Item 1. Financial Statements
Item 1. Financial Statements (Unaudited)
CONSOLIDATED BALANCE SHEETS
March 31, 2010 (unaudited)
March 31, December 31,
U.S. Dollars 2010 2009
ASSETS
Current Assets:
Cash and cash equivalents (Note 4) $ 60,983,350 $ 60,962,813
Marketable debt securities (Note 5) 10,128,000 10,175,020
Marketable equity securities (Note 6) 632,530 598,825
Assets held for sale (Notes 9, 20) 4,615,312
Deposits, advances and other 916,693 566,483
Total current assets 77,275,885 72,303,141
Property, plant and equipment, net (Note 10) 30,155,320 38,122,102
Restricted cash (Note 14) 8,995,701 9,489,777
Total assets $ 116,426,906 $ 119,915,020
LIABILITIES
Current Liabilities :
Accounts payable and accrued expenses $ 2,821,910 $ 3,790,003
Accrued interest 1,641,849 234,550
Total current liabilities 4,463,759 4,024,553
Convertible notes (Note 17) 94,485,747 93,693,168
Minority interest in consolidated subsidiaries 2,274,443 2,279,699
Total liabilities 101,223,949 99,997,420
Measurement uncertainty (Note 1)
Commitments and contingencies (Notes 12, 14)
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value, none issued
Common shares and equity units, without par value (Note 16) 248,016,755 247,905,231
Equity component of convertible notes (Note 17) 28,652,785 28,652,785
Less common shares held by affiliates (636,267) (636,267)
Stock options (Note 12) 10,062,595 10,014,136
Accumulated deficit (270,620,206) (265,630,369)
Accumulated other comprehensive income (loss) (162,014) (277,225)
KSOP debt (Note 11) (110,691) (110,691)
Total shareholders' equity 15,202,957 19,917,600
Total liabilities and shareholders' equity $ 116,426,906 $ 119,915,020
The accompanying notes are an integral part of the consolidated financial statements.
Approved by the Board of Directors:
s/ Chris D. Mikkelsen s/ Patrick D. McChesney
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2010 and 2009 (unaudited)
U.S. Dollars 2010 2009
OTHER INCOME
Interest $ 64,519 $ 79,942
Gain on extinguishment of debt 601,936
Gain on disposition of marketable securities 106,551
Gain on sale of equipment 55,874
Foreign currency gain (loss) 82,244 (21,950)
309,188 659,928
EXPENSES
Corporate general and administrative 978,693 1,185,662
Venezuelan expenses 450,117 782,470
Equipment holding costs 340,754 35,458
Corporate communications 130,114 194,269
Legal and accounting 127,151 787,069
Arbitration (Note 3) 1,079,269
Takeover defense (Note 18) 1,453,655
3,106,098 4,438,583
Loss before minority interest,
interest expense and income tax (2,796,910) (3,778,655)
Minority interest 5,256 (2,681)
Interest expense (2,199,877)
Loss before income tax (4,991,531) (3,781,336)
Income tax benefit 1,694 70,130
Net loss for the period $ (4,989,837) $(3,711,206)
Net loss per share, basic and diluted $ (0.09) $ (0.07)
Weighted average common
shares outstanding 57,529,117 56,959,277
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF DEFICIT
For the Three Months Ended March 31, 2010 and 2009 (unaudited)
U.S. Dollars
Deficit, December 31, 2009 $ (265,630,369)
Net loss for the period (4,989,837)
Deficit, March 31, 2010 $ (270,620,206)
Deficit, December 31, 2008 $ (100,180,541)
Net loss for the period (3,711,206)
Deficit, March 31, 2009 $ (103,891,747)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2010 and 2009 (unaudited)
U.S. Dollars 2010 2009
Net loss for the period $ (4,989,837) $ (3,711,206)
Other comprehensive income, net of tax:
Unrealized gain on marketable securities 221,762 134,825
Adjustment for realized gains
included in net loss (106,551) –
Other comprehensive income 115,211 134,825
Comprehensive loss for the period $ (4,874,626) $ (3,576,381)
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2010 and 2009 (unaudited)
U.S. Dollars 2010 2009
Cash Flows from Operating Activities:
Net loss for the period $ (4,989,837) $ (3,711,206)
Adjustments to reconcile net loss to net cash
used by operating activities:
Stock option compensation 70,599 184,836
Depreciation 40,143 54,093
Gain on extinguishment of debt (601,936)
Gain on sale of equipment (55,874)
Amortization of premium on
marketable debt securities 47,020
Accretion of convertible notes 792,579
Foreign currency loss 72,492
Minority interest in net (income) loss of
consolidated subsidiaries (5,256) 2,681
Net gain on disposition of marketable securities (106,551)
Future income tax benefit (69,455)
Shares issued for compensation 57,000 392,025
Changes in non-cash working capital:
Net increase in deposits and advances (350,210) (620,911)
Net increase (decrease) in accounts payable
and accrued expenses 439,206 (2,004,097)
Net cash used in operating activities (4,061,181) (6,301,478)
Cash Flows from Investing Activities:
Proceeds from disposition of marketable securities 609,592 500,000
Purchase of marketable securities (421,535) (500,000)
Purchase of property, plant and equipment (498,440) (2,904,650)
Proceeds from sales of equipment 3,865,641
Decrease in restricted cash 494,076
Other (31,365)
Net cash (used in) provided by investing activities 4,049,334 (2,936,015)
Cash Flows from Financing Activities:
Net proceeds from the issuance of common shares 32,384
Extinguishment of convertible notes (415,254)
Net cash (used in) provided by financing activities 32,384 (415,254)
Change in Cash and Cash Equivalents:
Net increase (decrease) in cash and cash equivalents 20,537 (9,652,747)
Cash and cash equivalents - beginning of period 60,962,813 91,550,167
Cash and cash equivalents - end of period $ 60,983,350 $ 81,897,420
The accompanying notes are an integral part of the consolidated financial statements.
1. The Company and Significant Accounting Policies
The Company. Gold Reserve Inc. (the “Company”) is an exploration stage company incorporated in 1998 under the laws of the Yukon Territory, Canada, and is the successor issuer to Gold Reserve Corporation which was incorporated in 1956. The Company is engaged in the business of acquiring, exploring and developing mining projects. From 1992 to 2009 the Company focused substantially all of its management and financial resources on the development of the Brisas gold and copper project located in the Kilometre 88 mining district of the State of Bolivar in south-eastern Venezuela (which we refer to as the “Brisas Project” or “Brisas”). As further detailed in Note 3, we discontinued development of the Brisas Project after it was expropriated by the Venezuelan government and we are now seeking to invest in or acquire an alternative mining project. The Company has no revenue producing mining operations at this time. All amounts shown herein are expressed in U.S. dollars unless otherwise noted. The expense categories shown in the consolidated statements of operations have been revised on a comparative basis to better present the current operations of the Company. The revisions had no effect on previously reported results of operations.
In February 1999, the shareholders of Gold Reserve Corporation approved a plan of reorganization whereby Gold Reserve Corporation became a subsidiary of Gold Reserve Inc., the successor issuer (the “Reorganization”). Generally, each shareholder of Gold Reserve Corporation received one Gold Reserve Inc. Class A common share for each common share owned of Gold Reserve Corporation.
Certain U.S. holders of Gold Reserve Corporation elected, for tax reasons, to receive equity units in lieu of Gold Reserve Inc. Class A common shares. An equity unit is comprised of one Gold Reserve Inc. Class B common share and one Gold Reserve Corporation Class B common share. Each equity unit is substantially equivalent to a Class A common share and is immediately convertible into a Gold Reserve Inc. Class A common share, upon compliance with certain procedures. Equity units are not listed for trading on any stock exchange, but, subject to compliance with applicable federal, provincial and state securities laws, may be transferred. Unless otherwise noted, general references to common shares of the Company include Class A common shares and Class B common shares as a combined group.
Principles of Consolidation . The consolidated financial statements contained herein have been prepared in accordance with accounting principles generally accepted in Canada, which as described in Note 19, differ in certain material respects from accounting principles generally accepted in the U.S.
These consolidated financial statements include the accounts of the Company, Gold Reserve Corporation, two domestic subsidiaries, Great Basin Energies, Inc. (“Great Basin”) and MGC Ventures Inc. (“MGC Ventures”), four Venezuelan subsidiaries, two Barbadian subsidiaries and five Aruban subsidiaries which were formed to hold the Company’s interest in its foreign subsidiaries or for future transactions. All subsidiaries are wholly owned with the exception of Great Basin and MGC Ventures which are 45% and 44% owned, respectively. All intercompany accounts and transactions have been eliminated on consolidation. The Company’s policy is to consolidate those subsidiaries where control exists. See Note 13.
Cash and Cash Equivalents . The Company considers short-term, highly liquid investments purchased with an original maturity of three months or less to be cash equivalents for purposes of reporting cash equivalents and cash flows. Cash and cash equivalents are designated as held-for-trading and recorded at fair value. The Company manages the exposure of its cash and cash equivalents to credit risk by diversifying its holdings into major Canadian and U.S. financial institutions and corporations
Exploration and Development Costs . Exploration costs incurred in locating areas of potential mineralization are expensed as incurred. Exploration costs of properties or working interests with specific areas of potential mineralization are capitalized at cost pending the determination of a property’s economic viability. Development costs of proven mining properties not yet producing are capitalized at cost and classified as capitalized exploration costs under property, plant and equipment. Costs related to staffing and maintenance of offices and facilities in Venezuela are charged to operations. Property holding costs are charged to operations during the period if no significant exploration or development activities are being conducted on the related properties. Upon commencement of production, capitalized exploration and development costs would be amortized based on the estimated proven and probable reserves benefited. Properties determined to be impaired or that are abandoned are written-down to the estimated fair value. Carrying values do not necessarily reflect present or future values.
Property, Plant and Equipment . Property, plant and equipment are recorded at cost less accumulated depreciation. Replacements and major improvements are capitalized. Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets retired or sold are removed from the accounts and any resulting gain or loss is reflected in operations. Depreciation is provided using straight-line and accelerated methods over the lesser of the useful life or lease term of the related asset. Interest and financing costs incurred during the construction and development of qualifying assets are capitalized on an interest avoidance basis. The amount capitalized during an accounting period is determined by applying an interest rate to the average amount of accumulated qualifying assets during the period. Adjustments increasing the carrying value of convertible notes upon remeasurement due to a change in estimated life are considered interest costs and are therefore eligible for capitalization. The Company’s qualifying assets include its costs of developing mining properties and constructing new facilities.
Impairment of Long Lived Assets . The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the expected future net cash flows to be generated from the use or disposition of a long-lived asset (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized and the asset is written down to fair value. Fair value is generally determined by discounting estimated cash flows, using quoted market prices where available or making estimates based on the best information available.
Foreign Currency. The U.S. dollar is the Company’s functional currency. The Company’s foreign subsidiaries are integrated foreign operations and accordingly foreign currency amounts are translated into U.S. dollars using the temporal method. Non-monetary assets and liabilities are translated at historical rates, monetary assets and liabilities are translated at current rates and revenue and expense items are translated at average exchange rates during the reporting period, except for depreciation which is translated at historical rates. Translation gains and losses are included in operating expenses.
In 2003, the Venezuelan government implemented foreign exchange controls which fixed the rate of exchange between Venezuelan Bolivars (Bs.) and the US dollar. In October 2005, the government enacted the Criminal Exchange Law which imposes sanctions on the exchange of Bs. with foreign currency unless the exchange is made by officially designated methods. The exchange regulations do not apply to transactions with certain securities denominated in Bs. which can be swapped for securities denominated in another currency effectively resulting in a parallel market for the Bolivar. Since 2007, the Company has used the parallel rate to re-measure transactions and to translate Bs. denominated monetary items. Since the Company has discontinued development of the Brisas project, the financial statement impact of transactions in the Venezuelan currency is expected to be reduced in the future.
Stock Based Compensation . The Company uses the fair value method of accounting for stock options. The fair value of options granted to employees is computed using the Black-Scholes method as described in Note 12 and is expensed over the vesting period of the option. For non-employees, the fair value of stock based compensation is recorded as an expense over the vesting period or, if earlier, upon completion of performance. Consideration paid for shares on exercise of share options, in addition to the fair value attributable to stock options granted, is credited to capital stock. Fair value of restricted stock issued as compensation is based on the grant date market value and expensed over the vesting period. The Company also maintains the Gold Reserve Director and Employee Retention Plan. Units granted under the plan become fully vested and payable upon a change of control. Each Unit granted to a participant entitles such person to receive a cash payment equal to the fair market value of one Gold Reserve Class A Common Share (1) on the date the Unit was granted or (2) on the date any such participant becomes entitled to payment, whichever is greater.
Income Taxes . The Company uses the liability method of accounting for income taxes. Future tax assets and liabilities are determined based on the differences between the tax basis of assets and liabilities and those amounts reported in the financial statements. The future tax assets or liabilities are calculated using the substantively enacted tax rates expected to apply in the periods in which the differences are expected to be settled. Future tax assets are recognized to the extent that they are considered more likely than not to be realized.
Use of Estimates . The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Measurement Uncertainty. Any operations we may have are subject to the effects of changes in legal, tax and regulatory regimes, political, labor and economic developments, social and political unrest, currency and exchange controls, import/export restrictions and government bureaucracy in the countries in which we operate. In 2009, subsequent to the expropriation and the resulting loss of control and physical access to the Brisas project, we recorded a $150.7 million non-cash write-off of the carrying value of the expropriated assets including an adjustment for the estimated net realizable value of certain processing and related equipment purchased for the Brisas Project of approximately $14.5 million. The realizable value of the remaining processing and related equipment may be different than management’s current estimate. See Notes 3, 9 and 14. The Company operates and files tax returns in a number of jurisdictions. The preparation of such tax filings requires considerable judgment and the use of assumptions. Accordingly, the amounts reported could vary in the future.
Net Loss Per Share . Net loss per share is computed by dividing net loss by the combined weighted average number of Class A and B common shares outstanding during each year, which is reduced by the common shares owned by Great Basin and MGC Ventures. In periods in which a loss is incurred, the effect of potential issuances of shares under options and convertible notes would be anti-dilutive, and therefore basic and diluted losses per share are the same.
Asset Retirement Obligations . The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and amortized over the same period as the underlying asset.
Convertible Notes . Convertible notes are initially recorded at fair value and subsequently measured at amortized cost. The fair value is allocated between the equity and debt component parts based on their respective fair values at the time of issuance and recorded net of transaction costs. The equity portion of the notes is estimated using the residual value method. The fair value of the debt component is accreted to the face value of the notes using the effective interest rate method over the expected life of the notes, with the resulting charge recorded as interest expense. Interest expense allocable to the qualifying cost of developing mining properties and to constructing new facilities is capitalized until assets are ready for their intended use.
Comprehensive Income . Comprehensive income includes net income or loss and other comprehensive income. Other comprehensive income may include unrealized gains and losses on available-for-sale securities, gains and losses on certain derivative instruments and foreign currency gains and losses from self sustaining foreign operations. The Company presents comprehensive income and its components in the consolidated statements of comprehensive loss.
Financial Instruments. The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts payable, accrued expenses and convertible notes. Cash and cash equivalents are classified as held for trading and any changes in fair value are charged to the statement of operations. Marketable equity securities are classified as available for sale with any unrealized gain or loss recorded in other comprehensive income. Marketable debt securities are classified as held-to-maturity and are measured at amortized cost using the effective interest rate method. Other financial liabilities are accounted for at cost or amortized cost.
Disposal of Long-Lived Assets. Long-Lived assets are classified as held for sale in the period in which certain criteria are met. Assets held for sale are measured at the lower of carrying amount or fair value less cost to sell and are not depreciated as long as they remain classified as held for sale.
2. New Accounting Policies
Future Accounting Policies :
CICA Section 1582, Business Combinations. This Section replaces Section 1581 and applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011. The Company is currently evaluating the impact of this Section on its financial statements.
CICA Section 1601, Consolidated Financial Statements. This section establishes standards for the preparation of consolidated financial statements and applies to financial reporting periods beginning on or after January 1, 2011. The Company is currently evaluating the impact of this Section on its financial statements.
CICA Section 1602, Non-Controlling Interests. This section establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination and applies to financial reporting periods beginning on or after January 1, 2011. The Company is currently evaluating the impact of this Section on its financial statements.
3. Expropriation of Brisas Project by Venezuelan Government and Arbitration
From 1992 to 2009 we focused substantially all of our management and financial resources on the development of the Brisas gold and copper project located in the Kilometre 88 mining district of the State of Bolivar in south-eastern Venezuela. After approval of the Brisas operating plan and the Environmental and Social Impact Study in 2003 and 2007, respectively, the Ministry of Environment issued in March 2007, the Authorization to Affect for the Brisas Project. In April 2008, the Ministry of Environment revoked the Authorization to Affect without prior notification.
On April 21, 2009 the Company notified the Venezuelan government of the existence of a dispute under the Agreement between the Government of Canada and the Government of the Republic of Venezuela for the Promotion and Protection of Investments (“Canada – Venezuela Treaty”) after months of continuous efforts to meet with representatives of the Venezuelan government to resolve the issues related to the revocation of the Authorization to Affect.
On October 21, 2009 we filed a Request for Arbitration under the Additional Facility Rules of ICSID, against the Bolivarian Republic of Venezuela (“Respondent”). In November 2009 our Request for Arbitration was registered by ICSID (Gold Reserve Inc. v. Bolivarian Republic of Venezuela (ICSID Case No. ARB(AF)/09/1)). On October 26, 2009, Venezuelan government personnel arrived at the Brisas Project camp site, claimed ownership of the Brisas Alluvial Concession, seized assets, expelled our personnel and took physical possession of the property. Subsequently, on November 4, 2009, the Venezuelan government notified the Company through the issuance of an Administrative Act, dated October 20, 2009, of its intent to cancel the Company’s underlying hard rock concession.
As a result of the expropriation of the Brisas Project by the Venezuelan government we no longer have control or physical access to the project which has caused the Company to discontinue the development of its Venezuelan properties, including Brisas and Choco 5 (which was a grass-roots exploration property also located in the State of Bolivar) and discontinue reporting mineral reserves for Brisas. In 2009 we recorded a $150.7 million non-cash write-off of the carrying value of the expropriated assets including an adjustment for the estimated net realizable value of certain processing and related equipment purchased for the Brisas Project of approximately $14.5 million.
The Company is seeking compensation in the arbitration for all of the loss and damage resulting from Venezuela’s wrongful conduct which includes the full market value of the legal rights to develop the Brisas Project. Our current arbitration efforts consist of engaging and assisting technical, legal, and financial experts and developing and filing our initial pleadings. The first session was held with the Tribunal on April 23, 2010 with several procedural matters agreed to, including the tentative time schedule for the Arbitration. The filing of our claim is planned for September 2010.
The Canada-Venezuela Treaty requires as a precondition to bringing an arbitration claim under the Treaty that an investor and any enterprise the investor owns directly or indirectly that has suffered losses that form the basis of a claim by the investor to "waive[ ] its right to initiate or continue any other proceedings in relation to the measure that is alleged to be in breach of [the Treaty] before the courts or tribunals of the Contracting Party concerned or in a dispute settlement procedure of any kind." As a result, the Company and its relevant subsidiaries waived their right to commence or continue before Venezuelan courts or tribunals with other legal or administrative challenges to the conduct that forms the basis of the ICSID claim, including the revocation of the Authorization to Affect and the denial of the extension of the Brisas Alluvial and El Pauji Concessions.
4. Cash and Cash Equivalents
March 31, December 31,
2010 2009
Bank deposits $ 53,807,674 $ 53,900,646
Money market funds 7,175,676 7,062,167
Total $ 60,983,350 $ 60,962,813
The above amounts exclude restricted cash of approximately $9 million and $9.5 million as at March 31, 2010 and December 31, 2009, respectively. See Note 14, Commitments. At March 31, 2010 and December 31, 2009, the Company had approximately $76,000 and $59,000 respectively, in Venezuela and banks outside Canada and the U.S.
5. Marketable Debt Securities
March 31, December 31,
2010 2009
Amortized cost $ 10,128,000 $ 10,175,020
The Companys marketable debt securities are classified as held-to-maturity and are measured at amortized cost using the effective interest rate method.
6. Marketable Equity Securities
March 31, December 31,
2010 2009
Fair value at beginning of year $ 598,825 $1,342,760
Acquisitions 171,535 2,135,293
Dispositions, at cost (253,041) (2,102,548)
Realized (gain) loss on sale (106,551) (2,274,848)
Unrealized gain (loss) 221,762 1,498,168
Fair value at balance sheet date $ 632,530 $ 598,825
The Companys marketable equity securities are classified as available-for-sale and are recorded at quoted market value with gains and losses recorded within other comprehensive income until realized. As of March 31, 2010 and December 31, 2009 marketable securities had a cost basis of $794,543 and $876,049, respectively.
7. Financial Instruments
The fair values as at March 31, 2010 and December 31, 2009 along with the carrying amounts shown on the consolidated balance sheets for each classification of financial instrument are as follows:
March 31, 2010 December 31, 2009
Carrying Fair Carrying Fair
Classification Amount Value Amount Value
Cash and cash equivalents held for trading $ 60,983,350 $ 60,983,350 $ 60,962,813 $ 60,962,813
Restricted cash held for trading 8,995,701 8,995,701 9,489,777 9,489,777
Marketable debt securities held to maturity 10,128,000 10,153,550 10,175,020 10,208,950
Marketable equity securities available for sale 632,530 632,530 598,825 598,825
Deposits advances and other held to maturity 916,693 916,693 566,483 566,483
A/P and accruals other financial liabilities 2,821,910 2,821,910 3,790,003 3,790,003
Accrued interest other financial liabilities 1,641,849 1,641,849 234,550 234,550
Convertible notes other financial liabilities 94,485,747 60,621,832 93,693,168 52,540,530
Fair value estimates for marketable securities are made at the balance sheet date by reference to published price quotations in active markets. The convertible notes are not listed on an exchange and the market for them is not active. Fair value estimates for convertible notes are made at the balance sheet date by reference to weighted average transaction prices over the preceding twelve months.
CICA 3862 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: Level 1 inputs are quoted prices in active markets for identical assets or liabilities, Level 2 inputs are inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability and Level 3 inputs are unobservable inputs for the asset or liability that reflect the entitys own assumptions.
Fair value
March 31, 2010 Level 1 Level 2 Level 3
Cash and cash equivalents $ 60,983,350 $ 60,983,350
Marketable equity securities 632,530 632,530
Restricted cash 8,995,701 8,995,701
Fair value
December 31, 2009 Level 1 Level 2 Level 3
Cash and cash equivalents $60,962,813 $ 60,962,813
Marketable equity securities 598,825 598,825
Restricted cash 9,489,777 9,489,777
The Company is exposed to various risks including credit risk, liquidity risk, currency risk and interest rate risk as described below:
a) Credit risk is the risk that a counter party will fail to meet its obligations to the Company. The Companys primary exposure to credit risk is through its cash and cash equivalents, restricted cash and marketable debt securities balances. The Company diversifies its cash holdings into major Canadian and U.S. financial institutions and corporations.
b) Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with its financial liabilities. The Company manages this risk by maintaining adequate cash balances through equity and debt offerings to meet its current and foreseeable obligations. The following table presents the Companys payments due on accounts payable and accrued expenses and its undiscounted interest and principal payments due on its convertible notes, based on the estimate that the term of the notes will end on June 15, 2012. If the notes were to reach their contractual maturity date of June 15, 2022, additional interest payments would amount to $56.3 million over the additional ten year term of the notes.
Payments due by Period
Less than More Than
Total 1 Year 1-3 Years 4-5 Years 5 Years
A/P and accruals $ 2,821,910 $ 2,821,910
Interest 14,072,988 5,629,195 $ 8,443,793
Principal 102,349,000 102,349,000
Total $ 119,243,898 $ 8,451,105 $ 110,792,793
c) The Company is subject to currency risk mainly due to its operations in Venezuela. Transactions denominated in foreign currency are exposed to exchange rate fluctuations which have an impact on the statement of operations. The Companys cash, value added tax and other monetary assets and liabilities that are held in Venezuelan and Canadian currency are subject to fluctuations against the US dollar. A 10% weakening of those currencies against the US dollar would have increased the Companys net gain (loss) from the translation of foreign currency denominated financial instruments, for the three months ended March 31, 2010 and 2009, by the amounts shown below.
2010 2009
Venezuelan Bolívar $ 20,417 $ 65,538
Canadian dollar 4,252 8,671
Total $ 24,669 $ 74,209
The Company limits the amount of currency held in non-U.S dollar accounts, but does not actively use derivative instruments to limit its exposure to fluctuations in foreign currency rates.
d) The Company is subject to the risk that changes in market interest rates will cause fluctuations in the fair values of its financial instruments. Cash and cash equivalents earn floating market rates of interest. Other current financial assets and liabilities are generally not exposed to this risk because of their immediate or short-term maturity. The interest rate on the Companys convertible notes is fixed and therefore the interest payments are not subject to changes in market rates of interest.
8. Capital Management
The capital structure of the Company consists of common shares and equity units, convertible notes, stock options, accumulated deficit, accumulated other comprehensive income and KSOP debt. The Companys objectives when managing its capital are to:
a) maintain sufficient liquidity in order to meet financial obligations including the costs of acquiring and developing mining projects and servicing debt;
b) safeguard the Companys assets and its ability to continue as a going concern and
c) maintain a capital structure that provides the flexibility to access additional sources of capital with minimal dilution to existing shareholders.
The Company manages its capital consistent with the objectives stated above and makes adjustments to its capital structure based on economic conditions and the risk characteristics of the underlying assets. The Company is in compliance with the covenants of its convertible notes. There were no changes to the Companys capital management during 2010.
9. Assets held for sale
March 31, December 31,
2010 2009
Equipment $ 4,615 312 $ 0
Assets held for sale consist of certain equipment originally purchased for use at the Brisas project. See Note 3.
10. Property, Plant and Equipment
Accumulated
Cost Depreciation Net
March 31, 2010
United States
Machinery and equipment deposits $ 29,563,378 $ $ 29,563,378
Furniture and office equipment 503,787 (406,656) 97,131
Leasehold improvements 41,190 (37,485) 3,705
$ 30,108,355 $ (444,141) $ 29,664,214
Venezuela
Buildings $ 403,286 $ (261,966) $ 141,320
Furniture and office equipment 482,562 (445,469) 37,093
Transportation equipment 480,198 (376,887) 103,311
Machinery and equipment 497,808 (288,426) 209,382
1,863,854 (1,372,748) 491,106
Total $ 31,972,209 $ (1,816,889) $ 30,155,320
Accumulated
Cost Depreciation Net
December 31, 2009
United States
Machinery and equipment deposits $ 37,491,372 $ $ 37,491,372
Furniture and office equipment 506,007 (399,737) 106,270
Leasehold improvements 41,190 (37,022) 4,168
$ 38,038,569 $ (436,759) $ 37,601,810
Venezuela
Buildings $ 403,286 $ (254,200) $ 149,086
Furniture and office equipment 482,562 (439,028) 43,534
Transportation equipment 480,198 (361,907) 118,291
Machinery and equipment 497,808 (288,427) 209,381
1,863,854 (1,343,562) 520,292
Total $ 39,902,423 $ (1,780,321) $ 38,122,102
Machinery and equipment deposits include amounts paid for infrastructure and milling equipment either in the manufacturing stage or being stored by the manufacturer.
11. KSOP Plan
The KSOP Plan, adopted in 1990 for the benefit of employees, is comprised of two parts, (1) a salary reduction component, or 401(k), and (2) an employee share ownership component, or ESOP. Unallocated shares are recorded as a reduction to shareholders equity. Allocation of common shares or cash contributions to participants accounts is at the discretion of the Companys board of directors, subject to certain limitations. The value of the shares allocated is recorded in the statement of operations with a reduction of the KSOP debt account. The Company allocated shares or made cash contributions to eligible participants for the Plan years 2010, 2009 and 2008 valued at $0, $57,292 and $269,679, respectively. As of March 31, 2010, 22,246 common shares remain unallocated to plan participants.
12. Stock Based Compensation
The Company has two equity incentive plans; the 1997 Equity Incentive Plan (last amended in March 2006 and last re-approved by the shareholders in June 2009, the 1997 Plan) and the 2008 Venezuelan Equity Incentive Plan (approved by the shareholders in June 2008, the Venezuelan Plan). Both plans permit the grants of stock options, stock appreciation rights and restricted stock, or any combination thereof, and each shall be 10% of the Companys outstanding shares, from time to time. The grants will be for terms up to ten years with vesting periods ranging from immediate to up to 3 years
Subsequent to shareholder approval in June 2008, 1,056,947 options previously granted to Venezuelan employees and consultants under the 1997 Plan were transferred to the Venezuelan Plan. The 1997 Plan remains available for insiders, employees and consultants of the Company.
Combined share option transactions for the three months ended March 31, 2010 and 2009 are as follows:
2010 2009
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
Options outstanding at beginning of period 4,573,318 $ 2.67 5,007,931 $ 3.18
Options exercised (111,666) 0.29
Options expired (40,000) 3.69 (75,000) 4.00
Options forfeited (71,917) 2.74
Options granted 547,500 0.73
Options outstanding at end of period 4,349,735 2.72 5,480,431 2.93
Options exercisable at end of period 3,921,946 $ 2.99 3,717,324 $ 3.69
Options available for
grant at end of period
under 1997 plan 2,232,890 1,376,400
Options available for
grant at end of period
under Venezuelan plan 5,088,955 4,777,327
Price Price
Range Range
Exercise price at end of period $0.29 - $ 5.36 $ 0.29 - $ 5.36
Exercise price for exercisable shares $0.29 - $ 5.36 $ 0.29 - $ 5.36
The following table relates to stock options at March 31, 2010:
Weighted Average
Weighted Weighted Exercise Price
Price Number Average Remaining Average Number of Exercisable
Range Outstanding Contractual Life Exercise Price Exercisable Options
$0.29 - $0.29 1,160,577 3.68 $0.29 732,788 $0.29
$0.73 - $1.89 938,750 2.53 $1.23 938,750 $1.23
$3.95 - $4.19 686,000 1.52 $4.12 686,000 $4.12
$4.22 - $4.62 406,000 1.36 $4.48 406,000 $4.48
$4.83 - $4.83 879,408 0.63 $4.83 879,408 $4.83
$5.07 - $5.36 279,000 1.67 $5.19 279,000 $5.19
$0.29 - $5.36 4,349,735 2.13 $2.72 3,921,946 $2.99
The Company recorded compensation expense, during the three months ended March 31, 2010 and 2009, of $70,599 and $184,836, respectively, for stock options granted. During the three months ended March 31, 2010 and 2009, 0 and 547,500 new options were granted, respectively. The fair value of options granted in 2009 was calculated at $323,449 using the Black-Scholes model based on the following assumptions:
Weighted average risk free interest rate 1.46%
Expected life 4.6 years
Expected volatility 120%
Dividend yield nil
In addition to the equity incentive plans, the Company also maintains the Gold Reserve Director and Employee Retention Plan. Units granted under the plan become fully vested and payable upon achievement of certain milestones related to the Brisas project or in the event of a change of control. The Company’s Board of Directors is currently evaluating modifying the vesting provisions of the units to more adequately reflect the current business objectives of the Company including successful arbitration, settlement of our dispute with Venezuela, reacquiring the rights to the Brisas Project and successful acquisition of a new business opportunity meeting specific parameters. Each Unit granted to a participant entitles such person to receive a cash payment equal to the fair market value of one Gold Reserve Class A Common Share (1) on the date the Unit was granted or (2) on the date any such participant becomes entitled to payment, whichever is greater. As of March 31, 2010 an aggregate of 1,732,500 unvested Units have been granted to directors and executive officers of the Company and 315,000 Units have been granted to other employees. The value of these units, based on the grant date value of the Class A shares, was approximately $8.9 million
13. Related Party Transactions:
MGC Ventures . The Chief Executive Officer, President, Vice President-Finance and Vice President-Administration of the Company are also officers and/or directors and shareholders of MGC Ventures. The Company owned 12,062,953 common shares of MGC Ventures at March 31, 2010 and December 31, 2009, which represented 44% of its outstanding shares. The Company believes it has control over MGC Ventures due to the combined shareholdings of the Company and its officers and directors. MGC Ventures owned 258,083 common shares of the Company at March 31, 2010 and December 31, 2009. In addition, MGC Ventures owned 280,000 common shares of Great Basin at March 31, 2010 and December 31, 2009. During the last three years, the Company sublet a portion of its office space to MGC Ventures for $6,000 per year.
Great Basin . The Chief Executive Officer, President, Vice President-Finance and Vice President-Administration of the Company are also officers and/or directors and shareholders of Great Basin. The Company owned 15,661,595 common shares of Great Basin at March 31, 2010 and December 31, 2009, which represented 45% of its outstanding shares. The Company believes it has control over Great Basin due to the combined shareholdings of the Company and its officers and directors. Great Basin owned 491,192 common shares of the Company at March 31, 2010 and December 31, 2009. Great Basin also owned 170,800 common shares of MGC Ventures at March 31, 2010 and December 31, 2009. During the last three years, the Company sublet a portion of its office space to Great Basin for $6,000 per year.
14. Commitments
In mid 2007, we commenced procurement efforts and placed orders totaling approximately $125 million for a gyratory crusher, pebble crushers, SAG and ball mills, mill motors, and other equipment for the Brisas Project. Since the revocation of the MinAmb Authorization to Affect the Company, in the fourth quarter of 2008 and the third quarter of 2009, sold certain equipment (one SAG mill, two ball mills (35,000 tonne per day through-put) and related motors as well as mobile equipment) originally costing approximately $53.1 million. The Company recovered approximately $26.5 million of progress payments and the purchaser assumed the Company's remaining payment obligations of approximately $21.9 million resulting in a combined loss on sale of equipment of approximately $4.7 million. As of March 31, 2010, the Company has equipment commitments totaling $61.7 million and has made payments on these orders of $52.7 million. Payments on the remaining commitments of $9 million are due within one year. In connection with a portion of these commitments, the Company opened an irrevocable standby letter of credit with a Canadian chartered bank providing security on the performance of obligations. As of March 31, 2010 and December 31, 2009, the Company had restricted cash of $9 million and $9.5 million, respectively, as required by this letter of credit.
15. Shareholder Rights Plan
The Company instituted a shareholder rights plan (the “Rights Plan”) in 1999. Since the original approval by the shareholders, the Rights Plan and the Rights Plan agreement have been amended and continued from time to time. In June 2009, the shareholders approved certain amendments to the Rights Plan including continuing the Shareholder Rights Plan until June 30, 2012. In December 2008, the Company’s Board of Directors amended the Rights Plan by extending the definition of “Permitted Bid” to include a bid by an entity which has confidential information about the Company that has executed a confidentiality and standstill agreement within three months prior to the commencement of the bid. The Rights Plan is intended to give adequate time for shareholders of the Company to properly assess the merits of a take-over bid without pressure and to allow competing bids to emerge. The Rights Plan is designed to give the Board of Director’s time to consider alternatives to allow shareholders to receive full and fair value for their common shares. One right is issued in respect of each outstanding share. The rights become exercisable only when a person, including any party related to it or acting jointly with it, acquires or announces its intention to acquire 20% or more of the Company’s outstanding shares without complying with the “permitted bid” provisions of the Rights Plan. Each right would, on exercise, entitle the holder, other than the acquiring person and related persons, to purchase Class A common shares of the Company at a 50% discount to the market price at the time.
16. Common Shares and Equity Units
During the three months ended March 31, 2010, the Company issued 111,666 shares at an average price of $0.29 per share upon exercise of stock options and 51,000 shares at an average price of $1.12 per share as compensation. As of March 31, 2010, there were a total of 57,857,663 Class A and 500,236 Class B shares issued.
During the three months ended March 31, 2009, the Company issued 551,500 shares at an average price of $0.71 per share as compensation. As of March 31, 2009, there were a total of 57,670,555 Class A and 500,236 Class B shares issued.
17. Convertible Notes
In May 2007, the Company issued $103,500,000 aggregate principal amount of its 5.50% Senior subordinated convertible notes. The notes are unsecured, bear interest at a rate of 5.50% annually, pay interest semi-annually in arrears and are due on June 15, 2022. The notes are convertible into Class A common shares of the Company at the initial conversion rate, subject to adjustment, of 132.626 shares per $1,000 principal amount (equivalent to a conversion price of $7.54). Upon conversion, the Company will have the option, unless there has occurred and is then continuing an event of default under the Company’s indenture, to deliver common shares, cash or a combination of common shares and cash for the notes surrendered.
The note holders have the option to require the Company to repurchase the notes on June 15, 2012, at a price equal to 100% of the principal amount of the notes plus accrued but unpaid interest. The Company may elect to satisfy its obligation to pay the repurchase price, in whole or in part, by delivering Common Shares. In the event of a change of control of the Company, the Company may be required to offer to repurchase the notes at a purchase price equal to 100% of the principal amount of the notes plus accrued but unpaid interest unless there has occurred and is continuing certain events of default under the Company’s indenture.
At any time on or after June 16, 2010, and until June 15, 2012, the Company may redeem the notes, in whole or in part, for cash at a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest if the closing sale price of the Common Shares is equal to or greater than 150% of the conversion price then in effect and the closing price for the Company’s Common Shares has remained above that price for at least twenty trading days in the period of thirty trading days preceding the Company’s notice of redemption. Beginning on June 16, 2012, the Company may, at its option, redeem all or part of the notes for cash at a redemption price equal to 100% of the principal amount being redeemed plus accrued and unpaid interest.
Canadian accounting standards require the Company to allocate the notes between their equity and debt component parts based on their respective fair values at the time of issuance. The liability component was computed by discounting the stream of future payments of interest and principal at the prevailing market rate for a similar liability that does not have an associated equity component. The equity portion of the notes was estimated using the residual value method at approximately $29 million, net of issuance costs. The fair value of the debt component is accreted to the face value of the notes using the effective interest rate method over the expected life of the notes, with the resulting charge recorded as interest expense. The expected life of the notes is an estimate and is subject to change, if warranted by facts and circumstances related to the potential early redemption of the notes by either the Company or the holders. Interest and accretion expense allocable to the qualifying cost of developing mining properties and to constructing new facilities is capitalized until assets are ready for their intended use. The Company capitalized interest and accretion on the notes until October, 2009, when the Company filed for arbitration and when the Venezuelan government expropriated Brisas. Thereafter all interest and accretion on the notes has been expensed.
As of March 31, 2010, convertible notes with a face value of $1,151,000 had been settled in cash or repurchased by the Company at a total cost of approximately $451,000.
18. Takeover Defense and Related Litigation
On December 15, 2008, Rusoro Mining Ltd. (Rusoro) commenced an unsolicited offer to acquire all of the outstanding shares and equity units of the Company in consideration for three shares of Rusoro for each Company share or equity unit. On December 16, 2008, the Company filed an action in the Ontario Superior Court of Justice against Rusoro and Rusoros financial advisor Endeavour Financial International Corporation (Endeavour) seeking an injunction restraining Rusoro and Endeavour from proceeding with Rusoros unsolicited offer, significant monetary damages, and various other items. Endeavour was the Companys financial advisor from 2004 until shortly after the commencement of Rusoros offer.
On February 10, 2009, the Ontario Superior Court of Justice granted an interlocutory injunction restraining Rusoro from proceeding with any hostile takeover bid to acquire the shares of the Company until the conclusion and disposition at trial of the action commenced by the Company. The injunction was granted by the Court following a motion by the Company on the basis that Rusoro had access to or benefited from the use of the Companys confidential information as a result of Rusoros relationship with Endeavour. The Court also issued an interlocutory injunction restraining Endeavour from having any involvement with a hostile takeover bid for the Company. The Court further required that Rusoro, Endeavour and their agents return to the Company both all the confidential information of the Company and also anything produced from that confidential information and pay the court costs. Following the issuance of the interlocutory injunctions, Rusoro withdrew its unsolicited offer to acquire the outstanding shares and equity units of the Company.
On February 15, 2009, Rusoro and Endeavour both served a motion with the Ontario Superior Court of Justice seeking permission to appeal to the Divisional Court the February 10, 2009 order that was granted against them. The Company opposed these motions which were heard in Toronto on April 2, 2009. On April 6, 2009 the permission to appeal was denied. Rusoro has filed a counterclaim against the Company for, among other things, damages of Cdn $102.5 million allegedly arising from the Companys successful motion for an interlocutory injunction. Endeavour has filed a $0.5 million counter claim against the Company relating to the lost opportunity to earn a success fee from the successful completion of the Rusoro offer.
The Company recently added two additional defendants and amended the claim for monetary damages. This amendment required a motion which has now been consented to by the new defendants counsel. The defendants have 60 days to file their defense.
19. Differences Between Canadian and U.S. GAAP
The Company prepares its consolidated financial statements in accordance with generally accepted accounting principles (GAAP) in Canada, which differ in certain respects from GAAP in the United States. The effect of the principal measurement differences between U.S. and Canadian GAAP are summarized below.
Consolidated Summarized Balance Sheets
Canadian GAAP Change U.S. GAAP
March 31, 2010
Assets
Current assets $ 77,275,885 $ $ 77,275,885
Property, plant and equipment, net 30,155,320 30,155,320
Other assets 8,995,701 8,995,701
$ 116,426,906 $ $ 116,426,906
Liabilities
Convertible notes C $ 94,485,747 $ 5,482,582 $ 99,968,329
Other liabilities 6,738,202 6,738,202
$ 101,223,949 $ 5,482,582 $ 106,706,531
Shareholders equity
Common shares & equity units B 248,016,755 (5,698,031) 242,318,724
Equity component of convertible notes C 28,652,785 (28,652,785)
Less, common shares & equity units
held by affiliates (636,267) (636,267)
Contributed surplus E 5,171,603 5,171,603
Stock options B 10,062,595 4,434,753 14,497,348
Accumulated deficit ,B,D (270,620,206) 19,261,878 (251,358,328)
Accumulated other comprehensive income (162,014) (162,014)
KSOP debt (110,691) (110,691)
15,202,957 (5,482,582) 9,720,375
$ 116,426,906 $ $ 116,426,906
Canadian GAAP Change U.S. GAAP
December 31, 2009
Assets
Current assets $ 72,303,141 $ $ 72,303,141
Property, plant and equipment, net 38,122,102 38,122,102
Other assets 9,489,777 9,489,777
$ 119,915,020 $ $ 119,915,020
Liabilities
Convertible notes C $ 93,693,168 $ 6,048,554 $ 99,741,722
Other liabilities 6,304,252 6,304,252
$ 99,997,420 $ 6,048,554 $ 106,045,974
Shareholders equity
Common shares & equity units B 247,905,231 (5,698,031) 242,207,200
Equity component of convertible notes C 28,652,785 (28,652,785)
Less, common shares & equity units
held by affiliates (636,267) (636,267)
Contributed surplus E 5,171,603 5,171,603
Stock options B 10,014,136 4,434,753 14,448,889
Accumulated deficit B,D (265,630,369) 18,695,906 (246,934,463)
Accumulated other comprehensive income (277,225) (277,225)
KSOP debt (110,691) (110,691)
19,917,600 (6,048,554) 13,869,046
$ 119,915,020 $ $ 119,915,020
Consolidated Summarized Statements of Operations
2010 2009
Net Loss under Canadian GAAP $ (4,989,837) $ (3,711,206)
Interest expense D 565,972
Gain on settlement of debt C (47,429)
Income tax A (69,455)
Net loss under U.S. GAAP (4,423,865) (3,828,090)
Other comprehensive income (loss)
Unrealized gain on available-
for-sale securities: A
Holding gain arising during period 221,762 204,280
Reclassification adjustment for gain
included in net loss (106,551)
Total comprehensive loss under
U.S. GAAP $ (4,308,654) $ (3,623,810)
Basic and diluted net loss per share
under U.S. GAAP $ (0.08) $ (0.07)
Consolidated Summarized Statements of Cash Flows
2010 2009
Cash flow used in operating activities
under Canadian GAAP $ (4,061,181) $ (6,301,478)
Cash flow used in operating activities
under U.S. GAAP $ (4,061,181) $ (6,301,478)
Cash flow provided by (used in) investing
activities under Canadian GAAP $ 4,049,334 $ (2,936,015)
Cash flow provided by (used in) investing
activities under U.S. GAAP $ 4,049,334 $ (2,936,015)
A Effective September 30, 2008, the Company adopted EIC 172, which requires that the tax benefit of tax loss carryforwards recognized to offset unrealized gains in other comprehensive income, such as unrealized gains on available-for-sale securities, be recognized in net income (loss). EIC 172 was applied retrospectively with restatement of prior periods from January 1, 2007. Under US GAAP, the tax benefit is recorded in other comprehensive income.
B For U.S. GAAP purposes, the Company adopted SFAS 123R (codified within ASC 718), Accounting for Stock Based Compensation effective January 1, 2006. SFAS 123R requires the use of the fair value method of accounting for stock based compensation. This standard is substantially consistent with the revised provisions of CICA 3870, which was adopted by the Company for Canadian GAAP effective January 1, 2004. For U.S.GAAP, the Company applied the modified prospective method of adoption included in SFAS 123R which requires that the company expense the fair value of all unvested and new grants on a prospective basis beginning January 1, 2006. In 2005, for U.S. GAAP purposes, the Company accounted for stock-based employee compensation arrangements using the intrinsic value method prescribed in Accounting Principles Board (APB) Opinion No.25, Accounting for Stock Issued to Employees. Under Opinion No. 25, when the exercise price of certain stock options is amended, these options are accounted for as variable compensation from the date of the effective repricing. Under this method, following the repricing date, compensation expense is recognized when the quoted market value of the Companys common shares exceeds the amended exercise price. Should the quoted market value subsequently decrease, a recovery of a portion, or all of the previously recognized compensation expense will be recognized. The Company has not amended the exercise price of any stock options since 2001.
C In 2007, the company issued $103,500,000 aggregate principal amount of convertible notes. As described in Note 17, under Canadian GAAP these notes are allocated between their equity and debt component parts. The debt component is accreted to the face value of the notes with the resulting interest expense charged to operations. Under U.S. GAAP, the notes are classified as a liability net of issuance costs and accreted to face value over the term ending on the first put date of the notes. As of March 31, 2010 and December 31, 2009, an additional $23.2 million and $22.6 million, respectively of accretion expense had been incurred for Canadian GAAP purposes over the amount incurred under U.S. GAAP.
D Prior to the Brisas expropriation and related arbitration filing, the Company capitalized interest on its convertible notes on an interest avoidance basis. The amount capitalized during an accounting period is determined by applying an interest rate to the average amount of accumulated qualifying assets during the period. The Companys qualifying assets include its costs of developing mining properties and constructing new facilities. The amount capitalized under U.S. GAAP differed from the amount capitalized under Canadian GAAP due to the difference in the amount of qualifying mineral property costs which had been accumulated under the two sets of accounting principles. Subsequent to the expropriation of the Brisas Project, all capitalized interest was written off.
E In 2003 and 2004, the Company completed equity offerings consisting of common shares and common share purchase warrants. For Canadian GAAP purposes the proceeds from the offerings were recorded as common shares. For U.S. GAAP purposes a value was assigned to the warrants and recorded as a separate element of stockholders equity. Warrants that expired unexercised were subsequently recorded as contributed surplus.
Additional Balance Sheet disclosure - U.S. GAAP
2010 2009
Accounts payable $ 1,683,499 $ 2,531,523
Accrued expenses 1,138,411 1,258,480
Accounts payable and accrued expenses $ 2,821,910 $ 3,790,003
20. Subsequent Event
In April 2010, the Company sold certain mining equipment that had been manufactured for use on the Brisas project. The equipment had a carrying value of approximately $4.6 million and the company recorded a gain on sale of approximately $0.3 million.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.