U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Utah Clay Technology, Inc.
(Name of small business issuer in its charter)
Utah 1400 87-0520575
- -------------- ---------------------------- --------------
(state of (Primary Standard Industrial (IRS Employer
incorporation) Classification Code Number) I.D. Number)
3985 South 2000 East
Salt Lake City, UT 84124
801-424-0223
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(Address and telephone number of registrant's principal
executive offices and principal place of business)
Dennis S. Engh
3985 South 2000 East
Salt Lake City, UT 84124
801-424-0223
---------------------------------------------------------
(Name, address and telephone number of agent for service)
Copies to:
Thomas J. Kenan, Esq., Fuller, Tubb, Pomeroy & Stokes
201 Robert S. Kerr Avenue, Suite 1000
Oklahoma City, OK 73102
Approximate date of proposed sale to the public: As soon as practicable
after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(c) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
Calculation of Registration Fee
Title of Proposed Proposed
each class maximum maximum
of securities Amount offering aggregate Amount of
to be to be price offering registration
registered registered per unit price fee
- --------------------------------------------------------------------------------
Common Stock 590,000 (1) (1) $103(1)
================================================================================
(1) These 590,000 shares are to be offered by three selling shareholders
from time to time at fluctuating market prices. The registration fee for
these shares is based on the average of a bid price of $0.5 and an ask
price of $0.656 on March 30, 2000 on the OTC Bulletin Board. Reg.
230.457(c).
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a)
may determine.
2
<PAGE>
PROSPECTUS
UTAH CLAY TECHNOLOGY, INC.
590,000 Shares of Common Stock
590,000 shares of Common Stock are being offered by three selling
security holders, Dennis S. Engh, James Groscost and the law firm of McKay,
Burton and Thurman, all of Salt Lake City, Utah. None of the proceeds of sale
will go to the company. All proceeds will go to the selling security holders and
for the payment of their brokerage commissions. Mr. Engh is the chief executive
officer and a director of the company.
The selling security holders will offer the 590,000 shares from time to
time in the over-the-counter market through brokers at fluctuating market
prices. They may also offer the shares in negotiated transactions, through the
writing of options on the securities, a combination of such methods of sale, or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices prevailing at the time of sale, or at negotiated prices.
-------------------------
Our Common Stock trades on the OTC Bulletin Board.
Its trading symbol is "UTCL".
-------------------------
The purchase of these shares involves Neither the Securities and Exchange
a high degree of risk. See "Risk Commission nor any state securities
Factors" beginning on page 1. commission has approved or disapproved
these securities or determined if this
offering memorandum is truthful or
complete. Any representation to the
contrary is a criminal offense.
Utah Clay Technology, Inc.
3985 South 2000 East
Salt Lake City, UT 84124
Telephone 801-424-0223
April _, 2000
<PAGE>
TABLE OF CONTENTS
Page
Summary ................................................................. 1
The Company ..................................................... 1
Risk Factors ............................................................ 1
Utah Clay's mines are not in commercial
production ............................................... 1
Utah Clay requires, but does not have,
approximately $15 million to achieve
its business plan ........................................ 2
Our estimates of profits to be derived from
future mining operations are not based
on actual experience ..................................... 2
The loss of one or more of our executive and
operating officers could have a
materially adverse effect on our company ................. 2
The market for our common stock is poorly
developed. Purchasers of the securities
offered herein should anticipate a
thin but volatile market ................................. 2
Use of Proceeds ......................................................... 2
Determination of Offering Prices ........................................ 3
The Selling Security Holders ............................................ 3
Plan of Distribution .................................................... 4
Legal Proceedings ....................................................... 5
Directors, Executive Officers, Promoters and
Control Persons ................................................. 5
Significant Consultants and Other Personnel ..................... 7
Securities Ownership of Certain Beneficial
Owners and Management ........................................... 8
Description of Securities ............................................... 8
Common Stock .................................................... 9
Voting Rights ............................................ 9
Dividend Rights .......................................... 9
Liquidation Rights ....................................... 9
Preemptive Rights ........................................ 9
Registrar and Transfer Agent ............................. 9
Dissenters' Rights ....................................... 9
Preferred Stock ................................................. 9
Series A Preferred Stock ........................................ 10
<PAGE>
Interest of Named Experts and Counsel ................................... 10
Indemnification ......................................................... 10
Description of Business ................................................. 11
Business Development ............................................ 11
Utah Clay's Business ............................................ 12
Utah Caly's Properties .......................................... 12
Kaolin .......................................................... 12
The Mineral Deposits ............................................ 13
Processing the Kaolin .................................... 13
Principal Products .............................................. 14
The Paint Market ......................................... 15
The Ceramics Market ...................................... 16
The Cement Market ........................................ 16
Distribution Methods ............................................ 16
Competitive Conditions in the Industry .......................... 17
Our Competitive Position Within the Industry .................... 17
Source and Availability of Raw Materials ........................ 18
Dependence of One or a Few Major Customers ...................... 18
Patents ......................................................... 18
Government Approval of Principal Products ....................... 18
Government Regulations .......................................... 19
Research and Development ........................................ 19
Costs and Effects of Complying with
Environmental Laws ....................................... 19
Employees ....................................................... 19
Reports to Security Holders ..................................... 20
Plan of Operations ...................................................... 20
Working Capital Requirements .................................... 20
Product Research and Development During
the Next Twelve Months ................................... 21
Additional Employees ............................................ 21
Description of Property ................................................. 21
Location and Means of Access to the
Properties ............................................... 21
Description of Our Title ........................................ 22
History of Operations ........................................... 24
Present Condition of the Properties ............................. 25
Plant and Equipment ............................................. 26
Rock Formations and Mineralizations ............................. 26
Certain Relationships and Related Transactions .......................... 26
Market for Common Equity and Related
Stockholder Matters ............................................. 28
Holders ......................................................... 28
Dividends ....................................................... 28
Penny Stock Regulations ................................................. 29
<PAGE>
The Penny Stock Suitability Rule ................................ 29
The Penny Stock Disclosure Rule ................................. 30
Effects of the Rule ............................................. 30
Potential De-Listing of Common Stock ............................ 30
Executive Compensation .................................................. 31
Stock Options ................................................... 31
Directors ....................................................... 31
Employment Contracts ............................................ 31
Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ............................. 32
Legal Matters ........................................................... 32
Additional Information .................................................. 32
Financial Statements .................................................... 32
<PAGE>
SUMMARY
The Company. Our company, Utah Clay Technology, Inc., is an
------------
exploration-stage mining corporation organized to mine, process and market
pigments from ore bodies under our White Mountain and Oro Blanco Mountain leases
and three other properties under option to lease to us. All properties are in
the State of Utah.
Laboratory tests conducted by independent laboratories have determined
that our properties, to the extent drilled and analyzed to date, contain highly
commercial mineral composition of hydrothermal kaolin, a white aluminum
silicate, with smaller inclusions of alunite, a white potassium aluminum
sulphate and white amorphous opaline silica. The commercial deposits occur in
beds ranging in thickness from 15 feet to more than 125 feet with typical widths
of 400 feet and up to 1,500 feet in length.
Independent laboratory studies and 200 tons of our processed kaolin have
demonstrated the equivalence or superiority of the kaolin deposits on our
properties to those currently in commercial production in Georgia and elsewhere
in the U.S. Once development and production are commenced, our primary product
line will consist of the following materials:
o Hydrous (uncalcined) and calcined white pigments
for paints and plastics;
o Main ingredient in high-end ceramics; and
o Reinforcing components in high strength cements
being federally mandated for roads, bridges and
building substructures.
RISK FACTORS
------------
The following principal factors make the offering described herein
speculative and one of high risk. An investment in the shares offered herein
should not be made by persons who cannot afford the loss of their entire
investment.
Utah Clay's mines are not in commercial production.
The efforts of our founders and then of our company after its
incorporation in 1994 have been to locate the principal kaolin deposits in Utah,
place them under lease, conduct exploratory mining for property appraisal
purposes, and test the extracted minerals both in the laboratory and with
commercial buyers. We have no revenues.
1
<PAGE>
Utah Clay requires, but does not have, approximately $15 million to
achieve its business plan.
We will be able to commence commercial operations with
approximately $3 million in additional equity or debt capital. These operations
would utilize nearby processing plants not owned by us. An additional $12
million will be required to build our own processing plant, which would realize
for us the greatest profit from operations.
We have not identified the sources for these capital needs.
Our estimates of profits to be derived from future mining operations are
not based on actual experience.
Until actual mining operations commence, there can never be
assurance in the mining business that conditions encountered beneath the surface
will be as expected. Costs in excess of estimated costs could be encountered,
and our estimates of profits could be adversely affected by unknown conditions.
The loss of one or more of our executive and operating officers could
have a materially adverse effect on our company.
We depend greatly on the day-to-day services of Dennis S. Engh,
our chief executive officer; Thomas F. Harrison, a vice president; and Carmen J.
(Tony) Lotito, director of marketing. They currently serve without receiving a
monthly salary check. It could be difficult to replace any of them unless the
company obtains the liquid resources to pay salaries.
The market for our common stock is poorly developed. Purchasers of the
securities offered herein should anticipate a thin but volatile market.
There are many days when our common stock does not trade at all
in the over-the-counter market. The spread between the quoted bid and ask prices
is usually great. The stock has never traded above $5, the price required to
remove certain trading requirements imposed on Bulletin Board "penny stocks."
Until these trading requirements are removed, many brokerage firms will not
allow their brokers to recommend our stock for purchase by their customers.
USE OF PROCEEDS
All proceeds from the sale of the 590,000 shares of common stock offered
herein will go to the selling security holders for their own personal use after
the payment of any brokerage commissions.
2
<PAGE>
DETERMINATION OF OFFERING PRICES
Each of the selling security holders proposes to sell the shares offered
herein primarily through broker-dealers at prevailing market prices. They may
also offer the securities in private transactions at negotiated prices.
THE SELLING SECURITY HOLDERS
There are three selling security holders of the 590,000 shares of
common stock of Utah Clay offered hereby - Dennis S. Engh, 500,000 shares; James
Groscost, 10,000 shares and the law firm of McKay, Burton and Thurman, 80,000
shares
Dennis S. Engh has been a director and the chief executive
officer of Utah Clay Technology since its organization in 1994. All of the
company's mining leases and options to acquire mining leases were acquired from
entities under the direct control and partial ownership of Mr. Engh and other
members of his family.
James Groscost is the owner of a trucking company in the Salt
Lake City, Utah area. He is not affiliated with Utah Clay.
McKay, Burton and Thurman is a Salt Lake City, Utah law firm that
has represented Utah Clay in many matters over the past several years. It is not
affiliated with Utah Clay.
The selling security holders' ownership of the company's common
stock, both before and after the offering, is as follows:
<TABLE>
<CAPTION>
Percent
Selling Security Holder Amount of Total
----------------------- ------- --------
Dennis S. Engh:
--------------
<S> <C> <C>
Owned now 4,641,197 19.89
Owned after sale of
500,000 shares offered
herein 4,141,197 17.75
James Groscost:
--------------
Owned now 10,000 0.04
Owned after sale of
10,000 shares offered
herein 0 0
McKay, Burton & Thurman:
-----------------------
Owned now 80,000 0.34
</TABLE>
3
<PAGE>
Owned after sale of
80,000 shares offered
herein 0 0
PLAN OF DISTRIBUTION
Each of the selling security holders may effect sales from time to time
in transactions in the over-the-counter market at market prices prevailing at
the time of sale or in negotiated transactions at negotiated prices. Sales could
be made at fixed prices which each could change.
Each of the selling security holders may effect such transactions by
selling the securities directly to a purchaser, through broker-dealers acting as
agents or to broker-dealers who may purchase the securities as principals and
thereafter sell the securities from time to time in the over-the-counter market,
in negotiated transactions or otherwise. Such broker-dealers, if any, may
receive compensation in the form of discounts, concessions or commissions from
the selling security holders or the purchaser for whom such broker-dealers may
act as agents or to whom they may sell as principals (which compensation as to a
particular broker-dealer may be in excess of customary commissions).
The selling security holders and broker-dealers, if any, acting in
connection with any such sale might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
With respect to the plan of distribution for the sale by the
selling security holders as stated above,
o to the extent that the securities are sold at a fixed price or by
option at a price other than the prevailing market price, such
price would need to be set forth in this Prospectus;
o if the securities are sold in block transactions and the
purchaser wishes to resell the securities purchased, such
arrangements would need to be described in this Prospectus; and
o if the compensation paid to broker-dealers is other than usual
and customary discounts, concessions or commissions, disclosure
of the terms of the transaction in this Prospectus would be
required.
The company has been advised that the selling security holders
understand the prospectus delivery requirements for sales made pursuant to this
Prospectus and that, if there are changes
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<PAGE>
to the stated plan of distribution or if additional information as noted above
is needed, a post-effective amendment with current information would need to be
filed before offers are made and no sales could occur until such amendment is
declared effective.
LEGAL PROCEEDINGS
Neither Utah Clay Technology nor any of its property is a party to or
the subject of a pending legal proceeding.
The company is unaware of any proceeding that a governmental authority
is contemplating that would involve the company or any of its property.
The company is unaware of any material proceeding to which any director,
officer or affiliate of the company, any owner of record or beneficially of more
than five percent of any class of voting securities of the company, or security
holder is a party adverse to the company or has a material interest adverse to
the company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
A list of the current officers, directors and significant consultants
appears below. The directors of the company are elected annually by the
shareholders. The officers serve at the pleasure of the Board of Directors. The
directors do not receive fees or other remuneration for their services.
<TABLE>
<CAPTION>
Position
Held
Person Office Since
-------------------------- ---------------------------------- ---------
<S> <C> <C>
Dennis S. Engh, 60 President and Director 1994
Thomas F. Harrison, 48 Vice President and Director 1994
Daniel H. Engh, 49(1) Vice President and Director 1994
Darin D. Engh, 29(2) Secretary, Treasurer and Director 1994
Carmen J. (Tony) Lotito, 55 Director of Marketing and Director 1994
Robert F. Conley, Ph.D., 65 Consultant 1994
-------------------------
</TABLE>
(1) Daniel H. Engh is the brother of Dennis S. Engh.
(2) Darin D. Engh is the son of Dennis S. Engh and the nephew of
Daniel H. Engh.
Dennis S. Engh. Mr. Engh studied botanical science and business at the
--------------
University of Utah. After college he became the manager for Engh Floral
Corporation, a family-owned business,
5
<PAGE>
advancing to president over a ten-year period. In 1981 he became president of
Dienco Oil Development, Inc., an oil well development company later purchased by
a company in Texas. In 1986 he became president of The Clothes Link, a
seven-store women's clothing store system in Utah. From 1985 to 1990 he also
supervised all land acquisition for industrial minerals for Pioneer Minerals,
Inc., a Utah corporation. He then became president of that company. During that
same period he also organized and operated a landscape and grounds maintenance
business which performed contract work in Utah, Idaho and Nevada. He organized
Utah Clay Technology in 1994 and has served as its president since its
organization.
Thomas F. Harrison. Mr. Harrison received a bachelor of science degree
------------------
in biology in 1972 and a master's of business administration degree from the
University of Utah in 1988. He was a microfilming supervisor for Mineral
Records, Inc. from 1976 to 1979. He served as the executive vice president and
the director of program development for CompHealth, Inc. from 1980 to 1992. In
this capacity he supervised the operations of 200 persons in three offices.
There were approximately 300 physicians working for the company at any one time.
Since 1995 Mr. Harrison has been president of Buffalo Energy Corp., which
develops energy projects for Indian Nations.
Daniel H. Engh. Mr. Engh received a bachelor of science degree in
---------------
accounting from the University of Utah in 1973. Upon graduation he joined the
Engh Floral Corporation where he managed the accounts, payroll, receivables and
handled tax matters. He trained personnel in numerous phases of accounting and
supervised a staff of 130 persons in this $3 million-a-year business. In 1984 he
became controller and buyer for Della's Flower & Gifts, Inc. He than joined the
staff of The Clothes Link where he was responsible for lease negotiations,
personnel and overseeing various store operations. In 1988 he became the
secretary and treasurer for Pioneer Minerals, Inc. and was in charge of all
accounting costs, controls, lease procurement and title operations. Since the
formation of that organization Mr. Engh has been active in the field work,
exploration and assessment of industrial minerals in the State of Utah. Mr. Engh
has served since 1985 as a tax audit manager for the Utah Tax Commission.
Darin D. Engh. Darin D. Engh is President of Engh Flowers, Inc., a
-------------
retail and wholesale garden center and nursery stock outlet which was organized
in 1990, expanded to four locations along the Wasach Front of Utah, has 40
employees, and has gross annual sales today of approximately $1 million. Mr.
Engh has received a bachelor of science in political geography at the University
of Utah.
Carmen J. (Tony) Lotito. Mr. Lotito received a bachelor of science
-----------------------
degree in accounting in 1967 from the University of Southern California. He
joined the accounting firm of Pannell,
6
<PAGE>
Kerr, Forester & Co. as the senior accountant in charge of management and audit
services for that company's San Diego, California office. In 1974 he formed his
own management and financial services organization. In this respect, he provides
direct management assistance and consulting financial services to oil and gas
industry clients, retail operations, and food manufacturing and distribution
companies. In 1988 he joined ConAgra, Inc. in San Antonio, Texas where he
oversaw research and development, sales and marketing of specialty products
under development. In 1994 he joined Utah Clay Technology and has served and
still serves as its director of marketing.
Significant Consultants and Other Personnel.
- -------------------------------------------
Robert F. Conley, Ph.D.. Dr. Conley acts as a consultant to the company.
-----------------------
He received a bachelor of science degree in chemistry, a masters of science
degree in electro-chemistry and a doctor of philosophy degree in inorganic
chemistry and mineralogy, all from Indiana University. He was employed for four
years at the Indiana Geological Survey in evaluating industrial minerals and
development technologies. Then, he joined the Georgia Kaolin Company and was in
charge of research into high technology processes, electrochemical studies, and
research into a variety of new products. At the request of the Engineering
Conference, he developed a series of lectures on the mechanics and chemistry of
delamination grinding. He continues to give annual seminars in the U.S. and in
Europe on this topic. In 1974 Dr. Conley formed Mineral and Resource Technology
with three other scientists to perform contract research on minerals and to
develop new products, especially pigments. He is the author of approximately 30
patents on mineral and specialty material systems, their process of generation
and separation. He is the coauthor of two books on industrial fine grinding and
chemical treatment of mineral systems for Polymer Corporation. In 1977 Dr.
Conley developed the electric process for producing ultra high purity solder now
used by most electronic circuit board manufacturers in the U.S. From 1978
through 1981 Dr. Conley worked under contract by the Federal Power Commission in
Mexico to design a system and to work with the mineral reserves in Mexico to
produce alumina and aluminum metal from low-grade mexican ores. Dr. Conley is
active in the general area of high technology and has been an annual guest
lecturer for 15 years for the chemistry department at Kent State University on
mineral pigment development, dispersion techniques and other aspects of pigment
processing for the paint, plastics and polymer industries.
No executive officer, director, person nominated to become a director,
promoter or control person of the company has been involved in legal proceedings
during the last five years such as bankruptcy, criminal proceedings (excluding
traffic violations and other minor offenses), or proceedings permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking
7
<PAGE>
activities, or been found by a court of competent jurisdiction in a civil
action, or the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities
law.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The table below sets forth the beneficial ownership of securities of the
company by the officers and directors, individually, and as a group, and each
person who is known to the company to be the beneficial owner of more than five
percent of any class of the company's voting securities:
<TABLE>
<CAPTION>
Shares of
Shares of Series A
Common Stock Percent Preferred Stock Percent
<S> <C> <C> <C> <C>
Dennis S. Engh 4,641,197 19.8 27,180 32.0
Thomas F. Harrison 4,555,592 19.5 51,037 60.2
Daniel H. Engh 4,786,307 20.4 - -
Carmen J. (Tony) Lotito 2,447,492 10.4 6,600 7.8
Darin D. Engh 100,000 0.4 - -
Robert and Jeannette Nelson(1) 1,312,500 5.6 - -
Officers and Directors as a
group (5 persons) 16,530,588 70.6 84,817 100.0
- ------------------------
</TABLE>
(1) Jeannette Nelson is the sister of Dennis S. Engh and
Daniel H. Engh and the aunt of Darin D. Engh.
There are no arrangements which may result in a change in control of the
company.
DESCRIPTION OF SECURITIES
-------------------------
The company is authorized to issue 30 million shares of Common Stock,
$0.001 par value and 10 million shares of Preferred Stock, $0.001 par value. The
presently outstanding 23,421,874 shares of Common Stock and 84,817 shares of
Preferred Stock are fully paid and nonassessable.
8
<PAGE>
Common Stock
- ------------
Voting Rights. Holders of shares of Common Stock are entitled to one
--------------
vote per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors.
Dividend Rights. Holders of record of shares of Common Stock are
----------------
entitled to receive dividends when and if declared by the Board of Directors out
of funds of the company legally available therefor.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
------------------
the company, holders of shares of Common Stock are entitled to receive pro rata
all of the assets of the company available for distribution to shareholders
after distributions are made to the holders of the company's Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any preemptive
-----------------
rights to subscribe for or to purchase any stock, obligations or other
securities of the company.
Registrar and Transfer Agent. The company's registrar and transfer agent
----------------------------
is Interwest Transfer Company, Inc., 1981 East Murray Holladay Road, Suite 100,
Salt Lake City, Utah 84117.
Dissenters' Rights. Under current Utah law, a shareholder is afforded
-------------------
dissenters' rights which, if properly exercised, may require the company to
purchase his shares. Dissenters' rights commonly arise in extraordinary
transactions such as mergers, consolidations, reorganizations, substantial asset
sales, liquidating distributions, and certain amendments to the company's
certificate of incorporation.
Preferred Stock
- ---------------
The company is also authorized to issue 10 million shares of Preferred
Stock, $0.001 par value. Some 84,817 shares of Series A Preferred Stock have
been issued.
The Preferred Stock or any series thereof shall have such designations,
preferences and relative, participating, optional or special rights and
qualifications, limitations or restrictions thereof as shall be expressed in the
resolution or resolutions providing for the issue of such stock adopted by the
board of directors and may be made dependent upon facts ascertainable outside
such resolution or resolutions of the board of directors, provided that the
manner in which such facts shall operate upon such designations, preferences,
rights and qualifications, limitations or restrictions of such class or series
of stock is
9
<PAGE>
clearly and expressly set forth in the resolution or resolutions providing for
the issuance of such stock by the board of directors.
Series A Preferred Stock
- ------------------------
The company has issued 84,817 shares of Series A Preferred Stock at
$5.00 a share for a total of $424,085, which stock (i) is entitled to annual
dividends of $0.50 a share payable only from earnings of the company and
cumulative if payable but missed, (ii) is non-voting, (iii) does not carry
preemption rights and (iv) is preferred over the company's Common Stock in the
event of the liquidation and dissolution of the company. The Series A Preferred
Stock is neither convertible into Common Stock nor redeemable at the option of
the holder but is redeemable at the option of the company.
There are no provisions in the company's charter or bylaws that would
delay, defer or prevent a change in control of the company.
INTEREST OF NAMED EXPERTS AND COUNSEL
Thomas J. Kenan is named in the Registration Statement of which this
Prospectus is a part as having given an opinion on the validity of the
securities offered herein. His spouse, Marilyn C. Kenan, is the trustee and sole
beneficiary of the Marilyn C. Kenan Trust, which is the record owner of 764,194
shares of common stock of the company. Mr. Kenan disavows any beneficial
interest in the shares owned of record by such trust.
INDEMNIFICATION
Under Utah corporation law, a corporation is authorized to indemnify
officers, directors, employees and agents who are parties or threatened to be
made parties to any civil, criminal, administrative or investigative suit or
proceeding by reason of the fact that they are or were a director, officer,
employee or agent of the corporation or are or were acting in the same capacity
for another entity at the request of the corporation. Such indemnification
includes reasonable expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement if they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation.
With respect to any criminal action or proceeding, these same
indemnification authorizations apply if these persons had no reasonable cause to
believe their conduct was unlawful.
In the case of any action by the corporation against such persons, the
corporation is authorized to provide similar indemnification, but if any such
persons should be adjudged to be liable for negligence or misconduct in the
performance of duties
10
<PAGE>
to the corporation, the court conducting the proceeding must determine that such
persons are nevertheless fairly and reasonably entitled to indemnification.
To the extent any such persons are successful on the merits in defense
of any such action, suit or proceeding, Utah law provides that they shall be
indemnified against reasonable expenses, including attorney fees. A corporation
is authorized to advance anticipated expenses for such suits or proceedings upon
an undertaking by the person to whom such advance is made to repay such advances
if it is ultimately determined that such person is not entitled to be
indemnified by the corporation.
Indemnification and payment of expenses provided by Utah law are not
deemed exclusive of any other rights by which an officer, director, employee or
agent may seek indemnification or payment of expenses or may be entitled to
under any bylaw, agreement, or vote of stockholders or disinterested directors.
In such regard, a Utah corporation may purchase and maintain liability insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation.
As a result of such corporation law, Utah Clay may, at some future time,
be legally obligated to pay judgments (including amounts paid in settlement) and
expenses in regard to civil or criminal suits or proceedings brought against one
or more of its officers, directors, employees or agents, as such.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the company pursuant to the foregoing provisions or otherwise, the company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
DESCRIPTION OF BUSINESS
Business Development
Utah Clay Technology, Inc. was incorporated on March 1, 1994 in the
State of Utah. Since its organization it has been engaged in the process of
locating the principal kaolin deposits in Utah, obtaining the legal right to
mine these deposits, conducting exploratory mining operations, testing the
extracted minerals in the laboratory and selling samples of the processed form
of our kaolin to commercial companies for market evaluation. We have financed
these activities by the sale of capital stock for money, advances by
shareholders and by the exchange of capital stock for services rendered to the
company and for the company's mining properties.
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Utah Clay's Business
Utah Clay Technology has the right to mine, extract and sell an
industrial mineral called kaolin from two properties containing kaolin in
western Utah. It also owns options to acquire leases on three other properties
in central and western Utah.
Utah Clay's Properties
We own two leases and have options to acquire three other leases from
affiliated companies and from the founders of the company. The names of the
properties and the nature of our ownership are set forth below:
Nature of
Property Name Our Ownership
-------------- ---------------
White Mountain Lease
Oro Blanco Lease
Kimberly Option to Lease
Koosharem Option to Lease
Topaz Option to Lease
The above properties are located in western and central Utah, near the
Union Pacific rail lines and interstate trucking routes I-70 and I-15.
The geology that created the Utah deposits is unusual. Kaolin deposits
in Utah were formed by hot acidic solutions being forced up through fault lines
to strongly alter the volcanic tuffs. They solidified into veins. The highest
concentrations of hydrothermal kaolin occur on either side of the center section
of these veins.
The overburden at our lease sites is minimal. The kaolin is just a few
feet below the surface. The veins are wide and have the potential for a
consistent quality throughout.
Mining can be done with an excavator. The clay from the ground is
similar to a hard chalk, so the need to blast is rare. The trucks can be loaded
directly from the excavator.
The brightness of the kaolin directly from the ground is a G.E.
brightness of 80 to 94 on a scale of 0-100. Grinding raises the brightness of
the kaolin on the lower end of the scale. There is also an undertone bluish
color, which makes the clay brighter to the eye. This means that very little has
to be done to the clay in the processing, besides grinding, to meet the
brightness required by the market.
Kaolin
Kaolin is a clay in the form of hydrated aluminum silica. It is commonly
known as "china clay". Kaolin is an industrial
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mineral used primarily as an inert filler. Customers combine it with other raw
materials, called formulations, and have developed over 600 different
applications. The largest single application is for coating paper to hide the
pulp strands and to give it a gloss finish. Another major use is in the paint
industry as an extender to reduce the amount of titanium dioxide needed to
reflect light. Kaolin is also used in refractory clays, plastics, ceramics,
rubber and fiberglass.
The total market for kaolin use worldwide is about 31 million tons per
year. The market has grown at an average of four percent per year.
The United States is the largest single producer of kaolin in the world.
Currently, ninety percent of the U.S. production comes from deposits in Georgia
and South Carolina. It has been mined from this area for over 90 years. Most of
the standards for the world industry are based on the kaolin from this area. The
characteristics of the clay from Utah will be compared to these standards.
The Mineral Deposits
There appear to be two major deposits of kaolin in western Utah. These
deposits are located west of Milford, Utah. The area was drilled extensively in
the 1960s by a consortium of companies that were looking for alunite, which is a
cousin mineral to kaolin. Their interest was to mine the alunite as a low grade
aluminum ore. They discovered what appear to be extensive deposits of both
alunite and kaolin.
Processing the Kaolin. The differences in the Utah deposits and the Georgia
- ----------------------
deposits that set the world standards require us to process the kaolin in a way
different than the way Georgia deposits are processed. Our process does not
address brightness, because of the natural high brightness of the Utah ore.
However, the solidification of the original hydrothermal solutions requires more
grinding to attain the desired particle sizes.
The process is as follows:
o The ore is put into a primary crusher to reduce the size of the
large chunks. A second crusher takes the ore stream to reduce the
size to about two inches in diameter for the grinder feeds.
o The output of the second grinder is put into a dryer to remove
any excess water. The output of the dryer is split into two
streams.
o The feed is sent to a roller mill. This mill reduces the size of
the feed to a (minus) -325 mesh, a portion of which is -5 microns
and -10 microns. This makes up
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some of the uncalcined clay stock and goes to the bagger. Each of
the mills has a classifier associated with it. The classifier
separates out the various particle sizes by an airstream blown
into a cyclone chamber.
o The remainder of the over -10 microns output from the roller
mill goes to a jet mill. This mill reduces the particle size to
the -5 and the -2 micron size for commercial use. It uses high
temperature and high-pressure steam to increase the efficiency of
the process.
o Part of this stream is fed to the calciner, and the rest is
bagged as high-end uncalcined product.
o The calciner output is cooled and sent to the bagger.
The advantage of this process is that it is a completely dry process.
This makes it cheaper to operate than the processes employed in Georgia, and the
initial capital cost is relatively low. The process also eliminates the
environmental impacts of wastewater disposal.
The final output is a range of calcined and uncalcined clays of varying
particle sizes. The process line is flexible enough to vary the amounts of the
product mix to meet market demand.
The company's process was first developed on a laboratory scale and then
was refined at the pilot plant scale with a number of equipment manufacturers.
The complete process has been run on a full production scale basis. A number of
tons of the uncalcined clay have been delivered to satisfied users.
There are processing plants in Utah and surrounding states available to
do the needed grinding and classifying. Eventually, Utah Clay will need its own
plant to make all the products that it needs in the proper proportions.
Principal Products
The nature of the deposits in Utah defines the products that this kaolin
is best suited for. Utah kaolin has different characteristics than Georgia
kaolin. A number of characteristics are tested in kaolin. The most important are
the particle size and the brightness. The smaller the particle size, the more
costly it is and the greater the number of uses it has. The best grades of
kaolin have a median particle size of two microns. One micron is the size of the
particles in cigarette smoke. There are grades of "less than 5 microns", "less
than 10" and so on. Each grade has different applications.
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The brightness characteristic is a measure of the amount of light that
the kaolin reflects back to the measuring instrument. The scale is called the
"G.E. Brightness Scale" and ranges from 1 to 100. Most kaolin applications
require a brightness number over 87. 95 on the brightness scale is a high number
for calcined kaolin clay.
Once the kaolin is mined, it must be processed to meet the standards of
the particular target industry.
There are two broad groups of processed kaolin clays, calcined and
uncalcined. Calcination is the process of heating the small particles of kaolin
to about 1800 degrees Fahrenheit for about 45 minutes. This process "pops" the
structure of the kaolin molecule and increases the surface area. The brightness
goes up. The reflective characteristics are increased. This makes it especially
valuable to the paint industry. Chemists are able to take advantage of its new
structural properties and increase the uses for calcined clay. These added
values command a higher price that more than offsets the increased processing
costs.
The uncalcined clays also have characteristics that make them valuable
as extenders in paints and fillers in other industries. A feature of the
structure of the kaolin clays is that it forms platlets. These platlets act
together to effectively reflect the light in a paint formulation.
Utah kaolin is naturally very bright. Through processing, it becomes a
high quality calcined and uncalcined paint filler. The particle size can be
ground to any size that is required by the end user. These characteristics allow
Utah kaolin to be processed into high quality products for several markets.
The Paint Market. We have chosen to focus on the paint market. The
- ------------------
characteristics of Utah kaolin fit well the needs of paint formulations. Its
high brightness coupled with a blue undertone makes it ideal as an extender in
paint. Titanium dioxide is used in paint as an opacity agent. It is quite
expensive, and manufacturers keep its use to a minimum. The calcined clays are
the best extenders, but the uncalcined clays also have a role. The Utah
uncalcined clays are of sufficient quality that they can, in certain
formulations, compete directly with the Georgia calcined clays.
The amount of kaolin used in paint in the United States is about
1,000,000 tons a year. An additional 1,000,000 tons of calcined clay for other
applications are also sold in the United States each year. Canada and the Far
East are significant users of kaolin clays.
The prices of uncalcined clay vary from $125 to $275 a ton
f.o.b. the plant. The price depends on the brightness and the
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particle size. Calcined clays range in price from $300 to $800 a ton.
The processing cost advantage ranges from $50 a ton for the
high-particle size uncalcined clay to $100 for the finer uncalcined clays and
the calcined clays.
The cost to rail the clay from Georgia to the West Coast is about $90 a
ton. The freight cost from Utah is $30 a ton. This gives our company a $60
freight advantage over Georgia clay with regard to the West Coast. We have about
a $25 a ton freight advantage for rail shipments to Midwest paint companies.
Thus, our first concentration for sales efforts will be to those paint
companies where we have both a processing advantage and a freight cost
advantage.
Our second area of emphasis will be to the large, growing market in the
Pacific Rim. Utah clay should be appealing to these markets because of its high
quality and our ability to sell it at a lower price because of the freight
advantage.
The Ceramics Market. We are planning to conduct studies with a products
- ---------------------
consultant and with Alfred University in New York to test Utah clay for use in
the ceramics market. Initial indications are that it would be quite competitive
with the clay now being used. Most of the market for ceramics in the U.S. is in
New England, and the clay for the high-end segment of this market comes from New
Zealand. Utah clay will compete in terms of quality and will certainly do much
better than the New Zealand competition in terms of freight costs.
The Cement Market. Utah Clay is developing a partially calcined product for use
- -----------------
in the cement market. There are certain high strength cements mandated to be
used in certain amounts in the construction of roads, bridges and other uses.
The partially calcined kaolin from the Utah deposits can be added to this high
strength cement to make it more reactive. This means that the cement will set up
faster and be usable to the contractors sooner. This is a major advantage in the
overall cost of a project.
Distribution Methods
Our marketing of the kaolin products directly to customers will be done
through independent distributors. These distributors contact the customers, make
the sale, take possession of the product, pay the producer, warehouse it and
deliver it to the customer. They then collect the payment from the customer. The
cost for this service is typically a 10% commission. Each of these distributors
handles a line of industrial minerals and chemicals. They are already selling
products to our targeted customers and are positioned to add our kaolin products
to their sales mix.
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Utah Clay has five different distributors. They cover the main markets
in the United States and could introduce our products to the Pacific Rim
markets. They are familiar with our product line and have delivered our products
to some of their clients. Our products were well received. We have experts
available that will support the distributors with technical assistance to help
with individual customers' specific concerns.
Competitive Conditions in the Industry
Historically, 80 to 90 percent of kaolin products consumed in the world
have come from Georgia and South Carolina. A few large companies have provided
the kaolin and have strong, entrenched, competitive positions. The four largest
U.S. producers and their respective portions of a total 80% market share are
approximately as follows:
(1) IMETAL, SA (NYSE) 43%
(2) Englehard (NYSE) 14%
(3) J.M. Huber (Private) 12%
(4) Thiele Kaolin (Private) 11%
These companies are well financed, have plants and their own production and are
established in the market-place. We will have to compete with these companies'
products.
Our Competitive Position Within the Industry
Our ability to break into the kaolin industry and to compete with
entrenched companies depends on a number of factors:
o The high quality of the Utah kaolin.
o Cheaper processing costs.
o Lower capital costs to get into business.
o The strategic location of the Utah deposits relative to
the West Coast markets.
o The large, diverse market for the kaolin products.
The products made from the kaolin from Utah must meet the
characteristics of the clay from Georgia. Over the years, Georgia clay has set
the standards for the industry.
Georgia clay fundamentally differs from Utah clay. Georgia clay is found
in sedimentary deposits from ancient inland seas. The feldspar source rock
eroded as the Appalachian Mountains eroded and was deposited in shallow layers
in sedimentary beds. For every foot of kaolin, there is an average of nine feet
of overburden that must be removed. There is organic material mixed in the clay
that gives it a brown-orange color in the ground. The
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measure of brightness is 50 to 70 directly from the ground. The natural
undertone is tan. To the eye, this detracts from the brightness. However, one
advantage of Georgia clay is that the particle size is small because of the
erosion.
The processing that Georgia clay requires is more involved than is the
case with Utah clay, because it has to increase the brightness of the clay and
eliminate the contaminates (degritting). First, the clay is slurried or
"blunged" at the mine site. It is then piped to the plant. It goes through a
large electro-magnet to eliminate some of the iron compounds that color the ore.
It then has to go through a chemical leaching process to increase the
brightness. The kaolin is separated from the solution on large rotary filters.
The wet kaolin is sent to an apron dryer and then a pulverizer. It is now ready
for the calciner or the bagger. This is a much more involved and costly process
than is the case with Utah clay. The initial capital cost for Georgia clay is
significantly more than that of a comparable plant to process Utah clay.
The lower capital outlay and the significant, ongoing, process cost
savings are a distinct advantage for the Utah kaolin.
And, then, the proximity of our deposits to the West Coast markets gives
us an advantage in freight costs.
Source and Availability of Raw Materials
Our leases will produce the raw material.
Dependence on One or a Few Major Customers
There are many markets that can be targeted by the products of Utah
Clay. In each of these markets there are a number of potential customers. Our
independent distributors will help Utah Clay reach out to these customers
without a large marketing budget. We do not anticipate becoming dependent on one
or a few major customers.
Patents
Utah Clay has no patents. Our primary advantage over competitors is the
fact that we either own or have leased the great majority of the Utah deposits
of kaolin clay.
Government Approval of Principal Products
There is no need to obtain government approval to sell kaolin and kaolin
products. The mining leases of the company, owned or under option to lease, are
leases of lands owned by the U.S. Government or the State of Utah. Annual
rentals of $100 a claim for the federal mining claims must be paid to the Bureau
of Land
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Management. The annual lease payment to the State of Utah totals $3,406 for the
six leases.
Government Regulations
The permitting of exploration work and mining activities on U.S.
Government leases in Utah is subject to federal regulations that are
administered by the Utah State Division of Oil, Gas and Mining. A five-acre
small miner's permit can be obtained to cover a tract of disturbed ground no
larger than five acres. No reclamation bond need be posted for such a permit,
although reclamation of the mining sites is required. Mining permits to cover
larger tracts do require reclamation bonds. Because the kaolin veins on our
White Mountain and Oro Blanco leases are 75 to 100 feet thick, we believe we can
conduct our mining operations with small miner's permits.
The sites of White Mountain and Oro Blanco have been surveyed for
sensitive plant species. The survey was conducted by a certified environmental
firm retained by the company. No sensitive species were found on either site.
Processing facilities for our kaolin require air quality permits that
are issued by the Utah Division of Air Quality, which administers regulations of
the Environmental Protection Agency. We have no processing plant at this time,
but the processing plants we will use do have the necessary air quality permits.
Research and Development
We have spent approximately $50,000 on research and development in the
last two years.
Costs and Effects of Complying with Environmental Laws
There are costs involved in complying with environmental laws in the
mining of kaolin. Mine sites are required to be reclaimed after the ore is
extracted. Reclamation involves recovering the mine site and seeding and growing
a cover unless the area is arid.
Then costs are included in the mining plan.
Any plant that processes kaolin must obtain air quality permits. The
major factor for air quality is the small particle dust created in the grinding
process. Since this dust is a desirable end product, the cost of providing bag
houses and other devices to capture this dust provides its own rewards.
Employees
We have two full time employees and no part time employees.
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Reports to Security Holders
We will file reports with the Securities and Exchange Commission. These
reports are annual 10-KSB, quarterly 10-QSB and periodic 8-K reports. We will
furnish stockholders with annual reports containing financial statements audited
by independent public or certified accountants and such other periodic reports
as we may deem appropriate or as required by law. The public may read and copy
any materials we file with the SEC at the Public Reference Room of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Utah Clay is an electronic filer, and the SEC maintains an
Internet Web site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC. The
address of such site is http://www.sec.gov.
PLAN OF OPERATIONS
While we have performed some mining of our ore deposits and have on
occasion contracted the processing of the ore at a nearby processing plant, this
processing plant is not configured to completely process the ore. We are
evaluating several plants with the goal of purchasing one of them and having it
process kaolin for us within the next twelve months. The purchase price of such
a plant should be in the range of $2.5 to $3.0 million.
Any of the plants we are evaluating could begin to process the kaolin
into a partial slate of products with little modification. The addition of a
fine grinding jet mill and a calciner for an additional $2.0 million would allow
us to produce a full slate of products for the paint industry.
In this regard, we are already having discussions with some of our Salt
Lake City friends who are potential investors in our company once we become
subject to the reporting requirements of the Securities Exchange Act of 1934.
This prospectus is part of a registration statement that, when effective at the
Securities and Exchange Commission, subjects us to these reporting requirements.
The cost of a new processing plant to be placed near our mines would be
approximately $12 million. It would take 18 to 24 months to put it into
operation. Should we be able to raise the additional capital to purchase a new
plant, we would do so, but our first priority would be to buy an existing plant.
Working Capital Requirements
We need little working capital to execute our day-to-day plan of
operations for the next twelve months. Most of the past compensation for
services performed for the company by its
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employees and consultants has been in the form of shares of common stock.
We have received commitments for the working capital for day-to-day
operations for the next twelve months. However, this commitment is not
sufficient to execute our full business plan without raising additional funds in
the next twelve months.
Product Research and Development During the Next Twelve Months
Subject to the availability of funds, we propose to perform
approximately $50,000 in research and development during the next twelve months
in an effort to determine the best calcination parameters for processing kaolin
for use in cement. We have been working with an industry partner with regard to
the use of partially calcined kaolin in cement. The addition of partially
calcined Utah kaolin to high strength cement makes the cement more reactive and
it sets faster. This saving of time on construction projects reduces the
contractor's costs. Industry requirements for partially calcined kaolin is large
and growing.
Additional Employees
Should we raise the capital needed to purchase a processing plant, we
would expect to hire ten employees to operate the plant and three employees to
perform administrative and marketing work.
DESCRIPTION OF PROPERTY
We have mining leases to extract minerals from mining claims in the White
Mountain area and the Oro Blanco area in western Utah. We have options to
acquire mining leases to extract minerals from mining claims in the Koosharem
area and the Kimberly area in central Utah and in the Topaz area in western
Utah.
Location and Means of Access to the Properties
White Mountain Claims. The White Mountain claims are located in Beaver
-----------------------
County, Utah approximately 25 miles west of Milford, Utah. Forty-one federal
placer and lode claims are located in Sections 4-10 in Township 29 South, Range
13 West and in Sections 1 and 12 in Township 29 South, Range 14 West.
Access to the area is provided by county gravel roads and unimproved,
Bureau of Land Management ("BLM") roads. Limited upgrade of the BLM roads would
be necessary to bring mining equipment to the White Mountain site.
Oro Blanco Claims. The Oro Blanco claims are located six miles west of the
-----------------
White Mountain claims in Beaver County, Utah. Ninety-one federal placer and lode
claims and six Utah State mineral leases covering these deposits are located in
Sections 13- 15, 21-24, 25-28, 32 and 34-36 in Township 29 South, Range 15 West
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and in Sections 1-3 and 10, 11 and 18 in Township 30 South, Range 15 West.
Access to the property is provided by county roads and unimproved BLM
roads. Limited upgrades of the BLM roads would be necessary to bring mining
equipment to the Oro Blanco site.
Koosharem Claims. The Koosharem claims are located in Piute and Sevier
-----------------
Counties, Utah. Twelve unpatented federal placer and lode claims are located on
lands managed by the National Forest Service in Townships 26 and 27 South,
Ranges 1 and 2 West.
Access to the area is provided by BLM roads. There is another mining
operation currently in operation adjacent to the deposit, and the road is
suitable for mining equipment.
Kimberly Claims. The Kimberly claims are located in Sevier County, Utah.
---------------
Twenty-six unpatented federal placer and lode claims are located on lands
managed by the National Forest Service in Township 26 South, Range 4.5 West.
Access to the site is provided by unimproved Forest Service roads. Limited
upgrade of the roads would be necessary to bring mining equipment to the site.
Topaz Claims. The Topaz claims are located in Juab County, Utah
-------------
approximately 40 miles west of Delta, Utah. Twenty-six federal placer and lode
claims are located on lands managed by the National Forest Service in Township
13 South, Ranges 10, 11 and 12 West and Township 14 South, Range 11 West.
Access to the area is provided by county gravel roads and unimproved BLM
roads. Limited upgrades to the BLM roads would be required to bring mining
equipment to the site.
Description of Our Title
White Mountain Claims. The lode mining claims are reserved from the BLM in
---------------------
the name of Don and Anola Fullmer, who are unaffiliated with our company.
The Fullmers have granted a mining lease to Dennis S. Engh and Daniel H.
Engh. Dennis Engh is president and a director of Utah Clay, and Daniel Engh is
a vice president and director of Utah Clay.
This lease from the Fullmers provides for an annual $5,000 minimum lease
payment and a minimum production requirement of 6,000 tons a year starting in
2005. There is a $2.50 per ton production royalty payment with a Consumer Price
Index annual escalator clause on the royalty. The lease also requires the
payment of all annual fees to the BLM to maintain the claims.
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The lease expires March 15, 2005, unless commercial production of at least
5,000 tons a year is being obtained from any or all of the claims subject to the
lease. The lease extends perpetually thereafter if the production minimums are
met. The Engh Family has incorporated the Fullmer lease with their own placer
claims into one lease assigned to Utah Clay as described below.
The White Mountain placer claims are held by the Engh family, who have
granted a mining lease to Utah Clay. These persons include Dennis and Judith
Engh, husband and wife; Daniel H. and Connie Engh, husband and wife; Darin D.
Engh, and Holly Engh Kingdon (the "Engh Family"). Dennis Engh is president and a
director of Utah Clay, the brother of Daniel Engh and the father of Darin Engh
and Holly Engh Kingdon. Daniel Engh is a vice president and a director of Utah
Clay. Darin Engh is a director of Utah Clay.
The Engh Family lease provides for a $5,000 minimum annual lease payment to
the Enghs or a $2.50 a ton production royalty payment with a Consumer Price
Index escalation clause, whichever is greater, a three percent royalty payment
on the gross value of all ores taken from the property, and the payment of all
fees required to maintain the claims with the BLM. In addition, all the terms of
the Engh lease with the Fullmers for the lode claims must be met by Utah Clay.
The term of the Engh Family lease is March 27, 2004 and thereafter as long
as commercial production is obtained.
Oro Blanco Claims. These 91 federal lode and placer claims and six Utah
------------------
State mineral leases are all held by the Engh family. A 5.5 percent production
royalty on ores taken from the six state leases must be paid to the State of
Utah.
The Engh family has granted a lease on these properties to Utah Clay. Utah
Clay is to pay all fees to the BLM to maintain the claims and a $5,000 minimum
annual lease payment to the Enghs or a $2.50 a ton production royalty payment
with a Consumer Price Index escalation clause, whichever is greater, and a
production royalty of three percent on the gross value of the ores taken from
the property. The term of the lease is March 27, 2004, and as long thereafter as
commercial production is maintained.
Koosharem, Kimberly and Topaz Claims. These claims are all reserved from
------------------------------------
the BLM in the name of Don and Anola Fullmer, who are unaffiliated with our
company. The Fullmers have granted leases on the claims to Daniel and Dennis
Engh, whose affiliation with Utah Clay is described above . Daniel and Dennis
Engh have granted options to Kaolin of the West, LLC, for it to obtain an
assignment of the leases. The members and owners of Kaolin of the West, LLC, are
Dennis S. Engh, Daniel H. Engh, Thomas F. Harrison and Carmen J. (Tony) Lotito.
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The royalty payments for the leases are identical to those of the White
Mountain mining claims, including the royalty payments to the Enghs and the
Fullmers.
Each of the three options expires March 27, 2004. A payment of $10,000
for each option - $5,000 to the Fullmers and $5,000 to the Enghs - must be paid
by June 10 of each year to extend the options past that date as well as the
payment of all federal and state rentals, taxes and other payments associated
with the mining claims. To exercise each option, Utah Clay must pay to the
owners of Kaolin of the West, LLC, in cash or in common stock of the company, an
amount of cash or common stock equal to the fair market value of the premises
subject to the optioned leases. The fair market value will be determined by
reference to an evaluation of any kaolin reserves as determined by an
independent engineer.
The mining claims of the three leases under option to the company expire
on March 27, 2004 unless by such date commercial production of at least 5,000
tons a year is being obtained from any or all of the claims subject to each of
the leases. Once the required level of commercial production has been obtained,
the term of each lease is extended for so long as the production requirement is
met.
History of Operations
White Mountain. Earth Sciences conducted some exploratory drilling in the
--------------
White Mountain area in the 1960s. Earth Sciences was a consortium of companies
that was looking for commercial deposits of alunite. They found alunite and
associated deposits of kaolin by rotary percussion drilling. Data for these
holes is not available.
Buena Vista Mining drilled seven holes in the White Mountain lease area in
1992. The core was stored and is available for chemical and brightness analysis.
Utah Clay has a test pit that reveals high brightness kaolin exposed at the
surface. Samples have been taken from the pit to test the kaolin for use in
paints and other industries.
Neither proven nor probable reserves have been established.
Oro Blanco. Earth Sciences conducted extensive exploration for molybdenum,
----------
uranium, gold and flouite in the Oro Blanco region of the Oro Blanco Mountains
in the 1970s and 1980s. Earth Sciences drilled 241 core and rotary holes in the
area subject to our claims. They found deposits of both kaolin and alunite. Most
of this drilling was done on the west side of the deposit where a 165 million
short ton deposit of 14 percent alunite was defined. The drilling also defined
zones of strong kaolinite alteration surrounding the alunite deposits.
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Fire Clay Minerals, Inc. next drilled 104 core holes in the area subject to
our placer claims, the holes totaling 10,982 feet and defining a deposit of high
brightness kaolin and alunite.
An area of 130 by 300 feet was stripped of overburden to expose a kaolin
deposit. Samples have been taken from this area to test for brightness and
chemistry.
Neither proven nor probable reserves have been established.
Koosharem and Kimberly Claims. There have been no significant operations on
-----------------------------
these claims other than the annual assessment work on the perceived deposits.
Topaz Claims. Utah Clay conducted a limited drilling program on the Topaz
------------
claims property in 1995. Evidence of a certain form of kaolite, called
halloysite, was found. Drilling was not sufficient to prove any reserves.
Present Condition of the Properties
White Mountain. White Mountain has an open pit and the seven test holes on
--------------
the deposit drilled by Buena Vista.
Our plan for development includes re-analyzing the core holes that were
drilled. This analysis will cover the brightness, alteration minerals, percent
of alteration and color along with other tests. A new drilling program is
planned. First, holes will be drilled on 200-foot spacing to define the areas of
greatest shallow, high brightness kaolinite. The next phase of drilling will
concentrate on the highest potential areas found in the first holes. The spacing
will be 100 feet. If the beds of kaolin are consistent and continuous, this will
give indicated and possibly measured reserves. Closer spacing of drill holes
will be necessary if the beds are not continuous. The holes will be drilled to
150 feet. The drilling will commence outward from the test pit where a previous
hole encountered 136 feet of white kaolin. Brightness, color and specific
gravity test will be conducted on the cores.
Oro Blanco. We plan to drill confirmation holes next to six or seven of the
----------
original holes in order to confirm the cores of the original holes. Should
confirmation be obtained, this should allow the results of the earlier drilling
program to be assumed to be correct.
The cores will have to be re-tested for brightness and color. Density tests
will also be run.
A drilling program similar to that planned for White Mountain is
contemplated. There was an indication from the previous program that a promising
trend of kaolin continues to the east past where the previous drilling program
stopped.
25
<PAGE>
Koosharem, Kimberly and Topaz Claims. We have no present proposed program
------------------------------------
of exploration on these properties subject to our options to acquire. They are
without known reserves.
Plant and Equipment
There is no plant or equipment at any of the sites of the mining claims.
Power can be supplied to the White Mountain site from Utah Power & Light's
grid four miles to the east. Power can be supplied to the Oro Blanco site from
Utah Power & Light's grid ten miles to the east.
Rock Formations and Mineralizations
White Mountain. Kaolinite and alunite occur in the lower and upper tuff
---------------
members of an unnamed volcanic formation. These minerals have formed where acid
rich hydrothermal fluids have strongly altered the tuffs. Strong kaolinite and
alunite alteration are present for two miles along east-west faults. Local
centers of strong kaolinite or alunite alteration occur where north-northwest
fault zones intersect the main east-west structural features. Individual centers
of alteration are from 250 to 500 feet wide and elongated up to 2,000 feet along
its principal fault "feeder" system. Alteration zoning consists of alunite with
kaolinite in the core, grading outward to strongly kaolinized tuff then
kaolinized tuff with disseminated hematite.
Oro Blanco. The geology is similar to that at White Mountain, but the
----------
alteration is more complex.
Koosharem, Kimberly and Topaz Claims. Each of these areas shows the
----------------------------------------
hydrothermal alteration of volcanic tuffs. The geology has not been studied in
sufficient detail to describe it accurately.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998 the company issued 2,100,774 shares of its common stock at
$0.18 a share to the following officers and directors of the company, persons
owning more than five percent of any class of security of the company, or to
members of their immediate family:
<TABLE>
<CAPTION>
Relationship No. of Shares
Person to the Company Issued(1) Consideration(2)
- ----------------------- ----------------------- ------------- ----------------
<S> <C> <C> <C>
Della Engh Mother of Dennis and 823,333 $148,200
Daniel Engh
Dennis S. Engh President and Director 581,900 104,742
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C> <C>
Carmen J. (Tony) Lotito Director of Marketing 332,659 59,879
and Director
Thomas F. Harrison Vice President and 135,872 24,467
Director
Daniel H. Engh Vice President and 227,010 40,862
--------- --------
Director
2,100,774 $378,150
- -------------------------
</TABLE>
(1) The shares issued were valued at $0.18 a share, the bid price of the
common stock at the time the shares were issued.
(2) The consideration received by the company was the cancellation of debt
in the indicated amounts owed by the company to each of the named
persons. The debts arose from loans of money made to the company by the
named persons or from unpaid salaries owed to the named persons. The
debt owed to Della Engh arose entirely from loans of money she made to
the company. The debts owed to the other four persons arose primarily
from unpaid compensation for their services but also from unreimbursed
expenditures they each made on behalf of the company.
On December 27, 1999 the company issued 17,739,500 shares of its common
stock as the purchase price for an assignment of the Oro Blanco mining lease.
The shares were valued at $0.001 a share for a total purchase price of
$17,739.50. At the time of the purchase, the company's common stock had not
traded in the over-the-counter market for several weeks, and the stockholders'
capital in the company was impaired. The seller of the Oro Blanco lease was Utah
Kaolin Corporation, an affiliate of our company by reason of common directors of
the two companies and by reason of common control of the two companies through
majority ownership of the voting stock of each company by the directors of the
two companies.
The following persons received from Utah Kaolin Corporation, by way of
distribution, the following number of shares of common stock as a result of this
transaction:
No. of
Person Relationship to the Company Shares Issued
------ --------------------------- -------------
Dennis S. Engh President and Director 3,979,297
Daniel H. Engh Vice President and Director 3,979,297
Thomas F. Harrison Vice President and Director 3,869,666
Carmen J. (Tony) Lotito Director of Marketing and Director 1,984,833
Marilyn C. Kenan, Spouse of Thomas J. Kenan, 650,194
Trustee of the Marilyn securities law counsel to the
C. Kenan Trust company
<PAGE>
Dorcas Ardella Engh Mother of Dennis S. Engh and 850,000
Daniel H. Engh
Sherie S. Adams Legal Assistant to Thomas J. 10,000
Kenan, securities law counsel to
the company
Robert N. Nelson and Brother-in-law and sister of 1,300,000
Jeanette E. Nelson, TTEE Dennis S. Engh and Daniel H. Engh,
FBO Nelson Family and uncle and aunt to Darin Engh
Revocable Trust UAD 2-
28-91
Raymond and Olga Nelson Son and daughter-in-law of Robert 200,000
N. Nelson and Jeanette E. Nelson
Jack Nelson Son of Robert N. and Jeanette E. 100,000
Nelson
Kendrick O. Morrison None (non-affiliated shareholder) 816,213
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is quoted on the OTC Bulletin Board under the stock
symbol "UTCLE". The high and low bid information for the stock during 1998 and
1999 is set forth below. The information was obtained from the OTC Bulletin
Board and reflects inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions:
<TABLE>
<CAPTION>
Calendar
Quarter High Low
------- ---- ---
1998:
<S> <C> <C> <C>
1st Qtr 2.125 1.75
2nd Qtr 2.0625 1.625
3rd Qtr 1.875 1.3125
4th Qtr 1.53125 0.125
1999:
1st Qtr 0.3438 0.1600
2nd Qtr 0.8438 0.1875
3rd Qtr 0.6250 0.1300
4th Qtr 0.5000 0.1875
</TABLE>
Holders. There are approximately 200 holders of record of our common stock.
- -------
There are three holders of record of our Series A Preferred Stock, for which
there is no trading market.
Dividends. No cash dividends have been declared during the last two years for
- ---------
either the common stock or the Series A Preferred Stock. There are no
restrictions that limit the ability of the company to pay dividends on the
common stock or that are likely to do so in the future other than the
requirement that dividends be paid first to the holders of the company's
preferred stock.
28
<PAGE>
PENNY STOCK REGULATIONS
Our common stock presently trades on the OTC Bulletin Board at a price
less than $5 a share and is subject to the rules governing "penny stocks."
A "penny stock" is any stock that:
o sells for less than $5 a share,
o is not listed on an exchange or authorized for quotation on The
Nasdaq Stock Market, and
o is not a stock of a "substantial issuer. "Utah Clay Technology is
not now a "substantial issuer" and cannot become one until it has
net tangible assets of at least $5 million, which it does not now
have.
There are statutes and regulations of the Securities and Exchange
Commission (the "Commission") that impose a strict regimen on brokers that
recommend penny stocks.
The Penny Stock Suitability Rule
Before a broker-dealer can recommend and sell a penny stock to a new
customer who is not an institutional accredited investor, the broker-dealer must
obtain from the customer information concerning the person's financial
situation, investment experience and investment objectives. Then, the
broker-dealer must "reasonably determine" (1) that transactions in penny stocks
are suitable for the person and (2) that the person, or his advisor, is capable
of evaluating the risks in penny stocks.
After making this determination, the broker-dealer must furnish the
customer with a written statement setting forth the basis for this suitability
determination. The customer must sign and date a copy of the written statement
and return it to the broker-dealer.
Finally the broker-dealer must also obtain from the customer a written
agreement to purchase the penny stock, identifying the stock and the number of
shares to be purchased.
The above exercise delays a proposed transaction. It causes many
broker-dealer firms to adopt a policy of not allowing their representatives to
recommend penny stocks to their customers.
The Penny Stock Suitability Rule, described above, and the Penny Stock
Disclosure Rule, described below, do not apply to the following:
o transactions not recommended by the broker-dealer,
29
<PAGE>
o sales to institutional accredited investors,
o sales to "established customers" of the broker-dealer persons who
either have had an account with the broker-dealer for at least a
year or who have effected three purchases of penny stocks with
the broker-dealer on three different days involving three
different issuers, and
o transactions in penny stocks by broker-dealers whose income from
penny stock activities does not exceed five percent of their
total income during certain defined periods.
The Penny Stock Disclosure Rule
Another Commission rule - the Penny Stock Disclosure Rule requires a
broker-dealer, who recommends the sale of a penny stock to a customer in a
transaction not exempt from the suitability rule described above, to furnish the
customer with a "risk disclosure document." This document includes a description
of the penny stock market and how it functions, its inadequacies and
shortcomings, and the risks associated with investments in the penny stock
market. The broker-dealer must also disclose the stock's bid and ask price
information and the dealer's and salesperson's compensation related to the
proposed transaction. Finally, the customer must be furnished with a monthly
statement including prescribed information relating to market and price
information concerning the penny stocks held in the customer's account.
Effects of the Rule
The above penny stock regulatory scheme is a response by the Congress
and the Commission to known abuses in the telemarketing of low-priced securities
by "boiler shop" operators. The scheme imposes market impediments on the sale
and trading of penny stocks. It has a limiting effect on a stockholder's ability
to resell a penny stock.
Our common stock likely will continue to trade below $5 a share on the
OTC Bulletin Board and be, for some time at least, shares of a "penny stock"
subject to the trading market impediments described above.
Potential De-Listing of Common Stock
Our common stock may be de-listed from the OTC Bulletin Board. NASD
Eligibility Rule 6530 issued on January 4, 1999, states that issuers that do not
make current filings pursuant to Sections 13 and 15(d) of the Securities
Exchange Act of 1934 are ineligible for listing on the OTC Bulletin Board.
Issuers who are not current with such filings are subject to de-listing
according
30
<PAGE>
to a phase-in schedule depending on each issuer's trading symbol as reported on
January 4, 1999. Our trading symbol on January 4, 1999 was UTCL. Under the
phase-in schedule, our common stock is subject to de-listing on May 3, 2000. On
April 7, 2000 our common stock trading symbol will be changed to UTCLE if we are
not current in filing reports by that date.
EXECUTIVE COMPENSATION
No executive officer of the company has received total compensation in
any of the last three years that exceeds $100,000. Dennis S. Engh, the president
of the company, received compensation for the last three years as follows:
Amount of Bonus and
Amount of Direct All Forms of
Person Compensation Non-Cash Compensation
------ ---------------- ---------------------
Dennis S. Engh, President:
1999 $72,000 0
1998 $72,000 0
1997 $72,000 0
Stock Options. We have adopted a 2000 Stock Option Plan, the major provisions of
- -------------
which Plan are as follows:
Options granted under the plan may be "employee incentive stock options"
as defined under Section 422 of the Internal Revenue Code or non-qualified stock
options, as determined by the option committee of the board of directors at the
time of grant of an option. The plan enables the option committee of the board
of directors to grant up to 500,000 stock options to employees and consultants
from time to time. The option committee has granted no options.
Directors. There are no arrangements pursuant to which directors of the company
- ---------
are compensated for their services as a director.
Employment Contracts. The company has no employment contracts with any person or
- --------------------
any compensatory plan or arrangement with any person that would result from the
resignation, retirement or any other termination of a person's employment with
the company or its subsidiaries or from a change in control of the company or a
change in a person's responsibilities following a change in control of the
company.
31
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The principal independent accountant of the company or any significant
subsidiary has not resigned, declined to stand for re-election, or been
dismissed by the company during the periods for which financial statements are
included herein.
LEGAL MATTERS
Thomas J. Kenan, Esq., of Oklahoma City, Oklahoma has passed and will
pass on certain legal matters for the company in connection with the offer, sale
and issuance of the shares offered herein.
ADDITIONAL INFORMATION
The company will furnish its shareholders with annual reports containing
audited financial information, reported upon by independent public accountants.
The company shall also furnish quarterly reports for the first three quarters of
each year containing unaudited financial information.
FINANCIAL STATEMENTS
The following financial statements are included as part of this
prospectus:
Page
----
Independent Auditors' Report ........................................... F-1
Balance Sheets December 31, 1999 and 1998 .............................. F-2
Statements of Operations
Year ended December 31, 1999 and 1998, and
cumulative from inception (March 1, 1994)
to December 31, 1999 ........................................... F-4
Statements of Changes in Stockholders' Deficit
From inception (March 1, 1994) to
December 31, 1999 .............................................. F-5
Statements of Cash Flows
Year ended December 31, 1999; year ended December 31, 1998; and
cumulative from inception (March 1, 1994) to
December 31, 1999 .............................................. F-7
Notes to Financial Statements .......................................... F-9
32
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders and Board of Directors
Utah Clay Technology, Inc.
We have audited the accompanying balance sheets of Utah Clay Technology,
Inc. (An exploration stage company) as of December 31, 1999 and 1998 and the
related statements of operations, stockholders' deficit and cash flows for the
years ended December 31, 1999 and 1998, and for the period from inception (March
1, 1994) to December 31, 1999. These financial statements are the responsibility
of the company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and singnificant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Utah Clay
Technology, Inc. (An Exploration Stage company) as of December 31, 1999 and 1998
and the results of its operations and its cash flows for the years then ended,
and for the period from inception (March 1, 1994) to December 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the company will continue as a going concern. As discussed in Note 11 to the
financial statements, the company has suffered losses from operations and
remains in the Exploration stage. These conditions raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 11. The financial statements do not
include any adjustments that might result from the outcome of this uncertainly.
/s/ Kabani & Company, Inc.
-----------------------------------
Kabani & Company, Inc.
Fountain Valley, California
March 17, 2000
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
BALANCE SHEETS
December 31, 1999 & 1998
ASSETS
------
<TABLE>
<CAPTION>
1999 1998
---- ----
Current Assets
<S> <C> <C>
Cash $ 640 $ 208
Receivables 350 100
Inventory 21,568 21,568
---------- ----------
Total Current Assets 22,558 21,876
Properties & Equipment
Laboratory equipment 2,484 2,484
Machine design & configuration 128,000 -
Mining leases 45,073 27,333
Mining properties and deferred expenditures 1,091,022 1,026,739
(Less valuation allowance) (1,091,022) (1,026,739)
----------- ----------
Total Properties & Equipment 175,557 29,817
---------- ----------
$ 198,115 $ 51,693
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Utah Clay Technology, Inc.
( An Exploration Stage Company )
BALANCE SHEETS
December 31, 1999 & 1998
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
1999 1998
---- ----
Current Liabilities $ 358,839 $ 194,541
Accounts payable
Advances payable- officers and directors 328,712 226,394
Notes payable 149,469 25,611
---------- -----------
Total Current Liabilities 837,020 446,546
Stockholders' Equity Deficit
Preferred stock, par value $0.001;
10,000,000 shares authorized;
84, 817 shares issued and outstanding 85 85
Common stock, par value $0.001;
30,000,000 shares authorized; 23,331,874
shares in1999 and 5,592,374 shares in 1998
issued and Outstanding 23,332 5,592
Additional paid-in capital 1,451,691 1,451,691
Deficit accumulated during the development stage (2,114,013) (1,852,221)
---------- ----------
Total Stockholders' Deficit (638,905) (394,853)
---------- ----------
$ 198,115 $ 51,693
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Utah Clay Technology, Inc
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
From inception
Year ended December 31, (March 1, 1994) to
-----------------------
1999 1998 December 31, 1999
---- ---- -----------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
Expenses:
Mineral lease rentals 64,531 48,608 378,832
Inventory value adjustment - 37,034 37,034
General and administrative 132,878 242,091 606,433
Valuation allowance - Mining
properties and deferred
expenditures 64,283 213,950 1,091,022
---------- ----------- -----------
Loss before income taxes (261,692) (541,683) (2,113,321)
---------- ----------- -----------
Income taxes 100 100 692
---------- ----------- -----------
NET LOSS $ (261,792) $ (541,783) $(2,114,013)
========== =========== ===========
Basic and diluted Loss per
common share $ (0.04) $ (0.17)
========== ===========
Basic and diluted weighted
average number of common
shares outstanding 5,835,381 3,127,762
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Utah Clay Technology, Inc.
( An Exploration Stage Company )
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
From Inception (March 1, 1994) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Preferred Stock Common Stock Paid-In Development
Shares Amount Shares Amount Capital Stage Total
--------- --------- ----------- ---------- ---------- ------------ ----------
Shares issued for
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash March 1, 1994 - $ - 5,600,000 $ 56,000 $ $ $ 56,000
Shares issued for
services March 1,
1994 - - 14,400,000 144,000 - 144,000
Net loss for period
March 1, 1994 to
December 31, 1994 - - - - - (105,573) (105,573)
--------- -------- ----------- ---------- ---------- ----------- ---------
Balance December
31, 1994 - - 20,000,000 200,000 - (105,573) 94,427
Net loss for the
year ended December
31, 1995 - - - - - (672,267) (672,267)
--------- -------- ----------- ---------- ---------- ---------- ---------
Balance December
31, 1995 - - 20,000,000 200,000 - (777,840) (577,840)
1 for 10 reverse
split September 30,
1996 - - (18,000,000) (180,000) 180,000 - -
Change of par
value to $0.001 - - - ( 18,000) 18,000 - -
Preferred stock
issued to related
parties for
cancellation of
debt September 30,
1996 84,817 85 - - 424,000 - 424,085
Shares issued for
services in 1996 - - 265,000 265 48,200 - 48,465
Net loss for the
year ended December
31, 1996 - - - - - (153,669) (153,669)
--------- -------- ----------- ---------- ---------- ---------- --------
Balance December
31, 1996 84,817 85 2,265,000 2,265 670,200 (931,509) (258,959)
Shares issued for
cash in 1997 - - 100,000 100 199,900 - 200,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (CONTINUED)
From Inception (March 1, 1994) to December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Preferred Stock Common Stock Paid-In Development
Shares Amount Shares Amount Capital Stage Total
--------- -------- ---------- ---------- ---------- ----------- ----------
Shares issued for
debt cancellation
<S> <C> <C> <C> <C> <C> <C> <C>
in 1997 - $ - 165,000 $ 165 $ (165) $ - $ -
Net loss for the
year ended December
31, 1997 - - - - - (378,929) (378,929)
--------- -------- ---------- ---------- ---------- ----------- ---------
Balance December
31, 1997 84,817 85 2,530,000 2,530 869,935 (1,310,438) (437,888)
Shares issued for
outstanding
Warrants - - 389,600 389 103,634 - 104,023
Shares issued for
debt cancellation
In 1998 - - 2,100,774 2,101 376,049 - 378,150
Shares issued for
services in 1998 - - 572,000 572 102,073 - 102,645
Net loss for the
year ended December
31, 1998 - - - - (541,783) (541,783)
--------- -------- ---------- ---------- ---------- ---------- ----------
Balance December
31, 1998 84,817 85 5,592,374 5,592 1,451,691 (1,852,221) (394,853)
Shares issued for
mining lease - - 17,739,500 17,740 - - 17,740
Net loss for the
year ended December
31, 1999 - - - - - (261,792) (261,792)
--------- ------- ----------- ---------- ---------- ---------- ----------
Balance December
31, 1999 84,817 $ 85 23,331,874 $ 23,332 $1,451,691 $(2,114,013) $ (638,905)
======== ======= =========== ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from inception
Year Ended Year Ended (March 1, 1994)
December 31, December 31, to December 31,
1999 1998 1999
------------ ------------ ---------------
Cash flows from operating
activities:
<S> <C> <C> <C>
Net loss $ (261,792) $ (541,783) $ (2,114,013)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Issuance of common stock for
services - 102,645 295,110
Inventory valuation adjustment - 37,034 37,034
Valuation allowance-mining
properties and deferred
expenditures 64,283 213,950 1,091,022
(Increase) in receivables (250) (100) (350)
(Increase) in inventory - (48,627) (58,602)
Increase in Accounts payable 164,298 67,600 507,039
---------- ----------- ---------------
Net cash used in operating
activities (33,461) (169,281) (242,760)
Cash flows from investing activities:
Mining properties and deferred
expenditures (64,283) (213,950) (1,091,022)
Mining leases - - (27,333)
Machine design & configuration (128,000) - (130,484)
---------- ----------- -------------
Net cash used in investing
activities (192,283) (213,950) (1,248,839)
Cash flows from financing activities:
Net proceeds from advances
by officers/directors 102,318 246,856 982,747
Proceeds from notes payable 123,858 25,611 149,469
Issuance of shares - 104,023 360,023
---------- ----------- --------------
Net cash provided by financing
activities: 226,176 376,490 1,492,239
Net increase (decrease) in cash &
cash equivalent 432 (6,741) 640
Cash & cash equivalent - beginning
of period 208 6,949 -
---------- ------------ --------------
Cash at end of period $ 640 $ 208 $ 640
========== ============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Cumulative
from inception
Year Ended Year Ended (March 1, 1994)
December 31, December 31, to December 31,
1999 1998 1999
------------ ------------ ---------------
Supplemental disclosures:
Cash paid during the period for:
<S> <C> <C> <C>
Interest $ 4,802 $ 2,149 $ 6,951
========== ========== ===========
Income tax $ 300 $ 250 $ 850
========== ========== ===========
Non-cash investing and financing
activities:
Issuance of common stock for
services $ - $ 102,645 $ 295,110
========== ========== ===========
Issuance of preferred stock
for debt $ - $ - $ 424,085
========== =========== ===========
Issuance of common stock for
acquisition of
Mining rights $ 17,740 $ - $ 17,740
========== =========== ===========
Issuance of common stock against
cancellation of debt - Advances
and accrued expenses $ - $ 378,150 $ 802,235
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
Note 1- Summary of significant accounting policies
Organization and nature of operations
Utah Clay Technology, Inc. (the "Company"), a Utah corporation, was
incorporated on March 1, 1994. The planned operations of the Company are to
engage in mining, processing and marketing of minerals. For the period from
inception (March 1, 1994) to December 31, 1999 the Company had no revenues. The
Company is classified as An Exploration stage company because its principal
activities involve obtaining the capital necessary to execute its strategic
business plan.
Cash and cash equivalents
The Company considers all liquid investments with a maturity of three
months or less from the date of purchase that are readily convertible into cash
to be cash equivalents.
Issuance of share for services
Valuation of shares for services is based on the fair market value of
services.
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 and
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.
Inventory
The inventory consists of mining, grinding and hauling costs of
processed Kaolin, an industrial mineral. Inventory is valued utilizing the lower
of cost or market value determined on First-in First-out (FIFO) valuation
method. On December 31, 1998, an adjustment of $37,034 was made to reduce the
value of inventory to bring it at the market value of the inventory.
Equipment and mining properties
Equipment is recorded at cost. The Company has adopted the straight-
line method in computing depreciation for financial reporting purposes and
generally uses accelerated methods for income tax purposes. The annual provision
for depreciation will be
F-9
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
computed principally in accordance with the following ranges of asset lives:
laboratory equipment- 3 to 5 years; processing equipment- 3 to 10 years.
Equipment was acquired and set up in late, 1997. No depreciation expense
has been recorded in the financial statements as the company is yet to use any
of its equipment and mining properties. (See Note 4).
Reclassifications
Certain items in the prior year financial statements have been
reclassified for comparative purposes to conform with the presentation in the
current years' presentation. These reclassifications have no effect on the
previously reported income (loss).
Income taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statements and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted laws and rates applicable to the periods in which the
differences are expected to affect taxable income (loss). Valuation allowance
is established when necessary to reduce deferred tax assets to the amount
expected to be realized.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with the Statement of
financial accounting standards No. 128 (SFAS No. 128), "Earnings per share".
SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15).
Net loss per share for all periods presented has been restated to reflect the
adoption of SFAS No. 128. Basic net loss per share is based upon the weighted
average number of common shares outstanding. Diluted net loss per share is
based on the assumption that all dilutive convertible shares and stock options
were converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period.
Stock-based compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-
Based Compensation". SFAS No. 123 prescribes accounting and reporting standards
for all stock-based compensation plans, including employee stock options,
restricted stock, employee stock purchase plans and stock appreciation rights.
SFAS No. 123 requires compensation expense to be recorded (i) using the new fair
value method or (ii) using the existing accounting rules prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for stock issued to
employees" (APB 25) and related interpretations with proforma disclosure of what
net income
F-10
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
and earnings per share would have been had the company adopted the new fair
value method. The company adopted this standard in 1998 and the implementation
of this standard did not have any impact on its financial statements.
Fair value of financial instruments
Statement of financial accounting standard No. 107, Disclosures about
fair value of financial instruments, requires that the company disclose
estimated fair values of financial instruments. The carrying amounts reported
in the statements of financial position for current assets and current
liabilities qualifying as financial instruments are a reasonable estimate of
fair value.
Comprehensive income
Statement of financial accounting standards No. 130, Reporting
comprehensive income (SFAS No. 130), establishes standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity, except
those resulting resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statements that is displayed
with the same prominence as other financial statements. The company adopted
this standard in 1998 and the implementation of this standard did not have a
material impact on its financial statements.
Reporting segments
Statement of financial accounting standards No. 131, Disclosures about
segments of am enterprise and related information (SFAS No. 131), which
superceded statement of financial accounting standards No. 14, Financial
reporting for segments of a business enterprise, establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial statements regarding products and
services, geographic areas and major customers. SFAS No. 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performances. The company adopted this standard in 1998 and the implementation
of this standard did not have a material impact on its financial statements.
F-11
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
Pension and other benefits
In February 1998, the Financing accounting standards board issued
statement of financial accounting standards No. 132, Employers' disclosures
about pension and other post-retirement benefits (SFAS No. 132), which
standardizes the disclosures requirements for pension and other post-retirement
benefits. The company adopted this standard in 1998 and the implementation of
this standard did not have any impact on its financial statements.
Accounting for the costs of computer software developed or obtained for internal
use
In March 1998, the Accounting standards executive committee of the
American institute of certified public accountants (ASEC of AICPA) issued
Statement of position (SOP) No. 98-1, "Accounting for the costs of computer
software developed or obtained for internal use", effective for fiscal years
beginning after December 15, 1998. SOP N0. 98-1 requires that certain costs of
computer software developed or obtained for internal use be continued
capitalized and amortized over the useful life of the related software . The
company adopted this standard in fiscal 1999 and the implementation of this
standard did not have a material impact on its financial statements.
Costs of start-up activities
In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on
the costs of start-up activities", effective for fiscal years beginning after
December 15, 1998. SOP 98-5 requires the costs of start-up activities and
organization costs to be expensed as incurred. The company adopted this standard
in fiscal 1999 and the implementation of this standard did not have a material
impact on its financial statements.
Accounting developments
In June 1998, the No. 133, "Accounting for derivative instruments and
hedging activities", effective for fiscal years beginning after June 15, 1999,
which has deferred to June 30, 2000 by publishing of SFAS No. 137. SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
This statement requires that an entity recognize all derivative as either
assets or liabilities in the statement of financial condition and measure those
instruments at fair value. The accounting for changes in the fair value of a
derivative instrument depends on its intended use and the resulting designation.
The company does not expect that the adoption of this standard will have a
material impact on its financial statements.
F-12
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
Note 2- Income taxes
Since the Company has not generated taxable income since inception, no
provision for income taxes has been provided (other than minimum franchise taxes
paid to the State of Utah). Differences between income tax benefits computed at
the federal statutory rate and reported income taxes for 1999 and 1998 are
primarily attributable to the valuation allowance for net operating losses
(NOL) and other permanent differences. The net deferred tax (benefit) due to
NOL carried forward, as of December 31, 1999 and 1998, consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax asset $ 418,389 $ 313,672
Deferred tax asset valuation allowance (418,389) (313,672)
Balance as of December 31 $ - $ -
========== ==========
</TABLE>
A summary of Net operating losses carried forward and their expiration
date is as follows:
<TABLE>
<CAPTION>
Year of Expiration Net Operating Losses
------------------ --------------------
<S> <C> <C>
2009 $ 105,573
2010 79,963
2011 112,380
2012 199,733
2013 286,532
2014 261,792
----- -----------
Total $ 1,045,973
===== ============
</TABLE>
Note 3- An exploration stage company
An exploration stage company is one for which principal operations of
mining have not commenced or principal operations have generated an
insignificant amount of revenue. Management of an exploration stage company
devotes most of its activities in conducting exploratory mining operations.
Operating losses have been incurred through December 31, 1999, and the Company
continues to use, rather than provide, working capital in this operation.
Although management believes that it is pursuing a course of action that will
provide successful future operations, the outcome of these matters is uncertain.
Note 4- Mining Properties and deferred expenditures and related valuation
allowance
Management and other shareholders formed the Company to obtain the
necessary financing to mine, explore, develop, operate and sell kaolin. The
Company owns two mining lease (including acquisition of a mining lease in
December 1999) and has options
F-13
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
to acquire three other mining leases held by founders (these parties are also
directors and officers of the Company) of the Company.
The Company defers all acquisition, Exploration and development costs
that relate to specific mineral properties until such time as the mineral
properties are brought into production or are sold or abandoned. Costs
pertaining to properties developed to the point of production will be amortized
over the estimated productive life of the properties. Cost pertaining to
properties sold or abandoned will be written off.
The realization of the costs of mining properties and deferred
expenses is dependent upon sales of kaolin on a commercial basis from the
reserves of ore bodies. For the period from inception ( March 1, 1994 ) to
December 31, 1999 the Company had no revenues. To commence operations, the
Company's management believes significant additional equity and debt financing
will be required. Therefore, due to uncertainty as to recoverability, a
valuation allowance is deducted from the related asset.
Note 5- Accounts payable and accrued expenses
Accounts payable and accrued expenses as of December 31, 1999 and
1998, consist of the following:
1999 1998
---- ----
Lease rentals payable $ 82,571 $ 52,906
Litigation settlement - 40,000
Legal fees 66,249 36,508
Machine design & configuration 128,000 -
Health Insurance 12,343 -
Miscellaneous 69,676 62,127
---------- -----------
$ 358,839 $ 191,541
========== ===========
Note 6-Advances payable - Officers & Directors
Advances payable represents amount payable to officers or directors
of the company in lieu of their services or for advances made to the company. In
1998, the company issued common stock against a portion of advances outstanding.
The advances payable to officers and directors are unsecured, interest free and
due on demand.
F-14
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
Following is a summary of Advances payable to officers and directors of the
company, as of December 31, 1999 and 1998:
Balance as on December 31, 1997 $ 209,488
Advances from officers and directors during 1998 287,454
Less: Issuance of 1,277,495 common stock @$0.18 per share (229,950)
Repayment of advances in 1998 (40,598)
-----------
Balance as on December 31, 1998 226,394
Advances from officers and directors during 1999 127,000
Less: Repayment of advances in 1999 (24,682)
-----------
Balance as on December 31, 1999 $ 328,712
===========
Note 7-Notes payable
Notes payable as on December 31, 1999 and 1998 comprised of following:
1999 1998
---- ----
Note payable-Bank, bearing an interest rate of
4 percent over the prime rate (7.75% on 12/31/99
and 8.50% on 12/31/98) and due on demand. $ 24,005 $ 25,611
Note payable to an affiliated company,
unsecured, interest free and due on demand. 30,464 -
Notes payable to individuals related to
officers of the company, bearing an
interest rate of 10% per annum, unsecured
and due on demand 50,000 -
Notes payable to others, bearing an
interest rate of 10% per annum, unsecured
and due on demand 20,000 -
Notes payable to others, interest free,
unsecured and due on 25,000 -
--------- --------
Total $ 149,469 $ 25,611
========= ========
Note 8- Preferred Stock
Effective September 30, 1996, the Company authorized the following
transactions:
(a) Authorization of 10,000,000 shares of preferred Stock at par value
of $ 0.001.
(b) The Company issued to the following officers, directors and
shareholders in exchange for the cancellation of the debt represented by
$424,085 in advances, 84,817 shares of Series A Preferred Stock at $5.00 a
share, which stock is entitled to annual dividends
F-15
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
of $0.50 a share payable from the earnings of the Company and cumulative if
missed, is non-voting and is preferred over the company's common Stock in the
event of the liquidation and dissolution of the Company. The Series A Preferred
Stock is neither convertible into common Stock nor redeemable at the option of
the holder but is redeemable at the option of the company.
Amount of Number of
Debt Price/ Preferred
Name Converted Share Shares
- ---- --------- ----- ---------
Thomas F. Harrison $ 255,185 $ 5.00 51,037
Dennis S. Engh 168,900 $ 5.00 33,780
--------- ------ ------
Total $ 424,085 84,817
========= ======
Note 9- Litigation
Utah Clay was a defendant in a lawsuit brought for the recovery of
$50,000, interest and attorney fees by Six Way, Inc. and Daniel W. Jacksons
Trustee of the MJB Trust. The Company acknowledged the loan made to it by the
plaintiffs, which was the basis for the civil action. The claim was settled for
$60,000, including interest and litigation costs of $10,000, to be payable by
1999. By December 31, 1999, the whole amount was paid off. The outstanding
liability of $40,000 as of December 31, 1998 is included in Accounts payable and
accrued expenses.
Note 10- Acquisition of mining lease
The company acquired a mining lease of Kaolin mineral from an
affiliated company for $17,740 on December 27, 1999. The Company issued
17,739,500 shares of common stock @$0.001 per share in lieu of consideration of
mining lease.
Note 11-Going Concern uncertainty
The company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The company
incurred a net loss of $2,114,013 for the period from inception (March 1, 1994)
to December 31, 1999. The company's current liabilities exceeded its current
assets by $814,462 and $424,670 as of December 31, 1999 and 1998, respectively.
The company's total liabilities exceeded its total assets by $638,905 and
$394,853 as of December 31, 1999 and 1998, respectively. These factors, as well
as the uncertain conditions that the company faces in its day-to-day operations,
create an uncertainty as to the company's ability to continue as a going
concern. The financial statements do not include any adjustments that might be
necessary should the company be unable to continue as a going concern.
F-16
<PAGE>
Utah Clay Technology, Inc.
(An Exploration Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
12- Subsequent events & Commitments
Lease commitments
Subsequent to year ended December 31, 1999, the company entered in
to five separate lease addendum agreements for mining leases on two properties
and option for mining lease on three properties, at $10,000 per year, per
property, for next five years through March, 2005. The company also is required
to pay to the Bureau of land management, US Department of interior, an amount
of $21,000 per year pursuant to their mining lease and option agreement.
Issuance of shares
Subsequent to year ended December 31, 1999 the company entered in to
various agreements with several parties, whereby, the company issued 1,540,000
shares for $573,000 in consideration for cash, services and cancellation of
debt, during the quarter ended March 31, 2000.
Stock Option
Subsequent to year ended December 31, 1999 the company has adopted a
stock option plan, under which options granted may be "employee incentive stock
options" as defined under Section 422 of the Internal revenue code or
non-qualified stock options, as determined by the option committee of the board
of directors at the time of grant of an option. The plan enables the option
committee of the board of directors to grant up to 500,000 stock options to
employees and consultants from time to time. The option committee has granted no
options. The date of grant of an Option shall, for all purposes, be the date on
which the Option Committee makes the determination granting such Option, or such
other date as is determined by the Option Committee.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The general corporation law of Utah and the bylaws of the Registrant
provide certain indemnification rights for directors, officers and agents of the
Registrant. These indemnification provisions are set forth in the Prospectus
under "Indemnification."
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses of this offering, other than brokers'
commissions, are as follows:
Estimated
Item Amount
--------------------- ---------
Registration fees $ 250
Transfer agent's fees 1,500
Printing 2,000
Legal 20,000
Accounting 35,000
EDGAR provider fees 3,000
--------
$ 61,750
The Registrant will pay all the above expenses. The selling security
holder will pay none of them.
Item 26. Recent Sales of Unregistered Securities
The following information is provided for all securities sold by the
Registrant within the past three years without registering the securities under
the Securities Act of 1933. All securities were shares of common stock. There
were no underwriters involved in the sales.
<TABLE>
<CAPTION>
Dollar Value of
No. of Cash Other Type of
Date Shares Sold Purchasers Consideration Consideration
- ---- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
1-12-97 to 265,000(1) 40 persons $200,000 $165,000
7-16-97
1998: 389,600(1) 9 persons(2) $104,040 -
823,333(1) Della Engh - $148,200(3)
581,900(1) Dennis S. Engh - 104,742(3)
332,659(1) Carmen J. (Tony) Lotito - 59,879(3)
135,872(1) Thomas F. Harrison - 24,467(3)
227,010(1) Daniel H. Engh - 40,862(3)
</TABLE>
33
<PAGE>
200,000(1) Nobel House Financial - 36,000(4)
Services
300,000(1) Del Mar Financial - 54,000(4)
Services
37,000(1) Investors Advisors - 6,600(4)
25,000(1) S.B. Stocks, U.S.A., Inc. - 250(4)
10,000(1) Strathmore Equities, Inc. - 100(4)
12-99 17,739,500(5) Utah Kaolin Corporation - 17,740
3-00 80,000(6) McKay, Burton & Thurman - 48,305
10,000(7) James Groscost - 2,600
- ------------------------
(1) These shares were sold pursuant to the exemption from registration
provided by Regulation D, Rule 504 in a public offering. At the time of
the sales, the Registrant was not a reporting company or a blank check
company. A total of $779,140 was received in cash, cancellation of debt,
or services rendered to the Registrant in exchange for all shares sold
pursuant to their exemption from registration.
(2) These persons exercised warrants that had been issued in 1997 as part of
the Regulation D, Rule 504 offering described in footnote (1) above.
(3) These amounts represent the cancellation of debt owed to the Registrant.
The debt to Della Engh represents cash loans made to the Registrant by
her. The other cancelled debts represent amounts owed to officers of the
Registrant for unpaid compensation for performance of their duties to
the Registrant and for reimbursement of outlays of cash they made on
behalf of the Registrant. The issuances of stock were made in reliance
on the exemption from registration provided by Regulation D, Rule 504.
See footnote (1) above.
(4) These amounts represent the value of services rendered to the Registrant
by the named entities. The nature of the services was that of financial
public relations - increasing the visibility of the Registrant in the
financial markets. See footnote (1) above.
(5) These shares were issued to purchase the Oro Blanco mining lease. See
"Certain Relationships and Related Transactions" in the Prospectus. The
shares were issued pursuant to the exemption from registration provided
by Regulation D, Rule 506. No public solicitation or public advertising
was employed. The purchaser of the shares was an affiliate of the
Registrant.
34
<PAGE>
(6) These shares were issued in exchange for legal services provided to Utah
Clay over a several year period and were issued pursuant to the
exemption from registration provided by Regulation D, Rule 506. No
public solicitation or public advertising was employed.
(7) These shares were issued in exchange for the cancellation of
indebtedness of Utah Clay that arose with regard to ore hauling services
provided by Mr. Groscost. The shares were issued pursuant to the
exemption from registration provided by Regulation D, Rule 506. No
public solicitation or public advertising was employed.
Exhibits
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description of Exhibit
- ------- ----------------------
3(i) - Articles of Incorporation of Utah Clay Technology, Inc.
and amendments thereto.
3(ii) - Bylaws of Utah Clay Technology, Inc.
5 - Opinion of Thomas J. Kenan on the legality of the
securities being registered.
9 - 2000 Stock Option Plan
10.1 - White Mountain mining lease, consisting of Amendment
Agreement of November 9, 1992; Mining Lease dated March 1,
1994; Addendum to Mining Lease dated March 15, 2000; and
Addendum to Mining Lease dated March 27, 2000.
10.2 - Oro Blanco mining lease, consisting of Mining Lease dated
December 31, 1999.
10.3 - Kimberly claims: Mining Lease Agreement (Fullmer-Engh),
dated June 19, 1993; Addendum to Fullmer-Engh Mining
Lease, dated March 15, 2000; Option (Engh-Kaolin of the
West)to Enter Into Mining Lease, dated September 30, 1996;
Option (Kaolin of the West-Utah Clay) to Enter Into Mining
Lease, dated September 30, 1996, to which is attached an
unexecuted Mining Lease; Addendum to Engh-Kaolin of the
West Option to Enter Into Mining Lease, dated March 27,
2000; and Addendum to Kaolin of the West-Utah Clay Option
to Enter Into Mining Lease dated March 27, 2000.
35
<PAGE>
10.4 - Koosharem claims: Mining Lease Agreement (Fullmer-Engh),
dated June 19, 1993; Addendum to Fullmer-Engh Mining
Lease, dated March 15, 2000; Option (Engh-Kaolin of the
West)to Enter Into Mining Lease, dated September 30, 1996;
Option (Kaolin of the West-Utah Clay) to Enter Into Mining
Lease, dated September 30, 1996, to which is attached an
unexecuted Mining Lease; Addendum to Engh-Kaolin of the
West Option to Enter Into Mining Lease, dated March 27,
2000; and Addendum to Kaolin of the West-Utah Clay Option
to Enter Into Mining Lease dated March 27, 2000.
10.5 - Topaz claims: Mining Lease Agreement (Fullmer-Engh), dated
June 19, 1993; Addendum to Fullmer-Engh Mining Lease,
dated March 15, 2000; Option (Engh-Kaolin of the West) to
Enter Into Mining Lease, dated September 30, 1996; Option
(Kaolin of the West-Utah Clay) to Enter Into Mining Lease,
dated September 30, 1996, to which is attached an
unexecuted Mining Lease; Addendum to Engh-Kaolin of the
West Option to Enter Into Mining Lease, dated March 27,
2000; and Addendum to Kaolin of the West-Utah Clay Option
to Enter Into Mining Lease dated March 27, 2000.
23.1 - Consent of Thomas J. Kenan, to the reference to him as an
attorney who has passed upon certain information contained
in the Registration Statement.
23.2 - Consent of Kabani & Company, Certified Public Accountants,
independent auditors of the Registrant.
27 - Financial Data Schedule.
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the company pursuant to the foregoing provisions, or otherwise, the
company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the company of expenses incurred or paid by a
director, officer or controlling person of the company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling
36
<PAGE>
person in connection with the securities being registered, the company will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
37
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Salt Lake City, Utah.
Date: March 31, 2000 UTAH CLAY TECHNOLOGY, INC.
By/s/Dennis S. Engh
----------------------------------
Dennis S. Engh, President, and
individually as a Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated.
Date: March 31, 2000 /s/ Darin D. Engh
---------------------------------
Darin D. Engh, Treasurer, Secretary
and Director
Date: March 31, 2000 /s/ Thomas F. Harrison
---------------------------------
Thomas F. Harrison, Vice President
and Director
Date: March 31, 2000 /s/ Daniel H. Engh
---------------------------------
Daniel H. Engh, Vice President and
Director
Date: March 31, 2000 /s/ Carmen J. (Tony) Lotito
---------------------------------
Carmen J. (Tony) Lotito, Director
of Marketing and Director
38
<PAGE>
PROSPECTUS DELIVERY OBLIGATION. All dealers or brokers that effect transactions
- ------------------------------
in these securities for the selling security holders are required to deliver a
Prospectus.
39
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jun-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 640
<SECURITIES> 0
<RECEIVABLES> 350
<ALLOWANCES> 0
<INVENTORY> 21,568
<CURRENT-ASSETS> 22,558
<PP&E> 130,484
<DEPRECIATION> 0
<TOTAL-ASSETS> 198,115
<CURRENT-LIABILITIES> 837,020
<BONDS> 149,469
0
0
<COMMON> 23,332
<OTHER-SE> (662,322)
<TOTAL-LIABILITY-AND-EQUITY> 198,115
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 261,792
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (261,692)
<INCOME-TAX> 100
<INCOME-CONTINUING> (261,792)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (261,792)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
