Some USCA Facts

[Franko10 ™]

Some USCA Facts

INVESTMENTS IN JOINT VENTURES AND BUSINESS COMBINATIONS
On January 20, 2004, the Company entered into a joint venture agreement with Nevada Minerals, Inc. to develop up to 500,000 acres of potential Kimberlite mineral property located in Canada. The Company issued 5,000,000 restricted shares of its common stock to acquire the underlying rights to Kimberlite property. Under the joint venture agreement the Company shall be entitled to receive 20% of the revenue generated from the property. The value of this transaction approximates $5,175,000 based upon the fair value of the said shares on the consummation of such agreement. Additional costs paid by the Company totaling $300,000 for the exploration of the property have also been capitalized as costs of maintaining mineral rights.

On February 23, 2004, the Company entered into joint venture agreement with Juina Mining Corporation (Juina) to acquire controlling voting interest in Juina's capital stock in exchange for $200,000. On March 28, 2004, a promissory note for $84,000 was signed (and subsequently paid in July 2004) and $116,000 was transferred to Juina in exchange for 10,000,000 newly issued shares of Juina preferred stock, resulting in a controlling interest in Juina. The preferred stock bears a voting conversion rate of 8 to 1, which was used as collateral for the promissory note. Subsequently, the Company converted its Juina preferred shares to 1,250,000 common shares.

On March 22, 2004, Juina Mining issued 5,000,000 of its restricted common shares to acquire 80% of the issued and outstanding shares of Yellow River Mining Corporation in a transaction valued at $150,000 based upon the estimated fair value of Juina shares on the date of acquisition. Yellow River is an active mine with unproven reserves and is currently not producing significant amounts of revenue. The Company anticipates using proceeds from subsequent offerings to construct and improve mining facilities at Yellow River. On July 28, 2004 the Company issued 50,000 shares of common stock to purchase this interest from Juina Mining.

The acquisition of Juina and Yellow River consisting almost entirely of mineral rights in Yellow River have been accounted for as purchase method business combinations in which the assets have been recorded at fair value based upon the value of the consideration given. Using the concept of "full costing" accounting, costs incurred to acquire, explore and develop the properties were capitalized as incurred prior to commencement of significant extraction, at which time costs will be amortized. Management estimates that the capitalized costs do not exceed the value of these reserves. The restricted shares issued by Juina for Yellow River resulted in a minority interest of $150,000 representing the only value in Juina for Yellow River not owned by the Company. No other minority interest has been recorded prior to the Yellow River acquisition since the minority shareholders' interest in prior Juina losses exceeded their investment.

In March 2004, the Company issued 50,000 shares if restricted common stock for 100% of the issued and outstanding shares of Nevada Magnetic Minerals (NMM). NMM owns mineral rights to real property located in Nevada and was previously engaged in the business of processing raw ore into anode bars, which can be transported for further processing into gold bullion. At the date of acquisition, NMM's assets were of insignificant value and had not been involved in active operations for some time. The acquisition has been accounted for as a business combination and the fair value of the underlying assets was determined to be nominal resulting in mineral rights valued at $206,250.
On May 11, 2004, the Company entered into a joint venture-agreement with El Capitan Precious Metals Inc. to acquire an 80% ownership of mining claims located in Arizona. The Company was required to contribute 720,000 shares of its common stock to acquire the mining rights. The value of this transaction approximates $1,539,000 based upon the fair value of said shares on the consummation of such agreement. The joint venture agreement entitles the Company to receive 50% of the anticipated profits from tailings and settlement ponds and gives the Company the obligation to provide operating capital for the first 90 days of operation, which it has commenced. After this period, the joint venture partner (operator) bears the risk of excess losses and liability.

The reserves for which the Company obtained mineral rights through the El Capitan joint venture agreement are "proven or probable" that is, the Company has been provided an outside commercial appraisal of the estimated value of the property "as is" for $5,000,000. The estimated reserves at March 2001 were estimated to yield ground values approximately $138,000,000 and eventual recovery of $120,000,000 in revenues. These estimates were based on gold (22% of total values), silver (28.4%), lead (15.5%) Zinc (25.0%), as well as copper (4.0%) prices at February 27, 2001. The Company has not obtained an appraisal since March 2001. The reserves are purported to have not been depleted since the date of appraisal. No minerals were produced during the nine months ended September 30, 2004.

The Emerging Issues Task Force (EITF) has reached a consensus that mineral rights are tangible assets (EITF Issue No. 04-2). The guidance in the EITF to be applied to reporting periods beginning after April 29, 2004. The Company has elected early application of this guidance.
The Company's management will evaluate expected future cash flow and other factors relating to the determination of fair value of its mineral rights on a periodic basis. The Company's policy is to record any impairment of value based on these evaluations in the most recent statement of operations.
In connection with the option to receive a 25% interest in the mineral claims of United Carina Resources Corp. ("UCRC"), the Company is under a commitment to expend an additional $200,000 on exploration and development by March 31, 2005, in order to receive the mineral rights. The Company paid $50,000 to acquire the option which has been recorded in other assets pending resolution of the commitment.

The Company is obligated under a non-cancelable facility operating lease through April 30, 2009. For the nine months ended September 30, 2004 and the year ended December 31, 2003, rent expense was $53,069 and $14,134, respectively. Future minimum lease payments required under such operating leases for the three months ended December 31, 2004 and the years ended December 31, 2005, 2006, 2007 and 2008 are as follows:


2004 $ 15,0292005 62,1182006 62,1182007 62,1182008 62,118Thereafter 20,706 --------Total $284,207 ========


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