SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended DECEMBER 31, 1996.
Commission file number 0-10104
LA TEKO RESOURCES LTD.
(Name of small business issuer in its charter)
BRITISH COLUMBIA, CANADA 87-0483319
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SUITE 500, 625 HOWE STREET
VANCOUVER, B.C. V6C 2T6
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (604) 688-0833
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Act:
COMMON STOCK, WITHOUT PAR VALUE
Indicate by check mark whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes X No
---
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in definite
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ].
As of March 21, 1997, the aggregate market price of the voting stock held
by non-affiliates was approximately $38,524,000.
As of March 21, 1997, the Company had outstanding 23,457,258 shares of
its common stock, without par value.
DOCUMENTS INCORPORATED BY REFERENCE. If the following documents are
incorporated by reference, briefly describe them and identify the part of Form
10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1)
any annual report to security holders; (2) any proxy or information statement;
and (3) any prospectus filed pursuant to rule 424(b) or (c) under the Securities
Act of 1933 ("Securities Act"): The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 31, 1990). NONE
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TABLE OF CONTENTS
PREFACE 3
PART I. 4
ITEM 1. BUSINESS 4
ITEM 2. PROPERTIES 7
ITEM 3. LEGAL PROCEEDINGS 25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 25
PART II. 25
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 25
ITEM 6. SELECTED FINANCIAL DATA 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 46
PART III. 46
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 46
ITEM 11. EXECUTIVE COMPENSATION 53
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 61
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 64
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K 64
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PREFACE
CAUTION RESPECTING FORWARD-LOOKING INFORMATION
This annual report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," believe," "estimate," expect," and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view
of the Company respecting future events and are subject to certain risks,
uncertainties, and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected, or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein
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PART I.
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ITEM 1. BUSINESS
GENERAL
La Teko Resources Ltd. ("La Teko" or the "Company") explores and develops
mineral properties. It has interests in several exploration properties in the
Fairbanks area of central Alaska and one gold exploration project, the
Margarita, in the Oro Blanco area of southern Arizona. Two of the Alaska
projects, True North, under joint venture with Newmont Exploration Limited
("Newmont"), a subsidiary of Newmont Gold Company (NYSE), and Ryan Lode, are at
advanced exploration to development stage. The remaining Alaska projects,
including Juniper, Twin Buttes, Lucky Gulch, and Discovery, are at an early
exploration stage. The Margarita project is under option to Oro Blanco
Resources Corp.
During 1996, the Company's activities were concentrated on monitoring the
exploration of its True North property under a joint venture with Newmont,
conducting limited mine maintenance and baseline studies on its Ryan Lode
property and analyzing, acquiring, and initiating exploration of additional
early exploration stage gold prospects in Alaska.
The Company received cash payments of $2,500,000 from Newmont during 1996,
the final installment of the $6,000,000 total due the Company from its sale to
Newmont of a 65% interest in the property. Newmont continued an active reverse
circulation and core drilling program during the year and significantly expanded
the project by acquiring adjacent properties. (See "ITEM 2. PROPERTIES: True
North Project.")
Ryan Lode activities during 1996 were focused on furthering baseline
studies that would be required in order to proceed with permitting. No
exploration drilling was completed on the Ryan Lode.
During 1996 the Company continued its investigation of other possible
exploration prospects and, on the basis of initial geological and geophysical
reconnaissance, acquired additional properties in Alaska on which the Company
intends to conduct limited gold exploration.
In 1997, the Company plans to continue to cooperate with Newmont with its
ongoing exploration and development of the True North project. In addition, La
Teko will commence its own evaluation of the reserves and resource potential of
the deposit. At present, the only cash requirements from La Teko for this
project are for its 35% share of new property acquisition costs. The Company's
evaluation and interpretation of ongoing results are required to assist it in
projecting when Newmont might be expected to complete its $21 million in
exploration and development expenditures on the property and produce a positive
feasibility study, and thus when contributions toward development costs from La
Teko might be required.
Early in 1997, the Company plans to make a decision as to whether to
develop the Ryan Lode property as a gold mine, to joint venture or sell the
project to another mining company, or to complete the reclamation program on the
property without any further production. Should a development option be chose,
the Company will immediately commence the permitting application process and
begin detailed drilling and engineering studies leading to a feasibility study.
La Teko will continue its efforts to enhance shareholder value through the
discovery of new mineral reserves. To this end, the Company will be continuing
to explore its several Fairbanks area gold exploration projects and will be
seeking more acquisition opportunities. The Company's strategy will be to focus
on advanced projects in areas with known mining history, while it will consider
farming out or joint venturing its early stage exploration projects in order to
reduce cost and risk to the Company.
The Company was formed on November 27, 1968, under the laws of British
Columbia. The registered office of the Company is 889 West Pender Street, Suite
800, Vancouver, B.C. V6C 3B2. The head office and principal place of business
of the Company is 625 Howe Street, Suite 500, Vancouver, B.C. V6C 2T6. When used
herein, the terms "La Teko" or the "Company" include La Teko Resources Ltd. and
its wholly-owned subsidiaries, La Teko Resources, Inc., the Nevada property-
holding entity, and Ryan Lode Mines, Inc., the Alaska operating entity.
EMPLOYEES
As of March 1997, the Company had 15 employees, one of whom is the
Company's president and a director. All of the Company's employees, except the
corporate president and four administrative personnel in the corporate offices,
work in Fairbanks, Alaska, and at the nearly Ryan Lode and True North sites.
Certain employees part-time employees are also employed part-time by Newmont n
the True North venture. The Company regularly engages consultants and other
advisors to provide specific geological and other professional services.
OFFICES
The Company has moved its corporate offices from Salt Lake City, Utah, to
Vancouver, British Columbia, at 625 Howe Street, Suite 500. Facilities in
British Columbia are leased on a month-to-month basis for $1,620 per month. The
Company's office at 180 East 2100 South, Suite 204, Salt Lake City, Utah that
were rented month-to-month for $638 will be consolidated with the Vancouver
office on May 1, 1997.
The Company's Alaska office at 2173 University Avenue South, Suite 101,
Fairbanks, Alaska, is leased from an unrelated party for $1,309 on a month-to-
month basis.
In the opinion of the Company, the above facilities are adequate for its
foreseeable future needs.
ITEM 2. PROPERTIES
TRUE NORTH PROJECT
True North is an advanced exploration project, located in the center of the
Fairbanks Mining District, Alaska. The project was acquired by La Teko in 1993
and is now under joint venture with Newmont, subject to its right to terminate
the venture and reconvey its 65% interest to the Company. Newmont, as operator
of the project, is in the midst of a multi-million dollar drilling program which
includes both definition of known gold mineralization and exploration for new
gold zones.
Location and Access
The True North project is located on the west flank of Pedro Dome,
approximately 17 miles northeast of Fairbanks, Alaska. The property is accessed
by a five-mile dirt and gravel road from the paved Steese Highway, which passes
along the south and eastern borders of the property.
Land Status
The True North project, consisting of 86 leased Alaska state mining claims,
aggregating 2,284 acres, was acquired by the Company's wholly-owned subsidiary,
La Teko Resources, Inc., from AMAX Gold Exploration, Inc. ("AMAX") in 1994 in
consideration of the Company's completion of $250,000 in exploration in each of
1994 and 1995. The Company was also required to pay to AMAX $500,000 in 1994
and $250,000 yearly thereafter to a cumulative total payment of $1,500,000 and
to pay a 1% net smelter return ("NSR") royalty. All required payments to date
have been paid.
On June 9, 1994, La Teko Resources, Inc., entered into a joint venture
agreement (the "JV Agreement") with Newmont, whereby Newmont acquired a 65%
interest in True North. In order to earn that interest, Newmont paid La Teko $6
million and must complete $21 million in exploration and development work on
True North ($5.8 million spent as of December 31, 1996) and complete a
feasibility study. The Company will receive no further cash payments from
Newmont under the JV Agreement. The feasibility study was to have been
completed by December 31, 1996. However, Newmont has elected to extend the date
for completion. The JV Agreement allows this extension for up to six months
beyond the time when Newmont ceases an active program of drilling to expand the
gold resource of True North. During such extension, certain of Newmont's
exploration costs are not credited against its $21 million funding commitment.
After Newmont has earned its 65% interest in True North, La Teko and Newmont
will each fund project development costs on a pro rata basis, with Newmont as
operator. If either partner fails to contribute its share, its interest in the
property will suffer corresponding dilution. Newmont can terminate the JV
Agreement by reconveying its 65% interest in the property to the Company, which
would then be under no obligation to reimburse Newmont for any payments or
expenditures to date. Although Newmont has advised the Company that Newmont
proposes further exploration of the True North property during 1997, Newmont's
further actions respecting the True North project are beyond the ability of the
Company to either control or predict. There can be no assurance that the
results of further exploration, development or feasibility analysis will warrant
placing the True North property into production by either the Company or
Newmont. The terms and conditions of the joint venture with Newmont are more
fully discussed in the Company's annual report on Form 10-K for the year ended
December 31, 1995.
Since acquiring the project, Newmont has added 60 claims by staking and
acquired an additional 16 adjacent properties by lease, purchase, or option from
third parties, bringing the total project acreage to 7,120 acres. These are all
within the joint venture's area of interest, and pursuant to La Teko's election
to participate in the acquisition cost, are being added to the joint venture
property.
Exploration History
Placer gold was first discovered in a creek draining the south side of
Pedro Dome in 1902 by Felix Pedro. Placer mining on Dome and Eldorado Creeks,
immediately adjacent to the True North property, began about eight years later.
During the period 1912 to 1914, the Soo Mine reportedly produced between 4,000
and 5,000 ounces of lode gold from a quartz vein in the southern portion of the
True North property. Several other small lode occurrences were prospected in
the vicinity.
In 1916, 200 tons of stibnite ore (antimony) was reportedly produced from
the Hindenburg Mine, within the area of the presently defined Hindenburg gold
deposit. A further shipment of 16 tons grading 38% antimony was reportedly made
in 1942. Another prospect, the Mother Lode, adjacent to the presently defined
Shepard deposit, had exploration shafts to 147 and 215 feet.
AMAX first acquired an interest in the property covering the Hindenburg
Mine in 1990. The property position was expanded as AMAX completed the first
drill program on the property, 4,000 feet, in 1991. The table below outlines
subsequent exploration on the property, including that conducted since the
Company acquired it in 1993.
1992 1993 1994 1995 1996 TOTAL
------ ------ ------ ------ ------ -------
RVC Drilling 5,332 3,450 51,810 14,885 40,428 115,805
Core Drilling 2,042 13,049 24,798 39,888
Geology and Mineralization
The True North property lies within a broad belt of metamorphic rocks
trending through central Alaska and Yukon known as the Yukon Tanana Terrane.
Numerous gold occurrences are found within these rocks, including the famous
Klondike gold camp in the Yukon and the Fairbanks Mining District of Alaska.
Lode gold occurrences typically occur where the older metamorphic rocks have
been intruded by granitic igneous rocks which were emplaced approximately 90
million years ago.
Several types of gold mineralization have been exploited. The early miners
sought the placer gold in streams and rivers draining the bedrock gold source
areas and this mining activity continues today. Initial lode mining
concentrated on quartz veins containing high grade gold values. More recently,
however, large, low-grade gold deposits have been sought. The best example of
this is the Fort Knox deposit, seven miles east of True North, which has just
been placed into production by Cyprus-AMAX at a mining rate of approximately
350,000 ounces gold per year.
Gold mineralization on the True North property is hosted by metamorphic
rock of the Chatanika Terrane, including quartz-mica schist, quartzite,
eclogite, amphibolite, marble, and argillite. Some units are graphitic. Gold
occurs in nearly flat-lying shear zones and along faulted contacts. These zones
are typically 30 to 50 feet thick, are stacked one on top of the other, and can
be correlated across the property. The three originally defined zones,
Hindenburg, Central, and Shepard, now all appear to be part of a single zone
with a continuous strike length of roughly 5,000 feet. Average grades are 0.05
to 0.07 oz. Au per ton (1.7 to 2.4 gm Au per tonne), although higher grades in
excess of 1 oz. Au per ton occur locally.
A more recently defined zone, the Zeppelin, occurs just north of the
Central zone, and is higher grade, averaging approximately 0.12 oz. Au per ton
(5.8 gm Au per tonne). Drilling late in 1996 encountered another new zone,
which also appears to grade in excess of 0.1 oz. Au per ton.
Within the first 150 to 200 feet of surface, the gold mineralization is
predominantly oxidized. Below this depth there is a gradual transition to
sulfide mineralization. The depth of oxidation is typically greater at higher
elevations and less in the valleys, and generally reflects depth to the top of
the water table.
Reserves
In 1995, La Teko announced a proven and probable reserve of 6.9 million
tons grading 0.065 oz. Au per ton, or 445,800 contained ounces of gold, as
calculated by Mine Development Associates, Inc., of Reno, Nevada. In 1996, La
Teko announced a total resource potential of 2 million plus ounces of gold.
Newmont has yet to announce a resource or reserve estimate.
Metallurgy
Preliminary metallurgical testing has demonstrated gold recoveries from in
the order of 90% for oxidized mineralization. As the degree of oxidation
decreases, gold recoveries also decrease. Bench scale flotation tests of
sulfide mineralization indicate gold recoveries of 82 to 96% in the sulfide
concentrate.
Proposed Program
The Company has been advised by Newmont that it has budgeted $2.1 million
for the $300,000 property payments due during the year and for an exploration
program for January through June 1997. This program will include mainly
drilling and some power auger geochemical sampling. The main focus of the
drilling program will be step-out drilling to expand the more recently
discovered gold zones.
RYAN LODE PROJECT
The Ryan Lode property has a long history of gold exploration and mining,
dating back to the turn of the century. During the period from 1987 to 1989,
the Company successfully produced 19,220 ounces of gold from 329,000 tons of ore
mined by open pit and extracted by heap leach methods. the Company has
subsequently made a substantial investment in the property, both in the
reclamation of the previous mining activity and in exploration for more minable
reserves.
Location
The Ryan Lode property is located on the southeast flank of Ester Dome,
approximately eight miles west of Fairbanks, Alaska. The Parks Highway,
connecting Fairbanks to Anchorage, traverses the southern boundary of the
property. The property can be accessed by Gold Hill Road and then Henderson
Road, for a total distance of 2.4 miles north from the highway. Power supply
also runs very close to the property.
Land Status
The core Ryan Lode claims, comprised of 10 claims, 14 unpatented claims,
and one unpatented placer claim totaling 700 acres, are subject to a lease
agreement which calls for a 5% net smelter royalty on production from these
claims. Annual advance royalty payments are being made, currently amounting to
$150,000 per year, escalating to $200,000 per year in 2013, to $250,000 per year
in 2018, to $300,000 per year in 2023, and $300,000 per year from 2028 to 2032.
The lease agreement may be extended annually thereafter. A 3% net smelter
return royalty is payable on the surrounding Bar and St. Patrick claims
comprising a total of 289 acres.
A prior lease agreement with LAC Minerals, U.S.A., requires payment of $5
million on the basis of 5% of net profits after recovery of pre-production
costs, 10% of net profits after recovery of two times pre-production costs, and
20% of net profits after recovery of three times pre-production costs until the
$5 million is paid. Pre-production costs are restricted to a maximum of $1
million.
The Company has expanded its Ryan Lode properties so that it now holds 234
additional acres adjacent to the Ryan Lode claim group. These claims are
generally subject to 3% to 4% net smelter return royalties based on mineral
product mined and removed from the properties.
Exploration and Development History
Extensive placer mining has taken place in the vicinity of Ester Dome since
the turn of the century. The first lode gold interest was during the period
1912 to 1916, when several prospect pits and two shafts were sunk. In 1916,
Kennecott Copper Corporation acquired the property, sank a 500-foot shaft and
carried out significant development activity. Others continued with sporadic
activity and, by 1930, reserves were estimated at 1.3 million tons grading 0.158
oz. Au per ton.
In 1938, the property was acquired by Bartholomae Oil Corporation which
continued with more exploration and development, culminating in the production
of 620 oz. Au from 1,430 tons of ore. All operations ceased during World War
II. Minor exploration was carried out from 1954 to 1958 and again from 1969 to
1970.
During the period 1974 to 1978, Fourbear Enterprises, Inc., constructed a
400 tpd flotation mill, which encountered gold recovery problems, and operations
ceased. St. Joe American Corporation then acquired the lease and carried out
further surface and underground exploration. In 1985, the property was acquired
by Citigold Mining Company, Ltd., which carried out a 10,000 ton test heap leach
before 1986, when it was acquired by La Teko. In the following three years, La
Teko mined and leached 329,000 tons of ore at an estimated grade of 0.09 oz. Au
per ton, to recover 19,220 ounces of gold. Production ceased in 1990.
From 1990 to the present, La Teko has carried out substantial exploration
on the property, including 220,236 feet of drilling in 752 drill holes. The
Company has also continued a program of baseline environmental monitoring and
reclamation of previous mining activity.
Geology and Mineralization
The principal rock unit in the Ryan Lode area is the Cleary Sequence member
of the Fairbanks Schist, consisting of varied rock types, including
metamorphosed volcanic rocks, along with marble, calcareous quartz-mica schist
and carbonaceous units. Granite intrusions in the area are principally
concentrated near and within the Curlew deposit, south of the main Ryan Shear.
The gold in both the Ryan and Curlew ore bodies occurs in mineralized
quartz veins, breccias, and gouge zones within broad shear zones. The gold
occurs with sulfide minerals pyrite, arsenopyrite, and locally stibnite. Higher
grade gold mineralization typically occurs next to the hanging wall of the
shear, with lower grade mineralization below this.
The main shear zone, which reaches 150 feet in thickness in places, has
been traced by drilling for over a mile and is contained in metasedimentary and
metavolcanic rocks of the Cleary Sequence. The Curlew Shear, which may be an
offset, southern continuation of the Ryan Shear, ranges up to 180 feet in
thickness. Other subparallel shears also occur on the property, and although
these are currently poorly defined, they could add to the future gold resource
base.
Mineralization is typically oxidized to depths of 200 to 300 feet, with an
enriched or supergene zone for 50 to 100 feet below this. The oxidized and
supergene zones demonstrate good gold recoveries by leaching, while rates of
gold recovery by leaching decreases at increasing depths below the enriched
zone.
Reserves
In 1994, Mine Development Associates, Inc., of Reno Nevada, calculated
proved and probable reserves for Ryan and the adjacent Curlew Shear to be 14.5
million tons grading 0.056 oz. Au per ton, with a 0.015 oz. Au per ton cut-off
and a stripping ratio of 3.8:1. This is a reserve of 822,200 contained oz. Au
within a geological resource of 2.4 million oz. Au. A subsequent "high grade"
pit calculation showed a reserve of 4.6 million tons grading 0.09 oz. Au per ton
with a strip ratio of 7.5:1 and an underground reserve of 1.46 million tons
grading 0.215 oz. Au per ton. The "high grade" pit includes only oxide and
supergene mineralization, and is thus totally amenable to heap leach gold
recovery.
Metallurgy
The ore at Ryan Lode requires crushing and agglomeration prior to leaching.
Column leach tests show that gold recoveries in the range of 70% to 80% can be
expected. A gravity circuit has been shown to recover 45% to 50% of the gold.
Gravity in combination with leaching would be expected to provide faster and
superior gold recovery to leaching alone.
Proposed Program
The Company's ongoing program at the Ryan Lode includes baseline studies
monitoring air and water quality, noise levels, and other environmental factors.
The Company is considering an effort to obtain mining permits and to complete a
feasibility study, both of which are required prior to placing the Ryan Lode
property into production. Future production is contingent upon obtaining the
necessary permits and capital required to fund the permitting, feasibility, and
construction phases of the project. Although the Company has funds to continue
baseline studies and complete a study of the feasibility of placing the Ryan
Lode into production, it does not now have the funds which would be required for
pre-production construction or the commencement of mining. The Company will
rely on the sales of securities or debt financing to meet its future Ryan Lode
capital requirements, or it will seek a joint venture partner to assist with the
Ryan Lode project. There can be no assurance that a joint venture partner will
be obtained or that funds for these purposes will be available.
JUNIPER PROPERTY
In February 1995, the Company located 104 state of Alaska prospecting sites
on approximately 16,131 acres located 30 miles northeast of Fairbanks, Alaska.
This property covers rocks of the Chatanika Terrane, the same as those hosting
the True North deposit 15 miles to the southwest. In addition, the property
lies along the same, northeast-trending structural linear which intersects both
the True North and Ryan Lode gold deposits. There is little evidence of
historical prospecting in the area, largely because of the thick cover of wind-
blown silt and clay which masks the underlying geology and would effectively
hide any bedrock mineralization. However, minor placer gold mining activity is
evident in a number of streams which drain the area.
During 1995, the Company carried out initial exploration efforts on this
property, including geochemical sampling, the results of which suggested that
further exploration was warranted. In 1996, the Company continued its
exploration effort with additional geologic mapping and soil sampling, and
converted the prospecting sites into 405 state claims. The fourth quarter of
1996 cost of conversion amounted to approximately $78,000. During 1997,
detailed soil sampling, geologic mapping, and possibly trenching will be
undertaken.
TWIN BUTTES PROPERTY
During April 1996, the Company executed a five-year agreement with the
University of Alaska to explore its 12,640-acre Twin Buttes property.
Subsequently, the Company paid $30,000 for an exclusive development and mining
lease. The property is located 28 miles northeast of Fairbanks, Alaska,
adjoining the south side of the Company's Juniper property. The property is
underlain by the same rocks as the Juniper property and has similar potential to
host gold mineralization.
A geochemical sampling program including 297 rock, soil, stream sediment,
and pan concentrate samples, was undertaken during the 1996 exploration season.
Eight percent of these samples had detectable gold, generally in the range of
5ppb to 50ppb. Although these anomalies are weak, there is extensive overburden
cover which could mask the expression of buried mineralization. Additional
sampling is required before any definite conclusion may be reached concerning
the mineral potential of this property.
The budgeted 1997 program includes approximately 1,200 soil samples which
will be collected using a track-mounted power auger. This ensures that samples
are collected from just above bedrock and beneath the wind-blown sediment. The
discovery of a significant anomaly will generate the need to follow-up trenching
to bedrock to disclose the source.
LUCKY GULCH PROPERTY
During July 1996, the Company acquired 12 claims comprising the Lucky Gulch
property. The property contains approximately 230 acres located in the Denali
Mining District on Lucky Gulch, a tributary of Valdez Creek, Alaska,
approximately 115 miles south of Fairbanks. The Lucky Gulch property has a
significant lode gold potential, as indicated by the subsequent production from
placer gold operations in creeks draining the area.
The property was acquired for an initial $10,000 non-refundable payment
with annual advance minimum royalty payments of $7,500 the first year,
escalating to $15,000 the fourth year and thereafter. The Company has satisfied
the requirement to spend $20,000 on exploration in 1996. Annual exploration
expenditures of $50,000 are required for subsequent years. The agreement calls
for a sliding scale net smelter royalty between 1 and 7%, based on profitability
and the price of gold.
The 1997 exploration program on this property is budgeted at $50,000. The
program includes geological mapping to more clearly define the lithology,
structure, and possible bedrock source of placer gold in the creek. The program
will also include soil geochemical sampling, followed by up to 2,000 feet of
trenching and several hundred feet of reverse circulation drilling.
DISCOVERY PROPERTY
On May 24, 1996, the Company, through its wholly-owned subsidiary, Ryan
Lode Mines, Inc., entered into a letter agreement with Mrs. Helen Warner for an
option on approximately 3,000 acres known as Discovery Gulch (the Discovery,
Deadwood and Tom group of claims) in the Circle Mining District near the small
town of Central, Alaska. The property is on Deadwood Creek, approximately 125
miles northeast of Fairbanks. A formal agreement is to be executed on or before
December 1, 1997.
The Company paid $15,000 for an exploration lease. Annual payments of
$10,000 are required upon each of the two succeeding anniversary dates.
Subsequent annual payments, beginning with the third anniversary date, will be
$35,000. The property is subject to a 2% net smelter return royalty payment.
The Company will have a vested interest in the property upon a $300, 000 cash
payment to be made to Warner at the Company's option within one year after
completion of a positive feasibility study. Minimum exploration requirements
for 1997 and 1998 are $30,000 and $35,000, respectively. During the fourth
exploration season, the minimum increases to $100,000 with an additional $50,000
increase annually thereafter.
The Company completed a $25,000 exploration program during 1996. This
effort included geological mapping, soil sampling, and trenching. A number of
samples returned anomalous gold values that confirm results of previous
exploration by others. The anomalies appear to be associated with a granitic
intrusion that occurs on the property. Placer gold production from the
surrounding creeks is further indication that this is an area with lode gold
potential.
ISSUES AFFECTING MINING OPERATIONS IN ALASKA
Climate
The climate in the Fairbanks area is variable. The record low temperature
of -54 degrees Celsius (-66F) and a record summer high of 37 degrees Celsius
(99F). The mean annual temperature is -3 degrees Celsius (26.5F). The average
temperature for the months of April through September is 10 degrees Celsius
(50.1F), the average temperature for the months of October through March is -16
degrees Celsius (2.75F). Temperature rises above 22 degrees Celsius (70F) 51
days per year and drops below freezing 225 days per year. The rivers in the
region begin to freeze in October and thaw in May. Average annual precipitation
in Fairbanks is approximately 12 inches, which includes an average snowfall of
69.3 inches. Mining operations can be conducted in the region throughout most
of the year, although exploration is restricted during the winter.
GOVERNMENT REGULATIONS AND ENVIRONMENTAL CONSIDERATIONS
There are extensive federal and state laws designed to conserve and prevent
the degradation of the environment. These laws and regulations require
obtaining various permits before undertaking certain exploration and development
activities and may result in significant delays, substantial costs, and the
alteration of proposed operating plans. These requirements also necessitate
significant capital outlays and may result in liability to the owner of the
property for damages that may result from specific operations, all of which may
materially and adversely affect the business of the Company and the financial
results of its operations.
The Company believes that it is in material compliance with applicable
environmental regulations.
Ryan Lode
The Ryan Lode property is located eight miles west of Fairbanks, Alaska,
and 0.5 miles from rural homes. The Company initiated baseline environmental
monitoring for the project in 1993, including air quality, surface water
quality, ground water quality, geohydrology, biological inventory, and acid base
accounting. The Company plans to expand these programs as well as to initiate
noise level monitoring and vibrations testing. These activities will support
environmental permitting activities which will commence with the development of
an operating plan.
The Company expects that obtaining required permits for proposed activities
on the Ryan Lode property may be adversely affected because of its location
eight miles from the city of Fairbanks and approximately one-half mile from
rural homes, which exposes the Company's proposed activities to greater public
interest and scrutiny and increases the potential adverse impacts on humans
resulting from the use, storage, or discharge of hazardous materials. The
Company expects that it may be required to complete an environmental impact
statement and be involved in a protracted process with applicable permitting
agencies and the public in obtaining required permits. There can be no
assurances respecting the time involved to obtain required permits, restrictions
on operations that may be imposed as a condition to obtaining such permits, or
when production could commence. Further, there can be no assurance that the
Company will not have to alter its plans in response to government review or
public comment, which could adversely affect the financial return to the Company
from its proposed activities. La Teko will be required to demonstrate
substantial financial responsibility through bonding, deposits, or other means
acceptable to governing agencies before resuming operations at Ryan Lode.
True North
The True North property is located in a relatively uninhabited area and
therefore should not be subject to stringent nuisance factors such as light,
noise, dust, and visibility considerations in receiving permits. The
Cyprus/Amax Gold, Inc., Fort Knox property, located in close proximity to True
North has been issued permits to commence production without the necessity of
providing a full environmental impact statement. Production facilities have
been completed and the project poured its first gold in December 1996. Newmont,
as the operator of the True North project, will have the responsibility of
permitting the True North project. There can be no assurance that Newmont will
continue with development of the True North project or that it will be able to
obtain permits without substantial delays and/or extensive expense.
Other Regulation
The mining and exploration operations of La Teko are also subject to both
federal and state laws and regulations pertaining to employee health and safety.
STATE OF ALASKA MINING LICENSE TAX, PRODUCTION ROYALTY, AND CLAIM RENTAL
The State of Alaska levies a mining license tax based on net income
reported to the federal government and royalties from Alaska mining property at
the following rates: there is no tax on taxable income under $40,000; however,
if taxable income exceeds $40,000 and is less than $50,000, the tax is 3% of the
total taxable income; $50,001 to $100,000 - $1,500 plus 5% of excess over
$50,000; $100,001 or over - $4,000 plus 7% of excess over $100,000. The State
of Alaska also charges a production royalty of 3% of net income on state mining
claims. An annual rental fee must be paid to the State of Alaska for each state
claim or fraction thereof. The rent is $20 per claim for the first five years
held; $40 per claim for the second five year held; and $100 per year per claim
thereafter. Claims staked before 1989 are considered to be staked in 1989 for
the purpose of this law.
MARGARITA PROPERTY
The Margarita property consists of 36 unpatented federal lode mining claims
totaling approximately 700 acres. The property is located approximately 75
miles south of Tucson, Arizona, in the Oro Blanco Mining District, approximately
three miles from the Mexican border. The property can be reached by traveling
20 miles east from Arivaca on a graded county road The Company's purchase
agreement calls for a 3% net smelter return royalty. In addition, prior lessees
will receive a 10% net profit interest on the first 20,000 ounces of Gold
production and 15% thereafter.
During January 1996, the Company completed 14 holes comprising 4,040 feet
of reverse circulation drilling on the Margarita property at an estimated cost
of $67,500. This program did not increase the previously estimated 30,000 ounce
resource.
During January 1997, the Company executed a letter agreement with Oro
Blanco Resources Corp. whereby Oro Blanco has an exclusive, three-year option to
explore the Margarita property. During this period, Oro Blanco must complete
$500,000 in exploration and issue 125,000 shares of common stock to La Teko,
according to the following schedule.
COMMON STOCK EXPLORATION
TO LA TEKO EXPENDITURES
------------- ------------
Year 1 25,000 shares $100,000
Year 2 50,000 shares $200,000
Year 3 50,000 shares $200,000
At the end of the option period, Oro Blanco can acquire a 100% interest in the
Margarita property by paying the Company $100,000 in cash. The Company retains
a 1% net smelter return production royalty. Minimum annual royalties are payable
$50,000 on the fourth anniversary date, $75,000 on the fifth anniversary date,
and $100,000 on the sixth and subsequent anniversaries. Advance minimum
royalties will be applied against net smelter royalties during the life of the
mine.
FREEGOLD INTERESTS
On July 19, 1994, La Teko entered into an agreement with International
Freegold Mineral Development, Inc., respecting the acquisition of Freegold
stock. Pursuant to the agreement, La Teko acquired 750,000 shares of Freegold
common stock for $231,069 in July 1994 and a further 750,000 shares for $269,844
in July 1996, for a total of 1.5 million shares for $500,913.
La Teko continues to own 1.5 million shares of Freegold constituting
approximately 9% of the issued and outstanding stock of Freegold, which had a
current market value as of December 31, 1996, of $780,000, based on the closing
sales price for such stock as of such date on the Vancouver Stock Exchange,
converted to U.S. dollars. Because of the nature of the limited trading market
for Freegold stock, there can be no assurance that the Company would be able to
liquidate its position readily or without a loss if it should desire to do so.
(See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.")
LIMITED TITLE TO UNPATENTED MINING CLAIMS
The Ryan Lode and the Margarita claim groups include Federal unpatented
mining claims. The Ryan Lode and True North groups include Alaska unpatented
mining claims. Such claims are subject to inherent uncertainties. Unpatented
mining claims, when properly located, staked, and posted according to
regulation, give the claimant possessory rights only. Possessory title to an
unpatented mining claim, when validly initiated, endures unless lost through
abandonment due to failure to perform and file proof of annual assessment work
or through a forfeiture which results from an adverse location made while the
prior location is in default with respect to the performance of annual
assessment work. Because many of these factors involve findings of fact, title
validity cannot be determined solely from an examination of the public record.
The continuing validity of these claims is subject to many contingencies,
including the availability of land for location at the time the location was
made, compliance with federal and state regulations for locating claims, the
performance of annual assessment work, the payment of annual rental fees and the
making of required annual filings with the Bureau of Land Management and the
appropriate state authority in which the claims are located. Failure to pay
required annual rentals constitutes a statutory abandonment of the mining claim
or site.
The Company believes that it has valid possessory title to all of the
unpatented federal and state mining claims described herein.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company. No
legal proceedings have been threatened or, to the best of the Company's
knowledge, are contemplated, by any governmental authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the last quarter of 1996 no matters were submitted to the
stockholders for approval.
- --------------------------------------------------------------------------
PART II.
- --------------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common shares are traded on the Vancouver Stock Exchange
("VSE") under the symbol "LAO" and are included on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") under the symbol
"LAORF." The high and low closing sales prices for the quarterly periods
indicated on the VSE are as follows:
VANCOUVER STOCK EXCHANGE SALES PRICES
CANADIAN DOLLAR U.S. DOLLAR*
--------------- --------------
LOW HIGH LOW HIGH
1995 ------ ------ ------ ------
1st quarter $ 3.10 $ 3.90 $ 2.22 $ 2.79
2nd quarter 2.95 3.50 2.15 2.55
3rd quarter 2.35 3.15 1.75 2.35
4th quarter 2.00 4.00 1.47 2.93
1996
1st quarter $ 2.61 $ 5.00 $ 1.91 $ 3.65
2nd quarter 3.00 4.50 2.20 3.30
3rd quarter 2.75 3.95 2.04 2.93
4th quarter 2.45 3.45 1.81 2.52
*Prices converted to U.S. dollars at the approximate exchange rates
prevailing during the individual quarter.
The high and low closing sales prices for the Company's common stock as
quoted on the Nasdaq Stock Market for the quarterly periods indicated are as
follows:
NASDAQ STOCK MARKET SALES PRICES
CANADIAN DOLLAR U.S. DOLLAR*
--------------- --------------
LOW HIGH LOW HIGH
1995 ------ ------ ------ ------
1st quarter $ 3.07 $ 4.02 $ 2.19 $ 2.88
2nd quarter 3.09 3.51 2.25 2.56
3rd quarter 2.35 3.27 1.75 2.44
4th quarter 1.88 3.29 1.38 2.41
1996
1st quarter $ 2.66 $ 4.71 $ 1.94 $ 3.44
2nd quarter 3.31 4.55 2.41 3.31
3rd quarter 2.91 4.13 2.16 3.06
4th quarter 2.54 3.46 1.88 2.56
*Quotations converted to Canadian dollars at the approximate exchange rates
prevailing during the individual quarter.
As of March 7, 1997, there were 480 United States stockholders of record
holding 22,362,026 common shares, or approximately 94% of the shares issued and
outstanding, and 124 Canadian stockholders of record holding 1,339,323 shares,
or approximately 6% of the shares outstanding.
DIVIDEND POLICY
The Company has never paid cash dividends on the Common Stock and does not
anticipate that it will pay dividends in the foreseeable future. The Company
currently intends to continue a policy of using retained earnings primarily for
the expansion of its business.
EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are no governmental laws, decrees or regulations in Canada relating
to restrictions on the import of capital affecting the remittance of interest,
dividends or other payments to non-resident holders of the Company's shares.
Any such remittances to United States residents, however, are subject to a 15%
withholding tax pursuant to Article X of the reciprocal tax treaty between
Canada and the United States.
Except as provided in the Investment Canada Act (the "Act"), there are no
limitations under the laws of Canada, the Province of British Columbia or in the
charter or any other constituent documents of the Company on the right of
foreigners to hold and/or vote the shares of the Company.
The Act requires a non-Canadian making an investment to acquire control of
a Canadian business, the gross assets of which exceed certain defined threshold
levels, to file an application for review with Investment Canada, the federal
agency created by the Act.
As a result of the Canada-U.S. Free Trade Agreement, the Act was amended in
January, 1989 to provide distinct threshold levels for Americans who acquire
control of a Canadian business. The threshold levels for Americans were
gradually raised until 1992.
A Canadian business is defined in the Act as a business carried on in
Canada that has a place of business in Canada, an individual or individuals in
Canada who are employed or self-employed in connection with the business, and
assets in Canada used in carrying on the business.
An American, as defined in the Act, includes: an individual who is an
American national or a lawful permanent resident of the U.S.; a government or
government agency of the U.S.; an American-controlled entity, corporation or
limited partnership; and a corporation, limited partnership or trust of which
two-thirds of its board of directors, general partners or trustees, as the case
may be, are non-Canadians or Americans.
Review by Investment Canada is required when investments by Americans for
direct acquisition of control exceeds $150 million.
For purposes of the Act, "direct acquisition" of control means a purchase
of the voting interests of a corporation, partnership, joint venture or trust
carrying on a Canadian business, or any purchase of all or substantially all of
the assets used in carrying on a Canadian business.
A non-Canadian is prohibited from implementing an investment reviewable
under the Act unless the investment has been reviewed and the Minister
responsible for Investment Canada is satisfied or is deemed to be satisfied that
the investment is likely to be of net benefit to Canada. If the Minister is not
satisfied that the investment is likely to be a net benefit to Canada, the non-
Canadian shall not implement the investment or, if the investment has been
implemented, shall divest himself of control of the business that is the subject
of the investment.
A non-Canadian or American making an investment to establish a new Canadian
business or an investment to acquire control of a Canadian business which
investment is not subject to review under the Act must notify Investment Canada,
within prescribed time limits, of such investments.
TAXATION
Generally, dividends paid by Canadian corporations to non-resident
shareholders are subject to a withholding tax of 25% of the gross amount of such
dividends. However, Article X of the reciprocal tax treaty between Canada and
the United States reduces to 15% the withholding tax on the gross amount of
dividends paid to residents of the United States. A further 5% reduction in the
withholding tax rate on the gross amount of dividends is applicable when a U.S.
corporation owns at least 10% of the voting stock of the Canadian corporation
paying the dividends. Prior to the redemption of its convertible debentures,
the Company withheld income taxes at applicable rates and forwarded said amounts
to Revenue Canada in accordance with regulations applicable to non-resident
security holders receiving interest/dividends from a Canadian corporation.
DISPOSITION OF SHARES BY NON-RESIDENTS OF CANADA
A non-resident who holds shares of the Company as capital property will not
be subject to tax on capital gains realized on the disposition of such shares
unless such shares are "taxable Canadian property" within the meaning of the
Income Tax Act (Canada) and no relief is afforded under any applicable tax
treaty. The shares of the Company would be taxable Canadian property of a non-
resident if at any time during the five-year period immediately preceding a
disposition by the non-resident of such shares not less than 25% of the issued
shares of any class of the Company belonged to the non-resident, to persons with
whom the non-resident did not deal at arm's length, or to the non-resident and
any person with whom the non-resident did not deal at arm's length.
RECENT SALES OF UNREGISTERED SECURITIES
During 1996, the year covered by this report, the Company did not sell any
securities that were not registered under the Securities Act.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the accompanying consolidated financial statements of the Company and the notes
thereto.
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF
OPERATIONS DATA:
Operating revenue $ -- $ -- $ -- $ -- $ --
before expenses........
Income (loss) from
operations.............(1,493) (1,200) (1,228) (1,389) (935)
Net income (loss)...... 956 (365) (1,370) (1,559) (935)
Income (loss) per
common share........... .04 (.02) (.06) (.08) (0.06)
BALANCE SHEET DATA:
Total assets..........$14,491 $13,871 $13,124 $12,111 $ 7,140
Long-term debt......... -- 360 1,073 1,068 --
Cash dividends per -- -- -- -- --
common share...........
Accumulated deficit...$(4,294) $(5,249) $(4,884) $(3,515) $(6,240)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Commencing in 1990, the Company discontinued mining operations at the Ryan
Lode and embarked upon an extensive exploration program to further delineate the
extent of mineral reserves. The Company has had no income from sales of mineral
product since 1990 and will continue to sustain exploration, general and
administrative and mine property expenses through 1997 without income from
operations. The Company has provided for recent years' operations primarily
from the receipt of funds from Newmont pursuant to the True North JV Agreement
and the cash proceeds from issuance of common stock. It is anticipated that
cash currently on hand, including the $2.5 million received from Newmont on
December 30, 1996, is sufficient to cover anticipated 1997 expenditures.
CURRENCY EXCHANGE RATES
All dollar amounts included in the Company's financial statements and
related discussion are in US dollars, except where noted otherwise as Canadian
dollars (CAN). In accordance with SFAS No. 52, Foreign Currency Translation,
any prior period adjustments resulting from transaction of Canadian dollars into
US dollars have been accumulated and reported as a separate component of
shareholders' equity. Prior to 1990, purchases of balance sheet items were
translated at year-end exchange rates except as pertaining to certain asset
acquisitions wherein exchange rates on specific dates of acquisition were used.
Subsequently, all financial transactions have been reported in US dollars and
Canadian transactions translated at exchange rates prevailing on specific
transaction dates. Any effects of conversion of Canadian dollars to US dollars
related to either current or prior period financial statements are
insignificant.
The following table sets forth the exchange rates utilized for converting
one Canadian dollar to one U.S. dollar for the past five years.
EXCHANGE RATE
---------------------------------------------------
YEAR-
YEAR AVERAGE HIGH LOW END
- ------ ------- ------ ------ ------
1992 0.8274 0.8771 0.7729 0.7868
1993 0.7754 0.8052 0.7442 0.7567
1994 0.7325 0.7631 0.7105 0.7135
1995 0.7282 0.7514 0.7035 0.7334
1996 0.7365 0.7515 0.7234 0.7297
RESULTS OF OPERATIONS
Income
As noted above, the Company has not received operating revenues during any
of the last three years.
Expenses
During 1996, the Company expended approximately $304,900 for capitalized
costs associated with the exploration and development of its mineral properties
as further discussed in the statement of cash flows and Note 2 of the
accompanying Notes to Consolidated Financial Statements.
Operating and mine maintenance expenses increased 82.3% to $276,000 for
1996 as compared to $151,000 in 1995, and decreased 35.5% in 1995 from $234,000
in 1994. The variations between 1996 and 1995 were due principally to changes
in salaries, wages and employee benefits and contract services, primarily
related to the level of environmental compliance and reclamation efforts
associated with the Ryan Lode Mine and its spent heap-leach pads.
New prospect evaluation expenses increased 51.4% to $56,000 for 1996 as
compared to $37,000 in 1995, reflecting the Company's increased activities in
seeking new exploration prospects. The Company had no similar expenditures in
1994.
General and administrative expenses, including corporate and project
overhead, increased 41.8% to $956,000 for 1996 as compared to $675,000 in 1995,
and decreased immaterially in 1995 from $695,000 in 1994. The I996 increase was
primarily the result of increases in salaries and wages and related 1996
employee benefits expense, compensatory stock option expense, and consulting
fees. The Company recognizes compensatory expense on the issuance of director
and employee stock options in accordance with APB Opinion No. 25 "Accounting for
Stock Issued to Employees." Generally, stock options are issued at an exercise
price approximately 15% under the current market price on the date of the grant
as authorized by the Vancouver Stock Exchange. Compensatory stock option
expense for officers, directors, and employees during 1996 exceeded 1995 by
approximately $124,000. Director fees for 1996 were $19,800 compared with
$13,500 for 1995. Consulting fees of $105,922 increased approximately $81,000
over 1995 expenses as a result of consulting arrangements initiated in
connection with an evaluation of the Company and its gold resources to guide the
directors in long range strategic planning for the Company.
Depreciation was approximately equal for each of the last three years as
the Company had no significant changes in depreciable property.
Royalty and lease expenses decreased 47.7% to $150,000 for 1996 as compared
to $287,000 in 1995, and increased 18.9% in 1995 from $241,000 in 1994. Royalty
expense for 1996 consisted only of its annual minimum royalty payment on the
Ryan Lode Mine inasmuch as minimum royalties associated with the True North
properties were assumed by Newmont under the JV Agreement. In 1994 and until
June 1995, the Company paid minimum royalties on its Ryan Lode and True North
properties. True North minimum royalties payable after entering into the joint
venture with Newmont in June 1995 have been paid by Newmont.
Other Income
Gain on sale of mineral property increased 76.9% to $2,447,000 for 1996 as
compared to $1,383,000 in 1995. As a result of the $2,500,000 cash receipt from
Newmont in 1996, the Company reported a gain of $2,447,248 from the disposition
of an interest in its True North property. During 1995, the Company recorded a
gain of $1,383,436 applicable to the 1995 receipt of $3.5 million from Newmont.
Accordingly, total gain to date is $3,830,684. The Company will receive no
further cash payments from Newmont under the JV Agreement.
The Company had no abandonment of mineral property in 1996, while it
reported $454,000 in 1995 relating to the abandonment of a claim group adjacent
to the Company's Ryan Lode property.
As a result of net operating losses carried forward for income tax
reporting purposes, except as pertaining to nominal alternative minimum taxes,
the Company will pay no corporate income tax on income reported from the
proceeds received from Newmont.
Net Income (Loss)
Net income increased to $955,000, or $0.04 per issued and outstanding
share, for 1996 as compared to losses of $365,000 in 1995 and $1,370,000 in
1994. Fully diluted earnings per share were not materially lower than primary
earnings per share during 1996.
LIQUIDITY AND CAPITAL RESOURCES
During 1996, the Company relied principally on net cash provided from
investing activities, namely the sale of a 65% interest in its True North
property to Newmont under the JV Agreement, to fund its cash requirements for
general and administrative costs, ongoing exploration and development projects,
and redemption of outstanding debentures. During 1995, cash provided from
payments from Newmont was supplemented by cash from the sale of securities to
fund operations, and in 1994 the Company relied exclusively on cash from the
sale of securities to fund operations. The Company will receive no further cash
payments from Newmont under the JV Agreement.
With no revenue generating operations, operating activities used net cash
of $1,254,000 during 1996, a 7.3% increase over $1,155,000 used in 1995, which
was a 13.8% decrease from net cash of $1,340,000 used in 1994. During 1996, the
Company's $956,000 net profit was impacted by $2,500,000 cash received from
Newmont resulting in a $2,447,000 gain on sale of the True North interest
discussed as an investment activity below and non-cash expenses of $188,000 for
compensatory stock options and $55,000 for depreciation. In 1995, the Company's
$365,000 net loss was impacted by Newmont's payment of $3,500,000 resulting in a
$1,383,000 gain relating to the True North transaction and non-cash expenses of
$454,000 abandonment loss related to the Mohawk claims near the Ryan Lode,
$64,000 in compensatory stock options and $51,000 in depreciation. In 1994, the
$1,370,000 loss included non-cash expenses of $57,000 in depreciation and
$44,000 in compensatory stock options.
Investing activities provided net cash of $1,762,000 in 1996, a 39.4%
decrease as compared to the $2,906,000 provided from such activities in 1995.
In each year, the largest component of this item is the receipt of $2,500,000
and $3,500,000 in 1996 and 1995, respectively, from Newmont related to the sale
by the Company of an undivided 65% interest in the True North property. The
Company will receive no further cash payments from Newmont under the JV
Agreement. The Company invested $413,000 in mineral properties and exploration
costs during 1996, associated with the Ryan Lode as well as other early stage
exploration prospects acquired during the year. During 1995, the Company
invested $595,000 in mineral properties and exploration costs, principally
associated with the True North property before such costs were assumed by
Newmont in June 1995 under the JV Agreement. (See Note 2 to Consolidated
Financial Statements.) During 1994 the Company invested $2,050,000 in mineral
properties and exploration costs, consisting of $1,642,000 and $417,000 for the
True North and Ryan Lode properties, respectively.
Financing activities used net cash of $478,000 in 1996, as $700,000 used
to redeem outstanding debentures exceeded the $222,000 in proceeds received from
the issuance of common stock on the exercise of options. During 1995, financing
activities provided net cash of $946,000, principally from the sale of common
stock. In 1994, financing activities provided net cash of $2,441,000,
consisting mainly of 2,477,000 in net proceeds from the sale of common stock.
In both 1995 and 1994, proceeds from debt financing were approximately equal to
principal reductions. Subsequent to December 31, 1996, the Company redeemed all
$373,000 in remaining debentures outstanding at December 31, 1996.
On December 31, 1996, the Company had working capital of $2,697,000, which
the Company believes is sufficient to meet the Company's anticipated
expenditures for 1997 as discussed below.
As noted above, the Company will receive no further cash payments from
Newmont under the True North JV Agreement and has no operating revenue.
Therefore, the Company will be dependent on its existing capital resources to
meet budgeted expenditures. Beyond 1997, the Company may require additional
capital before initiating production on the Ryan Lode property, providing a
portion of the capital that may be required for large scale production at the
True North property, or undertaking significant other exploration of other
activities. In order to meet such long-term needs, it will be necessary to
obtain required capital from the sale of securities, possible new joint venture
or similar arrangements, project financing or other sources. There can be no
assurance that any required additional funds will be available or can be
obtained on terms favorable to the Company.
The Company has outstanding options exercisable during 1997 to purchase an
aggregate of 1,084,000 shares of common stock at an average exercise price of
$1.82 per share, for a total of $1,967,900, but cannot predict whether any
material number of such options will be exercised.
PROJECTED 1997 REQUIREMENTS
During 1997, the Company has budgeted approximately $1,998,000 in capital
to fund the continuation of permitting and reclamation activities at the Ryan
Lode mine and related royalty payments, continue with the True North project
under joint venture with Newmont, undertake initial exploration of its other
prospects and make related minimum royalty and other property payments, evaluate
and perhaps acquire other potential prospects, retire $373,000 in convertible
debentures, and meet other ongoing operating expenses.
Ryan Lode
The Company has budgeted $500,000 during 1997 for operating, mine
maintenance, and royalty expenses associated with the Ryan Lode, including the
continuation of baseline environmental studies, permitting and environmental
compliance and reclamation efforts associated with the spent heap-leach pads.
In the near term, the Company plans to determine whether to develop the
Ryan Lode property as a gold mine, to joint venture or sell the project to
another mining company, or to complete the reclamation program on the property
without further production. Should a development option be chosen, the Company
will immediately commence the permitting application process and begin detailed
drilling and engineering studies leading to a feasibility study. However, the
Company has not completed any arrangement with an industry or financial partner
to place the Ryan Lode project into production, and there can be no assurance
that a suitable partner will be available to assist with the development of the
Ryan Lode property.
La Teko does not now have the necessary capital to place the Ryan Lode into
production. The Company will rely principally on the sales of securities and
debt financing or the procurement of an industry or financial joint-venture
partner to meet its future Ryan Lode capital requirements. There is no
assurance that funds for these purposes will be available or that a suitable
partner will be found. Future sale of additional securities could result in
dilution of the financial interest of existing shareholders.
True North
The Company anticipates that Newmont will continue to expand the True North
property through additional staking or leases or options with third parties,
which will require the Company to reimburse Newmont the Company's 35%
proportionate share of related costs. In addition, the Company will continue to
monitor Newmont's exploration activities to assist the Company in evaluating its
long-range participation on the project, including the feasibility of placing
the property into production, possible costs, and sources of project funding
should the nature and extent of the project exceed Newmont's obligation to
provide the first $21,000,000 in funding as discussed above and in future years
require the Company to bear its share of additional costs. (See "ITEM 2.
PROPERTIES.") The Company has budgeted approximately $50,000 during 1997 for
the foregoing.
Newmont has advised of its intent to continue with the True North Joint
Venture and that it is planning substantial additional exploration and
development work during 1997. However, decisions by Newmont respecting its True
North activities are beyond the ability of the Company to predict or control.
Newmont's decisions may be affected by the results of its exploration and
development work to date or to other external factors impacting Newmont that are
only remotely related to the True North property or its potential. Accordingly,
the Company has no guarantee that Newmont will continue. In the event of
termination by Newmont, the Company will reacquire, at no cost, Newmont's 65%
interest in the True North project, including subsequently-acquired acreage,
together with all exploration data, and the Company will then become obligated
for the continuing carrying costs and expenses of the True North project.
As discussed in "ITEM 2. PROPERTIES", Newmont advised La Teko of its
intent to delay the completion of a feasibility study pending continued
exploration and development drilling designed to delineate the full potential of
the True North project. Development drilling, outside of the confines of the
Hindenburg/Shepard current reserve area will be at Newmont's sole expense and
not considered as credits towards its $18 million obligation required to place
the True North property into production. Newmont represents that it has
expended funds in excess of its required $3 million commitment for 1995 and
1996. Such excess expenditures will apply towards the remaining $18 million
development commitment.
La Teko does not have an obligation to contribute towards the True North
project until such time as Newmont has expended $27 million for acquisition and
development costs and completed a feasibility study which recommends placing the
True North property into production. If the True North project were to
substantially increase in size so as to require capital investment in excess of
the $18 million budgeted by Newmont for the installation of production
facilities, La Teko could be called upon to fund its 35% share and/or sustain a
dilution in the project in the event it were unable to contribute the required
capital.
If Newmont determines that the results of the feasibility study do not
warrant development of the True North property, then Newmont will be deemed to
have elected to terminate the joint venture and will re-convey the 65% interest
in the True North property, which was deeded to Newmont upon payment of the
initial $2.5 million at the inception of the joint venture, with no required
reimbursement of monies paid to La Teko or expended on the property. If Newmont
determines, in its sole discretion, that the results of the feasibility study
warrant development of the True North property, then the joint venture will
proceed with development and the initiation of production pursuant to the terms
of the joint-venture agreement.
In the event the Company regains control of the True North property as a
result of Newmont's election not to continue, the Company would pursue other
alternatives for further exploration and development of the project and, if
warranted, placing it into production, and for obtaining the necessary funds to
do so through the sale of securities, other arrangements with third parties,
project financing or other alternatives that may then be available. In the
event such circumstances arise, there can be no assurance that La Teko will
obtain a satisfactory joint-venture partner or be in a position to acquire the
funds necessary for continued development of the property or the acquisition of
production facilities.
Prospect Exploration and Evaluation
During 1997, the Company estimates that it will spend up to $350,000 in
preliminary geological, geophysical and other exploration of its Juniper, Twin
Buttes, Lucky Gulch, and Discovery prospects and related property payments. The
Company also will continue its efforts to expand its mineral property base
during 1997. The amount spent on any single existing or potential prospect will
vary, depending on the results of initial work, estimated potential and other
factors.
Other Operating Expenses
The Company has budgeted approximately $725,000 for ongoing corporate and
project general and administrative expenses.
COMMITMENTS AND CONTINGENCIES
Operations are subject to certain lease and royalty obligations as
described in "ITEM 2. PROPERTIES" and in Note 2 of the Notes to Consolidated
Financial Statements.
The Company carries insurance against property damage including insurance
on its machinery and equipment and motor vehicles and also comprehensive general
liability and liability policies applicable to motor vehicles. The Company has
elected not to insure against business interruption.
The Company cannot insure for environmental pollution and has elected not
to insure for mine cave-in's, mine flooding, earthquake and other possible
natural hazards consistent with industry practice. La Teko may in the future be
exposed to contingencies relating to the foregoing or liabilities that may arise
under the governmental regulations relating to the environment as discussed in
"ITEM 2. PROPERTIES: Government Regulation and Environmental Considerations."
The Company is not aware of any existing material contingencies respecting
compliance of its previous activities with environmental requirements.
The Company has implemented procedures to minimize the possibility of
chemical spills, especially in its drilling and heap-leaching operations and
utilizes a special patented process in the neutralization of cyanide and other
chemical solutions prior to disseminating liquids from its retention ponds into
the environment.
CHANGING PRICES, CURRENCY EXCHANGE RATES, AND INFLATION
The value of the Company's properties and its proposed operations have been
and will continue to be affected generally by changes in gold prices. The
Company's ability to obtain exploration capital through joint ventures or other
arrangements with other mining firms and attract additional capital, if
required, through the sale of securities or borrowings on attractive terms are
also affected by gold prices. Such prices are subject to substantial
fluctuations that are beyond the ability of the Company to control or predict.
Although certain of the Company's costs and expenses are affected by the
level of inflation, inflation has not had a significant effect on the Company's
operations. Similarly, the Company's operations, all of which except for its
executive offices are located in the United States, are not materially affected
by fluctuations in the exchange rate between Canadian and US dollars.
OTHER
The Company has reviewed all recently issued, but not yet adopted,
accounting standards in order to determine their effects, if any, on the results
of operations or financial position of the Company. Based on that review, the
Company believes that none of these pronouncements will have any significant
effects on current or future operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LA TEKO RESOURCES LTD.
Page
Independent Auditors' Report.............................. F-1
Consolidated Financial Statements
Consolidated Balance Sheets, December 31, 1996
and 1995............................................. F-2
Consolidated Statements of Operations for the Years
Ended December 31, 1996, 1995 and 1994................ F-3
Consolidated Statements of Changes in Shareholders
Equity for the Years Ended December 31, 1996, 1995
and 1994............................................. F-4
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994............... F-5
Notes to Consolidated Financial Statements................ F-6
The financial statements of the Company include the consolidated operations
of La Teko Resources Ltd., a Canadian corporation, together with its wholly
owned subsidiaries La Teko Resources, Inc., a Nevada corporation, and Ryan Lode
Mines, Inc., an Alaska corporation.
Differences exist between United States and Canadian generally accepted
accounting principles for a company exploring for natural resources, related
primarily to the treatment of deferred exploration costs as differentiated from
administrative and finance costs. Certain administrative and finance costs
related to exploration are capitalized in Canada, whereas, in the U.S., these
costs are charged to operations as incurred each year. Amounts which may have
been capitalized in accordance with generally accepted accounting principles in
Canada have been nominal and inasmuch as the Company adheres to U.S. generally
accepted accounting principles, the Company has charged all administrative and
finance costs to operations since 1986. There are no material differences
relative to application of accounting principles.
Under U.S. generally accepted accounting principles, the computation of
primary earnings per share considers the weighted average number of shares
outstanding during the year, plus common stock equivalents such as common stock
options. This method requires that primary earnings per share be computed as if
stock options were exercised at the beginning of the year (or at the time of
issuance, if later), and as if the funds obtained thereby were used to purchase
common stock of the Company at its average market price during the year. Fully
diluted earnings per share shows the effect on earnings per share which would
result if the proceeds from the exercise of common stock options were used to
purchase the Company's common stock at its market price at the end of the year.
Earnings (loss) per share have been computed in accordance with the foregoing
procedures.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
- --------------------------------------------------------------------------
PART III.
- --------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a listing of the current directors and officers of the
Company:
NAME AGE POSITION HELD
- ----------------- ----- ------------------------------------------
Gerald G. Carlson 51 President, Treasurer and Director
(chief executive and financial
officer)
Robert W. Gentry 49 Director
Gordon Fretwell 43 Secretary and Director
John R. Hardesty 56 Director
John S. Auston 59 Director
Douglas R. Beaumont 64 Director
Directors have been elected to serve until the next general meeting of
shareholders to be held on June 6, 1997. Directors are elected annually and
serve for a period of one year and until their successors are elected and
qualified. Based upon Canadian corporate regulatory provisions, a majority of
the Company's directors must be Canadian residents. The officers serve at the
pleasure of the board of directors.
BUSINESS BIOGRAPHIES
Officers and Directors
GERALD G. CARLSON, PH.D., P. ENG. has been involved in mineral exploration and
junior exploration company management for over 25 years. Mr. Carlson's
educational background includes the following degrees: B.A. Sc. 1969 from the
University of Toronto; M.Sc 1974 from Michigan Technological University and Ph.
D. 1978 from Dartmouth College, New Hampshire. He is past president of ConSil
Corp. (June 1995 to November 1996), past vice president, exploration, for
Dentonia Resources Ltd. (February 1994 to May 1995). Both positions included
management of exploration activities in Mexico and the Northwest Territories.
He became a director of La Teko on December 2, 1996, and continues to serve as a
member of the board of directors of Dentonia Resources Ltd.
ROBERT W. GENTRY has held several key positions with the Ford Bank Group from
1982 through 1992 including that of senior vice president, First National Bank,
Lubbock, Texas (July 1991 to May 1992), president/CEO of United National Bank of
Denton, Texas (December 1987 to July 1991), president/CEO of First National Bank
of Borger, Texas (June 1985 to January 1986), organizing president of United
National Bank of Dallas, Texas (May 1984 to December 1987), and organizing vice-
chairman of Ford Capital, Ltd., Dallas, Texas (January 1986 to May 1992). Mr.
Gentry is a graduate of Texas Tech University with a B.A. degree in finance.
Mr. Gentry became a director of La Teko in May 1995 and served as President from
February 27, 1996 to December 2, 1996.
GORDON FRETWELL has been engaged for in excess of 15 years in the private
practice of law, in the last several years through his own law firm, in
Vancouver, British Columbia. Mr. Fretwell specializes in securities and mining
law and acts for several public companies engaged in the mineral resource
sector. Mr. Fretwell was appointed as a director of the Company on November 24,
1995 and was elected Corporate Secretary on February 27, 1996.
JOHN R. HARDESTY has been for in excess of five years the owner and president of
Thermo Dynamics, Inc., Laughlin, Nevada, and Chairman of Electro Dynamics
Crystal Corporation, Inc., Overland Park, Kansas. He is a previous owner of
Dixson, Inc., Grand Junction, Colorado (January 1988 to March 1995). He is a
graduate of Wayne State University with a B.S. degree in business
administration, majoring in accounting. He is a non-practicing certified public
accountant having been a past audit manager with Ernst & Young, Certified Public
Accountants from 1962 through 1968. From 1968 through 1986 he was involved
extensively in corporate finance and sales with other business entities. He has
been an operations manager with expertise in manufacturing, finance,
administration, sales and corporate strategic planning and acquisitions. Mr.
Hardesty currently serves as a director of Reno Air, Inc., Reno, Nevada. He
became a La Teko director in May 1995.
JOHN S. AUSTON is a geologist with 37 years of diversified world-wide experience
in the precious metals, base metals, uranium and coal mining industries in
Canada, the United States, and Australia. He was involved for many years in
Canadian, U.S., and Australian exploration and mining activities of the
Selection Trust Group of London (May 1959 to June 1980) and British Petroleum
(June 1980 to September 1992). He is past president and CEO of Granges, Inc.
(July 1993 to June 1995) and HyCroft Resources of Vancouver (July 1993 to June
1995). Since August 1996 he has served as director, president and chief
executive officer of Ashton Mining of Canada Inc., and May 1996 as a director of
Lysander Gold Corporation. Mr. Auston is a graduate of McGill University with
the degrees of Bachelor of Science and Master of Science (Applied). He became a
director of La Teko on June 5, 1996.
DOUGLAS R. BEAUMONT is a professional engineer. His forty years of mining
experience include project development and design and operation of mineral
processing plants. Since 1996 he has served as senior vice president -
international for Kilborn, SNC - Lavalin, having joined the Kilborne group of
companies in 1979, serving as vice president and general manager for Canadian
and international operations in Peru, Chile and Brazil. He is currently a
director of Crystallex International Corporation. He became a director of La
Teko on June 5, 1996.
Office Administration
D. SPENCER NILSON, an administrative employee of the Company, has been associat-
ed with La Teko since January, 1991, is a certified public accountant licensed
in the State of Utah and has been engaged in the practice of public accountancy
for approximately 42 years. He is a principal shareholder and part-time
employee serving as president and general manager of D. Spencer Nilson &
Associates, a Salt Lake City based firm of certified public accountants. Mr.
Nilson is a member of the American Institute of Certified Public Accountants and
the Utah Association of Certified Public Accountants.
Consulting Geologist
STUART R. HAVENSTRITE is the project consulting geologist for the Ryan Lode Mine
and the Margarita properties. Mr. Havenstrite served as a director of Silver
King Mines, Inc., from time to time from 1976 and was its president and chief
operating officer from 1987 through 1989. He was the chief geologist of Silver
King Mines, Inc., between 1976 and 1987. Mr. Havenstrite was the president and
chief operating officer of Alta Gold Co., the successor to Pacific Silver
Corporation and Silver King Mines, Inc. from their reorganization in late 1989
through his resignation in 1990.
Project Manager
RICHARD A. HUGHES is the project manager for the Ryan Lode Mine, a position
which he has held since March, 1993. Mr. Hughes was president and mining
consultant for BTW Mining & Exploration from 1983 to 1994. From 1988 to 1989,
Mr. Hughes was employed by Valdez Creek Mining Company, Inc., as the general
manager of a large open-pit placer mining and wash plant operation. Prior to
that time, from 1981 to 1987, Mr. Hughes was with ARCO Alaska, Inc., as the
quality assurance and safety director at Prudhoe Bay, Alaska. From 1977 to
1981, Mr. Hughes worked with Exxon Minerals Company, where he was the project
manager of an underground project in New Mexico and assistant manager of a
uranium operation in Wyoming. Mr. Hughes has been employed in the mining
industry in various other capacities since 1960. He is a registered
professional mining engineer in Alaska and Nevada. Mr. Hughes received a
Bachelor of Science degree in Mining Engineering from the University of Nevada
in 1960.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no person
who, at any time during the most recent fiscal year, was a director, officer,
beneficial owner of more than 10% of any class of equity securities of the
Company or any other person known to be subject to Section 16 of the Exchange
Act failed to file, on a timely basis, reports required by Section 16(a) of the
Exchange Act, except that Douglas Beaumont failed to timely file the report of
his initial ownership after being appointed a director and Gerald Carlson failed
to timely file the report of his initial ownership after being appointed an
officer and director less than one month late and John Hardesty failed to timely
file the report of his initial ownership after being appointed a director less
than two days late.
ITEM 11. EXECUTIVE COMPENSATION
On February 27, 1996, Robert W. Gentry was elected President, Treasurer and
Chief Financial Officer of the Company. He served as president of La Teko until
December 2, 1996 and continues to serve as a member of its Board of Directors.
Mr. Gentry replaced Jack Lane who served as President, Treasurer and Chief
Financial Officer until February 27, 1996.
Gerald G. Carlson became President, Treasurer and Chief Financial Officer
of La Teko and was appointed to the Board of Directors on December 2, 1996.
Annual compensation as an employee of the Company is approximately $108,000 per
annum.
SUMMARY COMPENSATION
The following table sets forth the compensation for the preceding three
years received by each person who served as the chief executive officer of the
Company during 1996 (a "Named Executive Officer"). No executive officer
received compensation in excess of $100,000 for any such year.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(A) (B) (C) (D) (E) (F) (H) (I)
Year Other Restrict Securities All Other
Ended Annual ed Stock Underlying LTIP Compen-
Name And Dec. Salary Bonus Compen- Award(S) Options/ SARS Payouts Sation
Principal 31, ($)(1) ($) Sation ($) (No.) ($) ($)
Position ($)
- --------------------------------------------------------------------------------------------------
Gerald G. Carlson 1996 $8,837 -- -- -- 500,000 -- $64,000(2)
President,
Treasurer, Chief
Financial
Officer, and
Director (CEO
after 12/96)
Robert W. Gentry 1996 3,100 -- -- -- 125,000 -- 63,377(2)
Director (CEO
2/96 to 12/96)
Jack Layne 1996 750 -- -- -- -- -- --
Past director 1995 2,250 -- -- -- 200,000(3) -- 30,000(2)
(CEO until 2/96) 1994 2,250 -- -- -- 100,000(3) -- 44,000(2)
</TABLE>
(1) Includes amounts paid to each Named Executive Officer for services rendered
by such Named Executive Officers as directors of the Company.
(2) Other compensation consists of the aggregate amount by which the market
price as of the date such options first became exercisable exceeded the
exercise price of exercisable options.
(3) Mr. Layne was granted options to purchase 100,000 shares August 17, 1994.
Such options were repriced on November 16, 1995, and are reported as grants
of options in both 1994 and 1995.
See below for a discussion of certain terms of options granted to
Named Executive Officers. The options granted to Gerald G. Carlson are subject
to shareholder approval.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information respecting all individual grants
of options and stock appreciation rights ("SARs") made during the last completed
fiscal year to a Named Executive Officer and each other executive officer of the
Company.
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
ASSUMED ANNUAL RATES OF Stock
INDIVIDUAL GRANTS Appreciation For
Option Term
(a) (b) (c) (d) (e) (f) (g)
Number Of % Of Total Exercise Market
Securities Options/SARS Or Base Price As
Underlying Gra<C>d To Price Of Date Expiration
Options/SARS Employees During ($/Share) Of Grant Date 0%($) 5%($) 10%($)
Name Granted (#) Fiscal Year
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald G. 200,000 12/10/01 $64,000 $183,905 $328,713
Carlson 100,000 12/10/02 32,000 105,800 199,292
100,000 12/10/03 32,000 120,340 237,722
100,000 12/10/04 32,000 135,607 279,994
500,000(1) 62.5% $1.85 $2.17 $160,000 $545,652 $1,045,721
Robert W. 100,000(2) 12.5% 2.50 2.94 3/14/01 $44,000 $125,226 $223,490
Gentry
Jack Layne -- -- -- -- --
</TABLE>
(1) Granted December 10, 1996.
(2) Granted March 14, 1996.
See below for a discussion of the terms of the options granted to executive
officers.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION/SAR
VALUES
The following table sets forth information respecting the exercise of
options and SARs during the last completed fiscal year by Named Executive
Officers of the Company and the fiscal year end values of unexercised options
and SARs.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number Of Securities Value Of Unexercised
Underlying In-The-Money
Unexercised Options/SARS At FY
Shares Value Options/SARS At FY End ($)
Name Acquired On Realized End (No.) Exercisable/
Exercise ($) Exercisable/ Unexercisable(1)
(No.) Unexercisable
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gerald G. -- -- 200,000/300,000(2) $30,000/$45,000
Carlson
Robert W. -- -- 150,000/50,000 $60,000/$20,000
Gentry
Jack Layne -- -- 200,000/-- $80,000/--
</TABLE>
(1) Market price at December 31, 1996 was $2.00 per share.
EXECUTIVE COMPENSATION AND BENEFITS
On December 2, 1996, Gerald G. Carlson was employed as President of the
Company to succeed Robert W. Gentry and was also appointed a director. At that
time, he was granted options to acquire 500,000 shares of La Teko stock at $1.85
per share, 85% of the then-existing market price. Two hundred thousand shares
of the options are exercisable upon grant and 100,000 shares each become
exercisable on each successive anniversary date following the date of grant.
Each option is exercisable for five years following the date they initially
become exercisable.
Mr. Carlson is employed under a letter agreement dated December 2, 1996,
for an initial term of three years as President and Chief Executive Officer of
the Company. The Company pays Mr. Carlson a salary of Cdn $12,000 per month and
provides him with a leased automobile. In the event of certain change of
control transactions which result in Mr. Carlson no longer serving as President
and Chief Executive Officer, he will receive a severance package of Cdn
$144,000, and 50% of his unvested stock options will immediately vest if the
change in control occurs in the first year of employment and all unvested
options will immediately vest if the change in control occurs thereafter.
On February 27, 1996, Gordon Fretwell, director and corporate counsel was
appointed secretary of the Company. The Company has paid or accrued to Mr.
Fretwell during 1996 $3,100 in director's fees and $34,575 in legal fees for
corporate representation and services in Canada.
The Company has no pension, retirement or similar benefits for officers,
directors or other employees of the Company except that effective December 10,
1996, the Company implemented a salary reduction simplified employee pension
plan to be funded solely by eligible employees during 1996. No contribution to
the plan was made by the Company. Effective March 1992, the Company initiated a
medical and life insurance plan for the benefit of all eligible employees.
Currently, the Company pays approximately 85% of insurance premiums for
employees and 50% of insurance premiums for their dependents.
DIRECTORS' STOCK OPTIONS AND COMPENSATION
There are presently outstanding options for directors, prior directors,
consultants and employees of the Company to acquire shares of La Teko stock as
follows:
NAME NUMBER OF EXERCISE EXPIRATION DATE
SHARES PRICE
- ------------------ ---------- -------- ---------------
DIRECTORS
Gerald G. Carlson 500,000 $1.85 12/10/2001-04
Robert W. Gentry 100,000 1.60 11/16/2000-03
100,000 2.50 3/14/2001
Gordon Fretwell 100,000 1.60 11/24/2000-03
John R. Hardesty 100,000 1.60 11/16/2000-03
John S. Auston 100,000 2.41 06/18/2001-04
Douglas R. Beaumont 100,000 2.41 06/18/2001-04
PREVIOUS DIRECTORS:
Jack Layne 100,000 1.60 8/17/1999
100,000 1.60 11/16/2000
David Tinsley 25,000 1.60 06/05/1997
OTHERS 100,000 2.13 4/01/1998-99
154,000 1.60 8/17/1999
105,935 1.60 11/16/2000
---------
1,684,935
Director options were granted for past and future services in behalf of the
Company, are subject to shareholder and Vancouver Stock Exchange approval and
each of the options listed above is contingent upon the optionee's continued
employment with the Company.
Options granted to directors in 1995 and 1996, except as pertaining to
Gerald G. Carlson as discussed above, are exercisable in increments of 25,000
shares per year, 25,000 shares at the time of the grant and 25,000 shares
following each anniversary date thereafter at $1.60 and $2.41 per share as
heretofore discussed. Each incremental option has a five-year maturity from the
applicable date of exercise.
Directors other than Gerald G. Carlson, Robert W. Gentry, and Gordon
Fretwell received an aggregate of $10,050 as directors' fees during 1996. Non-
employee directors are paid $100 for participating in each board of directors'
meeting held by telephone and $750 for each directors' meeting attended in
person, plus travel and subsistence.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the Company's security ownership information
as of March 7, 1997 for each director and for all officers and directors of the
Company as a group. There were no shareholders believed by the Company to own
beneficially more than 5% of the Company's common stock.
NAME OF BENEFICIAL NATURE OF PERCENTAGE OF
OWNER OWNERSHIP(1) NUMBER OWNERSHIP(2)
- --------------------- ------------- -------- -------------
DIRECTORS
Gerald G. Carlson Common Stock 9,000 --
Options 200,000 0.8
--------
Total 209,000 0.9
Robert W. Gentry Common Stock(3) 316,200 1.3
Options 150,000 0.6
--------
Total 466,200 1.9
John R. Hardesty Common Stock 60,000 0.3
Options 50,000 0.3
--------
Total 110,000 0.5
Gordon Fretwell Common Stock -- --
Options 50,000 0.3
--------
Total 50,000 0.3
John S. Auston Common Stock 4,000 --
Options 25,000 0.1
--------
Total 29,000 0.1
Douglas R. Beaumont Common Stock -- --
Options 25,000 0.1
--------
Total 25,000 0.1
ALL EXECUTIVE OFFICERS Common Stock 389,200 1.6
AS DIRECTORS AS A Options 500,000 2.1
GROUP (6 PERSONS) -------- ----
Total 889,200 3.7
--------
(1) Unless otherwise indicated, all securities are owned beneficially and of
record, and such record stockholder has sole voting, investment, and
dispositive power.
(2) Calculations of total percentages of ownership outstanding for each
individual assumes the exercise of options held by that individual to which
the percentage relates. Percentages calculated for totals of all executive
officers and directors as a group assume the exercise of all options held
by the indicated group.
(3) Includes 16,200 shares in the names of Mr. Gentry's minor children.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As explained in Note 5 of the Notes to Consolidated Financial Statements,
on November 16, 1995, March 14, 1996 and December 10, 1996, the Company granted
stock options to officers, directors and employees as listed under "ITEM 11,
EXECUTIVE COMPENSATION" of this report.
- --------------------------------------------------------------------------
PART IV.
- --------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1)FINANCIAL STATEMENTS. See Financial Statement index on page 28.
(a)(2)FINANCIAL STATEMENT SCHEDULES.
The financial statements schedules are omitted because of the absence of
conditions under which they are required or because the information is
shown in the financial statements.
(a)(3)EXHIBITS. The following exhibits are included as part of this report.
(See exhibit index in separate exhibit volume):
SEC
EXHIBIT REFERENCE
NUMBER NUMBER TITLE OF DOCUMENT LOCATION
- ------ --------- ----------------------------- -------------
ITEM 3. ARTICLES OF INCORPORATION AND BYLAWS
3.01 3 Restated and Amended Articles Incorporated
of Incorporation by
Reference(3)
3.02 3 Bylaws Incorporated
by
Reference(3)
ITEM 3 INSTRUMENTS DESCRIBING THE RIGHTS OF
SECURITY HOLDERS, INCLUDING DEBENTURES
4.01 4 La Teko Exchanged Debenture Incorporated
Certificate and related by
Debenture Agreement Reference(3)
ITEM 10 MATERIAL CONTRACTS
10.01 10 Agreement dated May 11, 1979, Incorporated
between Sara L. Bartholomae by
and St. Joe American Reference(1)
Corporation, regarding Ryan
Lode claim group
10.02 10 Assignment Agreement dated Incorporated
May 10, 1985 between St. Joe by
American Corporation and Reference(1)
Citigold Mining Company
Ltd., regarding Ryan Lode
claim group
10.03 10 Mineral Claim Purchase Incorporated
Agreement dated January 31, by
1987, between James Sorrell, Reference(1)
Newfields Minerals, (U.S.),
Inc., relating to Margarita
claims
10.04 10 Letter Agreement dated Incorporated
January 12, 1990, between La by
Teko Resources Ltd. and Reference(2)
Robert Clifford Emerson
regarding St. Patrick claim
group
10.05 10 Mining Lease dated effective Incorporated
January 1, 1993 between Sara by
L. Bartholomae and La Teko Reference(3)
Resources, Inc., relating to
Ryan Lode claim group
10.06 10 Mineral Claim Purchase Incorporated
Agreement between La Teko by
Resources Ltd. and Newfields Reference(3)
Minerals (U.S.), Inc.,
relating to Margarita claims
10.07 10 Letter Agreement dated March Incorporated
18, 1988, amending Mineral by
Claim Purchase Agreement Reference(3)
between James Sorrell and
Newfields Minerals, Inc.,
relating to Margarita claims
10.08 10 Purchase Agreement respecting Incorporated
the Long Association placer by
claim acquired from the Reference(4)
University of Alaska
Foundation and the Nature
Conservancy July 20, 1993
10.09 10 Evaluation and Earn-in Incorporated
Agreement between AMAX Gold by
Exploration, Inc. and La Reference(4)
Teko Resources Ltd.
respecting the True North
property, August 30, 1993
10.10 10 Mining Property Transfer Incorporated
Agreement of December 6, by
1993 between AMAX Gold Reference(4)
Exploration, Inc., and La
Teko Resources, Inc.,
respecting the True North
property
10.11 10 Mining Property Transfer Incorporated
Agreement, Amendment No. 1 by
dated January 10, 1994, Reference(4)
between AMAX Gold
Exploration, Inc. and La
Teko Resources, Inc.
10.12 10 Mining Sublease dated Incorporated
December 24, 1990 between by
Roger Charles Cope and AMAX Reference(4)
Gold Exploration, Inc.,
respecting the True North
property
10.13 10 Amendment to Mining Sublease Incorporated
dated May 23, 1991 between by
Roger Charles Cope and AMAX Reference(4)
Gold Exploration, Inc.
10.14 10 Amendment No. 2 to Mining Incorporated
Sublease dated August 25, by
1993 between Roger Charles Reference(4)
Cope and AMAX Gold
Exploration, Inc.
10.15 10 Mining Lease dated January 1, Incorporated
1992 between M. Dennis by
Shepard and AMAX Gold Reference(4)
Exploration, Inc. respecting
the True North property
10.16 10 Amendment No. 1 to Standard Incorporated
Mining Lease dated August by
25, 1993, between M. Dennis Reference(4)
Shepard and AMAX Gold
Exploration, Inc.
10.17 10 Second amended letter dated Incorporated
as of June 6, 1995, from by
Newmont Exploration Limited Reference(5)
to La Teko Resources, Inc.
and Ryan Lode Mines, Inc.
10.18 10 Venture Agreement dated as of Incorporated
June 9, 1995, between by
Newmont Exploration Limited, Reference(5)
La Teko Resources, Inc., and
Ryan Lode Mines, Inc.
10.19 10 Letter Agreement dated March Incorporated
6, 1995 between Newmont by
Exploration Limited and La Reference(6)
Teko Resources, Inc. and
Ryan Lode Mines, Inc.
10.20 10 Mining Lease and agreement Incorporated
dated August 1, 1995, by
between Vincent F. Howard Reference(7)
and Newmont Exploration
Limited regarding additional
True North claims in which
La Teko participates 35%
10.21 10 Mining Lease and agreement Incorporated
dated August 29, 1995, by
between Charles B. Woodruff Reference(7)
and Newmont Exploration
Limited regarding additional
True North claims in which
La Teko participates 35%
10.22 10 Mining Lease and agreement Incorporated
dated August 29, 1995, by
between M. Dennis Shepard Reference(7)
and Ronda D. Benish Shepard
and Newmont Exploration
Limited regarding additional
True North claims in which
La Teko participates 35%
10.23 10 Letter agreement dated This Filing
December 2, 1996 between La
Teko Resources Ltd, and
Gerald G. Carlson wherein he
is hired to become President
and Chief Executive Officer
of La Teko *
10.24 10 Agreement regarding mining This Filing
claims and Special Warranty
Deed, each dated October 30,
1996, between Placer Dome
U.S. Inc., La Teko
Resources, Inc. and Newmont
Exploration Limited - True
North Project
10.25 10 Letter agreement, offer to This Filing
purchase Margarita property
by Oro Blanco Resources
Corp. dated January 14, 1997
10.26 10 Form of Stock Option This Filing
Agreement, with related
schedule of options*
10.27 10 Non-Qualified Stock Option This Filing
dated December 10, 1996
granted to Gerald G.
Carlson*
10.28 10 Indemnification Agreement Incorporated
between La Teko Resources by Reference(8)
Ltd., including a schedule
of indemnitees subject
thereto
ITEM 21 SUBSIDIARIES OF THE REGISTRANT
21.01 21 Schedule of Subsidiaries This Filing
ITEM 23 CONSENTS OF EXPERTS AND COUNSEL
23.01 23 Consent of Bedford Curry Co., This Filing
auditors
23.02 23 Consent of Mine Development This Filing
Associates, Inc., mining
engineers
ITEM 27 FINANCIAL DATA SCHEDULE
27.01 27 Financial Data Schedule This Filing
* INDICATES MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS FORM PURSUANT TO ITEM 14(C) OF THIS REPORT.
(1) Incorporated by reference from Annual Report on Form 20-F for the fiscal
year ended December 31, 1988
(2) Incorporated by reference from Annual Report on Form 20-F for the fiscal
year ended December 31, 1990
(3) Incorporated by reference from the registration statement on Form S-4, SEC
File No. 33-56606
(4) Incorporated by reference from the Annual Report on Form 10-K for the year
ended December 31, 1993.
(5) Incorporated by reference from the registration statement on Form S-2 SEC
File No. 33-81886.
(6) Incorporated by reference from Annual Report on Form 10-KSB for the year
ended December 31, 1994.
(7) Incorporated by reference from Annual Report on Form 10-KSB for the year
ended December 31, 1995.
(8) Incorporated by reference from the registration statement on Form S-8, SEC
File No. 333-21225.
(b) Reports on Form 8-K
During the last quarter of the year ended December 31, 1996, the Company
filed an interim report on Form 8-K dated November 5, 1996.
SIGNATURES
In accordance with section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: March 27, l997. LA TEKO RESOURCES LTD.
(Registrant)
By /s/ Gerald G. Carlson
Gerald G. Carlson, President (chief
executive and financial officer and
controller)
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the date indicated.
Dated: March 27, 1997
/s/ Gerald G. Carlson,
Director
/s/ Robert W. Gentry,
Director
Gordon J. Fretwell,
Director
/s/ John R. Hardesty,
Director
/s/ John S. Auston, Director
/s/ Douglas R. Beaumont, Director
INDEPENDENT AUDITORS' REPORT
To the Shareholders of La Teko Resources Ltd.
We have audited the consolidated balance sheets of La Teko Resources Ltd. (a
Canadian corporation) as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the years ended December 31, 1996, 1995, and 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as of
December 31, 1996 and 1995, the changes in shareholders' equity and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1996, 1995, and 1994 in accordance with United States generally
accepted accounting principles. As required by the British Columbia Company
Act, we report that, in our opinion, these principles have been applied on a
consistent basis.
CHARTERED ACCOUNTANTS
Vancouver B.C., Canada
March 3, 1997
<PAGE>
LA TEKO RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
As of December 31, 1996 and 1995
(Expressed in U.S. Dollars)
ASSETS
1996 1995
----------- -----------
Current assets:
Cash and short-term deposits ..... $ 3,041,205 $ 2,972,278
Accounts receivable .............. 15,918 124,876
Inventories ...................... 6,295 6,295
Prepaid expenses ................. 200,845 176,541
----------- -----------
Total current assets ........... 3,264,263 3,279,990
Mineral properties and deferred 10,515,140 10,155,234
costs - (Note 2)...................
Plant and equipment (Note 3)....... 210,716 204,589
Investments........................ 500,913 231,069
----------- -----------
$14,491,032 $13,870,882
=========== ===========
LIABILITIES
Current liabilities:
Accounts payable and accrued $ 194,718 $ 240,441
expenses .........................
Current portion of long-term debt 372,500 712,296
(Note 4) .........................
----------- -----------
Total current liabilities ...... 567,218 952,737
Long-term debt (Note 4)............ -- 360,289
----------- -----------
567,218 1,313,026
SHAREHOLDERS' EQUITY
Common capital stock; no par value;
authorized: 100,000,000 shares;
issued and outstanding 23,457,258 18,217,342 17,807,169
(1995: 23,318,478) (Notes 6 and 7)
Accumulated deficit................ (4,293,528) (5,249,313)
----------- -----------
13,923,814 12,557,856
----------- -----------
$14,491,032 $13,870,882
=========== ===========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
LA TEKO RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
YEARS ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
------ ------ ------
INCOME
Sales of gold and silver.... $ -- $ -- $ --
EXPENSES
Operating and mine
maintenance costs ........ 275,623 151,179 234,362
New prospect evaluation ... 55,708 36,741 --
General and administrative 956,413 674,550 695,203
expenses .................
Depreciation .............. 54,828 51,092 57,348
Royalty and lease ......... 150,000 286,901 241,246
----------- ---------- ----------
1,492,572 1,200,463 1,228,159
----------- ---------- ----------
Income (loss) from
operations.................. (1,492,572) (1,200,463) (1,228,159)
Other income (expense)......
Gain on sale of mineral
property .................. 2,447,248 1,383,436 --
Abandonment of mineral
property .................. -- (454,305) --
Gain on sale of investment -- -- 5,180
Interest income (expense)
(net) ..................... 7,687 (61,021) (125,088)
Gain (loss) on sale of
equipment ................. 7,969 (8,132) (18,852)
Other ..................... -- (1,872) (2,892)
----------- ---------- ------------
Income (loss) before income 970,332 (342,357) (1,369,811)
taxes.......................
Provision for income tax
expense (benefit) - Note 5 . 14,547 22,500 --
----------- ----------- -------------
Net income (loss)........... $ 955,785 $ (364,857) $ (1,369,811)
=========== =========== =============
Income (loss) per share..... $ .04 $ (.02) $ (.06)
=========== =========== =============
Weighted average shares
outstanding................. 23,732,008 23,183,057 21,967,856
=========== =========== =============
The accompanying Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
LA TEKO RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Balance, December 31,
1993 ................... 34,933,849 $20,566,202 $(3,514,645) $17,051,557
---------- ----------- ----------- -----------
1994
Common stock issued for:
Private placement sales 450,000 738,000 -- 738,000
Public offering sales .. 379,480 952,500 -- 952,500
Exercise of options .... 75,000 42,164 -- 42,164
Exercise of warrants ... 444,480 841,600 -- 841,600
Exercise of warrants
issued for services .... 5,000 12,500 -- 12,500
Less public offering and
private placement costs . -- (143,987) -- (143,987)
Compensatory stock 43,500 -- 43,500
options.................. --
Net income (loss)........ -- -- (1,369,811) (1,369,811)
---------- ----------- ----------- -----------
1,353,960 2,486,277 (1,369,811) 1,116,466
---------- ----------- ----------- -----------
Balance, December 31,
1994 ................... 36,287,809 $23,052,479 $(4,884,456) $18,168,023
---------- ----------- ----------- -----------
1995
Common stock issued for:
Public offering sales .. 70,520 177,005 -- 177,005
Exercise of warrants ... 371,120 814,061 -- 814,061
Short-swing profits...... -- 2,100 -- 2,100
Less public offering and
private placement costs . -- (45,360) -- (45,360)
Compensatory stock -- 64,190 -- 64,190
options .................
Net income (loss)........ -- -- (364,857) (364,857)
---------- ----------- ----------- -----------
441,640 1,011,996 (364,857) 647,139
Balance, December 31,
1995 ................... 36,729,449 24,064,475 (5,249,313) 18,815,162
1996
Common stock issued for:
Exercise of options .... 138,780 222,048 222,048
Compensatory stock 188,125
options.................. 188,125
Net income (loss)........ -- -- 955,785 955,785
---------- ----------- ----------- -----------
36,868,229 24,474,648 (4,293,528) 20,181,120
Less cost of treasury
shares................... (13,410,971) (6,257,306) -- (6,257,306)
---------- ----------- ----------- -----------
Balance, December 31,
1996 ................... 23,457,258 $18,217,342 $ (4,293,528) $13,923,814
========== =========== ============ ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
LA TEKO RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Net income (loss) ........................... $ 955,785 $ (364,857) $ (1,369,811)
Charges (credits) to operations not affecting
cash:
Gain on sale of mineral property ........... (2,447,248) (1,383,436) --
Abandonment loss ........................... 2,294 454,305 --
(Gain) on sale of investment ............... -- -- (5,180)
(Gain) loss on sale of equipment ........... (7,969) 8,132 18,852
Depreciation ............................... 54,828 51,092 57,348
Compensatory stock options ................. 188,125 64,190 43,500
Adjust gold and silver inventory to fair
market value .............................. -- 1,872 2,892
---------- ---------- ----------
(1,254,185) (1,168,702) (1,252,399)
Net changes
Decrease in gold inventory ................. -- 5,109 67,983
(Increase) decrease in accounts receivable
and pre-paid expenses ..................... 84,654 (92,615) (53,689)
Increase (decrease) in accounts payable and
accrued expenses .......................... ( 45,723) 101,707 (101,603)
---------- ---------- ----------
Net cash used in operating activities ...... (1,215,254) (1,154,501) (1,339,708)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in mineral properties ........... (107,752) (272,950) (500,602)
Exploration costs capitalized .............. (304,906) (321,984) (1,549,658)
Proceeds from sale of investment ........... -- -- 6,858
Proceeds from sale of equipment ............ 9,800 13,705 2,075
Purchase of plant and equipment ............ (65,080) (13,047) ( 33,461)
Purchase of securities ..................... (269,844) -- --
Investment in advances receivable .......... -- -- (231,069)
Proceeds from sale of mineral property ..... 2,500,000 3,500,000 --
---------- ---------- ----------
Net cash provided by (used in) investing
activities ............................... 1,762,218 2,905,724 (2,305,857)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt financing ............... -- 200,000 757,200
Reduction of principal on debt ............. (700,085) (202,115) (792,500)
Cash proceeds from issuance of common stock 222,048 991,066 2,574,264
Public offering and reorganization costs ... -- (45,360) (97,564)
Short-swing profits ........................ -- 2,100 --
---------- ---------- ----------
Net cash provided by (used in) financing
activities ............................... (478,037) 945,691 2,441,400
---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents ................................. 68,927 2,696,914 (1,204,165)
Cash and cash equivalents, beginning of
period ...................................... 2,972,278 275,364 1,479,529
---------- ----------- ----------
Cash and cash equivalents, end of period .... $3,041,205 $ 2,972,278 $ 275,364
========== =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for interest .... $ 94,196 $ 134,072 $ 147,768
Cash paid during the period for income taxes 37,047 -- 350
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Depreciation capitalized into deferred costs $ -- $ 4,835 $ 8,561
Stock issued as bonus compensation .......... -- -- $ 12,500
</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
LA TEKO RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
(Expressed in U.S. Dollars)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries, La Teko
Resources, Inc., a Nevada corporation and Ryan Lode Mines, Inc., an Alaska
Corporation.
The consolidated financial statements are presented in U.S. dollars and
prepared in accordance with accounting principles generally accepted in the
United States, which, as applied in these consolidated financial statements, are
consistent in all material respects with accounting principles generally
accepted in Canada. Had these consolidated financial statements been prepared
in accordance with Canadian GAAP, there would have been no significant
differences in the reported amounts for shareholders' equity, net income (loss)
and income (loss) per share.
Use of estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Foreign Currency Translation - Transactions in Canadian dollars, primarily
related to certain asset acquisitions and administrative expenses have been
translated to U.S. dollars as prescribed by SFAS No. 52 "Foreign Currency
Translation." Balance sheet items have been converted to U.S. dollars at
exchange rates on specific dates of asset acquisition, where practicable, or at
year-end exchange rates. Operating statement amounts have been converted at
actual rates on dates of specific transactions.
Income (Loss) Per Share - Income (loss) per share of common stock and
common equivalent shares is computed based on the weighted average number of
common and common equivalent shares outstanding during the year. Common
equivalent shares which include common stock subscriptions and common stock
warrants and options were not included in the calculations, because the effects
on earnings per share were antidilutive or immaterial.
Revenue Recognition - Revenue is recognized when dore, mineral product
processed through on-site company smelting procedures, is shipped to the
refinery.
Cash Equivalents - For purposes of the Statement of Cash Flows, the Company
considers all short-term debt instruments with maturities of less than three
months as cash equivalents.
Inventories - Inventories comprise only mining supplies valued at the lower
of average purchase cost or net realizable value.
Marketable Securities - The Company has adopted the provisions of SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities." The
effect of adopting SFAS No. 115 did not have a material impact on the Company's
financial statements.
The Company classifies its marketable debt securities as "held to maturity"
if it has the positive intent and ability to hold the securities to maturity.
All other marketable debt and equity securities are classified as "available for
sale." Securities classified as "available for sale," are carried in the
financial statements at fair value. Realized gains and losses determined using
the specific identification method are included in earnings; unrealized holding
gains and losses are reported as a separate component of stockholders' equity.
Securities classified as held to maturity are carried at amortized cost.
For both categories of securities, declines in fair value below amortized
costs that are other than temporary are included in earnings.
Investment securities owned are carried at cost, which approximates market
value.
Mineral Properties and Deferred Costs - Mineral properties and deferred
costs are recorded at the lower of cost or the present value of estimated
recoverable amounts applicable thereto. Exploration and development expenses
are deferred until the mineral properties are brought into production, at which
time they are amortized on a units-of-production basis, or until the properties
are abandoned or sold, at which time the deferred costs are written off or
charged against sales proceeds. Capitalized costs and deferred exploration are
evaluated at least annually to determine the probability of recovery and the
requirement for periodic adjustments.
Certain properties are in the exploration or development stage. The
ultimate realization of capitalized costs is dependent upon the determination of
economically recoverable reserves, the ability of the Company to obtain
necessary financing to complete development, future profitable production and/or
proceeds from sale of these properties.
When a property is determined not to be commercially productive or its
value impaired, the accumulated costs are charged to operations to the extent
that costs exceed estimated net realizable value.
Plant and Equipment - Plant and equipment are recorded at cost and are
depreciated on the declining balance method over their estimated useful lives at
rates varying from 10% to 30% per year. Maintenance and repairs are expensed as
incurred. Replacements and major improvements are capitalized.
Fair Value of Financial Instruments that Approximate Carrying Values - The
Company has financial instruments, none of which are held for trading purposes.
The Company estimates that the fair value of such financial instruments at
December 31, 1996 and 1995 does not differ materially from the aggregate
carrying values of its financial instruments recorded in the accompanying
balance sheet. The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. Considerable judgement is necessarily required in interpreting
market data to develop the estimates of fair value, and accordingly, the
estimates are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. As a result of the risk associated with
these financial instruments, the cost applicable thereto approximates market.
Sales of Common Stock - All sales of the Company's common stock, together
with the issuance of options and warrants are accomplished pursuant to
authorization of the Vancouver Stock Exchange, Vancouver, B.C., Canada.
Generally, private placement sales of stock are made at a discount of
approximately 15% below the current trading price on the date the Vancouver
Stock Exchange approves the issuance. All stock sold is recorded at the amount
of the proceeds received therefor.
Income Taxes - The Company follows the tax allocation method of accounting
for income taxes, whereby deferred taxes and tax benefits are provided to the
extent that current taxes are affected by differences in accounting methods for
book and income tax purposes, primarily related to capitalization of equipment
and exploration and development costs, and depreciation and amortization related
thereto.
LA TEKO RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
(Expressed in U.S. Dollars)
NOTE 2 - MINERAL PROPERTIES AND DEFERRED COSTS
<TABLE>
<CAPTION>
CAPITALIZED CAPITALIZED
BALANCE ADDITIONS BALANCE ADDITIONS BALANCE
DECEMBER 31, (DELETIONS) DECEMBER 31, (DELETIONS) DECEMBER 31,
1994 1995 1995 1996 1996
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
RYAN LODE
Acquisition cost......... $ 4,839,376 $ -- $ 4,839,376 $ -- $ 4,839,376
Deferred exploration and
development expenses .... 5,221,352 115,946 -- -- --
-- (454,305) (1) 4,882,993 73,570 4,956,563
------------- ----------- ----------- ----------- ------------
Total Ryan Lode.......... 10,060,728 (338,359) 9,722,369 73,570 9,795,939
------------- ----------- ----------- ----------- ------------
TRUE NORTH
Acquisition cost......... 500,000 272,950 -- 52,752 52,752
(772,950) (2)
Deferred exploration and
development expenses .... 1,213,950 129,664 --
-- (1,343,614) (2) -- (52,752) (2) (52,752)
------------- ----------- ----------- ----------- ------------
Total True North......... 1,713,950 (1,713,950) -- -- --
------------- ----------- ----------- ----------- ------------
JUNIPER
Deferred exploration and
development expenses .... -- 78,211 78,211 90,294 168,505
------------- ----------- ----------- ----------- ------------
Total Juniper............ -- 78,211 78,211 90,294 168,505
------------- ----------- ----------- ----------- ------------
MARGARITA
Acquisition cost......... 350,100 -- 350,100 -- 350,100
Deferred exploration and
development expenses .... 1,556 2,998 4,554 71,540 76,094
------------- ----------- ----------- ----------- ------------
Total Margarita.......... 351,656 2,998 354,654 71,540 426,194
------------- ----------- ----------- ----------- ------------
TWIN BUTTES
Acquisition cost......... -- -- -- 30,000 30,000
Deferred exploration and
development expenses .... -- -- -- 27,634 27,634
------------- ----------- ----------- ----------- ------------
Total Twin Buttes........ -- -- -- 57,634 57,634
------------- ----------- ----------- ----------- ------------
LUCKY GULCH
Acquisition Company's.... -- -- -- 10,000 10,000
Deferred exploration and
development expenses .... -- -- -- 21,313 21,313
------------- ----------- ----------- ----------- ------------
Total Lucky Gulch........ -- -- -- 31,313 31,313
------------- ----------- ----------- ----------- ------------
DISCOVERY
Acquisition cost......... -- -- -- 15,000 15,000
Deferred exploration and
development expenses .... -- -- -- 20,555 20,555
------------- ----------- ----------- ----------- ------------
Total Lucky Gulch........ -- -- -- 35,555 35,555
------------- ----------- ----------- ----------- ------------
Total Mineral Properties. $ 12,126,334 $ (1,971,100) $ 10,155,234 $ 359,906 $ 10,515,140
============= =========== =========== =========== ============
</TABLE>
(1) Abandonment of Mohawk claims.
(2) Relates to True North sale to Newmont.
RYAN LODE MINE
The principal Ryan Lode leasehold interest consists of 10 patented lode
claims and 15 unpatented lode claims. On November 7, 1992, the Company executed
a new mining lease respecting its Ryan Lode properties. The lease provides for
a primary term of 20 years commencing January 1, 1993 with four five-year
extensions, all subject to the timely payment of production and/or advance
royalty payments escalating in $50,000 increments from $150,000 for 1996 to
$350,000 per year in 2028 and $350,000 annually thereafter. Advance minimum
royalties may be applied against production royalties for the year of production
only.
The Ryan Lode Mine includes other claims subject to net profits and net
smelter returns royalties with advance minimum royalty requirements. Generally,
net profits royalties payable to the State of Alaska on future production are 3%
whereas the royalties based on gross value of mineral products removed from the
mining properties are 5%. Advance minimum royalty payments are to be deducted
from production royalties. During 1995, the Mohawk claims, which were
considered part of the Ryan Lode group, were abandoned.
TRUE NORTH
On January 10, 1994, the Company executed a mining property transfer
agreement with AMAX and acquired the 2,333-acre True North project. See the
preceding cost summary for amounts concerning the acquisition and exploration of
the True North project. During 1995, the Company staked additional claims both
to the east and to the west of the True North property adding 896 acres to the
True North block. In addition, in 1995 1,207 acres were added by lease. During
1996, the True North Joint Venture acquired additional claims, bringing the
total True North property to approximately 7,200 acres.
During June 1995, the Company executed a joint venture agreement with
Newmont Exploration Limited, a subsidiary of Newmont Gold Mining Company,
whereby Newmont acquired a 65% interest in the True North property, contingent
upon its continued development of the property and the payment of specified
amounts required to explore, develop and place the property into production.
Generally, Newmont has paid La Teko $6 million cash, was obligated to
expend at least $1 million during 1995, and $2 million during 1996 for
exploration, development and property payments on the True North property and,
if it continues with the project, to expend up to an additional $18 million for
a feasibility study and the installation of capital equipment required to place
the property into production. Newmont has satisfied its $3 million capital
requirement for 1995 and 1996 and has extended the required date for completion
of a feasibility study by mutual agreement with La Teko as a result of
successful continued drilling.
During 1995, as a result of the $3.5 million received in cash, the Company
reflected $1,383,436 gain from the sale of mineral properties. In 1996, Newmont
paid $2.5 million and La Teko recognized an additional $2,447,248 gain from
disposition of the True North project. In accordance with generally accepted
accounting principles applicable to the mining industry, the Company has written
off all of its previously-capitalized True North costs against the $6 million
cash received from Newmont.
Newmont's cash contribution for exploration and development, property
payments and general and administrative expenses at the True North project
through December 31, 1996 approximated $5.8 million. Amounts in excess of the
required $3 million for 1995 and 1996 will be credited against Newmont's
remaining $18 million of its initial capital contribution required by the joint
venture agreement. Inasmuch as the feasibility study was not completed by
December 31, 1996, exploration costs incurred by Newmont after December 31, 1996
for exploration drilling outside of the perimeters of the current reserves of
the Hindenburg and Shepard ore zones will be paid by Newmont and such costs will
not be credited against its initial $21 million capital contribution
requirement.
If Newmont determines that the results of a forthcoming feasibility study
do not warrant development of the True North property, then Newmont will be
deemed to have elected to terminate the joint venture. If Newmont determines,
in its sole discretion, that the results of the feasibility study warrant
development of the True North property, then the joint venture will proceed with
development and the initiation of production, with Newmont being obligated to
contribute for development up to $18 million, less the amount, if any, by which
the True North exploration and development costs for 1995 and 1996 exceed the $3
million requirement for those years. Any amounts by which the True North
development costs exceed the $18 million development commitment, as adjusted,
will be borne by Newmont and La Teko in proportion to their respective
participating interests.
Newmont may terminate the joint venture at any time in its sole discretion
without further liability, in which case, it would be required to convey to La
Teko the 65% interest in the True North property acquired from La Teko and
contributed to the joint venture plus its 65% interest in subsequently-acquired
property in the area of interest. Newmont will not be entitled to reimbursement
of any amounts paid to La Teko, spent on the True North property or contributed
to the joint venture prior to termination. Termination of the joint venture by
Newmont would not relieve it of the obligation for exploration, development or
reclamation costs incurred but not yet paid prior to the date of termination.
JUNIPER
In February 1995, the Company located 104 state of Alaska prospecting sites
on approximately 16,131 acres approximately 30 miles north northeast of
Fairbanks, Alaska. The agreement allowed the Company to prospect for up to one
year with the right to renew for a second year, during which time it may elect
to convert the sites into state mining claims. During 1995 and continuing
through 1996, the Company commenced initial exploration efforts on this
property, including geo-chemical sampling, mapping and soil sampling, the
results of which suggest that further exploration may be warranted. Also during
1996, the Company staked 403 State of Alaska claims on the Juniper property, at
a cost of approximately $78,000, as required by a conversion clause in the lease
agreement.
TWIN BUTTES
During April 1996, the Company consummated a five-year agreement with the
University of Alaska to explore its Twin Buttes property, located 28 miles
northeast of Fairbanks, Alaska, adjacent to La Teko's Juniper property. The
initial acquisition cost was $30,000 for an exclusive development and mining
lease. A geochemical sampling program was initiated during the 1996 exploration
season to assess the near future expression of mineralization.
LUCKY GULCH
During July 1996, the Company acquired the Lucky Gulch property in the
Denali Mining District, Alaska, approximating 230 acres. The lease was acquired
for an initial $10,000 non-recoverable payment with advance minimum royalty
payments of $7,500 annually, escalating $2,500 per year to a maximum $15,000
each year as long as the contract shall remain in effect. Exploration
commitments were $20,000 for 1996 and $50,000 annually thereafter. The property
is subject to an NSR royalty based on the ratio of net profits to the price of
gold. The agreement calls for a sliding scale net smelter royalty (NSR) between
1 and 7% based on profitability. The formula for calculation of NSR is:
NSR, % = (0.085714 x f + 0.005714) x 100.
Where f equals profit in dollars per ounce to La Teko divided by price of gold
(profit - price of gold). For 4 of 0.05 or less the NSR shall be 1%, and for an
f of 0.75 or greater, the NSR shall be 7%. The above expression is used to
calculate the royalty between the low and high values for f.
The Lucky Gulch agreement relates only to the hardrock potential of the
property. The Company has the first right of refusal to obtain placer rights in
the future, subject to a current placer lessee dropping this option.
DISCOVERY
On May 24, 1996, the Company acquired approximately 3,000 acres known as
Discovery Gulch in the Circle Mining District, Alaska. The exploration lease
required an initial payment of $15,000 plus annual payments of $10,000 on the
first two anniversary dates and $35,000 annually thereafter. The property is
subject to a 2% NSR royalty on production from the property. Twenty-five
thousand dollars was required for exploration during 1996. Exploration
requirements for 1997 and 1998 are $30,000 and $35,000, respectively. During
the fourth exploration season, the exploration commitment increases to $100,000
with an additional $50,000 increase annually thereafter.
MARGARITA
The Margarita project comprises 36 unpatented lode mining claims consisting
of the Margarita, MX and NWM claims in Santa Cruz County, Arizona.
A royalty of 10% of net profits is payable on the first 20,000 ounces of
product removed from the property and 15% thereafter. "Net profits" is
determined after deduction of exploration costs, capital expenditures and all
other operating costs.
There are additional obligations to prior owners for a 3% net smelter
return royalty on the Margarita properties.
During January 1996, La Teko completed exploration drilling of 14 reverse-
circulation holes aggregating 4,040 feet on its Margarita property. Results of
the drilling did not increase the Company's estimated 30,000-ounce gold
resource.
NOTE 3 - PLANT AND EQUIPMENT
1996 1995
----------------------------------- ----------
ACCUMU-
LATED
DEPRECIA-
COST TION NET NET
---------- ---------- --------- ----------
Machinery and $ 578,717 $ 499,370 $ 79,347 $ 81,409
equipment..........
Buildings.......... 166,208 87,394 78,814 85,797
Trucks............. 47,410 34,030 13,380 9,690
Office furniture
and equipment ..... 93,072 55,493 37,579 25,698
Site work and roads 10,570 8,974 1,596 1,995
---------- ---------- --------- ----------
$ 895,977 $ 685,261 $ 210,716 $ 204,589
========== ========== ========= ==========
Depreciation of $54,828 and $51,092 was provided on plant and equipment and
charged to operations during 1996 and 1995 respectively. Additional
depreciation of $4,835 was capitalized with exploration costs during 1995.
NOTE 4 - LONG-TERM DEBT
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
Convertible debentures, interest at 12%,
due quarterly ........................... $ 372,500 $1,067,500
Computer lease purchase contract, payable
$258 monthly, including interest imputed
at 19.6% through December, 1997 ......... -- 5,085
Less: Amounts due within 1 year......... (372,500) (712,296)
----------- -----------
Long-term debt ........................ $ -- $ 360,289
=========== ===========
Interest expense on long-term debt was $94,636 and $129,078 for the years
1996 and 1995, respectively.
All convertible debentures of the Company maturing during 1997 were called
on January 6, 1997 and were redeemed prior to March 15, 1997.
NOTE 5 - INCOME TAXES
Provision for income taxes at December 31, 1996 consists of $14,547 in
alternative minimum taxes paid before December 31, 1996. Comparable alternative
minimum taxes for 1995 were $22,500. There were no deferred taxes.
Provision for income tax expense (benefit) differs from the amount
calculated at the statutory Federal income tax rate due to the following:
1996 1995
----------- -----------
U.S. Federal income tax expense
(benefit) at statutory rate ............ $ 367,145 $ 112,978
Alternative minimum taxes Federal and
state .................................. 14,547 22,500
Utilization of net operating loss
carryforwards .......................... (367,145) (112,978)
Portion of net operating loss for which
realization is not assured ............. -- --
----------- -----------
Provision for income tax expense
(benefit) .............................. $ 14,547 $ 22,500
=========== ===========
At December 31, 1996, the Company had a net operating loss carryforward
available to offset future taxable income of approximately $9,974,000 expiring
in 2003 through 2011. No deferred tax assets have been provided for these
amounts since realization is not assured.
NOTE 6 - CAPITAL STOCK AND RELATED-PARTY TRANSACTIONS
On November 16, 1995, the Company extended and re-priced options which had
previously been granted on August 17, 1994. In addition, at that time, the
Company also granted options to directors and employees.
On March 14, 1996, the Company granted an option to its then newly-
appointed president for the future issuance of 100,000 shares at $2.50 per
share, exercisable for a period of five years. This option was granted in lieu
of other compensation for future services.
On December 2, 1996, Gerald G. Carlson was employed as President of the
Company to succeed Robert W. Gentry and was also appointed a director. At that
time, he was granted options to acquire 500,000 shares of La Teko stock at $1.85
per share, 85% of the then-existing market price. Two hundred thousand shares
of the options were exercisable upon grant and 100,000 shares each are
exercisable on the annual anniversary dates following the date of grant. Each
option matures five years following the exercise date.
The following summary reflects the total options outstanding at December
31, 1996:
EXERCISE
SHARES PRICE EXPIRATION DATE
NAME --------- --------- ---------------
Directors 500,000 $1.85 12/10/2001-04
300,000 $1.60 11/16/2000-03
100,000 $2.50 3/14/2001
200,000 $2.41 06/18/2001-04
Previous Directors
100,000 $1.60 8/17/1999
100,000 $1.60 11/16/2000
25,000 $1.60 06/05/1997
Others
100,000 $2.13 4/01/1998-99
154,000 $1.60 8/17/1999
105,000 $1.60 11/16/2000
---------
1,684,000
=========
Shares eligible
for exercise
during 1997 1,084,000
=========
All options granted to officers and directors are subject to approval by
shareholders and the Vancouver Stock Exchange.
Subsequent to December 31, 1996, employees exercised options for the
purchase of 5,000 shares at $1.60 per share.
Exercise of all options is contingent upon continued employment with the
Company.
The option prices on the grant dates were the trading prices on the
Vancouver Stock Exchange less a 15% discount allowed by the VSE. Employees
exercising options will realize compensation income equal to the stock price on
the date of the exercise less the per share option price.
Stock options exercised during 1995 and 1996 are reflected in the
accompanying Consolidated Statements of Changes in Shareholders' Equity.
NOTE 7 - EMPLOYEE BENEFITS
During 1996, the Company established a Salary Reduction Simplified Employee
Pension Plan (SARSEP). Each eligible employee may elect to have his/her
compensation reduced by up to 15% of eligible wages for contribution to the
plan. The Company opted not to contribute to the SARSEP plan for 1996.
NOTE 8 -STOCK -BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Account Standard No. 123, "Accounting for Stock-Based Compensation"
(FAS 123) which established financial accounting and reporting standards for
stock-based compensation. The new standard defines a fair value method of
accounting for an employee stock option or similar equity instrument. This
statement gives entities the choice between adopting the fair value method or
continuing to use the intrinsic value method under Accounting Principals Board
(APB) Opinion No. 25 with footnote disclosure of the pro forma effects as if the
fair value method had been adopted. The Company has opted for the latter
approach. Had compensation expense for the Company's stock option plan been
determined based on the fair value at the grant date for awards in 1996 and 1995
consistent with the provisions of FAS No. 123, the Company's results of
operations would have been adjusted to the pro forma amounts indicated below.
DECEMBER 31,
-------------------------
1996 1995
--------- ---------
Net income (loss) - as reported.......... $ 955,785 $(364,857)
Net income (loss) - pro forma............ $ 663,202 $(446,719)
Earnings per share (loss) - as reported.. $ .04 $ (.02)
Earnings per share (loss) - pro forma.... $ .03 $ (.02)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions:
DECEMBER 31,
-------------------
1996 1995
------ ------
Expected dividend yield........... -- --
Expected stock price volatility... 39.66% 39.66%
Risk-free interest rate........... 6.13% 5.25%
Expected life of options.......... 5 years 5 years
The weighted average fair value of options granted during 1996 and 1995 are
$1.22 and $.80 respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company has stock options outstanding as discussed in Note 6.
The Company is obligated for various royalty payments based on future
mining and/or earnings from its mineral properties, as further described in Note
2.
La Teko cannot insure for environment pollution and, consistent with
industry practice, has elected not to insure for losses from mine cave-ins, mine
flooding, earthquake and other possible natural hazards caused by the
unavailability of such coverage or the cost thereof. The Company may in the
future be exposed to contingencies relating to the foregoing or liabilities that
may arise under the governmental regulations relating to the environment. It is
not however, aware of any existing material contingencies respecting compliance
with environmental requirements or previous activities. Any such contingent
environmental liabilities, if any, however, are not expected to have material
impact on the Company or its financial statements.
LA TEKO RESOURCES LTD.
180 EAST 2100 SOUTH
SALT LAKE CITY, UTAH
84119
December 2nd, 1996
Gerald G. Carlson
c/o Suite 500 - 625 Howe Street
Vancouver, B.C., V6C 2T6
Dear Mr. Carlson:
Re: La Teko Resources Ltd., (the "Company")
The purpose of this letter agreement is to document the terms upon which the
Company has agreed to hire you as its President and Chief Executive Officer.
1) Employment
1.1 Upon execution of this agreement (the "Agreement"), you will be appointed
to the board of directors of the Company (the "Board") and hired as the
Company's President and Chief Executive Officer. You will be responsible to the
Board for the management of all affairs and business of the Company and you will
take such action as may be required to fulfill your duties as President and
Chief Executive Officer of the Company.
1.2 You are authorized to sit on the board of directors of Dentonia Resources
Ltd. provided that such directorship does not result in a conflict of interest
with your position with the Company and provided that such directorship does not
impair your ability to fulfill your responsibilities under this Agreement. Any
directorships with other companies will require the prior approval of the Board.
1.3 Your employment under this Agreement, subject to the provisions of Section
4 of this Agreement' shall be for an initial term of three years (the "Initial
Term") and thereafter for a period to be determined between you and the Board.
2) Compensation
2.1 As compensation for services to be rendered pursuant to this Agreement, the
Company agrees to pay you a salary of Cdn$12,000 per month.
2.2 In addition to the salary referred to in paragraph 2.1 above, the Company
shall, subject to regulatory approval, grant you stock options entitling you to
purchase up to 500,000 shares of the Company which, subject to paragraph 4.4,
will vest incrementally as follows:
a) 200,000 upon execution of this Agreement;
b) a further 100,000 upon the first anniversary of this Agreement;
c) a further 100,000 upon the second anniversary of this Agreement; and
d) the final l00,000 upon the third anniversary of this Agreement.
2.3 The Company will, upon execution of this Agreement, take such steps as are
required to set the exercise price for the entire 500,000 stock options at the
lowest price allowable by the policies of the Vancouver Stock Exchange.
2.4 The Company shall pay or reimburse you for all reasonable expenses incurred
or paid by you during the period of your employment hereunder in the performance
of your services under this Agreement.
2.5 The Company will either include you under its existing medical/dental/life
insurance coverage or the Company will provide you with a comparable Canadian
policy.
2.6 You will be entitled to four weeks (20 work days), not including holidays
or sick leave, of paid vacation each year during your employment.
2.7 The Company will pay the leasing costs for a vehicle to be used by you
provided that such costs are reasonable and recognizing that it is your
intention to lease a 4-wheel drive vehicle.
3) Annual Objectives
3 1 Each year the Board will, in consultation with you, establish corporate
objectives for the forthcoming year which the Board will expect you to work
towards having the Company achieve. The Board will act reasonably in
establishing such corporate objectives and it is recognized that circumstances
may change from time to time which result in such corporate objectives being
modified prior to being achieved.
4) Termination of Employment Relationship
4.1 You may terminate this Agreement upon thirty (30) days written notice to
the Company.
4.2 The Company may terminate your employment under this Agreement as follows:
a) subject to paragraph 4.3, immediately for cause;
b) on three months notice if you have become disabled (physically or
mentally) to the extent that you have been unable to perform the essential
functions of your employment hereunder for a continuous period of six months,
and
c)on six months notice prior to the end of the Initial Term
4.3 In the event that the cause referred to in sub-paragraph 4.2 (a) is that
the Board is not satisfied with your efforts to accomplish the corporate
objectives established by the Board in accordance with paragraph 3.1, the
Company will provide you with six months notice. For the purposes of this
paragraph, the Board must act reasonably and in good faith in determining
whether it is satisfied with your efforts to accomplish the corporate objectives
in question.
4.4 In the event that the Company is purchased or undergoes a merger or other
similar corporate transaction (referred to in this paragraph as a "Transaction",
which results in you no longer retaining the position of President and Chief
Executive Officer of the Company in accordance with the terms of this Agreement,
you will receive a severance package equal to one year's salary (ie
Cdn$144,000), payable in a lump sum and the following shall apply to your
incentive stock options:
a) fifty percent of the unvested stock options will automatically vest if the
Transaction occurs in the first year of this Agreement, or
b) one-hundred percent of the unvested stock options mil automatically vest if
the Transaction occurs after the first anniversary of this Agreement.
5) General
5.1 This Agreement shall be construed in accordance with the laws of the
Province of British Columbia and shall enure to the benefit of and be binding
upon the parties hereto and their respective personal representative, successors
and assigns.
Assuming the above accurately sets out the terms agreed to, please evidence your
agreement by signing this letter below and returning a copy to us.
Yours truly,
LA TEKO RESOURCES LTD. AGREED TO AND ACKNOWLEDGED:
Per: /s/ Gordon Fretwell /s/ Gerald G. Carlson
RECORD THIS INSTRUMENT IN THE FAIRBANKS RECORDING DISTRICT
INDEX THIS INSTRUMENT AS FOLLOWS:
Grantor: Placer Dome U.S. Inc.
Grantee: La Teko Resources, Inc.
Newmont Exploration Limited
THE PROPERTY DESCRIBED IN EXHIBIT A ATTACHED HERETO IS SITUATED IN THE FOLLOWING
SECTION:
Township 3 North, Range 1 East, Fairbanks Meridian: Section 15
RETURN THIS INSTRUMENT TO: Guess & Rudd
Attention: Joseph J. Perkins, Jr.
510 L Street, Suite 700
Anchorage, Alaska 99501
SPECIAL WARRANTY DEED
THIS SPECIAL WARRANTY DEED (hereinafter referred to as "this Deed"), dated
this 30th day of October , 1996, is given by PLACER DOME U.S. INC. ("PDUS"), a
California corporation the address of which is Suite 2500, 1 California Street,
San Francisco, California 94111, to LA TEKO RESOURCES, INC. ("La Teko"), a
Nevada corporation the address of which is Suite 202, 180 East 2100 South, Salt
Lake City, Utah 84115, and NEWMONT EXPLORATION LIMITED ("Newmont"), a Delaware
corporation the address-of which is Suite 2800, 1700 Lincoln Street, Denver,
Colorado 80203.
WITNESSETH:
For and in consideration of $10.00 and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, PDUS
hereby ASSIGNS, CONVEYS, and SPECIALLY WARRANTS (as set forth below but not
otherwise) to La Teko (as to an undivided 35%) and Newmont (as to an undivided
65%), and each's respective successors and assigns, as tenants in common, all of
PDUS's rights, titles and interests (if any) in and to the- mining claims
described in Exhibit A attached hereto, together with any and all rights
appurtenant thereto (hereinafter collectively referred to as "the Property"), to
have and to hold forever. PDUS hereby SPECIALLY WARRANTS unto La Teko and
Newmont, and to each's respective successors and assigns, that the Property is
free and clear of any rights, titles, or interests of third parties arising by,
through, or under PDUS, but not otherwise.
IN WITNESS WHEREOF, PDUS has executed this Deed on the date first set forth
above.
PLACER DOME U.S. INC.
By: /s/ Richard G. Duncan
Printed Name: Richard G. Duncan
Title: V.P., Exploration
STATE OF NEVADA )
)ss.
COUNTY OF WASHOE )
THIS CERTIFIES that on the 30th day of October, 1996, at 240 S. Rock Blvd.,
Ste. 117, Reno, NV 89502, the foregoing instrument was acknowledged before me by
(name) Richard G. Duncan (title) V.P. Exploration of PLACER DOME U.S. INC., a
California corporation, on behalf of the corporation.
(Notary seal) /s/ S. Schaerer
Notary Public in and for Washoe County, Nevada
My commission expires November 10, 1998
<PAGE>
EXHIBIT A
MINING CLAIMS
The following State of Alaska mining locations:
Fairbanks
Recording District
Claim Name Book/Page DNR Serial Number
- -------------------- ------------------ -----------------
Cheker 30 (aka CH 30) 915/416 ADL-570961
Cheker 34 (aka CH 34) 915/420 ADL-57096
Cheker 35 (aka CH 35) 915/421 ADL-570966
<PAGE>
RECORD THIS AGREEMENT IN THE FAIRBANKS RECORDING DISTRICT
INDEX THIS AGREEMENT AS FOLLOWS:
Grantor: Placer Dome U.S. Inc.
Grantee: La Teko Resources, Inc.
Newmont Exploration Limited
THE PROPERTY DESCRIBED IN EXHIBIT A ATTACHED HERETO IS SITUATED IN THE FOLLOWING
SECTION:
Township 3 North, Range 1 East, Fairbanks Meridian: Section 15
RETURN THIS AGREEMENT TO: Guess & Rudd
Attention: Joseph J. Perkins, Jr.
510 L Street, Suite 700
Anchorage, Alaska 99501
AGREEMENT REGARDING MINING CLAIMS
THIS AGREEMENT REGARDING MINING CLAIMS (hereinafter referred to as "this
Agreement"), dated this 30th day of October , 1996, is entered into by and among
PLACER DOME U.S. INC. ("PDUS"), a California corporation the address of which is
Suite 2500, 1 California Street, San Francisco, California 94111, LA TEKO
RESOURCES, INC. ("La Teko"), a Nevada corporation the address of which is Suite
202, 180 East 2100 South, Salt Lake City, Utah 84115, and NEWMONT EXPLORATION
LIMITED ("Newmont"), a Delaware corporation the address of which is Suite 2800,
1700 Lincoln Street, Denver, Colorado 80203 (La Teko and Newmont are sometimes
collectively referred to herein as "Buyer").
WITNESSETH:
For and in consideration of $10.00 and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, and the covenants of
each party set forth herein, the parties hereby agree as follows:
1. PROPERTY; FURTHER ACTIONS.
The property subject to this Agreement (hereinafter collectively referred
to as "the Property") comprises (a) all rights, titles, and interests now owned
or hereafter acquired by PDUS in or to the mining claims described in Exhibit A
attached hereto or the lands included therein (including but not limited to any
and all amendments or relocations of the mining claims described in Exhibit A
attached hereto and any and all state mining leases into which one or more of
such claims, amendments or relocations are converted), together with (b) any and
all rights now or hereafter appurtenant thereto (including but not limited to
access rights and water rights).
The parties hereby agree to execute, acknowledge, and deliver such other
agreements and instruments as may be reasonably required from time to time
hereafter to implement the intent of the parties hereto (including but not
limited such other agreements and instruments as may be reasonably required from
time to time hereafter to subject formally to this Agreement any and all rights,
titles, or interests hereafter acquired by PDUS that constitute part of the
Property).
2. TERM.
The parties hereby agree that the term of this Agreement shall continue
from the date first set forth above for so long as PDUS (or any successor or
assign of PDUS other than La Teko or Newmont) owns any interest in the Property.
3. SPECIAL WARRANTY.
PDUS hereby SPECIALLY WARRANTS unto La Teko and Newmont, and to each's
respective successors and assigns, that the mining claims described in Exhibit A
attached hereto are free and clear of any rights, titles, or interests of third
parties arising by, through, or under PDUS, but not otherwise.
4. PROMISE TO MAINTAIN PROPERTY IN GOOD STANDING.
During the term of this Agreement, PDUS (a) shall perform such
assessment work, pay such rent, and take any and all other actions
necessary to maintain the Property in good standing under the laws of
the State of Alaska, and (b) shall deliver to La Teko and Newmont-no
later than two weeks prior to any performance, recording, filing,
payment, or other deadline-copies of such affidavits of assessment work
(as recorded if delivered to establish compliance with any recording
requirement), receipts, and other evidence as may be reasonably
necessary to establish PDUS's satisfaction of the foregoing obligations.
Without limiting the generality of the foregoing, during the term of
this Agreement, PDUS shall do the following:
(a) perform in a timely manner all assessment work required
to be performed for the benefit of the Property to maintain the
Property in good standing, for the assessment year beginning on
September 1, 1995, and for every assessment year beginning
thereafter if this Agreement is in effect on the 60th day prior to
the end of the assessment year. If PDUS may satisfy any such
assessment work obligation by making a payment in lieu thereof on
or after the date on which such obligation accrues hereunder, then
PDUS may either perform the required assessment work or make the
required payment in lieu thereof in a timely manner for said
assessment year. (e.g., if this Agreement is in effect on July 3,
1997 (the 60th day prior to September 1, 1997), PDUS shall perform
assessment work for the benefit of the Property or pay the
permitted maintenance fee in lieu thereof no later than August 31,
1997, for the assessment year beginning on September 1, 1996.) For
purposes of this paragraph, whether assessment work is "required"
shall be determined without regard to the value of any assessment
work-performed in assessment years commencing prior to the
assessment year beginning on September 1, 1995, and carried forward
under applicable law for use in future assessment years.
(b) pay in a timely manner all rental due on the Property
under AS 38.05.211 for the rental year beginning on September 1,
1996, and for every rental year thereafter if this Agreement is in
effect on the 30th day prior to the date any required rental fee
must be paid in order to maintain the property in good standing.
(e.g., if this Agreement is in effect on October 31, 1996, PDUS
shall pay the required rental fee that is due no later than
November 30, 1996, for the Property for the rental year beginning
on September 1, 1996.)
(c) prepare, record and file in a proper and timely manner
(for every assessment or rental year for which PDUS is obligated
hereunder to perform work or pay money) such affidavits and other
documents relating thereto as are required to maintain the Property
in good standing.
5. AGREEMENT TO OFFER TO CONVEY BEFORE ABANDONMENT.
If at any time during the term of this Agreement PDUS determines that it
desires to abandon any of the Property, PDUS shall give Buyer written notice of
such determination at least 30 days prior to abandoning any of the Property. If
Buyer elects, pursuant to a written notice delivered to PDUS no later than 20
days after receipt of said notice of intent to abandon, to have PDUS convey to
Buyer the Property described in said notice of intent to abandon, PDUS forthwith
shall execute, acknowledge, and deliver a special warranty deed to Buyer
conveying said Property to Buyer free and clear of any rights, titles, or
interests of third parties arising by, through, or under PDUS, but not
otherwise. If Buyer does not so elect to have PDUS convey to Buyer the Property
described in said notice of intent to abandon, PDUS shall have up to 30 days
beyond the end of said original 30-day period in which to complete its desired
abandonment. If PDUS fails to complete said abandonment within said additional
30-day period, the notice requirements of this Paragraph 5 shall again become
applicable to said Property.
6. GRANT OF RIGHTS BY SELLER TO BUYER; OPERATIONS OF BUYER PRIOR TO
ESTABLISHMENT OF BOUNDARY
Seller hereby grants to Buyer (a) the non-exclusive right to conduct, at
Buyer's sole risk and expense, mineral exploration operations (including but not
limited to drilling) on those portions of the Property situated inside the "Area
of Interest" established under that certain unrecorded Conflict of Interest and
Confidentiality Agreement by and between Ryan Lode Mines, Inc. (a wholly-owned
subsidiary of La Teko Resources, Ltd.) and Placer Dome U.S. Inc. dated August 4,
1994 ("Confidentiality Agreement"), and (b) the exclusive right to conduct, at
Buyer's sole risk and expense, mineral development anal production operations
for Buyer's sole account on those portions of the Property situated-inside the
"Area of Interest" established under the Confidentiality Agreement, to have and
to hold said rights forever.
Prior to the establishment of the boundary of said "Area of Interest"
pursuant to Paragraph 7 below, Buyer's non-exclusive right to conduct mineral
exploration operations (including but not limited to drilling) shall extend to
those portions of the Property that Buyer believes in good faith to be situated
inside said "Area of Interest".
7. AGREEMENT TO ESTABLISH BOUNDARY.
PDUS and Buyer hereby agree to establish, as soon as possible after either
PDUS or Buyer determines in good faith that "production of minerals for sale in
commercial quantities" (as used in AS 38.05.207) from the Property probably will
be commenced by either party, the precise boundary of the "Area of Interest"
established under the Confidentiality Agreement. PDUS and Buyer shall establish
said boundary either by agreement or pursuant to AS 09.45.020-09.45.050 (1994).
Costs (except for attorney's fees) of establishing said boundary as described
above shall be borne equally by PDUS and Buyer. Either party may seek to
establish said boundary sooner than as described above, but the costs (except
for attorney's fees) of establishing said boundary sooner shall be borne
entirely by the party seeking to establish said boundary sooner. In any case
seeking to establish the precise boundary of the "Area of Interest" established
under the Confidentiality Agreement, each party shall be bear its own attorney's
fees.
8. OPERATIONS OF BUYER AND SELLER AFTER ESTABLISHMENT OF BOUNDARY.
After establishment of the boundary described in Paragraph 7 above, Seller
shall cease to have any rights to conduct mineral exploration operations on
those portions of the Property situated inside the "Area of Interest"
established under the Confidentiality Agreement, and all of the rights granted
to Buyer pursuant to Paragraph 6 above shall become exclusive rights of Buyer,
subject only to applicable law and to the terms of any additional agreement
(e.g., a joint operating agreement, a joint venture agreement, or a similar
agreement) that may be negotiated and executed by the parties hereto.
9. TRANSFERABILITY: BINDING EFFECT.
Each party may freely transfer its rights, obligations, and liabilities
hereunder in whole or in part, but no such transfer shall relieve the
transferring party of any obligations or liabilities hereunder unless otherwise
agreed by the parties hereto in writing. This Agreement shall inure to the
benefit of and bind the parties hereto and each party's respective successors
and transferees.
10. COVENANTS RUNNING WITH THE LANDS
The covenants of PDUS set forth herein shall constitute covenants running
with the Property. Either La Teko or Newmont or any successor or assign of
either of them shall be entitled to enforce said covenants against PDUS or its
successors or assigns and shall otherwise be entitled to pursue any and all
remedies available in connection with a breach or breaches thereof.
IN WITNESS WHEREOF the parties have executed this Agreement on the date first
set forth above.
PLACER DOME U.S. INC.
By: /s/ Richard G. Duncan
Printed Name: Richard G. Duncan
Title: V.P., Exploration
LA TEKO RESOURCES, INC.
By: /s/ Robert Gentry
Printed Name: Robert Gentry
Title: President
NEWMONT EXPLORATION LIMITED
By: /s/ Leendert G. Krol
Printed Name: Leendert G. Krol
Title: President.
STATE OF NEVADA )
ss.
COUNTY OF WASHOE )
THIS CERTIFIES that on the 30 day of October, 1996, at 240 S. Rock Blvd., Ste
117, Reno, NV 89502, the foregoing instrument was acknowledged before me by
(name) Richard G. Duncan, (title) V.P. Exploration of PLACER DOME U.S. INC., a
California corporation, on behalf of the corporation.
(Notary seal) /s/ S. Schaerer
Notary Public in and for Washoe Country, Nevada
My commission expires Nov. 1998
STATE OF TEXAS )
ss.
COUNTY OF DALLAS )
THIS CERTIFIES THAT ON THE 18th day of November, 1996, at 14785 Preston
#35D, Dallas, TX the foregoing instrument was acknowledged be fore me by (name)
Robert Gentry (title) President of LA TEKO RESOURCES, INC., a Nevada
corporation, on behalf of the corporation
(notary seal) /s/ Paul A. Davidson
Notary Public in and for Texas
My commission expires 3/11/97
STATE OF COLORADO )
ss.
COUNTY OF DENVER )
THIS CERTIFIES that on the 15th day of November, 1996, at 1700 Lincoln
Street, Denver, Co 80203, the foregoing instrument was acknowledged before me by
(name) Leendert G. Krol (title) President of NEWMONT EXPLORATION LIMITED, a
Delaware corporation, on behalf of the corporation.
(Notary seal) /s/ Beth F. Frankel
Notary Public in and for Denver
My commission expires 8-2-99
<PAGE>
EXHIBIT A
Mining Claims
The following State of Alaska mining locations:
Fairbanks
Recording District
Claim Name Book/Page DNR Senal Number
- -------------------- ----------------- ----------------
Cheker 26 (aka CH 26) 915/412 ADL-570957
Cheker 31 (aka CH 31) 915/417 ADL-570962
Cheker 36 (aka CH 36) 915/422 ADL-570967
(recording stamp)
Fairbanks Rec District
Requested By Newmont Gold Co.
96 Nov 25 PM 1:43
ORO BLANCO RESOURCES CORP
(company letterhead)
January 14, 1997
La Teko Resources Ltd.
180 East 2100 South, Suite 204
Salt Lake City, UT 84115
Attn: Mr. Jerry Carlson
Dear Mr. Carlson
Oro Blanco Resouces Corp. herein proposes an offer to you regarding an option to
acquire the Margarita property in Santa Cruz County, Arizona.
1) Oro Blanco Resources Corp. will enter into an option agreement on the
properties with La Teko Resources whereby Oro Blanco would have exclusive
right to the claims for a period of three years;
2) During this period of time, Oro Blanco will agree to spend the sum of
$500,000 on exploration and/or development of the claim group. The
expenditure will be allocated as follows:
Year One $ 100,000
Year Two $ 200,000
Year Three $ 200,000
Any excess expenditures may be carried over to the next year.
3) Oro Blanco will make annual payments to La Teko as follows:
1st anniversary 25,000 shares Oro Blanco common stock
2nd anniversary 50,000 shares Oro Blanco common stock
3rd anniversary Exercise of option by payment of 50,000 shares of
Oro Blanco common stock plus 100,000 cash
4) Production royalties: 1% net smelter royalty
5) Minimum annual royalties:
4th anniversary $50,000
5th anniversary $75,000
6th anniversary $100,000
Cash payments under Section 5 will apply against net smelter royalties.
During the life of the mine.
6) Oro Blanco will make all necessary claim payments and drill core storage
payments and will keep the property in good standing with all regulatory
bodies during the term of this agreement.
7) Oro Blanco will not drop any of the claims without written permission of La
Teko.
8) La Teko will provide Oro Blanco with all data on the property including but
not limited to geological reports, test data, and drill results.
9) Oro Blanco will annually provide La Teko with all factual data generated by
its exploratory programs. Oro Blanco will annually provide La Teko with
all factual data generated by its exploratory programs. Oro Blanco will
provide La Teko with timely verification of annual rental payment, etc.
This agreement subject to the approval of appropriate regulatory authorities.
If this is acceptable, please sign and return by Fax. We will also mail to you
a hard copy for your signature. We shall begin preparation of a formal
agreement immediately. Both parties will make best efforts to complete the
formal agreement within 60 days.
Yours very truly,
ORO BLANCO RESOURCES CORP.
A. John Carter
President
Agreed to:
La Teko Resources Ltd.
/s/ Gerald Carlson, President
FORM OF NON-QUALIFIED STOCK OPTION
It is important that you retain this document. This original Non-Qualified
Stock Option must be delivered to the Company on exercise or transfer of the
option.
THIS NON-QUALIFIED STOCK OPTION (this "Option") is granted effective the --- day
of ---------, by TEKO RESOURCES LTD. a British Columbia, Canada corporation (the
"Company") to -------------------------- ("Optionee").
1. Grant of Option. The Company hereby irrevocably grants to Optionee the
right and option to purchase all or any part of an aggregate of ------ shares
(the "Shares") of common stock, having no par value per share, of the
Company (the "Common Stock") on the terms and conditions hereinafter set forth.
The options are exercisable in increments of ------- Shares each over the
following terms:
Shares Term
SEE ATTACHED SCHEDULE
2. Exercise Price. The exercise price of this Option shall be CDN. ------ per
share (USD) $------) of Common Stock (the "Exercise Price").
3. Term of Option. Subject to the other provisions of this Option, this
Option may be exercised, in whole or in part, at any time or from time to time
on or before 5:00 p.m., Mountain Time on the dates indicated under Grant of
Option in Item 1 above.
4. Shareholder's Rights. The Optionee shall have the rights of a shareholder
only with respect to Shares fully paid for by Optionee under this Option.
5. Adjustment of Exercise Price and Number of Shares.
a) The number of Shares purchasable on the exercise of this Option and
the Exercise Price shall be adjusted appropriately from time to time as
follows:
i) In the event the Company shall declare dividend or make any
other distribution on any capital stock of the Company payable in Common
Stock, rights to purchase Common Stock, or securities convertible into
Common Stock or shall subdivide its outstanding shares of Common Stock
into a greater number of shares or combine such outstanding stock into a
smaller number of shares, then in each such event, the number of Shares
subject to this Option shall be adjusted so that the holder shall be
entitled to purchase the kind and number of Shares of Common Stock or
other securities of the Company which it would have owned or have been
entitled to receive after the happening of any of the events described
above, had such Option been exercised immediately prior to the happening
of such event or any record date with respect thereto; an adjustment made
pursuant to this paragraph a) shall become effective immediately after the
effective date of such event retroactive to the record date for such
event.
ii) No adjustment in the number of Shares purchasable hereunder
shall be required unless such adjustment would require an increase or
decrease of at least 1% in the number of Shares purchasable on the
exercise of this Option; provided, however, that any adjustments which by
reason of this paragraph are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
iii) Whenever the number of Shares purchasable on the exercise of
this Option is adjusted, as herein provided, the Exercise Price payable on
exercise shall be adjusted by multiplying the Exercise Price immediately
prior to such adjustment by a fraction, the numerator of which shall be
the number of Shares purchasable on the exercise of this Option
immediately prior to such adjustment and the denominator of which shall be
the number of Shares so purchasable immediately thereafter.
iv) Whenever the number of Shares purchasable on the exercise of
this Option or the Exercise Price of such Shares are adjusted, as herein
provided, the Company shall cause to be promptly mailed by first class
mail, postage prepaid, to the Optionee of this Option notice of such
adjustment or adjustments and shall deliver a resolution of the board of
directors of the Company setting forth the number of Shares purchasable on
the exercise of this Option and the Exercise Price of such Shares after
such adjustment, setting forth a brief statement of the facts requiring
such adjustment, together with the computation by which such adjustment
was made. Such resolution, in the absence of manifest error, shall be
conclusive evidence of the correctness of adjustment.
v) All such adjustments shall be made by the board of directors
of the Company, which shall be binding on the Optionee in the absence of
demonstrable error.
b) No adjustments shall be made in connection with:
i) the issuance of any Shares on the exercise of this Option;
ii) the conversion of shares of preferred stock;
iii) the exercise or conversion of any rights, options, warrants,
or convertible securities containing the right to purchase or acquire
Common Stock;
iv) the issuance of additional Shares or other securities on
account of the anti-dilution provisions contained in or relating to this
Option or any other option, warrant, or right to acquire Common Stock;
v) the purchase or other acquisition by the Company of any
shares of Common Stock, evidences of its indebtedness or assets, or
rights, options, warrants, or convertible securities containing the right
to subscribe for or purchase Common Stock; or
vi) the sale or issuance by the Company of any shares of Common
Stock, evidences of its indebtedness or assets, or rights, options,
warrants, or convertible securities containing the right to subscribe for
or purchase Common Stock or other securities pursuant to options,
warrants, or other rights to acquire Common Stock or other securities.
6. Notice of Certain Events. In the event of:
a) any taking by the Company of a record of the holders of any class of
securities of the Company for the purpose of determining the holders thereof who
are entitled to receive any dividends or other distribution, or any right to
subscribe for, purchase, or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other rights;
b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, or any transfer of all or
substantially all of the assets of the Company to any other person, or any
consolidation, share exchange, or merger involving the Company; or
c) any voluntary or involuntary dissolution, liquidation, or winding up
of the Company, the Company will mail to the Optionee(s) of this Option, at
least 20 days prior to the earliest date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend, distribution, or right; the amount and character of such dividend,
distribution, or right, or the date on which any such reorganization,
reclassification, transfer, consolidation, share exchange, merger, dissolution,
liquidation, or winding up of the Company will occur and the terms and
conditions of such transaction or event.
7. Method of Exercise. This Option may be exercised, in accordance with all
of the terms and conditions set forth in this Option, by delivery of this Option
together with a notice of exercise, a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference, indicating the number of
Shares which the Optionee then elects to purchase and making payment in full for
the Shares in cash. Optionee shall include with the notice of exercise a
certified or official bank check payable to the order of the Company in the
amount of the full option price of the Shares being purchased for cash.
As soon as practicable after receipt by the Company of such notice and of
payment in full of the option price of all the Shares of Common Stock with
respect to which the Option has been exercised, a certificate or certificates
representing such Shares of Common Stock shall be issued in the name of the
Optionee, or, if the Optionee shall so request in the notice exercising the
Option, in the name of the Optionee and another person jointly, with right of
survivorship, and shall be delivered to the Optionee. To the extent required by
the terms of this Option, all Common Stock shall be issued only upon receipt by
the Company of the Optionee's representation that the shares are purchased for
investment and not with a view to distribution thereof. If this Option is not
exercised with respect to all Shares subject hereto, Optionee shall be entitled
to receive a similar Option of like tenor covering the number of Shares with
respect to which this Option shall not have been exercised.
8. Availability of Common Stock. During the term of this Option, the Company
shall at all times keep available the number of Shares of Common Stock required
to satisfy the Option.
9. Limitation on Exercise. If the board of directors of the Company, in its
sole discretion, shall determine that it is necessary or desirable to list,
register, or qualify the Common Stock under any state or federal law, this
Option may not be exercised, in whole or part, until such listing, registration,
or qualification shall have been obtained free of any conditions not acceptable
to the board of directors.
If an officer or director, the Optionee shall not exercise the Option
until such Time as the shareholders of the Company have approved the granting of
the Option by the Company and the exercise of the Option by the Optionee.
10. Restrictions on Transfer. The Option and the Shares subject to the Option
(collectively referred to as the "Securities") are subject to registration under
the Securities Act of 1933, as amended (the "Securities Act"), and any
applicable state securities statutes. Optionee acknowledges that unless a
registration statement with respect to the Securities is filed and declared
effective by the Securities and Exchange Commission and the appropriate state
governing agency, the Securities have or will be issued in reliance on specific
exemptions from such registration requirements for transactions by an issuer not
involving a public offering and specific exemptions under state statutes. Any
disposition of the Securities may, under certain circumstances, be inconsistent
with such exemptions. The Securities may be offered for sale, sold, or
otherwise transferred only if i) registered under the Securities Act, and in
some cases, under the applicable state securities acts, or, if not registered,
ii) only if pursuant to an exemption from such registration requirements and
only after the Optionee provides an opinion of counsel or other evidence
satisfactory to the Company to the effect that registration is not required. In
some states, specific conditions must be met or approval of the securities
regulatory authorities may be required before any such offer or sale. The
Company is under no obligation to register the Securities with the Securities
and Exchange Commission or any state agency. If rule 144 is available (and no
assurance is given that it will be), only routine sales of the Common Stock in
limited amounts can be made after one year following the acquisition date of the
Securities, as determined under rule 144(d), in accordance with the terms and
conditions of rule 144. The Company is under no obligation to make rule 144
available. In the event rule 144 is not available, compliance with regulation A
or some other disclosure exemption may be required before the Optionee can sell,
transfer, or otherwise dispose of the Securities without registration. The
Company and its registrar and transfer agent will maintain a stop transfer order
against the transfer of the Securities, and this Option and any other
certificate or agreement representing the Securities is subject to the following
legend:
THE SECURITIES REPRESENTED BY THIS OPTION, AGREEMENT, OR CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF
RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR
OTHER COMPLIANCE UNDER THE SECURITIES ACT.
The Company may refuse to transfer the Securities to any transferee who does not
furnish in writing to the Company the same representations and warranties set
forth in this paragraph and agree to the same conditions with respect to such
Securities as are set forth herein. The Company may further refuse to transfer
the Securities if certain circumstances are present reasonably indicating that
the proposed transferee's representations are not accurate. In any event, the
Company may refuse to consent to any transfer in the absence of an opinion of
legal counsel, satisfactory to and independent of counsel of the Company, that
such proposed transfer is consistent with the above conditions and applicable
securities laws.
11. Registration. The Company will utilize its best efforts to file and
maintain the effectiveness of a registration statement on form S-8 with the
Securities and Exchange Commission covering the issuance of the Shares issuable
on exercise of this option and to maintain the effectiveness of such
registration statement or a subsequent registration statement or other
qualification in order to permit the exercise of this Option as set forth
herein, although, there is no guaranty that such registration statement will be
effective when the Option is exercised. If no registration statement is
effective on the date of exercise of this Option, the Shares will not be issued
unless and until there is available to the Company evidence, including
representations from the Optionee, that such Shares are being acquired for
investment and not for resale, on which the Company may reasonably rely as to
the availability of an exemption from registration in issuing such Shares.
12. Assignment of Option. This Agreement shall not be assignable by the
Optionee or his legal representative otherwise than by Will or the law of
intestacy and the Option may be exercised, during his or her lifetime, only by
the Optionee.
If the Optionee dies on or prior to the Expiry Date while an officer or
director of the Company, the Option, or such part thereof as remains
unexercised, may be exercised by the legal representative of the Optionee at any
time up to and including (but not after) the date one (1) year following the
date of death of the Optionee or prior to the close of business on the Expiry
Date, whichever is earlier.
If the Optionee ceases to be an employee of the Company prior to the Expiry
Date, the Option shall, on the earlier of the Expiry Date or thirty (30) days
from the date the Optionee ceases to be an employee of the Company, terminate
and be of no further force or effect whatsoever as to such of the Optioned
Shares in respect to which the Option has not been exercised.
13. Amendments. If at any time during the continuance of this Agreement, the
parties deem it necessary or expedient to amend, alter or add to this Agreement,
they may do so by means of written agreement between them which shall supplement
and form part of this Agreement.
14. Withholdings. If the grant or exercise of this Option is subject to
withholding or other trust fund payment requirements of the U.S. Internal
Revenue Code or applicable Canadian or U.S. Province, state or local laws, such
requirements may, to the extent permitted by the then governing provisions of
the Code, be met by the holder of such Option delivering shares of common stock
or canceling options or other rights to acquire common stock or by the
withholding shares of common stock subject to such Option, all with a fair
market value equal to such requirements. To the extent that the holder of this
Option is subject to the provisions of section 16(b) of the U.S. Securities
Exchange Act of 1934, as amended, payment of the withholding and other trust
funds requirements of the foregoing methods shall be subject to the transaction
qualifying for an exemption from the provisions of section 16(b) under rule 16b-
3 promulgated pursuant to the Securities Exchange Act of 1934, as amended, or an
amendment or successor rule of like tenor.
15. Approval. The terms of this Agreement and any amendments are subject to
approval by the regulatory authorities having jurisdiction over the affairs of
the Company and, if the Optionee is an insider of the Company within the meaning
of the Securities Act, by the shareholders of the Company.
16. Total Stock Options. Total stock options do not exceed 10% of the
Company's issued and outstanding share capital (unless under a formal Stock
Option Plan) and total options to any one optionee does not exceed 5% of the
total issued and outstanding share capital of the Company.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
the day and year first written above.
LA TEKO RESOURCES LTD.
By
-----------------
(printed name) Optionee
Signed, Sealed and Delivered
by (printed name)
in the presence of:
(name)
Signature of Witness
Name (print)
Address
Occupation of Witness
<PAGE>
Exhibit A
Form of Exercise
(to be signed only upon exercise of Option)
TO: LA TEKO RESOURCES LTD.
The undersigned, the owner of the attached Option, hereby irrevocably elects to
exercise the purchase rights represented by the Option for, and to purchase
thereunder, shares of Common Stock of La Teko Resources Ltd. Enclosed
is payment in the amount of $ , the exercise price of the Common Stock
to be acquired, in the form of (insert description of manner of payment)
Please have the certificate(s) registered in the name of ,
Social Security No. and delivered to the following address:
If this exercise does not include all of the Common Stock covered by the
attached Option, please deliver a new option of like tenor for the balance of
the Common Stock to the undersigned at the foregoing address.
DATED this day of , 199 .
Signature of Optionee (Signature must be guaranteed by
a bank or securities broker-dealer)
Signature Guarantee:
DECLARATION OF STOCK OPTION POSITION
(This form is to be completed by the Optionee.)
INCENTIVE STOCK OPTIONS
TO: The Vancouver Stock Exchange
RE: incentive stock options in La Teko Resources Ltd.
("Company") at a price of CDN $ per share, granted on the
day of , 199 (the "Options"). The Options are subject to
Paragraph (1b) of the Non-Qualified Stock Option Agreement dated and
are exercisable over the term which is set out in the Agreement.
I, , HEREBY CERTIFY that the aforesaid non-transferable options have
been granted to me in compliance with the requirements of V.S.E. Policy 23; and
more particularly that at the time of grant, I was not aware of any change in
the affairs of the Company which might have affected the trading price or value
of the Company's shares and which had not been disclosed to the public. If the
Company is classified as a Venture Company as of the date of this declaration, I
confirm that I have not been granted a stock option in the Company within 2
years of the date of grant of the above Options.
I am a director of the Company, or of , a subsidiary of the Company, or
I am an individual employed by , a company providing management services
to the Company. (If an employee, my job description is and I work
hours per week for the Company or its subsidiaries.)
I HEREBY FURTHER CERTIFY (complete either Part I or Part II as applicable):
PART I
THAT I do not currently have any outstanding options granted by any listed
company.
DATED this day of , 199 .
SIGNATURE:
PART II
THAT I hold as of the date of this Declaration outstanding stock options which
have been granted to me by the Company and/or other listed companies as follows:
Name of Listed Company Date of Grant Outstanding Balance
(Complete on separate sheet if insufficient space)
DATED this day of , 199
SIGNATURE:
Enforcement action by the Vancouver Stock Exchange, the British Columbia
Securities Commission or other regulatory authorities may result if a person
makes a statement in this document that, at the time, and in light of the
circumstances under which it was made, is a misrepresentation.
THIS DOCUMENT WILL BE PLACED IN THE COMPANY'S PUBLIC FILE
SCHEDULE OF OPTIONEES
NAME NUMBER EXERCISE EXPIRATION
OF PRICE DATE
SHARES
- ----------------- ------- -------- -------------
DIRECTORS
Gerald G. Carlson 500,000 $1.85 12/10/2001-04
Robert W. Gentry 100,000 1.60 11/16/2000-03
100,000 2.50 3/14/2001
Gordon Fretwell 100,000 1.60 11/24/2000-03
John R. Hardesty 100,000 1.60 11/16/2000-03
John S. Auston 100,000 2.41 06/18/2001-04
Douglas R. 100,000 2.41 06/18/2001-04
Beaumont
PREVIOUS DIRECTORS:
Jack Layne 100,000 1.60 8/17/1999
100,000 1.60 11/16/2000
David Tinsley 25,000 1.60 06/05/1997
NON-QUALIFIED STOCK OPTION
It is important that you retain this document. This original Non-Qualified
Stock Option must be delivered to the Company on exercise or transfer of the
option.
THIS NON-QUALIFIED STOCK OPTION (this "Option") is granted effective the 10th
day of December, 1996, by LA TEKO RESOURCES LTD. a British Columbia, Canada
corporation (the "Company") to Gerald G. Carlson ("Optionee").
1. Grant of Option. The Company hereby irrevocably grants to Optionee the
right and option to purchase all or any part of an aggregate of 100,000 shares
(the "Shares") of common stock, having no par value per share, of the Company
(the "Common Stock") on the terms and conditions hereinafter set forth. The
options are exercisable in increments of 25,000 Shares each over the following
terms:
Shares Term
------------ ----------------------
25,000 Shares 11/16/1995 - 11/16/2000
25,000 Shares 11/16/1996 - 11/16/2001
25,000 Shares 11/16/1997 - 11/16/2002
25,000 Shares 11/16/1998 - 11/16/2003
2. Exercise Price. The exercise price of this Option shall be CDN. $2.51 per
share (USD) $1.85) of Common Stock (the "Exercise Price").
3. Term of Option. Subject to the other provisions of this Option, this
Option may be exercised, in whole or in part, at any time or from time to time
on or before 5:00 p.m., Mountain Time on the dates indicated under Grant of
Option in Item 1 above.
4. Shareholder's Rights. The Optionee shall have the rights of a shareholder
only with respect to Shares fully paid for by Optionee under this Option.
5. Adjustment of Exercise Price and Number of Shares.
a) The number of Shares purchasable on the exercise of this Option and
the Exercise Price shall be adjusted appropriately from time to time as
follows:
i) In the event the Company shall declare dividend or make any other
distribution on any capital stock of the Company payable in Common Stock,
rights to purchase Common Stock, or securities convertible into Common
Stock or shall subdivide its outstanding shares of Common Stock into a
greater number of shares or combine such outstanding stock into a smaller
number of shares, then in each such event, the number of Shares subject to
this Option shall be adjusted so that the holder shall be entitled to
purchase the kind and number of Shares of Common Stock or other securities
of the Company which it would have owned or have been entitled to receive
after the happening of any of the events described above, had such Option
been exercised immediately prior to the happening of such event or any
record date with respect thereto; an adjustment made pursuant to this
paragraph a) shall become effective immediately after the effective date of
such event retroactive to the record date for such event.
ii) No adjustment in the number of Shares purchasable hereunder shall
be required unless such adjustment would require an increase or decrease of
at least 1% in the number of Shares purchasable on the exercise of this
Option; provided, however, that any adjustments which by reason of this
paragraph are not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
iii) Whenever the number of Shares purchasable on the exercise of this
Option is adjusted, as herein provided, the Exercise Price payable on
exercise shall be adjusted by multiplying the Exercise Price immediately
prior to such adjustment by a fraction, the numerator of which shall be the
number of Shares purchasable on the exercise of this Option immediately
prior to such adjustment and the denominator of which shall be the number
of Shares so purchasable immediately thereafter.
iv) Whenever the number of Shares purchasable on the exercise of this
Option or the Exercise Price of such Shares are adjusted, as herein
provided, the Company shall cause to be promptly mailed by first class
mail, postage prepaid, to the Optionee of this Option notice of such
adjustment or adjustments and shall deliver a resolution of the board of
directors of the Company setting forth the number of Shares purchasable on
the exercise of this Option and the Exercise Price of such Shares after
such adjustment, setting forth a brief statement of the facts requiring
such adjustment, together with the computation by which such adjustment was
made. Such resolution, in the absence of manifest error, shall be
conclusive evidence of the correctness of adjustment.
v) All such adjustments shall be made by the board of directors of
the Company, which shall be binding on the Optionee in the absence of
demonstrable error.
b) No adjustments shall be made in connection with:
i) the issuance of any Shares on the exercise of this Option;
ii) the conversion of shares of preferred stock;
iii) the exercise or conversion of any rights, options, warrants, or
convertible securities containing the right to purchase or acquire Common
Stock;
iv) the issuance of additional Shares or other securities on account
of the anti-dilution provisions contained in or relating to this Option or
any other option, warrant, or right to acquire Common Stock;
v) the purchase or other acquisition by the Company of any shares of
Common Stock, evidences of its indebtedness or assets, or rights, options,
warrants, or convertible securities containing the right to subscribe for
or purchase Common Stock; or
vi) the sale or issuance by the Company of any shares of Common
Stock, evidences of its indebtedness or assets, or rights, options,
warrants, or convertible securities containing the right to subscribe for
or purchase Common Stock or other securities pursuant to options, warrants,
or other rights to acquire Common Stock or other securities.
6. Notice of Certain Events. In the event of:
a) any taking by the Company of a record of the holders of any class of
securities of the Company for the purpose of determining the holders thereof who
are entitled to receive any dividends or other distribution, or any right to
subscribe for, purchase, or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other rights;
b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, or any transfer of all or
substantially all of the assets of the Company to any other person, or any
consolidation, share exchange, or merger involving the Company; or
c) any voluntary or involuntary dissolution, liquidation, or winding up
of the Company, the Company will mail to the Optionee(s) of this Option, at
least 20 days prior to the earliest date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend, distribution, or right; the amount and character of such dividend,
distribution, or right, or the date on which any such reorganization,
reclassification, transfer, consolidation, share exchange, merger, dissolution,
liquidation, or winding up of the Company will occur and the terms and
conditions of such transaction or event.
7. Method of Exercise. This Option may be exercised, in accordance with all
of the terms and conditions set forth in this Option, by delivery of this Option
together with a notice of exercise, a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference, indicating the number of
Shares which the Optionee then elects to purchase and making payment in full for
the Shares in cash. Optionee shall include with the notice of exercise a
certified or official bank check payable to the order of the Company in the
amount of the full option price of the Shares being purchased for cash.
As soon as practicable after receipt by the Company of such notice and of
payment in full of the option price of all the Shares of Common Stock with
respect to which the Option has been exercised, a certificate or certificates
representing such Shares of Common Stock shall be issued in the name of the
Optionee, or, if the Optionee shall so request in the notice exercising the
Option, in the name of the Optionee and another person jointly, with right of
survivorship, and shall be delivered to the Optionee. To the extent required by
the terms of this Option, all Common Stock shall be issued only upon receipt by
the Company of the Optionee's representation that the shares are purchased for
investment and not with a view to distribution thereof. If this Option is not
exercised with respect to all Shares subject hereto, Optionee shall be entitled
to receive a similar Option of like tenor covering the number of Shares with
respect to which this Option shall not have been exercised.
8. Availability of Common Stock. During the term of this Option, the Company
shall at all times keep available the number of Shares of Common Stock required
to satisfy the Option.
9. Limitation on Exercise. If the board of directors of the Company, in its
sole discretion, shall determine that it is necessary or desirable to list,
register, or qualify the Common Stock under any state or federal law, this
Option may not be exercised, in whole or part, until such listing, registration,
or qualification shall have been obtained free of any conditions not acceptable
to the board of directors.
If an officer or director, the Optionee shall not exercise the Option until such
time as the shareholders of the Company have approved the granting of the Option
by the Company and the exercise of the Option by the Optionee.
10. Restrictions on Transfer. The Option and the Shares subject to the Option
(collectively referred to as the "Securities") are subject to registration under
the Securities Act of 1933, as amended (the "Securities Act"), and any
applicable state securities statutes. Optionee acknowledges that unless a
registration statement with respect to the Securities is filed and declared
effective by the Securities and Exchange Commission and the appropriate state
governing agency, the Securities have or will be issued in reliance on specific
exemptions from such registration requirements for transactions by an issuer not
involving a public offering and specific exemptions under state statutes. Any
disposition of the Securities may, under certain circumstances, be inconsistent
with such exemptions. The Securities may be offered for sale, sold, or
otherwise transferred only if i) registered under the Securities Act, and in
some cases, under the applicable state securities acts, or, if not registered,
ii) only if pursuant to an exemption from such registration requirements and
only after the Optionee provides an opinion of counsel or other evidence
satisfactory to the Company to the effect that registration is not required. In
some states, specific conditions must be met or approval of the securities
regulatory authorities may be required before any such offer or sale. The
Company is under no obligation to register the Securities with the Securities
and Exchange Commission or any state agency. If rule 144 is available (and no
assurance is given that it will be), only routine sales of the Common Stock in
limited amounts can be made after one year following the acquisition date of the
Securities, as determined under rule 144(d), in accordance with the terms and
conditions of rule 144. The Company is under no obligation to make rule 144
available. In the event rule 144 is not available, compliance with regulation A
or some other disclosure exemption may be required before the Optionee can sell,
transfer, or otherwise dispose of the Securities without registration. The
Company and its registrar and transfer agent will maintain a stop transfer order
against the transfer of the Securities, and this Option and any other
certificate or agreement representing the Securities is subject to the following
legend:
THE SECURITIES REPRESENTED BY THIS OPTION, AGREEMENT, OR CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF
RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR
OTHER COMPLIANCE UNDER THE SECURITIES ACT.
The Company may refuse to transfer the Securities to any transferee who does not
furnish in writing to the Company the same representations and warranties set
forth in this paragraph and agree to the same conditions with respect to such
Securities as are set forth herein. The Company may further refuse to transfer
the Securities if certain circumstances are present reasonably indicating that
the proposed transferee's representations are not accurate. In any event, the
Company may refuse to consent to any transfer in the absence of an opinion of
legal counsel, satisfactory to and independent of counsel of the Company, that
such proposed transfer is consistent with the above conditions and applicable
securities laws.
11. Registration. The Company will utilize its best efforts to file and
maintain the effectiveness of a registration statement on form S-8 with the
Securities and Exchange Commission covering the issuance of the Shares issuable
on exercise of this option and to maintain the effectiveness of such
registration statement or a subsequent registration statement or other
qualification in order to permit the exercise of this Option as set forth
herein, although, there is no guaranty that such registration statement will be
effective when the Option is exercised. If no registration statement is
effective on the date of exercise of this Option, the Shares will not be issued
unless and until there is available to the Company evidence, including
representations from the Optionee, that such Shares are being acquired for
investment and not for resale, on which the Company may reasonably rely as to
the availability of an exemption from registration in issuing such Shares.
12. Assignment of Option. This Agreement shall not be assignable by the
Optionee or his legal representative otherwise than by Will or the law of
intestacy and the Option may be exercised, during his or her lifetime, only by
the Optionee.
If the Optionee dies on or prior to the Expiry Date while an officer or
director of the Company, the Option, or such part thereof as remains
unexercised, may be exercised by the legal representative of the Optionee at any
time up to and including (but not after) the date one (1) year following the
date of death of the Optionee or prior to the close of business on the Expiry
Date, whichever is earlier.
If the Optionee ceases to be an employee of the Company prior to the Expiry
Date, the Option shall, on the earlier of the Expiry Date or thirty (30) days
from the date the Optionee ceases to be an employee of the Company, terminate
and be of no further force or effect whatsoever as to such of the Optioned
Shares in respect to which the Option has not been exercised.
13. Amendments. If at any time during the continuance of this Agreement, the
parties deem it necessary or expedient to amend, alter or add to this Agreement,
they may do so by means of written agreement between them which shall supplement
and form part of this Agreement.
14. Withholdings. If the grant or exercise of this Option is subject to
withholding or other trust fund payment requirements of the U.S. Internal
Revenue Code or applicable Canadian or U.S. Province, state or local laws, such
requirements may, to the extent permitted by the then governing provisions of
the Code, be met by the holder of such Option delivering shares of common stock
or canceling options or other rights to acquire common stock or by the
withholding shares of common stock subject to such Option, all with a fair
market value equal to such requirements. To the extent that the holder of this
Option is subject to the provisions of section 16(b) of the U.S. Securities
Exchange Act of 1934, as amended, payment of the withholding and other trust
funds requirements of the foregoing methods shall be subject to the transaction
qualifying for an exemption from the provisions of section 16(b) under rule 16b-
3 promulgated pursuant to the Securities Exchange Act of 1934, as amended, or an
amendment or successor rule of like tenor.
15. Approval. The terms of this Agreement and any amendments are subject to
approval by the regulatory authorities having jurisdiction over the affairs of
the Company and, if the Optionee is an insider of the Company within the meaning
of the Securities Act, by the shareholders of the Company.
16. Total Stock Options. Total stock options do not exceed 10% of the
Company's issued and outstanding share capital (unless under a formal Stock
Option Plan) and total options to any one optionee does not exceed 5% of the
total issued and outstanding share capital of the Company.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
the day and year first written above.
LA TEKO RESOURCES LTD.
By /s/ Gordon J. Fretwell, Director
/s/ Gerald G. Carlson
Gerald G. Carlson
Signed, Sealed and Delivered
by Gerald G. Carlson
in the presence of:
/s/ Gordon J. Fretwell
Signature of Witness
Gordon J. Fretwell
Name (print)
467 Hadden Drive
Address
Lawyer
Occupation of Witness
<PAGE>
Exhibit A
Form of Exercise
(to be signed only upon exercise of Option)
TO: LA TEKO RESOURCES LTD.
The undersigned, the owner of the attached Option, hereby irrevocably elects to
exercise the purchase rights represented by the Option for, and to purchase
thereunder, shares of Common Stock of La Teko Resources Ltd. Enclosed
is payment in the amount of $ , the exercise price of the Common Stock
to be acquired, in the form of (insert description of manner of payment)
Please have the certificate(s) registered in the name of ,
Social Security No. and delivered to the following address:
If this exercise does not include all of the Common Stock covered by the
attached Option, please deliver a new option of like tenor for the balance of
the Common Stock to the undersigned at the foregoing address.
DATED this day of , 199 .
Signature of Optionee (Signature must be guaranteed by
a bank or securities broker-dealer)
Signature Guarantee:
<PAGE>
DECLARATION OF STOCK OPTION POSITION
(This form is to be completed by the Optionee.)
INCENTIVE STOCK OPTIONS
TO: The Vancouver Stock Exchange
RE: 500,000 incentive stock options in La Teko Resources Ltd. ("Company") at a
price of CDN $2.51 per share, granted on the 10th day of December, 1996
(the "Options"). The Options are subject to Paragraph (1b) of the Non-
Qualified Stock Option Agreement dated December 10th, 1996 and are
exercisable over the term which is set out in the Agreement.
I, Gerald F. Carlson, HEREBY CERTIFY that the aforesaid non-transferable options
have been granted to me in compliance with the requirements of V.S.E. Policy 23;
and more particularly that at the time of grant, I was not aware of any change
in the affairs of the Company which might have affected the trading price or
value of the Company's shares and which had not been disclosed to the public.
If the Company is classified as a Venture Company as of the date of this
declaration, I confirm that I have not been granted a stock option in the
Company within 2 years of the date of grant of the above Options.
I am a director of the Company, or of n/a , a subsidiary of the Company, or I
am an individual employed by n/a , a company providing management services to
the Company. (If an employee, my job description is n/a and I work n/a
hours per week for the Company or its subsidiaries.)
I HEREBY FURTHER CERTIFY (complete either Part I or Part II as applicable):
PART I
THAT I do not currently have any outstanding options granted by any listed
company.
DATED this day of , 199 .
SIGNATURE:
PART II
THAT I hold as of the date of this Declaration outstanding stock options which
have been granted to me by the Company and/or other listed companies as follows:
Name of Listed Company Date of Grant Outstanding
Balance
Dentonia Resources, Ltd. Oct. 5, 1994 100,000
(Complete on separate sheet if insufficient space)
DATED this 8th day of January, 1997.
SIGNATURE /s/ Gerald G. Carlson
Enforcement action by the Vancouver Stock Exchange, the British Columbia
Securities Commission or other regulatory authorities may result if a person
makes a statement in this document that, at the time, and in light of the
circumstances under which it was made, is a misrepresentation.
THIS DOCUMENT WILL BE PLACED IN THE COMPANY'S PUBLIC FILE
SCHEDULE OF SUBSIDIARIES
Exhibit 21.01
State of
Name Incorporation
La Teko Resources, Inc. Nevada
BEDFORD CURRY
CHARTERED ACCOUNTANTS
[LETTERHEAD]
Board of Directors
La Teko Resources Ltd.
625 Howe Street, Suite 500
Vancouver, B.C. V6C 2T6
Dear Sirs:
LETTER OF CONSENT
Bedford Curry & Co. hereby consents to the incorporation by reference into
Registration Statements on Form S-8, SEC File Nos. 33-00174, 33-95586 and 33-
21225, and the Registration Statement on Form S-3, SEC File No. 33-81886, of La
Teko Resources Ltd. (the "Company") of its report respecting the financial
statements of the Company as of December 31, 1996 and 1995, as contained in the
Company's annual report on Form 10-K for 1996, and hereby consents to being
named in such annual report as having rendered its opinion respecting the
financial statements.
/s/ Bedford Curry
Chartered Accountants
MINE DEVELOPMENT ASSOCIATES
MINE ENGINEERING SERVICES
La Teko Resources Ltd.
Letter of Consent
Mine Development Associates, Inc., hereby consents to the discussion
relating to the resource and reserve study dated March 10, 1996 prepared for
La Teko Resources Ltd. (the "Company") respecting the True North property near
Fairbanks, Alaska, as it is contained in the Company's annual report on Form
10-K for the fiscal year ended December 31, 1996. We also consent to the
incorporation by reference into the Registration Statements on Form S-8, SEC
File Nos. 33-00174, 33-95586 and 33-21225, and the Registration Statement on
Form S-3, SEC File No. 33-81886, of such discussion as it is contained in the
Form 10-K.
Sincerely,
MINE DEVELOPMENT ASSOCIATES, INC.
/s/ Neil B. Prenn, P.E.
President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1996, AND STATEMENTS OF OPERATIONS FOR THE TWELVE
MONTHS ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,041,205
<SECURITIES> 500,913
<RECEIVABLES> 15,918
<ALLOWANCES> 0
<INVENTORY> 6,295
<CURRENT-ASSETS> 3,264,263
<PP&E> 895,977
<DEPRECIATION> 685,261
<TOTAL-ASSETS> 14,491,032
<CURRENT-LIABILITIES> 567,218
<BONDS> 0
<COMMON> 18,217,342
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,491,032
<SALES> 2,509,850 (1)
<TOTAL-REVENUES> 2,611,733 (2)
<CGS> 54,633 (3)
<TOTAL-COSTS> 54,633 (3)
<OTHER-EXPENSES> 1,492,572
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,186
<INCOME-PRETAX> 970,332
<INCOME-TAX> 14,547
<INCOME-CONTINUING> (1,499,432)
<DISCONTINUED> 2,455,217
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 955,785
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
<FN>
PROCEEDS/GAIN FROM NON-RECURRING
SALES:
SALES COST
Newmont J/V $ 2,500,000 $ 52,752
Vehicles 9,850 1,881
$ 2,509,850 (1) 54,633 (3)
----------- ---------
Interest Earned 101,883
-----------
Total $ 2,611,733 (2) $ 54,633 (3)
=========== =========
</FN>
</TABLE>
