SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE AC
T OF 1934
For the Fiscal Year Ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCH
ANGE ACT OF 1934
For the Transition Period from to
Commission file number : 1-9904
VANDERBILT GOLD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 88-0224117
(state or other jurisdiction of (I.R.S. Employer Incorporation
or organization) Identification No.)
4625 Wynn Road, Suite 103, Las Vegas NV 89103
(Address of principal executive offices) (Zip Code)
(702)362-3152
(Registrant's telephone, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
[x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
<PAGE>
The aggregate market value of the common stock held by non-affiliates of the
Registrant as of April 15, 1996, based upon a price of $0.18 per share, the
average of the bid and ask quotations as of such date was $0.17. As of April
15, 1996 there were 33,944,657 issued and outstanding shares of common stock of
the registrant
<PAGE>
PART 1
Item 1. Description of Business
General
The Company, Vanderbilt Gold Corporation, a Delaware corporation ("Company" or
"Vanderbilt"), is in the business of acquiring, developing, and producing
precious metals properties. The Company has one wholly-owned subsidiary, Star
Mining Corporation, a Nevada Corporation. Vanderbilt and its subsidiary are
hereinafter referred to as "Vanderbilt".
Vanderbilt is engaged in the mining business, primarily in the Western United
States and Mexico, with its principal operation at the Morning Star Mine
("Morning Star") which is located in San Bernardino County, California.
Morning Star is a gold and silver property which has produced significant
quantities of these precious metals. Vanderbilt has operated this mine
continuously since 1973. (See Item 2 Properties)
In January, 1995, the Company signed an Agreement with Compania Minera
Rosarence S. A. de C.V. ("Rosarence"), a Mexican Corporation with headquarters
in Culiacan, Sinaloa, Mexico wherein the Company will fund certain development
and exploration activities to be performed by Rosarence at a 67,000 acre
concession ("La Sierra") in the State of Durango, Mexico. La Sierra is being
converted from an "exploration concession" to an "exploitation concession" in
order to begin development of one or more of the seven targets that have been
identified on the concession. La Sierra when converted to an "Exploitation
Concession" will be reduced in size to about 32,000 acres which contains all
known mineral prospects. Preliminary sampling has identified gold, silver, and
copper potentials. In September, 1995, the Company also exercised its option
to acquire the concession and all of the outstanding shares of Rosarence, all
payments which consisted of 1.8 million common shares of Vanderbilt plus
$200,000 have been made with the exception of two quarterly payments of $30,000
each which are due and payable in 1996. (See Item 2 Properties) On December
31, 1995 Vanderbilt entered into a "Letter of Understanding" with Consolidated
Viscount Resources Ltd. ("Viscount") and Guardian Enterprises Ltd. ("Guardian")
of Vancouver, British Columbia which grants them the exclusive rights to
negotiate a joint venture for the La Sierra concession with Vanderbilt for 120
days. (See Item 2 Properties) Vanderbilt also holds a 17.15 % interest in
Cosalteca SA de CV's ("Cosalteca") 12,000 acre Las Coloradas concession group
in the Sierra Madre mining district. The company holds an option to increase
its interest to at least 42.65 %. Formerly, the mines and prospects were
divided among numerous holdings too small to attract sufficient developmental
capital to efficiently develop the district. These have been combined into
approximately 12,000 acre concession covering all of the known mines and
prospects as well as the structures in which the precious metal mineralization
occurs. A mill and ancillary infrastructure is already in place. A new shaft,
which will provide the means to mine more efficiently, has already been
started. (See Item 2 Properties)
<PAGE>
Narrative Description of Business
Vanderbilt is a production oriented gold and silver mining company. Its
business activities include property evaluation, exploration, and if warranted,
acquisition, development, construction of facilities, mining, processing, and
sale of metal, principally gold and silver in the form of dore. All dore is
sold to outside companies for final processing. Vanderbilt may enter into
joint ventures or partnerships with other business entities to accomplish these
same purposes.
Morning Star Mine
In June, 1987, Management decided to add a fine crushing plant to the facility
in order to increase gold recovery rates. In March, 1990 production problems
began which resulted in a sharp drop off in the amount of gold and silver being
recovered from the ores on the heap leach pads. Management suspended mining
operations, except for the crushing of previously mined ore, and concentrated
its attention on the gold recovery. The resultant drop in cash flows and
liquidity caused the Company to curtail its other activities, lay off
personnel, defer payments to vendors, and continue the moratorium on mining
activity at Morning Star. Working capital was negative and for two years the
Company survived on loans and extensions of credit from the Company's President
and others. During the three years ended December 31, 1993, efforts at the
Morning Star were directed to reclamation and remediation. During that time,
heap leach pad No. 1 was detoxified and final reclamation commenced.
In late 1994 as funds became available, the Morning Star was made ready for
increasing levels of operations, equipment was tested and brought on-line, the
assay lab was equipped, stocked with supplies and staffed, and the solution in
the remaining heap leach pad (No. 2) started through the gold recovery and
detoxification system. During 1995, the Company removed about 77 ounces of
gold from the carbon recovery tanks and delivered it to market. Reclamation
and efforts to secure new funding continued throughout the year.
In December, 1995, Vanderbilt entered into a "Letter of Understanding" with
Guardian and Viscount. Under the terms of the agreement they have the to earn
a 50% interest in the Morning Star Mine in exchange for funding, prior to the
end of 1996, of $750,000 for the operation of the mine
Sources and Availability of Mineral Resources
The ultimate realization of value from Vanderbilt's properties is dependent
upon the existence of economical quantities of ore containing significant
amounts of precious metals, gold and silver. The Company's continuing search
for suitable mining properties is subject to numerous uncertainties such as
locating commercially viable deposits, competition from other companies and the
ability to negotiate leases and other contracts with property owners on terms
favorable to the Company. Increased governmental regulation(s) as to the
location, exploration, and development of mineral prospects coupled with the
trend toward increased withdrawal of lands from mineral entry could possibly
limit Vanderbilt's access to suitable mineral prospects.
<PAGE>
Seasonal Nature of Business
Vanderbilt's business is generally not seasonal in nature except for certain
times when weather conditions may adversely affect access to and operations of
its properties.
Major Customers
Vanderbilt has sold gold and silver dore, produced at the Morning Star Mine to
Englehard Industries West, Inc., Gerald Metals, Inc. and G. D. Resources, Inc.
Vanderbilt does not believe that the loss of these customers would adversely
affect its business since there are several other potential customers for its
products. Vanderbilt also may enter into forward sales contracts with gold
merchants, users and others.
Competitive Conditions
Vanderbilt considers the exploration for, development, and acquisition of
precious metals and other mineable properties to be intensely competitive.
Companies with greater financial resources, existing staff and labor forces,
equipment for exploration and specialized experience, under certain
circumstances, may be in a better position than Vanderbilt to compete for
mineral properties, Also, the market price for gold and silver depends upon
factors beyond Vanderbilt's control, including the production of gold and
silver by other nations and by the monetary and fiscal policies of the United
Stated and other leading economic powers.
Environmental/Energy/Governmental Regulations
The California Desert Protection Act of 1994 ("Act") was passed by Congress and
signed into law by the President. The Morning Star Mine ("Morning Star") is
located in the newly designated "Mojave National Preserve". In general, the
Morning Star's mining and processing operations, under the new Act, may be
conducted as provided in the existing Plan of Operations ("Plans"). One change
is that public land, including that occupied by the Morning Star, is now
administered by the National Park Service ("NPS") instead of the Bureau of Land
Management ("BLM").The land around the Morning Star will no longer be open to
new mining claims, but the new Act expressly provides that this withdrawal of
land from mineral entry is "subject to valid existing rights", which would
obligate the United States Government to honor the Morning Star's valid mining
claims, permits and the approved Plan.
Since the Morning Star has an approved Plan and state water permits, it appears
that the mining and processing operations can proceed in accordance with the
Company's plans. However, it in not possible at this time to assess the
ultimate impact, if any, that the Act will have upon the Company's operations
at the Morning Star and the timing of such impact.
<PAGE>
Compliance with federal, state, and local provisions regarding the discharge
of materials and pollutants into the environment, has not materially affected,
nor is it expected to materially affect capital expenditures, earnings, or the
competitive position of Vanderbilt; although in certain cases Vanderbilt has
experienced substantial delays in implementing its mining plans with respect to
its mining properties because of the delays inherent in the environmental
permitting process.
Wastes generated in connection with the cyanide leach facility currently are
not considered to be hazardous wastes under either the Federal Resource
Conservation and Recovery Act or the State of California Hazardous Waste
Control Act. As a result, Vanderbilt's heap leach operation is not subject to
the regulations promulgated by the Environmental Protection Agency or the
California Department of Health Services with respect to hazardous wastes and
materials. However, the equipment used at the site generates small quantities
of waste oil, classified as a hazardous waste by the State of California, which
is stored at the site for later removal by a commercial disposal service.
Vanderbilt has obtained permits as a Hazardous Waste Generator and a Hazardous
Material Handler from the County of San Bernardino Environmental Health
Services Department in regard to the waste oil generated by the equipment on
site.
The cyanide leach facility is subject to review and regulation by the
California Regional Water Quality Control Board. Vanderbilt's facilities at the
mine site are being modified and leach pad No. 2 is in the process of
detoxification. On August 11, 1994, the California Regional Water Quality
Control Board, Lahontan Region, approved and adopted the amended waste
discharge requirements for Vanderbilt's Morning Star Mine. The effect of this
approval is that the Company may continue operations at the mine and that heap
leach pad No. 1 is reclassified as detoxified. No cyanide is presently being
used by the Company at the Morning Star Mine. Under the terms of its amended
permit, Vanderbilt has been approved to begin the use of cyanide processing
using a vat leach system inside an enclosed structure.
In addition, the following environmental requirements apply to various aspects
of the facility: (1) An air quality permit for the facility is required by the
San Bernardino Air Pollution Control District. An application for this permit
was filed in March, 1988, and continues to be under review by the District.
Vanderbilt is operating at the Morning Star under a temporary permit. (2) The
two underground storage tanks at the Morning Star Mine which were used to store
gasoline and diesel fuel for the trucks and other equipment used at the mine
site were removed. The tanks are now operated as surface tanks. (3) As required
by state law, Vanderbilt filed a Business plan with the County of San
Bernardino Environmental Health Services Department; this was approved in
August of 1988. (4) A reclamation plan for the mine was approved by the Federal
Bureau of Land Management ("BLM") in June, 1984.
<PAGE>
(5) Vanderbilt's mining permit issued by San Bernardino County, California,
expired in August, 1994 and the application process is underway for a new
permit. A Revised Plan of Operation was filed with the BLM in 1988 and as
amended, and updated plan was submitted in December 1990. A Revised Plan of
Operations was filed with the BLM pursuant to a request made in April, 1993.
The effect of the transfer of responsibility from the BLM to the NPS as a
result of the California Desert Protection Act of 1994 being enacted cannot be
evaluated at this time. See the "Environmental" section of "Management's
Discussion and Analysis" for additional information.
Permits were obtained from the County of San Bernardino Environmental Health
Services Department and the BLM to drill two water wells to the south of the
Morning Star mine site. These wells were drilled in August and October of 1988
and a Water Well Drillers Report was filed with the San Bernardino County and
the State of California Department of Water Resources. In December, 1988, a
right of way permit was obtained from the BLM and a five mile pipeline from the
wells to the Morning Star mine site was completed in 1989.
See Item 3. Legal Proceedings for information concerning misdemeanor
convictions in 1992 of Vanderbilt and its President for violations of
environmental laws. Any proceeding against Vanderbilt's former president were
dropped by the county following his death in July, 1995. This conviction
against Vanderbilt is under appeal.
Governmental agencies having jurisdiction over the Morning Star Mine in San
Bernardino County have publicly announced a policy of aggressively enforcing
laws and regulations designed to protect the environment especially as they
relate to mining operations. Accordingly, it can be expected that the Morning
Star Mine will be under the scrutiny of such authorities. While the Company
will make every effort to comply with these regulations there can be no
assurance as to the results such regulatory scrutiny may have upon the
operations of the Morning Star Mine.
During 1991, monitor wells on heap leach pad No. 2 disclosed the existence of a
small leak of the leach solution from the top pad liner. The local regulatory
authorities prohibited the Company from adding any further cyanide to the
leaching solution. Heap leach pad No. 2 has three separate pad liners. The
leak is apparently confined to the top liner. Tests conducted indicate that
the other two pad liners have maintained their integrity and there has been no
contamination of any of the soil underneath the heap leach pad.
It is the Company's policy to comply with environmental and health laws and
regulations.
Employees
Vanderbilt currently has one (1) employee.
<PAGE>
Item 2. Properties
Glossary of certain mining terms
The following is a glossary of some of the terms used in the mining industry
and referenced herein:
ADR - An acronym for adsorption, desorption, and reactivation (see definitions
lot adsorption. desorption, reactivation singularly).
adsorption - A process in which soluble complexes of gold and silver physically
adhere without chemical reaction to activated carbon particles.
agglomeration - A process whereby mineralized material is mixed with a binder
and water and cured for 10 to 70 hours. Agglomeration allows heap leaching of
material that otherwise does not permit the leaching solution to percolate
through, by increasing porosity and permeability.
bank cubic yard - ("bcy") Refers to a cubic yard of in situ resource.
bottle roll test - A small scale metallurgical laboratory test used to
determine the amenability of mineralization to the cyanidation extraction
process.
CIL - An acronym for Carbon-In-Leach - the process of a solution leach plant in
which the dissolved gold in the pregnant cyanide solution is extracted through
adsorption onto activated carbon concurrent with leaching.
column test - A large scale metallurgical laboratory test used to determine the
amenability of rnineralized material to the cyanidation extraction process.
contained gold - Total measurable gold or gold equivalent in grams or ounces
estimated to be contained within a mineral deposit. A calculation or estimate
of contained gold makes no allowance for mining dilution or recovery losses.
cutoff grade - Grade of mineralization, established by reference to economic
factors, above which material is included in mineral deposit reserve resource
calculations and below which the material is considered waste.
waste - May be either an external cutoff grade which refers to the grade of
mineralization used to control the external or design limits of an open pit
based upon the expected economic parameters of the operation, or an internal
cutoff grade which refers to the minimum grade required for blocks of
mineralization present within the confines of in open pit to be included in
mineral deposit estimates.
<PAGE>
development stage - The period when a mineral deposit that has been estimated
to be economically viable is prepared for commercial production; including
pre-production stripping in the mine and the construction of the necessary
process plant and supporting facilities.
desorption - A process in which gold and silver physically adhered to carbon
particles in the adsorption process are stripped from the carbon particles
using a weak acid solution.
dore - Unrefined gold and silver in bullion form.
gold deposit - Means a mineral deposit mineralized with gold but without
reference to its potential economics.
gold equivalent - A method of presenting combined gold and silver
concentrations or weights for comparison purposes. Commonly involves
expressing silver as its proportionate value in gold based on the relative
values of the two metals. When gold equivalent is used to express metal sold,
the calculation is based on actual prices received. When grades are expressed
in gold equivalent, the relative recoveries of the two metals are also taken
into account.
grade - The amount of valuable mineral in each ton of mineralized material
expressed as troy ounces (or grams) per ton or tonne for gold and silver or as
a percentage of copper and other minerals.
heap leaching - A method of gold and silver extraction in which mineralized
material is heaped on an impermeable pad and sodium cyanide solution is applied
to the material. The gold and silver are dissolved out of the materials as the
solution percolates down through the heap, the pregnant solution is collected
from below the heap and the gold and silver are precipitated from the pregnant
solution in vessels or columns containing activated carbon or zinc powder.
leach pad - A large, impermeable foundation or pad used as a base for ore
during heap leaching. The pad prevents the leach solution from escaping out
of the circuit.
lode mining claim - A mining claim located on a vein or lode of quartz or other
rock in place, bearing gold, silver, tin, lead, copper, or other valuable
deposits.
mineral deposit, deposit, or mineralized material - A mineralized body which
his been physically delimited by sufficient drilling, trenching and/or
underground work and found to contain a sufficient average grade of metal or
metals to warrant further exploration and/or development expenditures. Such a
deposit does not qualify under SEC standards as a commercially mineable ore
body or as containing ore reserves, until final legal, technical and economic
factors have been resolved.
<PAGE>
mixed ore - A mixture of oxidized and unoxidized ore.
net smelter return royalty - A phrase used to describe a royalty payment made
by a producer of metals, usually to a previous property owner or Governmental
authority, based an the value of gross metal production from the property, less
deduction of certain limited costs including smelting, refining, transportation
and insurance costs.
net profits interest royalty - A phrase used to describe a royalty payment made
by the producer of metals, usually to a property owner or Governmental
authority, based on the value of gross metal production from the property, less
deduction of certain costs including smelting, refining, transportation and
insurance costs (often referred to as realization costs) plus direct operating
costs associated with the mining and treatment of ore and the mining of
associated waste.
open pit mining - The process of mining an ore body from the surface in
progressively deeper steps. Sufficient waste rock adjacent to the ore body is
removed to maintain mining access and to maintain the stability of the
resulting pit.
ore - A natural aggregate of one or more minerals which, at a specified time
and place, may be mined and sold at a profit, or from which some part may be
profitably separated.
ounce (oz) - Troy ounce.
oxidized ore (also referred to "oxide ore") - Mineralized rock which can be
profitably mined and in which some of the original minerals have been oxidized
by natural processes. Oxidation tends to make the ore more porous and permits
a more complete permeation of cyanide solution so that minute particles of gold
in the interior of the rock will be more readily dissolved
oz/ton (opt) - Troy ounces per short ton.
reactivation - A process in which carbon particles which have been stripped of
gold and silver during the desorption process are heated in a kiln to relieve
them of all contaminants and prepare them for reuse in the adsorption process.
reserve - Means that part of a mineral deposit which can be economically and
legally extracted or produced at the time of the reserve determination.
Reserves are customarily stated in terms of "ore" when dealing with
metalliferous minerals.
strike length - The longest horizontal dimensions of a body or zone of
mineralization.
stripping ratio - The ratio of waste material to ore that is experienced in
mining an ore body.
<PAGE>
unpatented mining claim - A mining claim located on the public lands of the
United States, for which a patent has not been issued. An unpatented mining
claim is a possessory interest only, subject to the paramount title of the
United States. The validity of an unpatented mining claim depends upon the
existence of a valuable mineral deposit within the boundaries of the claim and
compliance with mining codes.
Morning Star Mine
The Morning Star Mine property is located in San Bernardino County, California,
approximately 70 miles south of Las Vegas, Nevada. As of March 22, 1995,
Vanderbilt controls a total of 59 unpatented lode claims in the Morning Star
area (approximately 1,200 acres). Nearly 124 acres comprise the mine, leach
pad, recovery plant, waste dumps and office, assay and maintenance facilities.
Access to the property is by paved highway and four miles of gravel road which
is maintained by the Company.
Gold mineralization at the Morning Star ore body is hosted entirely within late
Jurassic Ivanpah Granite, and is associated with quartz plus calcite veins and
stringers localized in the upper plate of the Morning Star thrust fault. Ore
grade values typically persist 65 feet to 100 feet perpendicular from the
Morning Star thrust fault plane into the upper plate. The gold is associated
with pyrite, chalcopyrite, galena, sphalerite, and covelite (in the zone of
secondary enrichment).
The ore reserve report prepared by independent geotechnical consultants based
upon drill hole data obtained from 1974 through 1987, estimated the proven and
probable reserves at the Morning Star Mine, is 6,455,617 tons averaging
approximately .048 ounces of gold per ton of ore. The planned production
capacity of the leach and recovery facilities is sufficient to produce between
one and two thousand ounces of gold per month.
La Sierra Concession, State of Durango, Mexico
In January, 1995, the Company entered into an agreement with Rosarence wherein
the Company will fund certain development and exploration activities to be
performed by Rosarence on a 67,000 acre concession, known as La Sierra, located
near Palmar, State of Durango, Mexico. The Company also acquired a one year
option to acquire a specified portion of the La Sierra Concession and the
option to acquire all of the outstanding shares of Rosarence at no further
cost. The exploration concession granted by the Mexican government in
September 23, 1992, specifically mentions that the minerals for which the
concession was granted are gold, silver, lead, copper, zinc, tungsten and
antimony. Preliminary sampling has definitely identified gold, silver and
copper potentials. Later, in 1995, an application was filed to convert the
concession to an "Exploration Concession" and reduce the size to about 32,000
acres retaining all known mineral prospects.
<PAGE>
In September, 1995, the Company exercised its option to acquire the concession,
and all of the outstanding shares of Rosarence. All payments, which consisted
of 1.8 million common shares of Vanderbilt plus $200,000, have been made with
the exception of two quarterly payments of $30,000 each which are due and
payable in 1996. The shares of Vanderbilt must be traded at a price equal to
$1.00 (median of Bid and Ask quotes) for a 15 day period by September 27, 1996
or the difference between the actual traded price and $1.00 will be paid by the
Company in either cash or stock with a value equal to the difference. The
manner of payment is at the discretion of the former owners of Rosarence.
Las Coloradas Concessions, State of Durango, Mexico
On December 22, 1995 Vanderbilt entered into a joint venture with Cosalteca,
Guardian and Viscount relating to Cosalteca's 12,000 acre Las Coloradas
concession group in the Sierra Madre mining district. The agreement requires
Vanderbilt to issue to Cosalteca 700,000 common shares as its initial
contribution to earn a 17.15% interest in the joint venture. The shares of
the Company were not issued as of December 31, 1995. The company holds a two
year option to increase its interest to at least 42.65%. The shares of
Vanderbilt must be traded at a price equal to $1.00 (median of Bid and Ask
quotes) for a 15 day period by February 22, 1997 or the difference between the
actual traded price and $1.00 will be paid by the Company in either cash or
stock with a value equal to the difference. The manner of payment is at the
discretion of Cosalteca.
Formerly, the mines and prospects were divided among numerous holdings too
small to attract sufficient developmental capital to efficiently develop the
district. These holdings have been combined into a 12,000 acre concession group
covering all of the known mines and prospects as well as the structures in
which the precious metal mineralization occurs. A mill and ancillary
infrastructure is already in place. A new shaft, which will provide the means
to mine more efficiently, has already been started.
At present, no data is available as to reserves for the La Sierra concession,
whether proven or probable.
Office Facilities
The Company currently leases its office space at 4625 Wynn Road, Suite 103, Las
Vegas, Nevada, on a month-to-month basis at a rental of $770.00 per month.
<PAGE>
Risk Inherent in the Mining Business
Mineral exploration and development is highly speculative and involves
significant risks. The majority of exploratory projects fail to discover
mineralization sufficient to be commercially exploited. All mineral properties
are subject to hazards and risks normally incident to the subsurface geological
structures which can abruptly terminate mineralization, difficult metallurgical
problems which can inhibit the economic recovery of minerals, changes in the
world prices for the mineral being mined and produced, and environmental
restraints and conditions imposed by Federal, State, and County agencies which
may make it economically impractical to operate.
Fluctuation in Metal Prices
The profitability of Vanderbilt's operations is often directly related to the
world market prices of gold and silver. The market price of both gold and
silver can fluctuate widely and are influenced by numerous factors beyond the
control of Vanderbilt, such as the rate of inflation (domestic and foreign),
interest rates, economic or political crisis, as well as a number of other
factors. If the market price of gold and silver should drop dramatically, the
value of Vanderbilt's properties could also drop and the Company may not be
able to recover its investment in these properties.
Item 3. Legal Proceeding
In October and November 1992 a misdemeanor jury trial was held in San
Bernardino County (California) Municipal Court, which resulted in ten guilty
verdicts against Vanderbilt and ten guilty verdicts against its President, John
F. Jordan, Jr., for environmental violations. These verdicts resulted in fines
totaling $90,000 for each of Vanderbilt and Mr. Jordan. Vanderbilt and Mr.
Jordan both filed an appeal to an Appellate Panel of the Superior Court of San
Bernardino County to each of these convictions. That appeal was denied. The
Company has filed a petition for a writ of habeas corpus with the Federal
District Court, Central District of California. That Petition is pending with
the court. The final determination of this matter is uncertain. Following his
death in July, 1995 the fine against Mr. Jordan's estate was terminated.
A lawsuit was filed in the Superior Court of the State of California in and for
the County of Santa Barbara against the company entitled Patricia R. Eubank v.
Vanderbilt Gold Corp., Case No. SM93578 for monies alleged to be owing pursuant
to a lease under which Vanderbilt was a tenant relating to certain mining
claims. Management disputed the contention that monies were owing due to
termination of the lease by the company. However, in order to compromise a
disputed claim and to avoid additional attorney's fees and costs, Management
has now reached a settlement with Plaintiffs. The terms of the settlement
include payment by Vanderbilt of $2,500, issuance of 50,000 shares of common
stock, termination of the lease and a full general release of all claims by
Plaintiffs and Vanderbilt.
<PAGE>
In 1992 eight individual creditors instituted litigation to enforce collection
of amounts due to them. The aggregate principal amount of debt owed by the
Company was $236,184, not including interest and attorney's fees. During 1992
all of the creditors obtained judgments against Vanderbilt for the amounts due,
including interest and attorney's fees. In 1993 and 1994, a corporation owned
by two of the Company's directors, purchased $112,542 of the original amount of
the debt. This was then converted into the Company's common stock at $.16 per
share (703,382 shares).
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matters to a vote of security holders during the
last quarter of the year ended December 31, 1995.
PART II
Item 5. Market for Company's Common Equity and related Stockholder Matters
The Company's common shares are traded upon the NASDAQ Electronic Bulletin
Board System. The following table sets forth the range of high and low
quarterly closing sales prices for Vanderbilt's common stock for years ended
December 31, 1995 and 1994.
Years Ended December 31,
1995 High Low
First Quarter 9/32 3/16
Second Quarter 9/32 3/16
Third Quarter 7/32 9/64
Fourth Quarter 9/64 7/64
1994 High Low
First Quarter 3/8 1/4
Second Quarter 5/16 3/32
Third Quarter 3/8 3/32
Fourth Quarter 9/32 5/32
As of April 15, 1996 there were approximately 3,430 identified holders of
record of the Company's common stock.
The Company has never declared a dividend and does not anticipate doing so in
the foreseeable future.
<PAGE>
Item 6. Selected Financial Data
The following selected financial data set forth for the years ended December
31, 1995, 1994, 1993, 1992, and 1991 have been derived from the financial
statements of the Company but is not covered by the accountant's reports on the
financial statements.
SELECTED FINANCIAL DATA
(In thousands except per share amounts)
Years Ended December 31, 1995 1994 1993 1992 1991
Net sales on operating revenues 29 14 61 101 689
Loss from continuing operations 680 708 420 1,031 2,590
Loss from continuing operations
per common share .02 .03 .03 .08 .21
Net loss 637 709 527 1,206 2,858
Net loss per common share .02 .03 .03 .09 .23
Extraordinary item:
Gain on sale of investments - - - - 10
Gain on sale of investments
per common share - - - - -
Cash dividends declared
per common share - - - - -
At year end:
Total assets 3,476 3,292 3,028 3,280 3,905
Long term obligations 45 45 47 91 91
Working capital (deficit) (1,332) (698) (2,330) (1,624) 536
Accumulated depreciation and
amortization 8,000 6,910 6,860 7,572 7,187
Shareholders' equity (deficit) 1,230 1,416 1,356 (11) 1,189
Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General commentary
In 1995 Vanderbilt Gold Corporation acquired an interest in two precious metal
bearing properties in Mexico as well as continuing modernization of the Morning
Star facilities.
The following discussion and analysis should be read in conjunction with the
audited financial statements starting at Item 8.
The Morning Star is located in the Ivanpah Valley of San Bernardino County,
California. Mining was discontinued in 1990. Under a newly arranged letter of
understanding with Guardian and Viscount, management expects the mine to reopen
during 1996, initially as an underground mine using a more efficient and
environmentally friendly processing system, to produce about 1,450 ounces per
month. The underground phase of mining, scheduled to begin in 1996, should be
completed in about 28 months, using less than 15% of the reserves. Open pit
operations can resume after new permitting is in place.
<PAGE>
Vanderbilt Gold Corporation purchased a 100% interest in the 32,000 acre La
Sierra exploitation concession in Durango, Mexico. The concession includes at
least five high grade but fairly thin gold vein systems which resemble deposits
in Grass Valley, California, a large multi - vein quartz tourmaline prospect
known as El Rincon, which appears similar to Hemlo in Canada, and a very old
bonanza type silver mine known as Chirimoya that was originally mined
underground on three levels. Redevelopment began in 1995. Old working faces
contained some silver grades exceeding 180 ounces per ton. More work is
required to assess the grade and reserve potential of this mine.
Vanderbilt also purchased a 17.15% interest in Cosalteca's 12,000 acre Las
Coloradas concession group in the Sierra Madre mining district. The company
holds an option to increase its interest to at least 42.65%. Formerly, the
mines and prospects were divided among numerous holdings too small to attract
sufficient developmental capital to efficiently develop the district, These
holdings have been combined into a concession group covering all of the known
mines and prospects as well as the structures in which the precious metal
mineralization occurs. A mill and ancillary infrastructure are already in
place. A new shaft, which will provide the means to mine more efficiently,
will be completed in 1996. High grade gold ore pockets have been found to
contain grades exceeding 3 ounces per ton. Sale of concentrates from this
concession is expected to begin in 1996.
Results of operations
The following financial and operational data highlight and summarize the
Company's results of operations and financial position, for the periods
indicated (in thousands except percentages, per share and per ounce amounts):
1995 1994 1993
Overburden and waste removed (tons) 0 0 0
Ore Mined (tons) 0 0 0
Payable Gold (troy ounces):
Produced 0 0 0
Sold 77 36* 12
Payable Silver (troy ounces):
Produced 0 0 0
Sold 0 33* 1
Average Realization:
Gold (per payable ounce) $380 $373 $334
Silver (per payable ounce) - $5.16 $3.64
Estimated troy ounces of recoverable gold
remaining on the heap leach pads
2,372 2,449 2,449
<PAGE>
Operating Loss 680 708 420
Net Loss 637 709 527
Net Cash Used in Operations 182 329 87
Net Cash (used in) Provided by
Investing Activities 421 (93) 6
Net Cash Provided by Financing Activities 114 539 117
Loss per Common Share .02 .03 .03
Total Assets 3,476 3,292 3,028
Total Liabilities 2,246 1,876 1,672
Accumulated Deficit 24,055 23,418 22,709
Shareholders' Equity 1,230 1,416 1,356
Working Capital Deficit 1,331 698 726
*Metals recovered from the spent carbon removed from the recovery tanks.
During 1995, the Company continued general reclamation activities at the
Morning Star Mine, restructured its debts, raised limited funds through private
placements.
The low level of gold production for 1991 through 1995 did not provide the
necessary revenues with which the Company could mine any new ore, remove any
waste or overburden, or fund day to day operations. Beginning in 1990 and
continuing in 1991 and 1992, numerous production difficulties were encountered
at the Morning Star Mine, which has been Vanderbilt's principal operating
facility. These difficulties resulted in an obvious decline in the amount of
gold and silver recovered from the ore on the heap leach pads but continued to
consume costs at a high rate. In August, 1990, management suspended mining
operations (other than leaching), reduced the workforce and implemented other
cost reduction measures. These measures remained in effect through 1994. In
1995, the work to revamp the recovery system to increase overall precious metal
recovery and make the entire system more environmentally friendly began.
Liquidity and Capital Resources
The Company ended the year of 1995 with a working capital deficit of $1,332,000
as opposed to a year end deficit for 1994 of $698,000. 1995 saw an decrease in
overall cash flow of $152,000 as compared to a cash flow increase of $117,000
for 1994. The cash and cash equivalent balances at year end 1995 of $1,000 as
opposed to $153,000 at year end 1994 is a result of the Company's lack of
funding through operations or capital raising efforts. During 1995 Vanderbilt
was able to raise $114,000 as compared to $548,000 in 1994. Current
liabilities increased by $370,000 during 1995 due to increases in accounts
payable, accrued expenses and short-term borrowings.
<PAGE>
As stated in the general Commentary to this Management Discussion and Narrative
Analysis, Management was been able to reduce current liabilities by December
31, 1993 by $1,575,000 or 49% from the December 31, 1992 level. While this was
not enough to restore working capital to a positive balance from a deficit
position, the working capital deficit was reduced by $1,604,000 by year end
1993 from the 1992 year end level. $133,000 in cash was raised through private
placements; the related commissions were paid in common stock. The Company was
able to negotiate with creditors and retire $902,000 in prior accounts payable,
pay $72,000 of current expenses, pay amounts due related parties of $19,000,
reduce notes payable - other of $400,000, reduce accrued interest of $60,000,
and settle deferred revenues - gold sales of $1 18,000 all with common stock in
debt restructuring, Another $100,000 in accounts payable and $48,000 in amounts
due to related parties were paid with Series A Preferred Stock. In total, the
Company issued approximately 11,000,000 common shares for a value of $1,846,000
(average $0.1678 per share) and 9,670 Series A Preferred Shares for a value of
$148,000 (average $0.153 per share). These shares were subsequently converted
to common shares following approval by the stockholders to increase the number
of common shares available.
The Company's continued existence and resumption of operations at the Mine and
the continuation of evaluation, exploration and development of other mineral
properties, including the La Sierra concessions, are dependent upon its ability
to raise additional capital for these purposes through private placements,
restructuring of debt, joint venture and other financing arrangements. The
company has already obtained the financing necessary to bring the mines at Las
Coloradas into full production.
Inflation and Other Factors Influencing Future Performance
The impact of inflation on Vanderbilt's operations can vary. The future price
of gold and the level of interest rates could directly affect the Company's
future operating revenues and/or net profits. Low interest rates and higher
gold prices may enhance the value of Vanderbilt's investment in its mining
operations. Renewed interest in gold and silver as commodities or for
investment could also increase profitability and add to shareholder equity.
Falling prices, on the other hand could have the opposite effect.
Vanderbilt's future operating results depend upon its success in locating,
acquiring and producing commercial quantities of gold and other minerals from
properties it already has and in acquiring new properties with short term cash
flow potential.
Since Vanderbilt does not yet have any regular and dependable source of
revenues, increases in inflation could cause costs and expenses to exceed
anticipated or budgeted amounts.
<PAGE>
Vanderbilt's management does not believe that inflation has or will, in the
foreseeable future, adversely affect its income or loss from continuing
operations. However, economic conditions, certain hazards and risks inherent
to the mining industry in general, as well as environmental factors, could
adversely affect income and cash flow from operations.
Environmental
In 1995, all operating permits were maintained. A county permit, which largely
consists of reclamation plans, must be filed with San Bernardino County as the
previously held permit has expired. The Company plans to do so as soon as
funding for the fees and preparation costs are obtained. Management does not
believe that, if properly applied for, the permit will be withheld.
Reclamation of leach pad No. 1 is partly completed. The company expects to
fill in the pregnant pond, establish the monitoring system, contour the pad and
plant native vegetation on it in accordance with the plan already approved by
the California Water Quality Control Board as soon as practicable.
In April, 1993, the BLM served Vanderbilt with a request that the Morning Star
Mine "Plan of Operation be amended. A "Plan of Operation" filed with the BLM
is, in effect, a permit to operate the mine which is located on public land.
Vanderbilt has filed the "Revised Plan of Operation" to the BLM pursuant to
that request. Administration of the public lands on which Morning Star Mine is
located has now passed to the NPS. The plan, as submitted to BLM is now part
of the files held by the NPS.
During 1991 and continuing through early 1994, Vanderbilt had been actively
detoxifying heap leach pad No. 1 and has now obtained reclassification and
closure from the regulatory authorities that it has been so detoxified. The
same procedure that was used to detoxify pad No. 1 is being used to detoxify
pad No. 2.
Conclusion
In January, 1995 the Company signed an Agreement with Rosarence, a Mexican
Corporation, headquartered in Culiacan, Sinaloa, Mexico wherein the Company
will fund certain development and exploration activities to be performed by
Rosarence at a 67,000 acre concession in the State of Durango, Mexico. Later
in 1995, an application was filled to convert the concession to an
"Exploitation Concession" and reduce it in size to about 32,000 acres
containing all known mineral prospects. Preliminary sampling has identified
gold, silver and copper potentials. In September, 1995, the Company exercised
its option to acquire the concession and all of the outstanding shares of
Rosarence.
During the first and second quarters of 1995, the Company recovered and
processed about 77 ounces of gold from the heap leach solutions underlying heap
leach pad #2 at the Morning Star Mine, demonstrating that the current process
and the equipment in place are both functional.
<PAGE>
New Accounting Pronouncements
"Accounting for the Impairment of Long - Lived Assets and for Long - Lived
Assets to Be Disposed Of" ("SFAS No. 121") was issued by the Financial
Accounting Standards Board (FASB) in March 1995. SFAS No. 121 requires, for
fiscal years beginning after December 15, 1995, that an entity review long-
lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable and that
an impairment loss be recognized as the amount by which the carrying amount of
the asset exceeds the fair value of the asset. The Company will adopt SFAS No.
121 effective January 1, 1996. The adoption is not expected to have a material
effect on the Company's financial position or results of operations.
"Accounting for Stock-Based Compensation," ("SFAS No. 123") was issued by the
Financial Accounting Standards Board in October 1995. SFAS No. 123 establishes
financial and reporting standards for stock- based employee compensation plans,
which will be effective for the Company's 1996 consolidated financial
statements. SFAS No. 123 encourages, but does not require, the adoption of a
fair-value-based method of accounting for such plans in place of current
accounting standards. Companies electing to continue their existing accounting
method must make pro forma disclosures of net income as if the fair-value-based
method had been applied. The Company is evaluating SFAS No. 123 and has not
decided whether it will adopt the new accounting method.
Management's Responsibility for Financial Reporting
Vanderbilt Gold Corporation
The accompanying consolidated financial statements of Vanderbilt Gold
Corporation and Subsidiaries are prepared by the Company's management in
conformity with generally accepted accounting principles. Management is
responsible for the fairness of the financial statements, which include
estimates based on judgments.
The Company maintains accounting and other control systems which management
believes provide reasonable assurance that financial records are reliable for
the purposes of preparing financial statements and the assets are properly
safeguarded and accounted for. Underlying the concept of reasonable assurance
is the premise that the cost of controls should not be disproportion are to the
benefits expected to be derived from such controls. The Company's internal
control structure is reviewed by its internal auditors and by the independent
auditors in connection with their audit of the Company's consolidated financial
statements.
<PAGE>
The external auditors conduct an independent audit of the consolidated
financial statements in accordance with generally accepted auditing standards
in order to express their opinion on these financial statements. These
standards require that the external auditors plan and perform the audit to
obtain reasonable assurance that the financial statements are free of material
misstatement.
The Audit Committee of the Board of Directors, composed entirely of outside
directors, meets periodically with management, internal auditors and the
external auditors to discuss the annual audit, internal control, internal
auditing, and financial reporting matters. The external auditors and the
internal auditors have direct access to the Audit Committee.
/S Keith Fegert
Keith Fegert
Chief Executive Officer
/S Howard Urband
Howard Urband
Vice President
April 18, 1996
<PAGE>
Item 8. Financial Statements
INDEPENDENT AUDITOR'S REPORT
The Board of Directors Vanderbilt Gold Corporation
I have audited the accompanying consolidated balance sheets of Vanderbilt Gold
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, changes in shareholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these consolidated financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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 significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Vanderbilt Gold
Corporation and subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses from operations and
accumulated deficit raise substantial doubt about the entity's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments relating to the recoverability and classification of reported
asset amounts or the amounts and classification of liabilities that might
result from the outcome of this uncertainty.
/S Keith J. Rosen
Keith J. Rosen
Certified Public Accountant
Sherman Oaks, California
April 18, 1996
<PAGE>
VANDERBILT GOLD CORPORATION
Consolidated Balance Sheets
December 31, 1995 and 1994
In Thousands
December 31,
1995 1994
ASSETS
Current Assets
Cash and cash equivalents $ 1 $ 153
Accounts receivable - Trade 2 68
Employee advances receivable 23 23
Due from related parties - 17
Inventories 837 867
Prepaid and other assets 6 5
Total Current Assets 869 1,133
Property, Plant and Equipment 2,607 2,159
Total Assets $ 3,476 $ 3,292
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 1,202 $ 1,062
Accrued expenses 171 124
Accounts payable - Related parties 67 -
Accrued payroll 505 512
Notes payable - Other 123 -
Deferred revenue - Gold sales 95 95
Gold loan payable 38 38
Total Current Liabilities 2,201 1,831
Long Term Liabilities 45 45
Stockholder's Equity 1,230 1,415
Total Liabilities and Equity $ 3,476 $ 3,291
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
VANDERBILT GOLD CORPORATION
Consolidated Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
In Thousands (except share amounts)
1995 1994 1993
Revenue from Sales:
Bullion sales $ 29 $ 14 $ 4
Other revenue - - 57
Total Revenue from Sales 29 14 61
Mining Expenses:
Mine maintenance costs 153 215 154
Depreciation, depletion
and amortization 59 59 104
Exploration costs 177 51 -
Total Mining Expenses 389 325 258
General & Administrative 320 397 223
Total Expenses 709 722 481
(Loss) From Operation (680) (708) (420)
Other Income and Expense:
Dividend income 1 1 -
Interest expense (10) (37) (72)
Debt Cancellation income 52 11 131
Gain (loss) fixed assets - (1) (166)
Gain on joint venture sale - 25 -
Total Other Income and Expense 43 (1) (107)
Net Income $ (637) $ (709) $ (527)
Net loss per share $0.03 $0.03 $0.03
Weighted average shares outstanding 29,253 25,128 15,141
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
VANDERBILT GOLD CORPORATION
Consolidated Statements of Shareholders' Equity
For the years ended December 31, 1995, 1994, and 1993
In Thousands (except share amounts)
Common Stock Preferred Other Accumulated
Shares Amount Stock Capital Deficit Total
Balances,
12/31/92 12,481 $ 125 $ - $ 22,046 $ (22,182) $ (11)
Net loss - - - - (527) (527)
Sale of shares 740 7 - 126 - 133
Exercise of
employee options 70 1 - 16 - 17
Common stock
subscriptions 423 4 - (2) - 2
Common stock
for services 6,038 60 - 925 - 985
Settlement of
debt 3,806 38 - 571 - 609
Preferred stock
for services - - 148 - - 148
Balances,
12/31/93 23,558 235 148 23,682 (22,709) 1,356
Net loss - - - - (709) (709)
Sale of shares 3,072 31 - 384 - 415
Conversion of
preferred shares 967 10 (148) 138 - -
Common stock
subscriptions - - - 133 - 133
Common stock
for services 1,159 11 - 175 - 186
Settlement of debt 220 3 - 32 - 35
Balances,
12/31/94 28,976 290 - 24,544 (23,418) 1,416
Net loss - - - - (637) (637)
Sale of shares 1,317 13 - 183 - 196
Subscribed shares
issued - - - (128) - (128)
Common stock
subscriptions - - - 45 - 45
Common stock
for property 1,800 18 - 320 - 338
Balances
12/31/95 32,093 321 - 24964 (24055) 1,230
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
VANDERBILT GOLD CORPORATION
Consolidated Statements of Cash Flows
For the years ended December 31, 1995, 1994, and 1993
In Thousands
1995 1994 1993
Operating activities:
Net(Loss) $ (637) $ (709) $ (527)
Reconciliation to net cash
provided (used) for
operating activities:
Depreciation, depletion and
amortization 63 63 109
Cancellation of debt 52 (11) (131)
Accrued reclamation costs - (2) (44)
Loss on disposal
of fixed assets - 1 166
Deferred sales - 13 31
Common shares issued
for expenses - 60 72
Effect of changes in
working capital items:
Receivables - trade 84 (86) -
Receivables - related parties - (17) -
Inventories 30 (16) 2
Prepaids and other
assets (1) 2 5
Accounts payable and
accrued liabilities 279 373 230
Net cash used by
operations (182) (329) (87)
Investing activities
Additions to property,
plant and equipment (421) (93) -
Proceeds from asset
sales - - 6
Net cash used for
investing activities (421) (93) 6
<PAGE>
Financing activities
Proceeds from sale
of stock 114 548 133
Borrowings - 10 12
Debt repayment - (14) (8)
Related parties payable -
decrease - (5) (26)
Related parties payable -
increase - - 6
Net cash provided by
financing activities 114 539 117
Net increase (decrease)
in cash and equivalents (152) 117 36
Cash and equivalents,
beginning of period 153 36 -
Cash and equivalents,
end of period $ 1 $ 153 $ 36
Interest paid - 1 -
Payment of payables
with stock - 163 1,082
Payment of payables
with stock - related parties - - 6
Purchase mineral property
with stock 1,800 - -
Payment of note payable
with stock - 10 400
Payment of payables
with preferred stock - - 100
Payment of payables
with preferred stock - related parties - - 48
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
VANDERBILT GOLD CORPORATION
Notes to FinancialStatements
GENERAL
Vanderbilt Gold Corporation ("VGC" or the "Company") is a gold exploration and
development company based in Las Vegas, Nevada, with properties in California
and Mexico. The property in California has been placed on stand by and the
properties in Mexico are awaiting development and/or exploration. The emphasis
of the Company has been on developing its properties in Mexico and reopening
its Morning Star Mine in California.
The Company's consolidated financial statements have been prepared on the going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company's continued
existence is dependent upon its ability to achieve profitable operations,
reduce its accounts payable and accrued expenses, realize its investment in
inventories and to obtain additional financing. Accordingly, the consolidated
financial statements do not include any adjustments relating to the overall
recoverability and classification of recorded asset amounts or the amount and
classification of liabilities or any other adjustments that might be necessary
should the Company be unable to continue as a going concern in its present
form.
2.SIGNIFICANT ACCOUNTING POLICIES
The Company's consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which require
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. A
summary of the Company's significant accounting policies follows:
Consolidation
The consolidated financial statements include the Company, its subsidiaries and
their undivided interests in joint ventures after elimination of intercompany
accounts. Undivided interests in joint ventures are reported using pro-rata
consolidation which includes the Company's proportionate share of assets,
liabilities, income and expenses. Investments in less than fifty percent owned
entities over which the Company exercises significant influence are reported
using the equity method of accounting.
Inventories
Inventories of ores (on the heap leach pad) and precious metals in process are
valued at the lower of average cost or market. Ore inventories include direct
production costs, allocable operating overhead and allocable depreciation and
amortization. Materials and supplies are stated at the lower of cost, using
the first-in, first-out method, or market.
<PAGE>
Mineral Properties and Mine Development Costs
Mineral property acquisition costs are capitalized. Mine development costs,
including those incurred in advance of commercial production and those incurred
to expand capacity of existing mines, are capitalized. Mine development costs
incurred to maintain production at existing mines are expensed as incurred.
Depletion and amortization related to capitalized mineral properties and mine
development costs is computed using the units-of-production method based on
proven and probable reserves.
Plant, Equipment, and Capitalized Interest
Plant, equipment, and capitalized interest are recorded at cost. Depreciation
of plant and equipment is computed using straight-line over the estimated lives
of the assets (three to ten year.) Costs of normal maintenance and repairs are
expensed as incurred.
Exploration Costs
Exploration costs and costs of carrying and retaining undeveloped properties
are charged against income as incurred.
Reclamation Costs
Costs expected to be incurred for reclamation are estimated using current
environmental and regulatory requirements and are expensed over the estimated
life of the property, principally using the units-of- production.
Accounting for Income Taxes
The Company uses an asset and liability approach for financial accounting and
reporting for income taxes. If the required accounting results in a net
deferred asset, some or all of which may not be realized, the Company
establishes a valuation allowance to reduce the net asset.
<PAGE>
Property Evaluation
Recoverability of investments in mineral properties and related plant and
equipment is periodically evaluated. The Company evaluates operating properties
utilizing estimated future cash flows from proven and probable reserves based
on current and projected estimates of production and reclamation costs and
metals prices, and capital requirements. Evaluation of non-operating
properties incorporates the use of estimates of expected development costs of
known mineralization, costs to hold the property, future capital cost estimates
to bring the property into production and expected production costs and metals
prices. Future costs and metals prices are estimated using historical and
current information as a basis for the projections. Investments in mineral
properties in excess of expected future net cash flows that are deemed to be
other than temporary are written off when that determination is made.
Properties which have not been explored or evaluated sufficiently to determine
whether development of the property, a write-down is recorded to reflect
management's best estimate of the net realizable value of the assets and an
accrual for estimated reclamation and closure costs is recorded.
Cash Equivalents
Cash equivalents include all highly liquid investments with a maturity of three
months or less at the date of purchase.
Deferred Financing Costs
Costs incurred in obtaining financing through the issuance of promissory notes
are amortized and expensed over the life of the note. The unamortized portion
of deferred financing costs for convertible promissory notes that are converted
into common stock are charged to contributed capital. Costs incurred to issue
common stock through private placements are charged to other capital.
Foreign Currency
The US dollar is the Company's functional and reporting currency. All
significant transactions of foreign subsidiaries are recorded in US dollars and
accordingly, the resulting foreign exchange gains and losses, if any, are
immaterial.
Net Income (Loss) Per Share
The number of shares used to calculate per share information for the periods
presented are based on the weighted average number of common shares and common
share equivalents outstanding during each period.
Reclassifications
Certain amounts in the consolidated financial statements for prior periods have
been reclassified to conform to the current period financial statement
presentation. Such reclassifications have had no impact on the amount of net
loss(es) reported.
<PAGE>
3. RELATED PARTY TRANSACTIONS:
The Company entered into a Gold Loan in November, 1990 with Brenda, Inc. It
borrowed 653 ounces of gold which were simultaneously sold at $383.10 per
ounce and the Company received the proceeds of $250,164.30. Under the terms of
the Loan Agreement and the related Security Agreement, the loan bears interest,
payable monthly, of 3.53% per annum on the outstanding dollar value of the
unpaid gold ounces computed daily using the London afternoon fixing price. The
Loan Agreement provides for repayment by the Company delivering 100 ounces of
gold to Brenda Inc. each month from January to April, 1991, 125 ounces in May,
1991, and 128 ounces in June, 1991. Virtually all of the Company's assets are
pledged as collateral for this loan under the Security Agreement until the loan
is paid in full. At December 31, 1994, 1993 and 1992, 100 ounces remained
undelivered. The President engaged in financial transactions with the Company
during 1995, 1994 and 1993. Following is a summary of the financial
transactions between the Company and this related party:
1995 1994 1993
Loan balance, beginning of year $ (17,000) $ 5,000 $ 74,000
Additional loans during the year - 21,000 6,000
Transfer of accounts payable balance 17,000 - 2,000
Expense reports submitted - 3,000 9,000
Cash repayments - (46,000) (26,000)
Exercise of employee stock options - - (12,000)
Repayment of loan with Series A
Preferred Stock - - (48,000)
Repayment of loan with Common Stock, - - -
Loan (Receivable) balance, end of year, $ 0 $ (17,000) $ 5,000
4.PROPERTY, PLANT, EQUIPMENT AND MINING PROPERTIES - NET:
Property, plant, equipment and mining properties, accumulated depreciation and
amortization and range of estimated lives as of December 31, 1995 and 1994 are
as follows (in thousands):
Lives 1995 1994
Units of
Minig properties production $ 8,501 $ 8,019
Plant and equipment 5-10 1,080 1,050
9,581 9,069
Less: Accumulated depreciation and
Amortization (6,974) (6,910)
Net property, plant and equipment $ 2,607 $ 2,159
<PAGE>
5.INVENTORIES:
Inventories at December 31, consist of the following (in thousands):
1995 1994
Ore (on Heap Leach Pad and in process) 835 856
Materials and supplies 2 11
Total $ 837 $ 867
Management believes that 2,372 ounces of gold remains in the heap leach pad at
December 31, 199 and that they are recoverable over a several year period,
depending upon the level of mine and refinery operations.
6.INCOME TAXES:
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109 effective January 1, 1993. Adoption of SFAS No.
109 had no material impact upon the financial statements of the Company. The
Company has no computable material timing differences for any items of income
or deductions for 1995, 1994 or 1993 which could give rise to any material
deferred income taxes. The Company has available at December 31, 1995,
estimated federal net operating loss carry forwards of approximately
$13,000,000 which expire in varying amounts between 1997 and 2010. It also has
net investment tax credits of $23,000 which expire in varying amounts between
the years 1995 and 2004. A write off of the Mine Lease Intangible in the
amount of $6,154,000 which the Company recorded in 1990 is not a deduction for
income tax purposes until the Company has ceased operations at, disposed of the
Morning Star Mine or recorded amortization for tax purposes which fully
expenses the remaining balance.
7.RENTAL EXPENSE AND LEASE COMMITMENTS:
Morning Star Mine
The Company leases six unpatented lode mining claims from unrelated parties.
The lease commenced on October 24, 1973, and was scheduled to expire in October
of 1993; however, the lease provides that it will continue so long as the
lessee is conducting exploration, development or mining operations on the
property. The Company is obligated to pay a monthly royalty equal to the
greater of $1,000 or 5% of the net smelter receipts. The Company was obligated
for the payment of royalties of $12,000 for each of 1995, 1994 and 1993.
Vanderbilt may cancel this lease at its option.
Office Lease
The Company rents its principal offices on Wynn Road in Las Vegas, Nevada, on a
month to month basis at $770 per month, with the last month's rent prepaid.
<PAGE>
8.STOCK OPTIONS:
Incentive Stock Option Plans:
At the Annual Meeting of Stockholders held on June 6, 1989, the Stockholders
approved the Company's 1989 Stock Option Plan. This plan provides for the
discretionary grant of up to 500,000 shares of the Company's common stock as
incentive stock options to officers and other key employees and for the
automatic grant of certain non-qualified stock options to non-employee
directors. At the Annual Meeting of Shareholders held on June 16, 1994, the
Stockholders approved amending the 1989 Stock Option Plan to authorize the
eligibility of certain consultants to be granted options and to increase the
number of shares available for grant under the Plan from 500,000 to 1,000,000
shares of Common Stock. The 1989 Stock Option Plan transactions during 1995,
1994 and 1993 are shown below:
Number of Shares 1995 1994 1993
Balance at January 1: 725,000 102,000 174,500
Authorized increase in shares - 500,000 -
Options granted 100,000 645,000 5,000
Options exercised - - (70,000)
Average price - - $0.24
Options lapsed or terminated 330,000 (22,000) (7,500)
At December 31:
Options outstanding 495,000 725,000 102,000
Average price $0.23 $0.25 $0.64
Options available for grant 505,000 275,000 398,000
Outstanding options in the amount of 395,000 expire in 1995 and 100,000 expire
in 2000.
9.FINANCIAL INSTRUMENTS
The carrying and fair value of the Company's financial instruments at December
31, 1995 were as follows:
Carrying Value Fair Value
Cash equivalents $ 1 $ 1
Receivable $ 25 $ 25
Long-term debt $ 45 $ 45
<PAGE>
9.DEFERRED REVENUE - GOLD SALES:
The Company entered into forward gold sale arrangements with four parties
between June and August, 1990. Under the arrangements, the company agreed to
deliver a total of 900 ounces of gold on varying delivery dates commencing in
December, 1990 through March, 1991. The Company received a total of $266,500
(average price per ounce $296.11) in cash proceeds at the time the contracts
were entered into. Between October, 1991 and April, 1994, three of the parties
agreed to accept common shares as payment in lieu of gold delivery.. As part
of the debt restructuring in 1994, $25,000 (85 ounces) of these contracts was
settled with 156,875 common shares (at $0.16 per share). As a part of the debt
restructuring in 1993, the Company was able to settle $118,000 of these
contracts (400 ounces) for 933,000 shares of common stock at $0.16 per share.
During 1994, the Company entered into a gold contract with an unrelated party
wherein the Company sold 166.66 ounces of gold at $300.00 per ounce under a
delivery schedule projected to commence in November 1994 and conclude by
November 1995. The Company guaranteed the buyer a minimum 10% return should the
price of gold at the dates of delivery be below $330.00 per ounce. The
Company received $50,000 in proceeds at the effective date of the contract.
This contract has been extended until November 1996.
10.PREFERRED STOCK:
On December 30, 1993, the Board of Directors by written consent authorized the
Company to issue 9,670 shares of Series A Preferred Stock. 100,000 shares of
the authorized 5,000,000 shares of preferred stock was designated that date by
the Board of Directors as Series A Preferred Stock. This Series A Preferred
Stock is not entitled to receive dividends, has a $1.00 per share preference
upon liquidation, has the right to share ratably with others entitled to
liquidation preferences, and has voting rights equal to the number of common
shares into which the preferred could be converted. Each share of the Series A
Preferred Stock is convertible into 100 shares of common stock; except that in
the event of a change of control each Series A preferred share shall be
convertible into 1,000 shares of common stock. For this purpose, a change of
control of the Company not approved by at least 75% of the directors prior to
such change of control, includes the acquisition by a single holder or a group
acting in concert, of such number of shares of common stock or other securities
of the Company so as to permit the holder or affiliated holders to cause the
election of at least one-third of the directors of the Company. The Company had
the option to convert the Series A Preferred Stock into common shares at any
time up to and including December 31, 1994; thereafter the holder(s) of such
preferred shares have the right to require conversion. 6,670 shares at $14.99
per share of the Series A Preferred Stock were issued December 30, 1993 in
payment of $100,000 of accounts payable to an unrelated party and 3,000 shares
at $16.00 per share were issued to the Chairman of the Board and President in
payment of $48,000 which he had loaned to the Company. On October 10, 1994, the
Board of Directors exercised the conversion right and all of the Series A
Preferred Stock was converted into common stock.
<PAGE>
11.CONTINGENCIES:
In September and October, 1992, a misdemeanor jury trial was held in San
Bernardino County (California) Municipal Court, which resulted in ten guilty
verdicts against Vanderbilt and ten guilty verdicts against its President, Mr.
John F. Jordan, Jr., for environmental violations. These verdicts resulted in
fines totaling $90,000 for each (grand total $180,000). The Company and Mr.
Jordan have filed an appeal to an Appellate Panel in the Superior Court of San
Bernardino County against each of the ten misdemeanor convictions. It would be
premature to attempt to predict the eventual outcome of the Company's appeal.
A provision for the Company's fine was recorded in the 1992 financial
statements. In April, 1993, the Bureau of Land Management (BLM) served
Vanderbilt with a request that the Morning Star Mine "Plan of Operation" be
amended. A "Plan of Operation" filed with the BLM is, in effect, a permit to
operate the mine which is located on public land. Vanderbilt has filed a
"Revised Plan of Operation" to the BLM pursuant to their request. Like other
companies, Vanderbilt is subject to the existing and evolving standards
relating to the protection of the environment. It has established a reserve
for reclamation for those costs it can estimate that it will probably incur
when the operations at the Mine finally cease. However, Vanderbilt is subject
to contingencies as a result of changing environmental laws and regulations.
The related future cost is indeterminable due to such factors as the unknown
timing and extent of corrective actions which may be required and due to the
application of joint and several liability. Vanderbilt believes that those
costs will not have a material adverse effect on its operations or financial
position.
In January, 1995, the Company entered into an agreement with Rosarence wherein
the Company will fund certain development and exploration activities to be
performed by Rosarence on a 67,000 acre concession, known as La Sierra, located
near Palmar, State of Durango, Mexico. In September, 1995, the Company
exercised its option to acquire the concession, and all of the outstanding
shares of Rosarence. All payments, which consisted of 1.8 million common
shares of Vanderbilt plus $200,000, have been made with the exception of two
quarterly payments of $30,000 each which are due and payable in 1996. The
shares of Vanderbilt must be traded at a price equal to $1.00 (median of Bid
and Ask quotes) for a 15 day period by September 27, 1996 or the difference
between the actual traded price and $1.00 will be paid by the Company in either
cash or stock with a value equal to the difference. The manner of payment is at
the discretion of the former owners of Rosarence. The amount of any future
payments, if any, are not determinable at this time.
<PAGE>
On December 22, 1995 Vanderbilt entered into a joint venture with Cosalteca,
Guardian and Viscount relating to Cosalteca's 12,000 acre Las Coloradas
concession group in the Sierra Madre mining district. The agreement requires
Vanderbilt to issue to Cosalteca 700,000 common shares as its initial
contribution to earn a 17.15% interest in the joint venture. The shares of
the Company were not issued as of December 31, 1995. The company holds a two
year option to increase its interest to at least 42.65%. The shares of
Vanderbilt must be traded at a price equal to $1.00 (median of Bid and Ask
quotes) for a 15 day period by February 22, 1997 or the difference between the
actual traded price and $1.00 will be paid by the Company in either cash or
stock with a value equal to the difference. The manner of payment is at the
discretion Cosalteca. The amount of any future payments, if any, are not
determinable at this time.
12.SUPPLEMENTARY MINERAL RESERVE INFORMATION (unaudited):
An ore reserve report was prepared by independent geotechnical consultants,
Exploration & Development Associates, Inc. and Geomath, Inc. based upon data
developed from drilling performed between 1984 and 1987. As of December 1995,
the proven reserves consisted of 3,517,617 tons of ore averaging .058 ounces of
gold per ton; proven and probable reserves consisted of 6,455,617 tons of .048
ounces of gold per ton or ore. A proposed modification to the recovery
facilities will be sufficient to produce between 1,000 and 2,000 ounces of gold
per month when the equipment and modifications are completed and placed in
service.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Company
The following table sets forth certain information about the executive officers
and directors of Vanderbilt as of December 31, 1994:
Name Age Position with Vanderbilt
Tom D. Scott 67 Chairman of the Board of Directors since
June 1994; President and Chairman of the
Board of Directors form 1980-1987;
Director 1971-1987, 1994- Present
Keith Fegert 34 President and Treasurer since July 1995;
Director since 1994
Howard T. Urband 64 Vice President, Secretary, and Director;
Vice President since 1989;Secretary
since 1990; Director since 1989
Ted E. Slanker 77 Director since 1974
Bernard O. Brynelsen 84 Director since 1984
Barry L. Adams 34 Director since 1994
<PAGE>
Tom D. Scott is a regional director of Document, Inc., a manufacturer of
electronic financial document delivery systems.
Howard T. Urband was President and director of Heavy Metals Development
Corporation, a former wholly-owned subsidiary of Vanderbilt Gold Corporation;
Vice President then President of Exploration & Development Associates, Inc.,
(mining consultants) from 1980-1988; Exploration Manager and Mine Geologist
since 1957.
Ted E. Slanker was a director of Heavy Metals Development Corporation, a former
wholly-owned subsidiary of Vanderbilt Gold Corporation until it became inactive
in 1991; manages his own investments.
Bernard O. Brynelsen is a former director of several mining companies including
Brenda Mines, Ltd., Viceroy Resource Company and Forester Resource, Inc. He has
been a director of Vanderbilt since December 1984 and has been a mining
engineer for 48 years.
Barry L. Adams is an attorney at law in private practice in California
specializing in environmental and solid waste issues, general business and real
estate law. He was formerly associated with the Environmental Department of
the Pacific Legal Foundation.
Keith W. Fegert former general manager of Target Construction Company and
SanRoc, Inc. (mining and construction contractors). Over thirteen years
experience in the mining industry as Operations Manager and Controller;
including experience in project financing, financial controls, and contract
negotiations.
Item 11. Executive Compensation
The following table sets forth the cash compensation paid to the Company's
Executive Officers for the fiscal year ended December 31, 1995:
Summary Compensation Table
Name of Individual Compensated Year Capacities Served Cash Compensation
Keith Fegert 1995 President and Chief
Financial Officer, $2,2707
Howard T. Urband 1995 Vice President
and Secretary 17,956
1994 2,563
1993 0
John F. Jordan, Jr. 1995 Former President and
Chief Financial Officer 0
1994 5,287
1993 0
<PAGE>
Mr. Fegert had no accrued salary for 1995.
Mr. Urband accrued $36,044.41 in salary for 1995.
Mr. Urband accrued $51,437 in salary for 1994.
Mr. Urband accrued $54,000 in salary for 1993.
Mr. Jordan accrued $44,100 in salary for 1994.
Mr. Jordan accrued $58,800 in salary for 1993.
The following table sets forth Company stock options that were granted during
1995 for each named executive.
Option/SAR Grants in Last Fiscal Year
Individual Grants
Potential Realizable
Number of % of Total Value at Assumed
Securities Options/ Annual Rates of
Underlying SARs Stock Price
Option/ Granted to Exercise Appreciation for
SARS Employees or Base Option Term*
Granted in Fiscal Price Expiration
Name (#) Year ($/share) Date 5% 10%
Keith Fegert 5,000 5 0.16 6/30/00 $ 1,022 $ 1,288
Barry L. Adams 5,000 5 0.16 6/30/00 $ 1,022 $ 1,288
H T. Urband 75,000 75 0.16 7/26/00 $ 15,315 $ 19,328
Ted Slanker 5,000 5 0.16 7/26/00 $ 1,022 $ 1,288
Tom D. Scott 5,000 5 0.16 6/30/00 $ 1,022 $ 1,288
B. Brynelsen 5,000 5 0.16 7/26/00 $ 1,022 $ 1,288
* The dollar amounts under these columns are the result of calculations at 5%
and 10% compounded annual rates as set by the Securities and Exchange
Commission, and therefore are not intended to forecast future appreciation, if
any, in the price of the Company's common stock. The potential realizable
values illustrated at 5% and 10% compound annual appreciation assume that the
price of the Company's common
<PAGE>
The following table sets forth Company Stock Options data including options
exercised during 1995 for each named executive:
Aggregated Option/SAR Exercises in Last Year and Year - End Option SAR/Values
(c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Value Realized Exercisable/ Exerciseable/
Name On Exercise ($) Unexerciseable Unexerciseable
J. F. Jordan, Jr.
none none 250,000 N/A
Howard T. Urband
none none 75,000 N/A
All securities listed in column (d) are assumed to be exercisable at December
31, 1995.
Notes to table:
Exercise price of $.16; market price at December 31, 1995 $.13 (last trade of
1995).
Does not include any options not covered by the 1989 Stock Option Plan.
None of the Company's options were in-the-money as of December 31, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of December 31, 1995 certain information
concerning the ownership of shares of common stock of the Company by (I) each
person who is known by the Company to own of record or beneficially 5% or more
of the common stock of the Company, (ii) each director of the Company and (iii)
all officers and directors of the Company as a group. As of such date,
32,093,135 shares were issued and outstanding.
All shareholders listed below have sole voting and investment power with
respect to their shares except as otherwise noted.
<PAGE>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
Target Construction Inc. 3,750,000 11.7
Holcomb Avenue, #100
Reno, NV 89509
Mother Lode Mining Co., LLC. 1,600.000 5.0
Gamble Oak Circle
Sandy, UT 84092
Compania Minera Rosarence S A De C V 1,800,000 5.6
Carratera Culiacan-Eldorado KM 0.600
Interior 3
Culiacan, Sinaloa, Mexico
Keith W. Fegert 4,463,382(1) 13.9
Barry L. Adams 812,851(2) 2.5
John F. Jordan, Jr. 149,500(3) *
Howard T. Urband 233,000(4) *
Tom D. Scott 301,613(5) *
Ted E. Slanker 107,466(6) *
Bernard O. Brynelsen 57,036(6) *
All officers and Directors (7 Persons) 6,124,848(1)(2)(3) 19.1
(4)(5)(6)
(1) Mr. Fegert disclaims beneficial ownership of 3,526,691 shares. The total
shown above includes 10,000 shares issuable upon the exercise of stock options.
(2) Mr. Adams disclaims beneficial ownership of 576,691shares. The total shown
above includes 10,000 shares issuable upon the exercise of stock options.
(3) Mr. Jordan shares are held by the Jordan Family Trust.
(4) Includes 225,000 shares issuable upon the exercise of stock options.
(5) Mr. Scott disclaims beneficial ownership of 70,569 shares. The total shown
above includes 10,000 shares issuable upon the exercise of stock options.
(6) Includes 10,000 shares issuable upon the exercise of stock options.
* Less than 1%.
The certificate of incorporation of the Company provides for a classified board
of directors. The board is divided into three classes, designated Class I,
Class II, and Class III. The directors in Classes I, II, and III were elected
to hold office until the annual meetings of shareholders in 1995, 1996 and
1997, respectively.
<PAGE>
Nonqualified Stock Option Plan
On March 27, 1987, the shareholders approved the 1986 Nonqualified Stock Option
Plan (the "Non- Qualified Plan") under which directors and full-time key
employees of the Company and its subsidiaries were eligible to receive
non-qualified options to purchase shares of Common Stock at an exercise price
not less than 100% of the fair market value of the Common Stock on the date of
the option grant and with a term not exceeding ten years. In 1989, the Board
of Directors resolved that notwithstanding the terms of the Nonqualified Plan,
no non-employee directors of the Company or its subsidiaries will be eligible
to participate under the Nonqualified Plan. The administrators of the
Nonqualified Plan determined in their sole discretion which officers and other
key employees of the Company and its subsidiaries should be granted options
under the Nonqualified Plan. A registration statement on Form S-8 was filed
with the Securities and Exchange Commission covering the 500,000 shares of
Common Stock reserved for issuance under the Nonqualified Plan, and the
registration statement became effective September 11, 1987. As of December 31,
1993, there were no outstanding unexercised options under the Nonqualified
Plan. The Nonqualified Plan was terminated by the Board Of Directors on April
20, 1994.
Stock Option Plan
On June 6, 1989, the stockholders of the Company approved the 1989 Stock Option
Plan (the "1989 Plan") under which full-time officers and key employees of the
Company and its subsidiaries are eligible to receive either incentive stock
options or nonqualified stock options to purchase shares of Common Stock with
terms not exceeding ten years. In addition, the 1989 Plan provides for the
automatic grant of non-qualified options to non-employee directors ("Director
Option"). All options are granted at exercise prices of not less that 100% of
the fair market value of the Common Stock on the date of the grant. A director
Option to purchase 5,000 shares (subject to adjustment as provided in the 1989
Plan) shall be granted to each non-employee director automatically as of the
last trading day in June immediately following the date of his or her election
or reelection through 1998, as the case may be, to the Board of Directors.
A Director Option to purchase 2,500 shares (subject to adjustment as provided
in the 1989 Plan) shall be granted automatically to each non-employee director
on the last trading day in each June through 1998, except that a non-employee
director will not be entitled to receive such annual grant to purchase 2,500
shares in any year during which he or she was elected or reelected, as the case
my be, to the Board of Directors and received a Director Option to purchase
5,000 shares as described above. The administrators of the 1989 Plan determine
in their sole discretion which officers and other key employees of the
Company and its subsidiaries should be granted option under the 1989 Plan.
<PAGE>
A registration statement on Form S-8 was filed with the Securities and Exchange
Commission covering the 500,000 shares of Common Stock reserved for issuance
under the 1989 Plan, and the registration statement became effective on June
29, 1989.
At the annual stockholders' meeting held June 16, 1994, the stockholders
approved amendments to the 1989 Stock Option Plan which authorized the
eligibility of certain consultants to be granted options under the Plan as may
be approved by the Board of Directors and authorized and increase in the
number of shares available for grant under the Plan from 500,000 to 1,000,000
shares of Common Stock. As of December 31, 1995, options to purchase 495,000
shares of Common Stock were outstanding. During 1995 options to purchase
100,000 shares were granted and options to purchase 330,000 shares lapsed.
Preferred Stock
On December 30, 1993, the Board of Directors designated 100,000 shares of the
Company's 5,000,000 authorized shares of Preferred Stock as Series A Preferred
Stock (the "Preferred Stock"). This Preferred Stock is not entitled to receive
dividends, has a liquidation preference of $1.00 per share, has the right to
share ratable with other shares entitled to liquidation preferences, and has
voting rights equal to the number of shares of common stock into which it is
convertible. Each share of preferred stock is convertible into 100 shares of
common stock, provided that in the event of a change of control each share of
Preferred Stock shall be convertible into 1,000 shares of common stock. Change
of control means a change of control of the Company not approved by at least
75% of the directors prior to such change of control and includes the
acquisition by a single holder or a group acting in concert of such number of
share of common stock or other securities of the Company as to permit the
holder or affiliated holders to cause the election of a least one third of the
directors of the Company.
The Preferred Stock is convertible at the option of the Company until December
21, 1994 and thereafter is convertible at the option of the holders thereof.
On December 31, 1993, the directors authorized the issuance of 9,679 shares of
Preferred Stock including 3,000 shares of Preferred Stock issued to John F.
Jordan, Jr., as trustee of the Jordan Family Trust, in consideration for the
cancellation of debt in the amount of $48,000 which Mr. Jordan had loaned to
the Company. During 1994, the Board of Directors exercised its option to
convert all 9,670 shares of the Preferred Stock into 967,000 shares of the
Company's Common Stock.
Director Compensation
The Company has agreed to pay its outside directors $500, plus expenses, for
each Board meeting attended. In addition, the outside (non-employee) directors
have been granted stock options as discussed above.
<PAGE>
Item 13. Certain Relationships and Related Transactions
The Company entered into a Gold Loan in November, 1990 with Brenda, Inc. It
borrowed 653 ounces of gold which were simultaneously sold at $383.10 per ounce
and the Company received the proceeds of $250,164,30. Under the terms of the
Loan Agreement and the related Security Agreement, the loan bears interest,
payable monthly, of 3.53% per annum on the outstanding dollar value of the
unpaid gold ounces computed daily using the London afternoon fixing price. The
Loan Agreement provides for repayment by the Company delivering 100 ounces of
gold to Brenda Inc. each month from January to April, 1991, 125 ounces in May,
1991, and 128 ounces in June, 1991. Virtually all of the Company's assets are
pledged as collateral for this loan under the Security Agreement until the loan
is paid in full. At December 31, 1995, 1994, and 1993, 100 ounces remained
undelivered. Bernard O. Brynelsen, a director of the Company, was the Chairman
of the Board of Directors of Brenda Mines Ltd., which is controlled by Brenda,
Inc.
John F. Jordan, Jr.(Deceased), the former President and Chief Financial Office
of the Company, engaged in financial transactions with the Company during 1995,
1994, and 1993. Following is a summary of the financial transactions between
the Company and this related party:
1995 1994 1993
Loan Balance, Beginning of Year (17,000) 5,000 74,000
Additional Loans During
the Year 21,000 6,000
Transfer of Accounts
Payable Balance 17,000 - 2,000
Expense Reports Submitted - 3,000 9,000
Cash Repayment - (46,000) (26,000)
Exercise of Employee
Stock Options - - (12,000)
Repayment of Loan with
Series A Preferred Stock - - - (48,000)
Loan (Receivable) Balance,
End of Year - (17,000) 5,000
Mr. Jordan loaned an aggregate of $134,000 (plus $11,000 of expenses and
transfer of payable) to the Company and its subsidiaries from January 1, 1990
through December 31, 1991; $19,000 was repaid through December 31, 1991, and
$24,875 was applied to the exercise of an employee stock option for 99,500
shares on December 9, 1991. This loan was at 12% interest per annum; $6,000 was
repaid by December 31, 1992 and the director received an option to acquire
48,000 shares of common stock (which expired unexercised on August 14, 1993)
for waiving interest on the loan. In exchange for waiving interest on his
loans to the Company, Mr. Jordan was granted a three year option in July, 1991,
to purchase 380,000 shares of common stock at $.25 each; this option expired
unexercised in July, 1994.
<PAGE>
On December 31, 1993, Mr. Jordan, as trustee of the Jordan Family Trust, was
issued 3,00 shares of Series A Preferred Stock in consideration of his
cancellation of $28,000 of debt owed by the Company to him which was
subsequently converted into 30,000 shares of Common Stock.
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-k
(a) (1) Financial Statements
Refer to Part II, item 8
(2) Exhibits
Exhibit 10
No. Description of exhibit
10.1 Agreement between Vanderbilt and Compania Minera Rosarence S. A. de C.
V., dated as of January 13, 1995, concerning a mining concession in
the State of Durango, Mexico. (incorporated by reference to Form 8-K
filed in 1996).
10.2 Joint Venture Agreement between Vanderbilt Gold Corporation and
Cosalteca SA De CV and Guardian Enterprises Ltd. and Consolidated
Viscount Resources Ltd., dated as of December 22, 1995, concerning a
mining concession in the State of Durango, Mexico. (incorporated by
reference to Form 8-K filed in 1996.
10.3 Letter of understanding between Vanderbilt Gold Corporation and
Guardian Enterprises Ltd and Consolidated Viscount Resources Ltd.,
dated as of December 22, 1995, concerning the Morning Star Mine, The
La Sierra concession and the Buyout provisions of Cosalteca's interest
in the Los Coloradas Joint Venture.
21.1 Subsidiary of registrant
24.1 Consent of Keith J. Rosen, CPA
(b) Reports filed on Form 8-K
None
(PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on April 24, 1996.
VANDERBILT GOLD CORPORATION
(Company)
By: /S Keith Fegert.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
DATED: April 25, 1996
By: /S Keith Fegert
Director, President and Chief Financial Officer
DATED: April 25, 1996
By: /S Howard T. Urband
Vice President and Director
DATED: April 25, 1996
By: /S Bernard O. Brynelsen
Director
DATED: April 25, 1996
By: /S Ted E. Slanker
Director
DATED: April 25, 1996
By: /S Barry L. Adams
Director
DATED: April 25, 1996
By: /S Tom D. Scott
Chairman of the Board and Director
<PAGE>
EXHIBIT 10-3
Letter of understanding between Vanderbilt Gold Corporation and Guardian
Enterprises Ltd and Consolidated Viscount Resources Ltd., dated as of December
22, 1995, concerning the Morning Star Mine, The La Sierra concession and the
Buyout provisions of Cosalteca's interest in the Los Coloradas Joint Venture.
<PAGE>
letterhead
Vanderbilt Gold Corporation
4625 Wynn Road, Suite 103
Las Vegas NEVADA 89103
December 22, 1995
Leonard Harris, President
Guardian Enterprises
Consolidated Viscount Resources
The Marine Building, 830-355 Burrard Street
Vancouver, BC Canada V6C-2G8
Dear Len:
This Letter of Understanding is made between Vanderbilt Gold Corporation,
("Vanderbilt"), and Consolidated Viscount Resources Ltd., and Guardian
Enterprises Ltd. (herinafter collectively referred to as "Guardian") This
Letter of Understanding is for the purpose of confirming the relationship
between Vanderbilt and Guardian with regard to the Los Coloradas joint venture
and relative to potential future joint ventures on the Morningstar Mine in
California and the La Sierra Concession in Mexico.
1. GUARDIAN SHARE TRANSFER. In consideration of the rights granted to
Guardian by Vanderbilt, Guardian agrees to provide the sum of $30,000 in
tradeable shares directly to Vanderbilt upon execution of this Agreement.
2. MORNINGSTAR MINE. Vanderbilt grants Guardian the right to enter into
a joint venture agreement on the terms previously discussed, including funding
of $750,000 for the Morningstar Mine in San Bernardino County, California.
Guardian shall have until the end of the third quarter 1996 to "begin to" fund
the joint venture.
3. LA SIERRA CONCESSION. Vanderbilt agrees that it will not enter into a
joint venture or other arrangement with any party other than Guardian for a 120
day period from the signing of this letter. Vanderbilt agrees to negotiate
with Guardian during that time period regarding a joint venture for the La
Sierra Concession in Mexico.
4. BUYOUT PROVISIONS OF COSALTECA'S INTEREST IN LOS COLORADAS JOINT
VENTURE. Either party shall have the right to request a buyout of Cosalteca's
51% interest in the joint venture pursuant to the Joint Venture Agreement. If
such a request for buy out is made by either party, the other party shall be
entitled to provide funds to acquire a 50% interest in the Cosalteca interest.
The parties shall have 60 days to provide the funds necessary for their share
of the buy out of Cosalteca's interest. Neither party shall be required to
provide the entire 50% interest, the percentage actually obtained by either
party shall be in accordance with the percentage of the buyout price that the
party contributes.
<PAGE>
Page 2
Letter Agreement
Leonard Harris
December 21, 1995
5. FAILURE TO MEET CASH REQUIREMENTS. If either party fails or is unable
to meet cash requirements of the Los Coloradas joint venture when due, the
other party shall have the right to contribute said sums on behalf of the
defaulting party and obtain an additional interest in the Joint Venture and
this Agreement in accordance with said contribution. The change in interest
shall be calculated as a function of the percent contributed by the
contributing party as compared to the total contributed by both parties up to
that point in time.
Sincerely
/S Keith Fegert
Keith W. Fegert
President, Vanderbilt Gold Corp.
Agreed and accepted
Dated: Dec 31, 1995 By /Leonard Harris
President, Guardian Enterprises Ltd
and Consolidated Viscount
Resources Ltd
<PAGE>
EXHIBIT 21.1
SUBSIDIARY OF REGISTRANT
Star Mining Corporation, A Nevada Corporation
<PAGE>
EXHIBIT 24.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
As an independent certified public accountant, I hereby consent to the
inclusion in Vanderbilt Gold Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, of my report dated April 18, 1996
on the consolidated statement of operations, changes in shareholders'
equity, and cash flows for the three years then ended of Vanderbilt Gold
Corporation and Subsidiaries.
/S Keith J. Rosen
Keith J. Rosen
Certified Public Accountant
Sherman Oaks, California
April 29, 1996
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<FISCAL-YEAR-END> DEC-31-1995
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