SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________________ to _______________
Commission file number - 1-7525
THE GOLDFIELD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 88-0031580
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 Rialto Place, Suite 500, Melbourne, Florida 32901
(Address of principal executive offices) (Zip Code)
(407) 724-1700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
There were 26,854,748 shares of common stock, par value $.10 per
share, of The Goldfield Corporation outstanding as of June 30, 1997.
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE GOLDFIELD CORPORATION
and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 4,262,550 $ 4,610,198
Accounts receivable and accrued billings 2,437,868 1,420,270
Current portion of notes receivable 76,875 39,771
Inventories (Note 3) 221,961 228,049
Costs and estimated earnings in excess
of billings on uncompleted contracts 370,143 600,302
Prepaid expenses and other current assets 279,513 63,794
Total current assets 7,648,910 6,962,384
Properties, net 4,166,150 4,187,288
Notes receivable, less current portion 854,831 875,100
Deferred charges and other assets
Deferred income taxes (Note 2) 628,000 860,000
Repurchased royalty at cost, less accumulated
amortization of $197,757 in 1997 and
$184,718 in 1996 121,693 134,732
Cash surrender value of life insurance 637,439 632,739
Total deferred charges and other assets 1,387,132 1,627,471
Total assets $14,057,023 $13,652,243
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 1,008,542 $ 954,366
Billings in excess of costs and estimated
earnings on uncompleted contracts 13,149 74,071
Income taxes payable (Note 2) 31,000 --
Total current liabilities 1,052,691 1,028,437
Deferred gain on installment sales 180,286 180,400
Total liabilities 1,232,977 1,208,837
Stockholders' equity
Preferred stock, $1 par value per share,
5,000,000 shares authorized; issued
and outstanding 339,407 shares of
Series A 7% voting cumulative
convertible stock 339,407 339,407
Common stock, $.10 par value per share,
40,000,000 shares authorized; issued
26,872,106 shares 2,687,211 2,687,211
Capital surplus 18,369,860 18,369,860
Retained earnings (deficit) (8,553,712) (8,934,352)
Total 12,842,766 12,462,126
Less common stock in treasury, 17,358
shares, at cost 18,720 18,720
Total stockholders' equity 12,824,046 12,443,406
Total liabilities and stockholders' equity $14,057,023 $13,652,243
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
THE GOLDFIELD CORPORATION
and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue
Electrical construction $3,559,162 $ 2,171,484 $6,292,688 $ 5,049,546
Mining 514,367 388,346 1,029,937 736,332
Royalty income 5,000 -- 5,000 --
Other income, net 79,589 88,416 175,564 188,186
Total revenue 4,158,118 2,648,246 7,503,189 5,974,064
Costs and expenses
Electrical construction 2,613,665 2,353,568 4,908,943 4,985,139
Mining 425,091 354,843 835,726 671,513
Depreciation and
amortization 246,507 229,493 481,530 462,709
General and administrative 319,340 278,855 621,471 572,965
Total costs and expenses 3,604,603 3,216,759 6,847,670 6,692,326
Income (loss) from operations
before income taxes 553,515 (568,513) 655,519 (718,262)
Income taxes (Note 2) 239,000 -- 263,000 --
Net income (loss) 314,515 (568,513) 392,519 (718,262)
Preferred stock dividends 5,940 5,940 11,879 11,879
Income (loss) available to
common stockholders $ 308,575 $ (574,453) $ 380,640 $ (730,141)
Income (loss) per share of
common stock (Note 4) $ 0.01 $ (0.02) $ 0.01 $ (0.03)
Weighted average number of
common shares outstanding 26,854,748 26,854,748 26,854,748 26,854,748
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
THE GOLDFIELD CORPORATION
and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net income(loss) $ 314,515 $(568,513) $ 392,519 $ (718,262)
Adjustments to reconcile
net income (loss) to
net cash provided from
(used by) operating
activities
Depreciation and
amortization 246,507 229,493 481,530 462,709
Deferred income taxes 208,000 -- 232,000 --
Deferred gain on
installment sales (56) (10,150) (114) (14,210)
Loss (gain) on sale of
property and equipment (9,607) 2,575 (38,244) (2,691)
Increase (decrease) in:
Accounts receivable
and accrued billings (444,846) (190,086) (1,017,598) 99,339
Inventories (16,286) (12,570) 6,088 (42,461)
Costs and estimated
earnings in excess of
billings on uncompleted
contracts 510,406 46,396 230,159 (273,417)
Prepaid expenses and
other current assets (68,842) 74,287 (215,719) 51,077
Cash surrender value of
life insurance -- -- (4,700) (4,701)
Increase (decrease) in:
Accounts payable and
accrued liabilities (86,065) (74,818) 54,176 (69,133)
Billings in excess of
costs and estimated
earnings on uncompleted
contracts (46,652) (34,870) (60,922) (33,162)
Income taxes payable 31,000 -- 31,000 --
Total adjustments 323,559 30,257 (302,344) 173,350
Net cash provided from
(used by) operating
activities 638,074 (538,256) 90,175 (544,912)
Cash flows from investing
activities
Proceeds from the
disposal of fixed
assets 10,500 1,700 76,637 8,008
Loans granted (23,568) (10,726) (33,566) (30,726)
Collections from notes
receivable 12,316 134,828 16,731 153,923
Purchases of fixed
assets (347,936) (93,416) (485,746) (290,504)
Payments made to acquire
fixed assets of Fiber
Optic Services -- -- -- (173,138)
Net cash used
by investing
activities (348,688) 32,386 (425,944) (332,437)
Cash flows from financing
activities
Payments of preferred
stock dividends (5,940) (5,940) (11,879) (11,879)
Net cash used by
financing
activities (5,940) (5,940) (11,879) (11,879)
Net increase (decrease) in
cash and cash
equivalents 283,446 (511,810) (347,648) (889,228)
Cash and cash equivalents
at beginning of period 3,979,104 4,070,392 4,610,198 4,447,810
Cash and cash equivalents
at end of period $4,262,550 $3,558,582 $4,262,550 $3,558,582
See accompanying Notes to Consolidated Financial Statements
</TABLE>
THE GOLDFIELD CORPORATION
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
Note 1 - Basis of Presentation
In the opinion of the management, the accompanying unaudited interim
consolidated financial statements include all adjustments necessary
to present fairly the financial position of the Company, the results
of its operations and changes in cash flows for the interim periods
reported. These adjustments are of a normal recurring nature. All
financial statements presented herein are unaudited. However, the
balance sheet as of December 31, 1996, was derived from the audited
consolidated balance sheet. These statements should be read in
conjunction with the financial statements included in the Company's
annual report on Form 10-K for the year ended December 31, 1996.
The results of operations for the interim periods shown in this
report are not necessarily indicative of results to be expected for
the fiscal year.
Note 2 - Income Taxes
The income tax provision (benefit) consists of the following:
<TABLE>
Three Months Three Months
Ended June 30, Ended June 30,
1997 1996
<S> <C> <S>
Current
Federal $ 5,000 --
State 26,000 --
31,000 --
Deferred
Federal 175,000 --
State 33,000 --
Total $239,000 --
Six Months Six Months
Ended June 30, Ended June 30,
1997 1996
Current
Federal $ 5,000 --
State 26,000 --
31,000 --
Deferred
Federal 195,000 --
State 37,000 --
Total $263,000 --
</TABLE>
Temporary differences and carryforwards which give rise to deferred
tax assets and liabilities as of June 30, 1997 and December 31, 1996
are as follows:
<TABLE>
June 30, December 31,
1997 1996
<S> <C> <C>
Deferred tax assets
Depletion, mineral rights and
deferred development and
exploration costs $ 324,000 $ 325,000
Accrued workers' compensation
costs 49,000 62,000
Accrued vacation and bonus 64,000 11,000
principally due to differences
in depreciation and valuation
write-downs 325,000 340,000
Contingent salary payments
recorded as goodwill for tax
purposes 6,000 --
Net operating loss carryforwards 2,445,000 2,881,000
Investment tax credit
carryforwards 239,000 264,000
Alternative minimum tax credit
carryforwards 261,000 256,000
3,713,000 4,139,000
Valuation allowance (3,085,000) (3,279,000)
Total net deferred tax assets 628,000 860,000
Deferred tax liabilities -- --
Net deferred tax assets $ 628,000 $ 860,000
</TABLE>
The Company has recorded a valuation allowance to reflect the
estimated amount of deferred tax assets which may not be realized.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary
differences become deductible. Management considers the projected
future taxable income and tax planning strategies in making this
assessment. The Company decreased the valuation allowance for net
deferred tax assets by approximately $194,000 for the six months
ended June 30, 1997 and decreased the valuation allowance $146,000
for the quarter ended June 30, 1997.
At June 30, 1997, the Company had tax net operating loss
carryforwards of approximately $7,000,000 available to offset future
regular taxable income, which if unused, will expire from 2000
through 2011.
Additionally, the Company at June 30, 1997 had investment tax credit
carryforwards of approximately $239,000 available to reduce future
Federal income taxes, which if unused, will expire from 1998 through
2000. In addition, the Company has alternative minimum tax credit
carryforwards of approximately $261,000 which are available to
reduce future Federal income taxes over an indefinite period.
Note 3 - Inventories
Inventories are summarized as follows:
<TABLE>
June 30, December 31,
1997 1996
<S> <C> <C>
Materials and supplies $101,374 $ 106,672
Industrial mineral products 53,581 62,983
Ores in process 67,006 58,394
Total inventories $221,961 $ 228,049
</TABLE>
Note 4 - Earnings (Loss) Per Share of Common Stock
Earnings (loss) per common share, after deducting dividend
requirements on the Company's Series A Stock of $11,879 in each of
the six month periods ended June 30, 1997 and 1996, were based on
the weighted average number of shares of Common Stock outstanding,
excluding 17,358 shares of Treasury stock for each of the periods
ended June 30, 1997 and 1996. The inclusion of Common Stock
issuable upon conversion of Series A Stock has not been included in
the per share calculations because such inclusion would not have a
material effect on the earnings (loss) per common share.
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations.
Results of Operations - Six Months Ended June 30, 1997 Compared to
Six Month Ended June 30, 1996.
Net Income (Loss)
The Company had pretax earnings of $655,519 and net income of
$392,519 for the six months ended June 30, 1997, compared to a net
loss of $718,262 for the six months ended June 30, 1996. Net income
for the six months ended June 30, 1997 includes an income tax expense
of $263,000, substantially all of which is not payable due to net
operating loss carryforwards.
Revenues
Total revenues for the six months ended June 30, 1997 were
$7,503,189, compared to $5,974,064 in the like 1996 period. The
increase in revenues was primarily attributable to a higher level of
activity in electrical construction operations.
Electrical construction revenue increased by 25% in the six months
ended June 30, 1997 to $6,292,688 from $5,049,546 for the six months
ended June 30, 1996. The increase in electrical construction
revenues was primarily due to a higher level of activity.
Revenue from mining operations for the six months ended June 30,
1997 increased by 40% to $1,029,937 from $736,332 for the six months
ended June 30, 1996. The increase in revenue from mining
for 1997 was primarily a result of new off-site construction contracts
utilizing existing mining personnel and equipment.
Operating Results
Electrical construction operations had operating profit of
$1,091,876 during the six months ended June 30, 1997, compared to an
operating loss of $222,984 for the six months ended June 30, 1996.
The increase in operating results was due to a higher level of
construction activity and generally improved profit margins. The
varying magnitude and duration of electrical construction projects
may result in substantial fluctuation in the Company's backlog from
time to time. At June 30, 1997, the approximate value of
uncompleted contracts was $5,900,000, compared to $ 4,000,000 at
February 14, 1997 and $2,300,000 at June 30, 1996.
During the six months ended June 30, 1997, operating income from
mining operations was $32,550, compared to an operating loss of
$91,299 during the six months ended June 30, 1996. Operating
profit(loss) includes royalty income and depreciation expense. The
improvement in operating results from mining operations in the
second quarter of 1997 was primarily a result of new construction
contracts. Royalty income for the second quarter of 1997 was $5,000
as compared to no royalty income for the second quarter of 1996.
During 1995, the lessee suspended mining operations at Harlan Fuel
Company. The original royalty agreement provided that the Company
was to receive annual minimum royalties in the amount of $150,000.
During the year ended December 31, 1996, the Company did not receive
any 1996 minimum royalty payments. Effective February 14, 1997, the
agreement was amended to provide for a payment of $20,000 and
monthly minimum payments of $5,000 until all minimum royalties are
collected. The expiration date of the royalty agreement will be
extended beyond 2002 to the extent necessary to permit payments of
the $150,000 per year minimum royalties. Such annual minimum
royalties will be recognized when realization of the income is
assured. The Company is continuing to amortize the royalty interest
on a straight line basis over the period ending January 2002.
The St. Cloud Mining Company, a wholly-owned subsidiary of the
Company ("St. Cloud"), sold 7,941 tons of natural zeolite during the
six months ended June 30, 1997, compared to 7,200 tons during the
six months ended June 30, 1996.
Surface and underground mining of base and precious metals have been
halted at St. Cloud since the third quarter of 1991 and the first
quarter of 1992, respectively, due to declining prices and mine
grades. St. Cloud's viability is sensitive to the future price of
base and precious metals, particularly silver.
During the six months ended June 30, 1997, The Lordsburg Mining
Company, a wholly-owned subsidiary of the Company ("Lordsburg"),
sold 15,970 tons of construction aggregate material, compared to
10,269 tons sold during the six months ended June 30, 1996. During
the six months ended June 30, 1996, Lordsburg sold 7,095 tons of
barren siliceous flux to copper smelters. Lordsburg did not sell
any barren siliceous flux during the six months ended June 30, 1997.
Production from underground mining at Lordsburg, which was suspended
in February 1994, had previously been intermittent due to low ore
grade and inconsistent smelter demand. The ore produced from the
mine was used by nearby copper smelters as precious metal bearing
siliceous flux. Future demand for underground ores cannot be
determined at this time.
Although the Company has continued limited production of
construction aggregates and siliceous flux at Lordsburg, a final
decision with respect to the future operations at Lordsburg has not
been reached.
Costs and Expenses
Total costs and expenses and the components thereof remained
relatively constant during the six months ended June 30, 1997 as
compared to the like period in 1996.
Electrical construction costs were $4,908,943 and $4,985,139 for the
six months ended June 30, 1997 and June 30, 1996, respectively.
Depreciation and amortization was $481,530 in the six months ended
June 30, 1997, compared to $462,709 in the six months ended June 30,
1996.
General corporate expenses of the Company were $644,471 in the six
months ended June 30, 1997, compared to $592,165 in the six months
ended June 30, 1996.
Results of Operations - Three Months Ended June 30, 1997 compared to
Three Months Ended June 30, 1996
Net Income(Loss)
The Company had pretax earnings of $553,515, and net income of
$314,515 for the three months ended June 30, 1997, compared to a net
loss of $568,513 for the three months ended June 30, 1996. Net
income for the three months ended June 30, 1997 includes an income
tax expense of $239,000.
Revenues
Total revenues for the three months ended June 30, 1997 were
$4,158,118, compared to $2,648,246 in the like 1996 period. The
increase in revenues was primarily attributable to electrical
construction operations.
Electrical construction revenue increased by 64% in the three months
ended June 30, 1997 to $3,559,162 from $2,171,484 for the three
months ended June 30, 1996. The increase in electrical construction
revenues was primarily due to increased level of construction
activity.
Revenue from mining operations for the three months ended June 30,
1997 increased by 32% to $514,367 from $388,346 for the second
quarter for 1996. The increase in revenue from mining for 1997 was
primarily a result of new off-site construction contracts.
Operating Results
Electrical construction operations had operating profit of $796,135
during the three months ended June 30, 1997, compared to an
operating loss of $326,735 for the three months ended June 30, 1996.
The increase in operating results was due to a higher level of
activity and generally improved profit margins. The varying
magnitude and duration of electrical construction projects may
result in substantial fluctuation in the Company's backlog from time
to time.
During the three months ended June 30, 1997, mining operations had
income of $9,131, compared to an operating loss of $41,739 during
the three months ended June 30, 1996. Operating profit(loss)
includes royalty income and depreciation expense. The increase in
operating results from mining operations in the second quarter of
1997 was primarily due to new construction contracts.
St. Cloud sold 3,941 tons of natural zeolite during the three months
ended June 30, 1997, compared to 3,164 tons during the three months
ended June 30, 1996.
During the three months ended June 30, 1997, Lordsburg sold 8,707
tons of construction aggregate material, compared to 7,040 tons sold
during the three months ended June 30, 1996. During the three months
ended June 30, 1996, Lordsburg sold 4,979 tons of barren, siliceous
flux to copper smelters. Lordsburg did not sell any barren,
siliceous flux during the three months ended June 30, 1997.
Costs and Expenses
Electrical construction costs were $2,613,665 and $2,353,568 for the
three months ended June 30, 1997 and June 30, 1996, respectively.
The increase during the 1997 period resulted from the higher level
of activity.
Depreciation and amortization was $246,507 in the three months ended
June 30, 1997, compared to $229,493 in the three months ended June
30, 1996.
General corporate expenses of the Company were $331,340 in the three
months ended June 30, 1997, compared to $288,455 in the three months
ended June 30, 1996.
Liquidity and Capital Resources
Cash and cash equivalents as of June 30, 1997 were $4,262,550,
compared to $4,610,198 as of December 31, 1996. Working capital at
June 30, 1997 was $6,596,219, compared to $5,933,947 at December 31,
1996. The Company's ratio of current assets to current liabilities
was 7.3 to 1 at June 30, 1997, compared to 6.8 to 1 at December 31,
1996.
The Company paid cash dividends on its Series A Preferred Stock in
the amount of $11,879 in each of the six month periods ended June
30, 1997 and 1996. No cash dividends have been paid by the Company
on its Common Stock since 1933, and it is not expected that the
Company will pay any cash dividends on its Common Stock in the
immediate future.
Pursuant to an unsecured line of credit agreement between Southeast
Power and SunTrust Bank of Central Florida, N.A. (guaranteed by the
Company), Southeast Power may borrow up to $1,000,000 at the bank's
prime rate of interest. This credit line expires April 30, 1998, at
which time the Company expects to renew it for an additional year.
No borrowings were outstanding under this line of credit during the
six months ended June 30, 1997 and 1996. However, beginning in 1996
$100,000 of this line of credit was reserved for a standby letter of
credit.
The Company's capital expenditures for the six months ended June 30,
1997 were $485,746, compared to $463,642 for the six months ended
June 30, 1996. The capital expenditures for 1996 include the
acquisition of the fixed assets of Fiber Optic Services for
$173,138.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders.
(a) The Annual Meeting of Stockholders was held on June 3, 1997.
(b) This information is omitted pursuant to instruction 3.
(c) At the Annual Meeting of Stockholders, the stockholders
elected 5 Directors. Set forth below are the votes cast
for the election of Directors:
<TABLE>
For Withheld
<S> <C> <C>
John P. Fazzini 19,793,006 1,221,826
Danforth E. Leitner 19,797,356 1,217,476
James Sottile 19,742,451 1,272,381
John H. Sottile 19,819,276 1,195,556
John M. Starling 19,808,908 1,205,924
</TABLE>
The stockholders also voted to approve the appointment of
KPMG Peat Marwick LLP as Independent Accountants. Votes
cast in favor were 20,362,458, against were 444,822 and
abstaining were 207,552.
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits in accordance with the provisions of Item 601 of
Regulation S-K
10-6(d) Amendment dated July 18, 1997 to Promissory Note
dated April 12, 1993 between The San Pedro Mining
Corporation, Royalstar Resources Ltd., and Royalstar
Southwest (now assumed by Royalstar Washington, Inc.).
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed during the quarter
ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE GOLDFIELD CORPORATION
(Registrant)
Date: August 14, 1997 /s/ John H. Sottile
(John H. Sottile)
President and Chief
Executive Officer
Date: August 14, 1997 /s/ Stephen R. Wherry
(Stephen R. Wherry, C.P.A.)
Vice President, Treasurer
and Chief Financial Officer
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997 Commission File No. 1-7525
THE GOLDFIELD CORPORATION
EXHIBITS
August 14, 1997
Royalstar
Resources Ltd.
Please respond to:
1019 8th Street, Suite 3095
Golden, Colorado 80401
Phone 303-277-1222
Fax 303-277-0006
July 18, 1997
Revised
Mr. John H. Sottile, President
Florida Transport Corporation VIA FAX & MAIL
100 Rialto Place, Suite #500 407-724-1703
Melbourne, Florida 32901
Re: Promissory Note dated April 12, 1993 executed by The
San Pedro Mining Corporation, Royalstar Resources
Ltd., and Royalstar Southwest (now assumed by
Royalstar Washington, Inc.) In favor of Florida
Transport Corporation in the original amount of
$1,170,000.
Dear Mr. Sottile:
In the last two weeks you and I have engaged in several telephone
discussions related to the obligation of San Pedro Mining
Corporation, et al under the above-mentioned Promissory Note (the
"Note") dated April 12, 1993 executed by the San Pedro Mining
Corporation, Royalstar Resources Ltd., and other Royalstar
affiliates (jointly "Royalstar") in favor of Florida Transport
Corporation (hereinafter "Florida Transport").
Your accountant has informed Royalstar that as of July 12, 1997
Royalstar is delinquent on the above-mentioned Note in the amount of
US$44,254.63. An additional payment of approximately $15,000 is due
August 12, 1997 bringing the total amount due August 12th to
$59,254.63 plus interest accrued from July 12, 1997.
In addition, on February 18, 1997 Royalstar agreed to and signed a
Letter Agreement with Florida Transport and a Bill of Sale in favor
of Florida Transport, attached hereto as Exhibit A, for a certain
list of equipment then owned by San Pedro and located at the San
Pedro facilities near Santa Fe, New Mexico in payment of $150,000
then due to Florida Transport. That Letter Agreement provided an
option for Royalstar to repurchase the equipment listed in the Bill
of Sale from Florida Transport for $150,000 at any time on or before
April 18, 1997. That date was later extended by Florida Transport
until June 30, 1997. Royalstar did not exercise its right to
repurchase that equipment because of certain financial difficulties.
As you are aware Royalstar Resources Ltd. has entered into a
Contract with Globex Mining Enterprises, Inc. (Globex) for the sale
of Royalstar's interest in Gold Capital Corporation (Tonkin Springs
Project, Nevada). This sale is scheduled to close on or before
August 30, 1997. Globex has informed Royalstar that all issues
leading toward closing are on schedule and they expect to close on
or before the end of August. Upon Closing, Royalstar will receive
approximately Cdn$5.8 million which will be used, in large part, to
pay outstanding bills - including that owed to Florida Transport.
As we discussed earlier this week Royalstar proposes, with your
concurrence, to settle the Florida Transport account in the
following manner:
1. Following Closing of the Globex Arrangement and on or
before September 12, 1997 Royalstar will bring the existing
account outstanding up to date. We anticipate this will amount
to the existing amount due through, and including September 12,
1997, of US$74,254.63 plus interest from June 12, 1997;
2. On or before September 12, 1997 Royalstar will also repurchase
the list of equipment covered by the February 18, 1997 Bill of
Sale to Florida Transport for a total price of $150,000;
3. Royalstar will pre-pay $50,000 in payments to Florida Transport
on or before September 12, 1997. This pre-payment is to be
retained and applied by Florida Transport against the final
three monthly payments under the Promissory Note;
4. Royalstar will establish a policy to make monthly payments
required by the above-mentioned Note on a prompt and timely
basis; and
5. This settlement proposal is subject to: a) a timely Closing of
the Globex Arrangement; and b) concurrence of the Board of
Directors of Royalstar, such concurrence is anticipated. In
the event the Globex Arrangement does not conclude in a timely
fashion, Royalstar will promptly advise Florida Transport and
the parties will attempt to resolve all outstanding matters in
a businesslike fashion.
Mr. Sottile, as the new management of Royalstar I certainly
understand your past problems with Royalstar on this account and
appreciate your willingness to work with new management to resolve
the situation on an equitable basis. If this proposal meets with
your agreement, please indicate to me your concurrence and have your
Mr. Wherry provide me, prior to August 30, 1997, the correct amount
of principal and interest due through September 12, 1997.
If you have any questions or concerns related to this proposed
settlement, please feel free to contact me at your convenience.
Royalstar looks forward to re-establishing a good working
relationship with Florida Transport.
Sincerely,
ROYALSTAR RESOURCES LTD.
/s/ Paul C. Jones
Paul C. Jones
Executive Vice President
Agreed and Accepted:
FLORIDA TRANSPORTATION CORPORATION
/s/ John H. Sottile
John H. Sottile, President
Enclosure
Appendix A - Letter Agreement and Bill of Sale dated February
18, 1997 between Royalstar and Florida Transport.
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