our behalf for three months. The Agreement afforded us the exclusive right to conduct a comprehensive analysis of the property, make commercial viability studies and possibly enter into a definitive agreement for the purchase of the property. On February 15, 2008, our Board of Directors heard a report by a due diligence and commercial scoping committee organized for the purpose of evaluating the Livengood Bench property. The Board of Directors concluded the property was not a suitable investment for Goldrich. We then canceled the Exclusivity Agreement and released our potential interest in the property.
Broken Hills West, Nevada
In 2008, we relinquished our Broken Hills West, Nevada exploration property.
The property was returned to its owners on May 30, 2008, in full compliance
with the termination provisions of the mining lease. We have no retained
interests or liabilities in or associated with this property.
We undertook these measures to conserve our resources, and also because management believes the technical results of the exploration work we completed on this property did not justify keeping it in light of upcoming financial obligations contained in the lease.
Pedra de Fogo, Brazil
In March of 2007, we acquired the Pedra de Fogo gold exploration property in Goias State, south central Brazil. We relinquished all rights to the Pedra de Fogo property on June 3, 2008. The property was returned to its owners in full compliance with the termination provisions of our mining lease. We retained no interests or liabilities in or associated with this property. We wrote off $14,000 of Mining claims associated with this property.
We undertook these measures to conserve our resources, and also because management believes the technical results of the exploration work we completed on the Pedra de Fogo property did not justify keeping it in light of upcoming financial and work obligations contained in the lease.
2009 Exploration Plans
At the date of this writing, we have yet to secure sufficient financing to accomplish our planned 2009 drilling activities. We estimate that it would take about five million dollars to complete our 2009 exploration plans for our Chandalar, Alaska property, and to sustaining our corporation at an appropriate operating level to support an ongoing program there. While we believe that we will be successful in obtaining the necessary financing for 2009, we cannot assure that financing may be obtained on terms acceptable to us. Should we be unable to secure financing, we would take the necessary measures to secure, maintain and protect our corporation and its assets until such time our financing efforts bear fruit.
Chandalar, Alaska
We believe that we accumulated sufficient data during the 2007 placer drilling to establish that we have a significant commercial alluvial gold deposit discovery. We also think that additional drilling of this alluvial gold deposit will be needed to eventually set ore reserves and to expand the size of the body of mineralization. (This would take about 300 drill holes over two years, accumulating to about 60,000 feet of drilling.) Additionally, we have laid the ground work to secure a diamond core drill to execute the hard rock drill plan formulated from the results of the 2006 drilling season and our prospecting work accomplished since then. All exploration activities in Chandalar are contingent upon successful financing during the spring of 2009. If financing is not obtained by in the Spring of 2009, the window of opportunity to organize a significant exploration program in Alaska for 2009 will close until the summer of 2010.
We are proceeding at this time with more in-depth engineering studies on the Little Squaw Creek alluvial gold deposit as we prepare for an aggressive summer drilling program which we are attempting to finance by a private placement offering, or through an earn-in joint venture agreement with another company. Should we be unsuccessful in this financing effort the drilling program will of necessity be deferred until sufficient funds can be raised to fund those drilling operations.
Liquidity and Capital Resources
We are an Exploration Stage company and have incurred losses since our inception. We have no recurring source of revenue and our ability to continue as a going concern is dependent on our ability to raise capital to fund our future exploration and working capital requirements. Our plans for the long term continuation as a going concern include financing our future operations through sales of our common stock and/or debt and the eventual profitable exploitation of our mining properties. With the recent reported success in our determination of the size of an alluvial gold deposit in the Little Squaw Creek drainage, we are exploring the economics of beginning a mining operation of our own to fund ongoing hard rock exploration activities and the needs of our corporation in general. Our plans may also, at some future point, include the formation of mining joint ventures with senior mining company partners on specific mineral properties whereby the joint venture partner would provide the necessary financing in return for equity in the property.
On December 31, 2008, we had total assets of $1,510,622 and total liabilities of $1,230,215. This compares to total assets of $3,245,800 and total liabilities of $1,296,892 on December 31, 2007. The decrease in assets was largely due to a use of cash for operating expenses as well as the reduction in our mining claims. When compared to 2007, liabilities decreased during 2008 due to decreases in accounts payable and accrued liabilities, resulting from decreased operational activities as we were operating at 'care and custody' levels at the end of 2008. These decreases were offset somewhat by increases in deferred fees and stock payable as well as an increase in the carrying value of the Convertible Debenture due to accretion of the beneficial conversion feature.
As of December 31, 2008, our assets consisted of $219,724 of cash and cash equivalents, $52,721 of prepaid expenses, $23,788 in taxes receivable, $56,337 of fuel inventory, $715,263 of equipment, net of depreciation, $340,854 of mining properties and claims and $101,935 of other assets, represented by gold specimens from the Chandalar property purchased from a previous owner. As of December 31, 2008, our liabilities consisted of $38,564 in accounts payable, $67,845 in legal fees payable, $8,152 in accrued liabilities, $37,800 of related party payable, $15,198 in deferred manager and director fees, $5,096 accrued interest payable, $7,560 in stock payable, $1,000,000 of convertible debenture and $50,000 for accrued remediation costs. The Convertible Debenture is reflected on our financial statement at its face amount of $1,000,000 after full recognition of accretion of the discount for the fair value of the debenture's beneficial conversion feature.
As of December 31, 2008, we had current assets of $352,570, including cash and cash equivalents of $219,724; current liabilities of $167,559; and working capital of $185,011 This compares to current assets of $1,741,074, including cash and cash equivalents of $1,483,885; current liabilities of $1,241,796; and working capital of $499,278 as of December 31, 2007. The decrease in working capital for 2008 can be characterized as the use cash balances and cash proceeds of the private placements that occurred in 2008 to support the company's operating needs.
Net loss for 2008 was $3,178,695 compared to a net loss of $4,142,832 for the year ended December 31, 2007. The decrease in net loss for 2008 was due to significant decreases in exploration expense and nearly all categories of spending as we did not have the funding for a full Exploration program in 2008.
Our principal source of liquidity during 2008 and 2007 has been through equity financing. Financing activities provided cash of $814,459 and $2,110,872 during the years ended December 31, 2008 and 2007, respectively. We used cash in operating activities of $2,083,492 and $3,800,496 during the years ended December 31, 2008 and 2007, respectively, the decrease due to decreased spending in exploration and nearly all categories of spending as we did not have the funding for a full exploration program in 2008. Investing activities provided cash of $4,872 as a restriction on a portion of our cash expired in 2008, offset by cash used to purchase minor equipment in Alaska and mining claims in Mexico.
We believe that, we have sufficient cash to fund company operations until
approximately August of 2009. We are currently in negotiations with multiple
parties which, if successful, may provide the capital we require to fund
operations for the next twelve months. Our current cash requirements on a
monthly basis for our reduced operations are approximately $20,000. The
Company's current cash assets allow it to continue to pay the costs of
maintaining and preserving company assets and minimal operating costs, and gives
us additional time to solicit funding under hopefully improved market conditions
in 2009. To assure the continuing operations of the Company, we will need to
raise additional funds through debt or identified equity sources in early 2009.
We cannot assure you that we will be successful at attracting capital or debt
on terms acceptable to us or current stakeholders.
The current equity market conditions in the United States, Canada and in the broader international markets have precluded us from accomplishing our financing objectives for 2008. As a result we have depleted our cash reserves to levels that no longer support our normal business activities for the long term. We have insufficient cash to support normal business activities beyond the necessary caretaker and asset preservation requirements. Effective September 1, 2008, we terminated all employees except those required to oversee physical assets at our Chandalar property until the winter snows could provide a certain level of access protection. At this writing, we have no employees and no available cash to execute on any exploration plans.
Without additional financing during 2009, we may not have sufficient funds to fund the 2009 drilling and other exploration activities on our property in Alaska. If we are unsuccessful in attracting additional financing sufficient to fund exploration activities for 2009, we will implement only those strategies which will maintain property and asset value until additional financing can be obtained. There can be no assurance we would be successful in completing such a securities offering on terms acceptable to us.
Private Placement Offerings
On various dates in January and February 2007, we issued 90,000 shares of common stock as a result of exercise of 90,000 Class A warrants at $0.30 per common share, resulting in $27,000 proceeds received by us.
On various dates in January and February 2007, we issued 3,465,194 shares of common stock as a result of exercise of 3,465,194 Class B warrants at $0.35 per common share, resulting in $1,215,933 net proceeds received by us.
On March 8, 2007, we issued 2,500,000 shares of common stock as a result of exercise of 2,500,000 Class A warrants at $0.30 per common share, resulting in $750,000 proceeds received by us.
On March 8, 2007, we issued 400,000 shares of common stock as a result of exercise of 400,000 other warrants from a 2005 private placement at $0.35 per common share, resulting in $140,000 proceeds received by us.
During the spring of 2008, we self-promoting a private placement. On April 8th,
we initiated what was intended to be a rolling close on $581,899, net of
offering costs of $1,101, obtained largely from existing shareholders. The
private placement offering was for a maximum of $5,000,000 with no minimum.
Under the terms of the subscription agreement, we sold units at $0.60, each
unit consisting of one share of our common stock and one half of a two-year
warrant to purchase a share of common stock at an exercise price of $0.85 for
each full share in the first year and $1.25 for each full share in the second
year. In the face of generally deteriorating market conditions and the
sympathetic slide in our share price, we were unable to sell any more of these units. We therefore abandoned the offering in June 2008. There were no finder's fees or commissions paid relative to this offering.
On December 29, 2008, we closed on $225,000 of additional financing from existing shareholders. This private placement consisted of of 225,000 Units, at a price of $1.00 per unit, each unit consisting of one share of Series A Convertible Preferred shares, convertible into six shares of common stock, subject to customary adjustment for stock splits, dividends, recapitalization and other similar corporate transactions. The Company did not grant registration rights to the investors in this series of preferred shares. The shares have voting rights equal to the number of underlying shares into which they are convertible and will carry a cumulative dividend rate of 5%. We an unconditional right to force conversion of any and all Series A Preferred Stock for ten years from the date of issue. The Series A Preferred Stock shall rank superior in preference to common stock with respect to payment of dividends and the distribution of assets in the event of liquidation, dissolution or winding up of the Issuer. The Series A Preferred Stock will have a preference of $2.00 per share plus an amount equal to any cumulated dividend upon liquidation of the Company, payable pari passu with the preference and prior to any distributions to holders of common stock of the Company. Any monies available for distribution thereafter will be shared ratably among the holders of Series A Preferred Stock and Common Stock on an as converted basis.
Consulting Agreement
On November 26, 2007, we entered into a Consulting Agreement with Baron Group
USA, LLC ("Baron") of New York City. Under the terms of a Consulting Agreement,
we agreed to pay Baron, as consultant, a cash finder's fee in an amount equal to
8% of the gross proceeds received by us in a private placement. In addition,
Baron would receive common share purchase warrants representing 10% of the
number of warrants issued to investors in a private placement with the same
terms and conditions as those of the financing investors. During the term of
the agreement, Baron was the exclusive and sole representative for us. Baron had
the right to engage qualified broker-dealers in connection with providing
services in connection with a Private Placement, provided that such
broker-dealers were properly registered and agreed to comply with the terms of
the agreement. Efforts to close a private placement of our securities were
unsuccessful, for reasons which in our opinion were within the control of Baron.
On March 5, 2008, the agreement was terminated by mutual consent of both
parties, effective immediately. Baron ceased providing any services under the
agreement and we are no longer under any obligation to pay Baron any
compensation of any kind under the agreement.
Convertible Debenture
Subsequent to the end of 2008, in February 2009, the Company issued a total of
5,072,328 common shares to RAB Special Situations (Master) Fund Limited ("RAB"),
pursuant to the terms of a convertible debenture held by RAB dated November 25,
2005 in the principal amount of $1,000,000 due November 21, 2008 and extended by
mutual agreement to February 27, 2009 (the "Debenture"). In accordance with the
terms of the Debenture, the principal amount of $1,000,000 plus interest of
$14,465.75, accrued from December 1, 2008 through February 27, 2009, was
converted into common shares of the Company at a price of $0.20 per share.
Consequently, 5,000,000 common shares were issued to satisfy the conversion of
the principal and 72,328 common shares were issued to satisfy conversion of the
interest. After the conversion and issuance of these common shares, the Company
had 44,219,712 shares of common stock outstanding.
The maturity date of the Debenture was originally November 21, 2008; however,
the parties agreed to an extension to February 27, 2009. On February 17, 2009,
the Company provided 10-day notice to RAB in writing of its intent to convert
the Debenture, at the Company's option as allowed in the provisions of the
Debenture, into common shares of the Company effective on February 27, 2009.
The certificate for the common shares was delivered on February 23, 2009. While
the Company was entitled to issue the common shares to RAB pursuant to an
exemption from the registration requirements of the United States Securities Act
of 1933, as amended (the "U.S. Securities Act"), provided by section 3(a)(9) of
the U.S. Securities Act, the terms of the Convertible Debenture required us to
register the shares for trading. A Form S-1 was filed on February 5, 2009, as
post-effective amendment number two to the Registration Statement on Form SB-2
(No. 333-140899) initially filed with the Securities and Exchange Commission
("SEC") on February 26, 2007, as last amended October 24, 2008. The S-1
Registration Statement also served as post-effective amendment number four to
the Registration Statement on Form SB-2 (No. 333-133216) initially filed with
the SEC on April 11, 2006 as last amended May 1, 2007, and as post-effective
amendment number four to the
Registration Statement on Form SB-2 (No. 333-130819) initially filed with the SEC December 30, 2005, as last amended May 1, 2007. An amendment to Form S-1 will be filed to incorporate the audited financial statements and other information contained in this Form 10-K for 2008. We anticipate that the amended S-1 will be declared effective, as the previous filings were, after appropriate review by the SEC. Should the registration not be declared effective, the shares will be tradable 6 months from the issue date.
On December 1, 2008, we remitted interest to RAB Special Situations (Master) Fund Limited in the amount $30,082 in the form of stock as allowed by terms of the 6% Convertible Debenture, resulting in 334,246 shares of common stock being issued to the holder. The stock price used as specified in the Debenture was the closing bid price five (5) business days prior to the due date of the interest payment, which was November 24, 2008. On that date Goldrich's common stock closed at $0.09 per share. Subsequent to the end of the quarter it was determined that an error was made in the issuance of the shares for the December 1, 2008 interest payment. As allowed by the terms of the Debenture the number of shares to be issued in payment of the interest payment is actually the greater of the Conversion Price of $0.20 or the closing bid price five (5) business days prior to the due date of the interest payment, which was November 24, 2008. This resulted in the cancellation of the 334,246 shares and the issuance of 150,410 shares calculated using the $0.20 conversion. The recalculation of shares had no effect on interest expense recognized.
On June 1, 2008, we remitted interest to RAB Special Situations (Master) Fund Limited in the amount $30,082 in the form of stock as allowed by terms of the 6% Convertible Debenture, resulting in 60,164 shares of common stock being issued to the holder. The stock price used as specified in the Debenture was the closing bid price five (5) business days prior to the due date of the interest payment, which was May 27, 2008. On that date Goldrich's common stock closed at $0.50 per share.
In connection with the placement, we issued to the placement agent a 500,000
Class A Warrant under the terms of a Placement Agent Agreement which is
convertible into 500,000 common shares at an exercise price of $0.30 until
November 21, 2008. This Class A Warrant included the same mandatory conversion
provision as the warrant issued to the debenture holder. The fair value of this
warrant was estimated using the Black-Scholes option pricing model. The warrant
with a fair value of $30,000 was included in deferred financing costs, bringing
the total to $130,000 with the cash fee paid to the agent as described above.
The deferred financing costs were amortized over the life of the convertible
debenture, which resulted in amortization of $39,725 and $43,332 to interest
expense being recorded in 2008 and 2007, respectively. The Class A Warrant
expired on November 21, 2008.
Upon the issuance of the 6% Convertible Debenture on November 21, 2005, we were required to allocate value to the warrant issued with the debenture, and to record a discount on the debenture for its conversion feature. In accordance with EIFT No. 00-27 "Application of Issue No. 98-5 to Certain Convertible Instruments" we recorded a discount in the amount of $150,000. This discount was amortized over the life of the convertible debenture, which resulted in accretion of $29,642 and $58,309 to the convertible debenture being recorded in 2008 and 2007, respectively. With the completion of the amortization in November 2008, the Convertible Debenture then reflected its full face value on our balance sheet.
Also, in accordance with EITF 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", the Warrants issued in connection with the 6% Convertible Debenture were accounted for under APB 14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants". Under APB 14, the proceeds received from the investor were allocated to the 6% Debenture and the Warrant in proportion to their respective fair values. The fair value of the warrants was calculated using the Black-Scholes option pricing model. The warrants with a fair value of $150,000 were presented as a component of additional paid-in capital in shareholder's equity. This discount was amortized over the life of the Convertible Debenture, with the remaining unamortized discount expensed in full when the Warrant was exercised. The warrants were exercised on March 8, 2007. As a result, amortization of discounts totaling $0 and $87,951 were recognized as interest expense for the years ended December 31, 2008 and 2007, respectively.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Contractual Obligations
With the exception of management consulting contracts, the Convertible Debenture described above, we had no material contractual obligations as of December 31, 2008.
Inflation
We do not believe that inflation has had a significant impact on our consolidated results of operations or financial condition.
Critical Accounting Policies
We have identified our critical accounting policies, the application of which may materially affect the financial statements, either because of the significance of the financials statement item to which they relate, or because they require management's judgment in making estimates and assumptions in measuring, at a specific point in time, events which will be settled in the future. The critical accounting policies, judgments and estimates which management believes have the most significant effect on the financial statements are set forth below:
·
Estimates of the recoverability of the carrying value of our mining and mineral property assets. Our estimate of carrying value is based partially on the . . .
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