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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2003
GOLD RESERVE INC.
Commission file number 000-30102
Address Of Principal Executive Offices:
926 West Sprague Avenue
Suite 200
Spokane, Washington 99201
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned
to the registrant in connection with Rule 12g3-2(b):
GOLD RESERVE INC.
September 30, 2003
Interim Financial Report
U.S. Dollars
Forward Looking Statements
The information presented or incorporated by reference in this interim
report, including managements discussion and analysis of financial condition
and results of operations, contains both historical information and
forward-looking statements (within the meaning of Section 27A of the United
States Securities Act of 1933, as amended (the Securities Act), and Section
21E of the United States Securities Exchange Act of 1934, as amended (the
Exchange Act)). These forward-looking statements involve risks and
uncertainties, as well as assumptions that, if they never materialize, prove
incorrect or materialize other than as currently contemplated, could cause
the results of the Company and its consolidated subsidiaries to differ
materially from those expressed or implied by such forward-looking statements.
Numerous factors could cause actual results to differ materially from those
in the forward-looking statements, including without limitation the risk that
actual reserves may vary considerably from estimates presently made, the
impact of currency, metal prices and metal production volatility, the
concentration of operations and assets in Venezuela, the regulatory,
political and economic risks associated with Venezuelan operations, our
ability to obtain additional funding for future advancement of the Brisas
property, our dependence upon the abilities and continued participation of
certain key employees, and the risks normally incident to the operation and
development of mining properties.
The words "believe," "anticipate," "expect," "intend," "estimate," "plan,"
"assume," "positioned," "may," "will," "could" and other similar expressions
that are predictions of or indicate future events and future trends which do
not relate to historical matters, identify forward-looking statements. Any
such forward-looking statements are not intended to give any assurances as to
future results.
Investors are cautioned not to put undue reliance on forward-looking
statements, and should not infer that there has been no change in the affairs
of the Company since the date of this report that would warrant any
modification of any forward-looking statement made in this document, other
documents filed periodically with securities regulators or documents
presented on our Company website. All subsequent written and oral forward-
looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this notice. The Company
disclaims any intent or obligation to update publicly these forward-looking
statements, whether as a result of new information, future events or
otherwise.
Investors are urged to read the Company's filings with U.S. and Canadian
regulatory agencies, which can be viewed on-line at www.sec.gov,
www.sedar.com or at the Company's website, www.goldreserveinc.com.
Additionally, you can request a copy directly from the Company.
Operations Overview
The Company's Brisas property, a gold and copper deposit, is located in the
Kilometer 88 mining district in the State of Bolivar, southeastern Venezuela.
The in-pit mineral reserves on the Brisas property utilizing the Cominco
Engineering Services Limited (CESL) process and a traditional smelter process
for treating copper concentrates are estimated at 7.5 million ounces of gold
and approximately 1.1 billion pounds of copper and 6.6 million ounces of gold
and approximately 764 million pounds of copper, respectively. The identified
mineralization is contained within an area approximately 1,900 meters long
and 500 to 900 meters wide and continues for an unknown distance down dip to
the west, to the north and south and below the current mineralized deposit.
Based on a pre-feasibility study and previous reserve estimates, the
anticipated mining and processing facility was to process an estimated 50,000
tonnes per day, yielding an average annual production of approximately 362,000
ounces of gold and 46 million pounds of copper. The proposed mining facility,
as it presently exists, includes on-site copper processing utilizing an
autoclave for pressure oxidation of the concentrates followed by a series of
leaching sequences to recover the copper and gold. Construction of a mining
facility at the Brisas property is estimated to cost approximately $353
million (including working capital of approximately $19.5 million).
Construction of a mining facility, if warranted, would take 18 to 24 months.
The Company has selected an engineering firm to complete a bankable
feasibility study. The feasibility study will update the pre-feasibility cash
operating and total costs per ounce utilizing current reserve estimates. Using
previously completed reserve estimates that were based on Gold Institute
guidelines and the assumptions included in the pre-feasibility study, cash
operating costs were estimated at $153 per ounce of gold (using $300 per
ounce gold, $0.90 per pound copper and on-site copper processing) and total
after-tax costs were estimated at $243 per ounce of gold (including operating
costs, working capital, initial capital and life of mine capital less sunk
costs). Estimated cost per ounce of gold is determined net of copper
revenues. Actual production rates, cost of production and capital
requirements are likely to vary from present estimates based on the results
of the final feasibility study.
Brisas Project
During the first quarter of 2003, MEM (Ministry of Energy and Mines) approved
an operating plan for the alluvial and hardrock ore and project infrastructure
for the Brisas project. Based on this operating plan, the Company is preparing
an updated and expanded EIS for the larger project. The Brisas project is
located in the Imataca Forest Reserve ("Imataca") within an area previously
set aside for mining. In 1997 the Supreme Court issued a preventive measure
that no new mining concessions or rights could be granted in the Imataca.
Subsequent to the Supreme Court order, MEM granted the Company the hardrock
exploitation concession based on the fact that Brisas is located in the area
previously approved for mining within the boundary of the Imataca. Prior to
the granting of the hardrock concession and subsequent to the Supreme Court
order, the Company had submitted to MEM and MARNR (Ministry of Environment)
several concession and permit applications related to the Brisas project.
Although MEM has approved the operating plan for the Brisas property, these
applications are currently pending the resolution of the Imataca matter.
Exploitation activities including preparations for production activities are
typically required to commence within two years from the approval of the
operating plan, but MEM representatives have indicated that any delay in the
resolution of the Imataca matter further delays any obligation required of
the concession and/or contract holder. MEM and MARNR are presently holding
public meetings and have indicated that the Imataca issue is expected to be
resolved during the next six months.
In March 2003, Behre Dolbear & Company, Inc. (Behre Dolbear) of Denver,
Colorado commenced a mine reserve analysis for the Company's Brisas
gold/copper project. This study was completed in August 2003 and included
separate reserve analysis for the CESL process, as well as, a conventional
smelter process case. The results of the reserve analyses, which are
discussed elsewhere in this document, will be utilized in the completion of
the final feasibility study. Behre Dolbear also recommended that the Company
complete additional drilling which could potentially expand the mineral
reserves.
In May 2003, a mining contractor was engaged to extract a 600-700 tonne bulk
sample from the Brisas gold/copper project for a large scale CESL test. The
material will be processed into a gold-copper concentrate at SGS Lakefield
Research Limited in Canada and then transported to CESL in Vancouver. This
test is designed to provide the necessary data to complete the CESL portion
of the final feasibility study. The immediate advantage of the CESL process
is an improved return on payable metal and elimination of significant
transportation costs for the gold-copper concentrate to an out-of-country
smelter. In early November the shaft to obtain the underground bulk sample
had reached total depth and horizontal drifting commenced. The Company
expects to ship the ore sample to Canada before year-end.
In November 2003, the Company commenced a drilling program at the Brisas
gold-copper project. The drill program is expected to utilize two drill rigs
for 33 core holes totaling approximately 11,500 meters, at a cost of
approximately US $700,000. The drilling will occur primarily in the down dip
extension and southern extension of the ore body and also in a high-grade
zone southeast of the existing pit design. The current drill program is
expected to increase the Company's mineral reserves.
Also in November 2003, the Company selected Kvaerner U.S. Inc., a subsidiary
of the international engineering and construction services group Aker
Kvaerner, to complete the bankable feasibility study for the construction and
operation of the Brisas gold-copper project. The study contemplates the
previously discussed 50,000 tonne per day conventional milling facility
utilizing two primary cases to be evaluated for a 2004 production decision.
The base case will be a conventional gold-copper mill with a secondary
circuit utilizing the CESL gold-copper process, producing dore gold and
cathode copper on-site. The other case will be a conventional gold-copper
mill that will produce a copper concentrate for processing by an off-site
smelter. Other processing alternatives and optimization studies will also be
conducted as part of the final feasibility study. Vector Colorado LLC and
Pincock Allen & Holt will participate in the completion of the Brisas
feasibility study.
In addition to these activities, environmental studies as well as permitting
are required to complete the final feasibility study. The need for and the
timing of additional activities are subject to, among other things, the
results of the CESL test, typical environmental and regulatory permits as
well as the scheduling of third party consultants and contractors and any
additional information required by third parties for the completion of the
feasibility study.
Reserve Estimate Audits
Management, in accordance with the disclosure requirements of applicable
Canadian and U.S. Securities Commissions, has prepared the mineral reserve
and resource estimates set forth in this document. The definitions related to
reserves, used herein, are pursuant to Canadian National Instrument 43-101;
Standards of Disclosure for Mineral Projects, which management believes are
substantially the same as those definitions used in the U.S. Securities and
Exchange Commission Industry Guide 7. The qualified persons involved in the
property evaluation and the resource and reserve estimates are Dr. Qingping
Deng, C.P.Geol. of AIPG and Ing. Baltazar Salano Rico of Behre Dolbear. In
addition, Brad Yonaka a geological consultant for Gold Reserve was involved
in the geologic analysis.
Behre Dolbear & Company, Inc. ("Behre Dolbear") has performed various audits
of the Brisas data compiled by the Company. Behre Dolbear concluded from
their audits that: technical data collection procedures met or exceeded
accepted industry standards; assay laboratories provided reliable and
acceptable results; and the compiled database was of a quality appropriate
for utilization in a mineral reserve study suitable for obtaining financing.
Further, Behre Dolbear has advised Gold Reserve that it has an adequate basis
for supporting the estimated mineral reserves at the Brisas project in
accordance with Canadian National Instrument 43-101, Standards of Disclosure
for Mineral Projects as well as the standards contained in the U.S.
Securities and Exchange Commission Industry Guide 7.
Mineral Reserve Estimate
CESL PROCESS
The Brisas property in-pit mineral reserve estimate utilizing the CESL
process for treating copper concentrate is estimated to contain approximately
328.5 million tonnes with an average grade of 0.708 grams of gold per tonne
and 0.15% copper with a waste to ore ratio of 1.80:1. The reserve was
calculated using an average gold and copper price of $325 per ounce and $0.85
per pound, respectively. The August 2003 mineral reserve is summarized in the
following tables:
Reserve Au Cu Waste Total
tonnes Au grade Cu grade ounces pounds tonnes tonnes Strip
Class (thousands) (g/t) (%) (thousands) (millions) (thousands) (thousands) Ratio
- -----------------------------------------------------------------------------------------------
Proven 224,174 0.770 0.132 5,547 650
Probable 104,288 0.575 0.188 1,928 433
- -----------------------------------------------------------------------------------------------
Total 328,462 0.708 0.150 7,475 1,083 591,722 920,184 1.80
===============================================================================================
SMELTER PROCESS
The Brisas property in-pit mineral reserve estimate utilizing a traditional
smelter process for treating copper concentrate off-site is estimated to
contain approximately 256.6 million tonnes of mineral reserves with an
average grade of 0.805 grams of gold per tonne and 0.135% copper with a waste
to ore ratio of 2.19:1. The reserve was calculated using an average gold and
copper price of $325 per ounce and $0.85 per pound, respectively. The August
2003 mineral reserve is summarized in the following tables:
Reserve Au Cu Waste Total
tonnes Au grade Cu grade ounces pounds tonnes tonnes Strip
Class (thousands) (g/t) (%) (thousands) (millions) (thousands) (thousands) Ratio
- -----------------------------------------------------------------------------------------------
Proven 193,685 0.841 0.124 5,237 528
Probable 62,930 0.694 0.170 1,404 236
- -----------------------------------------------------------------------------------------------
Total 256,615 0.805 0.135 6,641 764 562,579 819,194 2.19
===============================================================================================
Mineral Resource Estimates
CESL PROCESS
The Brisas property, using the CESL process for treating copper concentrates,
is estimated to contain a measured and indicated mineral resource of 9.9
million ounces of gold and approximately 1.4 billion pounds of copper (based
on 0.4 gram per tonne gold equivalent cut-off). The August 2003 measured and
indicated mineral resource for the CESL process, which includes the mineral
reserve, is summarized in the following tables:
Measured/Indicated
(kt= 1,000 tonnes) Measured Indicated Combined
- ----------------------------------------------------------------------------------------------
Au Eq
Cutoff Au Cu Au Cu Au Cu
Grade kt (g/t) (%) kt (g/t) (%) kt (g/t) (%)
- ----------------------------------------------------------------------------------------------
0.40 273,013 0.73 0.119 194,573 0.557 0.16 467,586 0.658 0.136
==============================================================================================
Measured/Indicated
(millions) Measured Indicated Combined
- ----------------------------------------------------------------------------------------------
Au Eq
Cutoff Au Cu Au Cu Au Cu
Grade oz. lb. oz. lb. oz. lb
- ----------------------------------------------------------------------------------------------
0.40 6.405 717 3.484 687 9.889 1,404
==============================================================================================
The inferred mineral resource for the CESL process (based on 0.4 gram per
tonne equivalent cut-off) is estimated at 93.1 million tonnes of 0.56 grams
gold per tonne and 0.14 percent copper, or 1.67 million ounces of gold and
282 million pounds of copper.
SMELTER PROCESS
The Brisas property, using a traditional smelter process for treating copper
concentrates off-site, is estimated to contain a measured and indicated
mineral resource of 9.5 million ounces of gold and approximately 1.2 billion
pounds of copper (based on 0.4 gram per tonne gold equivalent cut-off). The
August 2003 measured and indicated mineral resource for a traditional smelter
process, which includes the mineral reserve, is summarized in the following
tables:
Measured/Indicated
(kt= 1,000 tonnes) Measured Indicated Combined
- ----------------------------------------------------------------------------------------------
Au Eq
Cutoff Au Cu Au Cu Au Cu
Grade kt (g/t) (%) kt (g/t) (%) kt (g/t) (%)
- ----------------------------------------------------------------------------------------------
0.40 252,227 0.769 0.117 162,264 0.625 0.155 414,491 0.712 0.132
==============================================================================================
Measured/Indicated
(millions) Measured Indicated Combined
- ----------------------------------------------------------------------------------------------
Au Eq
Cutoff Au Cu Au Cu Au Cu
Grade oz. lb. oz. lb. oz. lb
- ----------------------------------------------------------------------------------------------
0.40 6.233 649 3.258 554 9.491 1,203
==============================================================================================
The inferred mineral resource for the smelter process (based on 0.4 gram per
tonne equivalent cut-off) is estimated at 77.2 million tonnes of 0.64 grams
gold per tonne and 0.12 percent copper, or 1.58 million ounces of gold and
205 million pounds of copper
Financial Overview
Overview
We prepare our consolidated financial statements in U.S. Dollars in
accordance with accounting principles generally accepted in Canada. The
Company has not recorded revenue or cash flow from mining operations and has
experienced losses from operations for each of the last five years, a trend
we expect to continue until the Brisas property is put into production. The
information contained herein should be read in conjunction with the Company's
consolidated financial statements, included herein.
Venezuela has experienced high levels of inflation during the last several
years and has also most recently experienced political instability and civil
unrest (including a national work stoppage and a number of civil
disturbances), fuel shortages, currency and exchange controls, and a decline
in industrial output and foreign investment. Despite this political and
economic turmoil, we have not experienced any significant adverse impact on
our operations in Venezuela nor have we curtailed our investment activities
in the country. However, our future operations and investments in Venezuela
could be adversely affected by continued political instability and civil
unrest, as well as, exchange controls, currency fluctuations, political
instability, changes in mining laws or regulations, taxation, judicial
decisions and laws or policies of Venezuela and the United States affecting
trade, investment, taxation and other factors.
The total financial resources of the Company, cash plus current and
non-current marketable securities, increased $7.8 million from December 31,
2002 to approximately $20.4 million as of September 30, 2003 (unaudited):
September 30, December 31,
2003 2002
- ----------------------------------------------------------------------
Cash and equivalents $ 11,829,946 $ 1,584,632
Marketable securities - current 7,758,055 10,945,768
Marketable securities - non-current 766,327
- ----------------------------------------------------------------------
$ 20,354,328 $ 12,530,400
======================================================================
Consolidated net loss for the three and nine months ended September 30, 2003
amounted to $809,276 and $2,074,145 or $0.03 and $0.09 per share compared to
consolidated net loss of $643,273 and $2,248,257 or $0.03 and $0.10 per share
for the same periods in 2002. The decrease in net loss from the comparable
nine-month period results primarily from a decrease in foreign currency loss.
On September 26, 2003, the company completed a private placement financing of
4,042,000 units at Canadian $3.50 per unit. Each unit consists of one Common
Share and one half Common Share Purchase Warrant. Each whole Common Share
Purchase Warrant entitles its holder to acquire one Common Share at a price
of Canadian $5.25 for a period of 18 months following the closing of the
private placement. The net proceeds of the private placement amounted to
approximately US$ 9.6 million. The Company had no significant investing
activities during the nine months ended September 30, 2003, other than
investments in marketable securities, which, on a net basis, totaled
approximately $2.4 million in sales and maturities of marketable securities.
Planned corporate expenditures for 2003, excluding the amounts that may be
expended for the completion of the feasibility study on the Brisas property
and other exploration as noted below, are estimated at $3.0 million. Interest
and investment income for 2003 is projected to be approximately $0.8 million.
On October 3, 2003 the Company's common shares were approved for listing on
the American Stock Exchange ("AMEX") under the ticker symbol GRZ. Concurrent
with the commencement of trading on the AMEX, The Toronto Stock Exchange
changed the Company's trading symbol to GRZ. Trading on the NASD, OTC BB was
discontinued at the close of market on Thursday, October 2, 2003.
We expect the activities related to the completion of final feasibility and
engineering to cost approximately $7 million. We plan on completing the final
feasibility in 2004, although the timing of these activities are subject to,
among other things, typical environmental and regulatory permits as well as
the scheduling of third party consultants and contractors. As a result, we
cannot say with certainty if the final feasibility study will be completed in
2004.
As of November 25, 2003, the Company held approximately $20 million in cash
and investments. In the near- term management believes that current cash and
investment balances are sufficient to allow the Company to fund its
activities through 2004. The Brisas property mining facility, as presently
proposed in the Brisas preliminary feasibility study, is estimated to cost
$353 million over an 18 to 24 month construction period. The ultimate design
and cost of the plant and associated expenditures are subject to the results
of a final feasibility study and would be expected to vary to some degree
from original estimates.
Future production of gold and copper on the Brisas property is dependent
upon, among other things, the price of gold and copper, obtaining adequate
financing, and obtaining the appropriate environmental and operating permits.
Management can provide no assurances that it will be able to acquire the
required significant additional financing that will be needed, if and when,
construction on the Brisas project commences. Failure to raise the required
funds will impede the Company's ability to construct and operate the Brisas
project and would, in the long-term, have a material adverse effect on the
Company.
The Bolivar/Dollar exchange rate ended 2002 at Bs. 1,403 to the Dollar, up
Bs. 645 (85%) from December 2001. In February 2002, a free-floating exchange
rate system was established, with the Venezuelan Central Bank acting as the
main foreign currency seller. During the first quarter of 2003, the exchange
rate was fixed at Bs. 1,600 to the Dollar.
As of November 25, 2003, the Company had the following shares, equity units,
warrants and share options issued:
Class A common 27,355,258
Equity units* 1,237,880
Warrants to purchase Class A common shares 2,021,000
Options to purchase Class A common shares 3,339,124
*An equity unit consists of one class B common share of Gold Reserve Inc. and
one class B common share of Gold Reserve Corporation. Equity units are
convertible into Class A common shares of Gold Reserve Inc. on a one
to one basis.
CONSOLIDATED BALANCE SHEETS
September 30, 2003 (unaudited) and December 31, 2002
September 30, December 31,
U.S. Dollars 2003 2002
- -------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 11,829,946 $ 1,584,632
Marketable securities 7,758,055 10,945,768
Deposits, advances and other 386,084 348,798
Accrued interest 83,457 148,893
- -------------------------------------------------------------------------------
Total current assets 20,057,542 13,028,091
- -------------------------------------------------------------------------------
Property, plant and equipment, net 46,130,956 46,144,396
Marketable securities 766,327
Other 613,441 670,036
- -------------------------------------------------------------------------------
Total assets $ 67,568,266 $ 59,842,523
===============================================================================
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 468,620 $ 350,261
- -------------------------------------------------------------------------------
Total current liabilities 468,620 350,261
Minority interest in consolidated subsidiaries 1,102,520 1,080,241
- -------------------------------------------------------------------------------
Total liabilities 1,571,140 1,430,502
SHAREHOLDERS' EQUITY
Serial preferred stock, without par value
Common shares and equity units, without par value 112,157,321 102,498,071
Less, common shares held by affiliates (674,598) (674,598)
Accumulated deficit (45,420,813) (43,346,668)
KSOP debt (64,784) (64,784)
- -------------------------------------------------------------------------------
Total shareholders' equity 65,997,126 58,412,021
- -------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 67,568,266 $ 59,842,523
===============================================================================
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 and Nine Months Ended September 30, 2003 and 2002 (unaudited)
Three Months Ended Nine Months Ended
U.S. Dollars 2003 2002 2003 2002
- --------------------------------------------------------------------------------
OTHER INCOME
Interest $145,664 $167,040 $467,363 $477,219
Gain (loss) on sale of
marketable securities (6) 11,800 (4,254)
- --------------------------------------------------------------------------------
145,664 167,034 479,163 472,965
EXPENSES
General and administrative 365,513 376,381 970,192 921,301
Technical services 507,807 326,922 1,133,892 1,030,683
Corporate communications 105,885 58,407 303,182 215,279
Legal and accounting 9,725 6,733 107,902 97,897
Foreign currency (gain) loss (41,409) 32,999 15,861 435,021
Minority interest in net income
of consolidated subsidiaries 7,419 8,865 22,279 21,041
- --------------------------------------------------------------------------------
954,940 810,307 2,553,308 2,721,222
- --------------------------------------------------------------------------------
Net loss $(809,276) $(643,273) $(2,074,145)$(2,248,257)
================================================================================
Net loss per share $(0.03) $(0.03) $(0.09) $(0.10)
================================================================================
Weighted average common
shares outstanding 23,673,135 23,273,564 23,553,556 23,272,816
================================================================================
CONSOLIDATED STATEMENTS OF DEFICIT
For the Nine Months Ended September 30, 2003 and 2002 (unaudited)
U.S. Dollars
Deficit, December 31, 2002 $(43,346,668)
Net loss (2,074,145)
- ----------------------------------------------------------------
Deficit, September 30, 2003 $(45,420,813)
================================================================
Deficit, December 31, 2001 $(40,338,546)
Net loss (2,248,257)
- ----------------------------------------------------------------
Deficit, September 30, 2002 $(42,586,803)
================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Nine Months Ended September 30, 2003 and 2002 (unaudited)
Three Months Ended Nine Months Ended
U.S. Dollars 2003 2002 2003 2002
- ------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net loss $(809,276) $(643,273) $(2,074,145) $(2,248,257)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Depreciation 10,992 12,294 33,369 47,352
Amortization of premium on
marketable securities 22,993 33,865 68,211 76,341
Foreign currency (gain) loss (41,409) 32,999 15,861 435,021
Minority interest in net income
of consolidated subsidiaries 7,419 8,865 22,279 21,041
Net (gain) loss on sale
of marketable securities 6 (11,800) 4,254
Shares issued for compensation
and KSOP 30,000
Changes in non-cash working capital:
Net decrease (increase) in deposits,
advances and accrued interest (26,259) (22,569) 28,150 (84,957)
Net (decrease) increase in accounts
payable and accrued expenses 191,547 5,313 118,359 (67,668)
- ------------------------------------------------------------------------------------------
Net cash used by operating activities (643,993) (572,500) (1,799,716) (1,786,873)
- ------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from the sale and maturity
of marketable securities 2,000,000 199,994 6,851,300 7,413,246
Purchase of marketable securities (1,300,718)(2,281,800) (4,486,325) (9,408,410)
Purchase of property, plant
and equipment (14,928) (543) (19,929) (6,235)
Other 31,632 (4,536) 40,734 95,266
- ------------------------------------------------------------------------------------------
Net cash provided (used) by
investing activities 715,986 (2,086,885) 2,385,780 (1,906,133)
- ------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from the issuance of
common shares 9,659,250 10,800 9,659,250 12,960
- ------------------------------------------------------------------------------------------
Net cash provided by financing activities 9,659,250 10,800 9,659,250 12,960
- ------------------------------------------------------------------------------------------
Change in Cash and Cash Equivalents:
Net increase (decrease) in cash
and cash equivalents 9,731,243 (2,648,585) 10,245,314 (3,680,046)
Cash and cash equivalents -
beginning of period 2,098,703 4,733,204 1,584,632 5,764,665
- ------------------------------------------------------------------------------------------
Cash and cash equivalents -
end of period 11,829,946 $2,084,619 $11,829,946 $2,084,619
==========================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
Selected Notes To Consolidated Financial Statements For the Nine Months Ended
September 30, 2003 and 2002 (unaudited) Expressed in U.S. Dollars
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
Canada for interim financial information. Accordingly, they do not include
all of the information and footnotes required by accounting principles
generally accepted in Canada for complete financial statements.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of Gold Reserve Inc. and subsidiaries (the "Company") as
of September 30, 2003, and the results of operations and the cash flows for
the nine months ended September 30, 2003 and 2002. The results of operations
for the nine months ended September 30, 2003 and 2002 are not necessarily
indicative of the results to be expected for the full year.
These financial statements follow the same accounting policies and methods of
their application as the most recent annual financial statements and should be
read in conjunction with the consolidated financial statements including notes
thereto included in the Company's 2002 annual report.
2. Geographic Segments
Net Loss for the Three and Nine Months Ended September 30, 2003 and 2002
Three Months Ended Nine Months Ended
2003 2002 2003 2002
- ----------------------------------------------------------------------------
United States $331,511 $292,110 $962,499 $880,323
Venezuela 477,765 351,163 1,111,646 1,367,934
- ----------------------------------------------------------------------------
Consolidated $809,276 $643,273 $2,074,145 $2,248,257
============================================================================
3. Share Option Plan:
The Company's Equity Incentive Plan (the "Plan") allows for the granting of
common share purchase options to officers, directors and key individuals for
terms of up to ten years. The vesting period of options ranges from
immediately to up to three years. There were 598,641 options remaining for
future grants at September 30, 2003. Share option transactions for the nine
months ended September 30, 2003 and 2002 are as follows:
2003 2002
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
- --------------------------------------------------------------------------
Options outstanding at
beginning of period 3,368,549 $0.80 3,421,950 $ 0.81
Options exercised (55,000) $0.73 (18,000) $ 0.72
Options canceled (50,901) $ 1.21
Options granted 128,075 $1.56 15,500 $ 1.10
- --------------------------------------------------------------------------
Options outstanding at
end of period 3,441,624 $0.83 3,368,549 $ 0.80
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Options exercisable at
end of period 3,299,320 $0.81 3,310,217 $ 0.80
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Price Price
Range Range
Exercise price at
end of period $ 0.50 - $ 1.58 $ 0.50 - $ 1.50
Exercise price for
exercisable shares $ 0.50 - $ 1.58 $ 0.50 - $ 1.50
Effective January 1, 2002, the Company adopted the requirements of the new
Canadian Institute of Chartered Accountants standard concerning the
accounting for stock-based compensation. No compensation expense is
recognized if the exercise price of the stock options at date of grant is
equal to market value.
The Company elected not to adopt the fair value method of accounting for
stock options. Had the fair value method of accounting been followed, the
Company would have recorded additional compensation expense of $152,337
and $12,993 for the nine months ended September 2003 and 2002, respectively.
The fair value of the options granted was calculated using the Black-Scholes
model assumimg a risk free interest rate of 4%, expected life of five years,
expected volatility of 100%, and a dividend yield of nil. The effect of such
adjustment on proforma basic and diluted net loss per share would have been
nil for the nine months ended September 30, 2003 and 2002, respectively.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLD RESERVE INC.
By: s/ Robert A. McGuinness
Vice President Finance & CFO
November 25, 2003