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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT No. 1
to
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year 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 0-4395
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COBB RESOURCES CORPORATION
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(Exact name of registrant as specified in its charter)
New Mexico 85-0206160
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 East Jackson, West Columbia, Texas 77486
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (409) 345-5666
------------------------
Securities registered pursuant to Section 12(b) of the Act: None
---------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
----------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 of 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 [ ]
As of September 15, 1997, there were outstanding 8,534,257 shares of the
Registrant's $.10 par value Common Stock, and the aggregate market value held by
non-affiliates was approximately $175,000.
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Table of Contents
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PART I
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Item 1. Business......................................................... 1
Item 2. Properties....................................................... 6
Item 3 Legal Proceedings................................................ 6
Item 4. Submission of Matters to a Vote
of Security Holders.............................................. 7
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.................................. 7
Item 6. Selected Financial Data.......................................... 7
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations................. 8
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk............................................... 11
Item 8. Financial Statements............................................ 11
Item 9. Changes in and Disagreements with
Accountant on Accounting and Financial Disclosure............... 11
PART III
Item 10. Directors, Executive Officers, Promoters
and Control Persons; Compliance with Section 16(a)
of the Exchange Act............................................. 12
Item 11. Executive Compensation.......................................... 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management.................................................. 14
Item 13. Certain Relationships and Related Transactions.................. 14
PART IV
Item 14. Exhibits, Financial Statements
and Reports on Form 8-K......................................... 15
SIGNATURES ...................................................................... 16
</TABLE>
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PART I
Item 1. Business.
GENERAL DEVELOPMENT AND DESCRIPTION OF BUSINESS
Cobb Resources Corporation (the "Company") is a New Mexico corporation
which was engaged primarily in the mining and oil and gas sectors through leases
under venture developments with other parties or held by the Company for
evaluation, development or possible resale. Since its incorporation in 1969 the
Company's business evolved from its early emphasis on the acquisition and
development of uranium properties to the purchase through the 1980s of the Chace
Oil Company, then a wholly owned subsidiary of the Company, with interests in
the oil and gas sector. Following approval by its stockholders of the sale by
Chace of Chace's oil and gas properties and related assets in 1992, the Company
turned its focus to its remaining properties and plans for their sale or future
development. Through small leasehold acquisitions, the Company continues to
maintain a limited speculative stake in minerals and oil and gas exploration and
development.
MINING SECTOR
In its initial stages in the 1960s and 1970s the Company was engaged
primarily in the acquisition, exploration and development of mineral leases
including precious metals, primarily gold and solver, as well as uranium leases
and base metals such as zinc. The Company commenced production and shipment of
uranium ore in 1978. After several years of successful production, uranium
operations were discontinued following the severe worldwide price downturn in
the uranium market. Thereafter, the Company's interests in uranium properties
were written off as discontinued operations.
LONDON MINE. During 1978 the Company acquired certain leases pertaining to
the London mine, historically a major gold producer located in central Colorado
(the "London Mine"). Subsequently the Company entered into a joint venture
agreement ("London Mine Venture") with Boulder Gold, Inc., a Colorado
corporation ("Boulder") pursuant to which Boulder operated the London Mine. The
London Mine interest consisted of mining leases covering approximately 300
patented and unpatented claims. During May 1988, the London Mine, which had been
worked by various independent miners and other persons from time to time since
the late 1800s, was reopened by the operator and was produced for approximately
fourteen months until again being closed during the summer of 1989. The primary
reasons for the closing of the London Mine were the declining prices of gold,
less than projected recovery ratios and the inability to reach significant
economies of scale in operations.
In September 1990 the London Mine Venture executed a mining venture
agreement with Alma American Mining Corporation, a Colorado corporation ("Alma")
to form the Alma London Joint Venture (the "Alma Venture") for further
exploration, development and operation of the London Mine by Alma. Under the
Alma Venture, Alma operated the Alma Venture and participated with a 50%
interest, while the Company and Boulder each retained a 25% interest. Based upon
the results of such renewed exploration and drilling operations and the
continued weakness of gold prices, during September 1991 Alma terminated its
management of and participation in the Alma Venture and control of the London
Mine reverted back to the London Mine Venture.
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During June 1992, notice of intent to cancel the London Mine lease was
given to the owner of the underlying fee interests in the London Mine. Following
such lease termination, the permitted rights and obligations to which operations
of the London Mine were subject, reverted to the fee owner. As a result, the
London Mine Venture completed the liquidation of all of its assets and
liabilities and the joint venture agreement was terminated.
The Company was previously also involved in the development and evaluation
of other precious metal base metal and uranium properties located in Colorado
and New Mexico. In June 1994 the Company transferred certain mining properties
including those commonly known as the London Mine, Ambrosia Lake Mine,
Vindicator Mine, and the Johnny Bull Mine, including without limitation any and
all residual rights to mining claims and mineral interests to Southwest
Resources, Inc., a wholly-owned subsidiary of the Company. These mining
properties had been fully written off in previous years as discontinued mining
operations. The Company retained royalty interests in the Copper Flat property
and a minimal interest in a limestone mineral prospect. The common stock of
Southwest Resources, Inc., was later sold to Mr. George O. Lotspeich, the former
President and a former director of the Company.
COPPER FLAT PROPERTY. Pursuant to an agreement with Hydro Resources
Corporation, a New Mexico corporation owned substantially by Mr. George O.
Lotspeich, the former President and a former director of the Company ("Hydro"),
the Company sold the Copper Flat property in July 1989 to Copper Flat Mining
Company, Ltd., a Colorado corporation ("CFMC"). Proceeds to the Company which
were paid at closing included the first year's annual minimum royalty of
$150,000 and an expense reimbursement of $25,000. The agreement with CFMC
provides for continuing minimum annual royalty payments of $150,000 until
production begins. Thereafter royalties are 2-1/2% Net Smelter Return ("NSR")
until the earlier of payout or five years and 5% NSR thereafter. NSR refers to
gross proceeds from sales of concentrates less transportation costs and
penalties. After the initial royalty payment to the Company of $150,000, the
Company and Hydro were to each receive 50% of all future payments, after
reimbursement of expenses. In an agreement entered into between the Company and
Hydro dated April 5, 1991, Hydro reconveyed a portion of its royalty and
reversionary rights in the Copper Flat property to the Company. As a result, the
Company will receive 51% of all future royalty payments after reimbursement of
expenses, and Hydro will receive the remaining 49% of each royalty payment. In
the event the Copper Flat property reverts under the agreement with CFMC, the
Company and Hydro would receive a 51% and a 49% interest, respectively, in the
property. Annual royalty payments from the Copper Flat property are due and
payable not later than September 30 of each year, although such payment may be
paid within a 60 day grace period following written notification and demand. The
payment for the next annual royalty is expected to be received by the Company
during September 1997.
On January 26, 1994, the Company and Hydro entered into an agreement with
Alta Gold Company, a Nevada Corporation, ("Alta") whereby the royalty interests
held by the Company and Hydro in the Copper Flat property would be adjusted in
order to make the development of the Copper Flat property viable. In
consideration of the foregoing, Alta agreed to provide the Company/Hydro with
375,000 restricted shares of Alta stock within thirty days of Alta's acquisition
of the Copper Flat property. At any time within two years from the date on which
the stock is issued, Alta shall have the right to repurchase 125,000 shares for
$4.00 per share, upon giving the Company/Hydro thirty days notice. The
Company/Hydro will have the option, upon written demand to Alta within thirty
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days after the second anniversary date of the stock issuance, if the market
price of the stock on the second anniversary is less than $4.00 per share, to
demand that Alta pay to the Company/Hydro the difference between $4.00 per share
and the market price per share on the second anniversary date as multiplied by a
maximum of 250,000 shares. Alta shall have sixty days from the date of said
demand to pay same.
On June 14, 1994 Alta acquired the Copper Flat property and thereafter on
June 22, 1994 Alta issued to the Company its pro rata 51% of the 375,000 shares
of Alta common stock. At that date, the market price of the Alta common stock as
traded on NASDAQ was $1.25 per share. As a result of the transaction, the
Company reported a net gain of $679,394. The Company's interest in the Copper
Flat property had been previously written off as discontinued mining operations.
At various times in July and August 1996, the Company sold all its holdings
totaling 191,250 shares of common stock in Alta for combined net proceeds of
$674,173. In accordance with the agreement, Alta paid the Company $55,781 in
September 1996 which represented the difference between $4.00 per share and the
market price per share on the second anniversary date of the agreement.
As a result of the agreement, Alta will be obligated to pay the
Company/Hydro a 2-1/2% Net Smelter Return for as long as Alta operates the
Copper Flat property which amends the 5% Net Smelter Return as above. The annual
minimum royalty payment will be credited against future production royalties
after Alta acquires the Copper Flat property. If the Copper Flat property is not
in production at the end of said five year period, the annual minimum royalty
payment will no longer be credited against future production royalty. In no
event, however, will the production royalty due the Company/Hydro be less than
$150,000 per year.
The Company/Hydro also granted Alta a Right of First Refusal on the royalty
interest held. Alta will have sixty days from the date it is notified to
exercise its Right of First Refusal. The Right of First Refusal granted will
have a term of 10 years from the date Alta exercises its option to purchase the
Copper Flat property.
OIL AND GAS SECTOR
The Company entered the business of oil and gas exploration and development
through acquisition of Chace Oil Company, Inc. ("Chace") in 1980. The Company's
oil and gas operations were conducted principally through wholly-owned
subsidiaries and a series of limited partnerships and joint ventures sponsored
by Chace as to which Chace served as operator and general partner. Chace's
principal area of interest was in the San Juan Basin in northwestern New Mexico.
Chace's oil and gas leases were acquired through farmout agreements with various
companies and individuals and were held by production.
As part of its exploration and production activities, the Company has
owned, acquired and sold oil and gas leases and other mineral interests and
conducted exploration and development activities for its own account and for
joint venture or partnership accounts. In order to spread the risks inherent in
exploration and development activities, the Company generally attempted to
include participation from third parties.
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During 1991 the Company entered into an Asset Purchase Agreement with
Golden Oil Company, a Delaware corporation, ("Golden"), which provided for the
sale to Golden of substantially all of the Company's and Chace's oil and gas
properties and related oil and gas assets for consideration of 5,132,563 shares
of Golden Common Stock, subject to certain adjustments. Such transaction was
approved and ratified by the Company stockholders at their meeting in March
1992. Following consummation of the transaction, the Company distributed ninety
percent of the Golden shares to Company stockholders.
The Company participated in the successful completion of two gas wells
located in the Permian Supai Formation on the crest of the St. John's Anticline
in Arizona. There were plans to drill five additional wells to increase
producibility for the industrial parks being developed to utilize carbon dioxide
reserves. The land lease holdings exceed 40,000 acres covering three known
surface structures. The Company had a 5 percent working interest in the Arizona
project.
During March 1997, the Company exchanged its working interest in the
Arizona project for 115,385 shares of common stock of Arizona Resources
Industries, Inc., a Canadian company. During April 1997, the Company entered
into a stock purchase and voting agreement with Ridgeway Petroleum Corp., a
Canadian company, whereby the Company will receive 115,385 shares of
unrestricted common stock of Ridgeway Petroleum Corp. in exchange for the
115,385 shares of Arizona Resources Industries, Inc. As a result of these
transactions, the Company now has only limited oil and gas related assets.
OTHER INFORMATION CONCERNING THE BUSINESS
GOVERNMENT REGULATION. Mining operations are subject to extensive federal,
state and local regulations. Permits must be obtained from various federal,
state and local agencies prior to the establishment of any mining and milling
operations. The Company has not experienced difficulty obtaining such required
permits for its past operations and believes that it is in substantial
compliance with regulations pertaining to its operations. The Company believes
its costs to comply with such laws have been generally consistent with the
levels experienced throughout the industry. However, the Company can give no
assurance that permits for any future mining or milling operations will continue
to be obtainable or that the associated costs to comply with laws concerning
government regulations will be affordable for any future mining operations. The
Company cannot predict future legislation or regulations that may be passed or
adopted which could require additional expenses, capital expenditures,
restrictions or delays in operations which could have a materially adverse
effect on the value of the Company's mining lease holdings or its mining or
minerals operations.
The Company's domestic production and sale of oil and gas are subject to
regulation by the Department of Energy. Rates of production have for many years
been subject to federal and state conservation laws and the petroleum industry
has been subject to federal tax laws dealing specifically with the industry. The
Company is subject to various federal, state and local regulations regarding,
among other things, environmental and ecological matters. While environmental
laws affecting oil and gas operations may potentially require significant
capital outlays, such laws and related regulations did not materially hinder or
adversely affect the Company's production and sale of oil and gas.
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COMPETITION. The Company's mining operations have competed with other
entities which have financial and other resources greater than those of the
Company. The acquisition, exploration, development, production and sale of
precious and base metals, are subject to many factors which are outside the
Company's control.
The exploration for and development of minerals is highly speculative and
involve greater risks than many other businesses. The Company's mining
operations, in addition to being subject to environmental issues, are subject to
operating hazards and risks which are normal in the development of mineral
properties, such as encountering unusual or unexpected formations. Unforeseen or
uninsured losses or liabilities might occur which could adversely affect the
Company's ability to operate.
The Company competes with numerous other parties in the exploration and
acquisition of oil and gas reserves, in the marketing of oil and gas and in the
raising of funds to explore for oil and gas. The Company's competitors include
major oil companies, independent oil companies and individuals, many of which
have financial resources, staffs and facilities substantially greater than those
of the Company. Despite product price fluctuations, competition remains intense
for the acquisition of oil and gas prospects and properties.
Competitive conditions in marketing of products are influenced by factors
including the production volume of other domestic crude oil and crude oil
imports; the proximity of pipelines to producing properties; the regulation by
states of allowable rates of production; and the regulation by federal
authorities of the marketing of crude oil and natural gas. All of the foregoing
are variable factors which are influenced by economic and political forces
beyond the Company's control and which can not be predicted with assurance.
EMPLOYEES. At June 30, 1997, the Company had one full time employee. In
addition, the Company periodically employs part time personnel and retains
outside professionals which provide accounting, legal, administrative and other
services.
ADDITIONAL INFORMATION. The Company's business does not presently require
expenditure of substantial funds for research and development. Sales of oil and
gas tend to be influenced by factors including local demand, the availability of
transportation and seasonal weather conditions with increased sales during the
colder winter months. The Company does not believe that any other materials
aspects of its business are significantly seasonal in nature.
Other than mineral leases with various state, federal and private entities,
the Company has no material mining patents, trademarks, licenses, franchises or
concessions.
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ITEM 2. PROPERTIES.
OFFICE FACILITIES
The Company's principal executive office is located at 302 East Jackson,
West Columbia, Texas 77486.
MINING PROPERTIES
The Copper Flat property is located in the Hillsboro Mining District,
Sierra County, New Mexico approximately five miles northeast of Hillsboro, New
Mexico. The property is accessible by private unpaved roads and consists of
unpatented lode and placer mining claims, unpatented mill site claims and
patented mining claims. Geological reports support primarily copper deposits
although gold, silver and molybdenum are indicated in lesser amounts.
ITEM 3. LEGAL PROCEEDINGS.
Other than routine litigation incidental to the Company's business, the
following summarizes the legal proceedings of which management is aware and in
which the Company or its wholly-owned subsidiaries and any of their directors or
officers are party:
On October 30, 1990, a mining joint venture (the "Venture") in which the
Company was previously involved, received notice from the United States
Environmental Protection Agency ("EPA") that the Venture was believed by the EPA
to be a "potentially responsible party" for the release of certain allegedly
hazardous substances at a site located in central Colorado. The Venture operated
the facility for only a brief period, but may be required to bear its share of
any costs incurred in connection with this matter. Any such amounts for which
the Company may ultimately be held liable may not be adequately covered by
insurance.
The Company believes that other parties have taken appropriate response
action required at this central Colorado site and have obtained EPA approval of
their cleanup actions. In the opinion of the Company's management and based on
independent advice from professional experts engaged to assess the site, it
appears unlikely that the Company will be responsible to bear material liability
in this matter.
The Company was notified by the operator of the London Mine Venture ("LMV")
that the venture had received on December 8, 1991, a notice of violation from
the Colorado Department of Health ("Department") in connection with alleged
noncompliance with certain amended standards of water discharge permits at the
London Mine from July 1991 through October 1991. The London Mine was operated
during this period by the operators of each of the Alma London Joint Venture and
the LMV. The notice of violation included a cease and desist order with respect
to further violations and notes the possibility of imposition of significant
fines. To date, while the Department has not assessed any fines, the Company is
not able to assess fully the extent to which, if any remedial action is
determined to be necessary, the Company may be held responsible for any such
required remediation, and there can be no assurance that the ultimate resolution
of this matter will not have a material adverse effect on the Company in the
future.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to vote by security holders during the fourth
quarter of the fiscal year ended June 30, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's trading symbol is COBB. The ranges of reported high and low
bid quotations for the Company's Common Stock for each quarterly period within
the two years ended June 30, 1997 are set forth below. Quotations are as
reported by the National Quotation Bureau or members of the National Association
of Securities Dealers who maintain a market in the Company's Common Stock on the
OTC Bulletin Board. Such quotations represent prices between dealers without
retail markup, markdown or commissions and do not necessarily represent actual
transactions.
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HIGH LOW
QUARTER ENDED BID BID
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June 30, 1997 $0.15 $0.06
March 31, 1997 0.15 0.06
December 31, 1996 0.15 0.06
September 30, 1996 0.15 0.06
June 30, 1996 $0.15 $0.06
March 31, 1996 0.15 0.06
December 31, 1995 0.15 0.06
September 30, 1995 0.15 0.06
</TABLE>
As of September 15, 1997 there were approximately 1,200 shareholders of
record of the Company's Common Stock.
The Company has not paid any cash dividends on its Common Stock and does
not expect to do so in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial information has been derived from, and is
qualified by reference to and should be read in conjunction with, the Company's
Consolidated Financial Statements and Notes thereto included elsewhere herein.
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YEARS ENDED JUNE 30,
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1997 1996 1995 1994 1993
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Revenues $ 426,329 $ 95,447 $ 125,993 $ 946,944 $ 90,000
Net earnings (loss) 126,835 (45,492) (1,244) 855,944 (45,000)
Net earnings (loss) per
common share .01 (.01) (.00) 1.00 (.01)
Total assets 1,125,338 1,050,221 1,033,946 676,000 264,000
Long-term debt 34,053 108,942 13,862 -- --
Stockholders' equity 1,059,688 938,433 1,016,916 1,024,160 168,216
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere in this
Report. See Financial Statements. Certain statements in the following
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") are forward looking statements. Words such as "expect",
"anticipates", "estimates" and similar expressions are intended to identify
forward looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected.
OVERVIEW
Cobb Resources Corporation's (the "Company") operations are funded
primarily through internally generated funds from operations and the sale of
certain marketable equity securities. The Company is currently placing renewed
emphasis on its minerals sector and selective oil and gas prospects. Management
intends to continue to hold fixed and administrative expenditures to low levels
which are consistent with the Company's balance sheet financial ratios and
anticipated income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of operating income has been the royalty
interest on its Copper Flat property in southern New Mexico and proceeds from
the sale of certain marketable equity securities and office building. Since 1990
the Copper Flat property has been held for possible development by Copper Flat
Mining Company, Ltd., a subsidiary of Gold Express Corporation ("Gold Express")
with the payment of annual delay rentals to the Company of $150,000 per year on
a gross basis. Such amounts are then divided on a 51/49% basis with Hydro
Resources Corporation. Annual royalty payments from the Copper Flat property are
due and payable not later than September 30 of each year, although such payment
may be paid within a 60 day grace period following written notification and
demand. The payment for the next annual royalty is expected to be received by
the Company during September 1997.
On January 26, 1994, the Company and Hydro entered into an agreement with
Alta Gold Company, a Nevada Corporation, ("Alta") whereby the royalty interests
held by the Company and Hydro in the Copper Flat property would be adjusted in
order to make the development of the Copper Flat property viable. In
consideration of the foregoing, Alta agreed to provide the Company/Hydro with
375,000 restricted shares of Alta stock within thirty days of Alta's acquisition
of the Copper Flat property. At any time within two years from the date on which
the stock is issued, Alta shall have the right to repurchase 125,000 shares for
$4.00 per share, upon giving the Company/Hydro thirty days notice. The
Company/Hydro will have the option, upon written demand to Alta within thirty
days after the second anniversary date of the stock issuance, if the market
price of the stock on the second anniversary is less than $4.00 per share, to
demand that Alta pay to the Company/Hydro the difference between $4.00 per share
and the market price per share on the second anniversary date as multiplied by a
maximum of 250,000 shares. Alta shall have 60 days from the date of said demand
to pay same.
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On June 14, 1994 Alta acquired the Copper Flat property and thereafter on
June 22, 1994 Alta issued to the Company its pro rata 51% of the 375,000 shares
of Alta common stock. At that date, the market price of the Alta common stock as
traded on NASDAQ was $1.25 per share. As a result of the transaction, the
Company reported a net gain of $679,394. The Company's interest in the Copper
Flat property had been previously written off as discontinued mining operations.
As a result of the agreement, Alta will be obligated to pay the
Company/Hydro a 2-1/2% Net Smelter Return for as long as Alta operates the
Copper Flat property which amends the 5% Net Smelter Return as above. The annual
minimum royalty payment will be credited against future production royalties
after Alta acquires the Copper Flat property. If the Copper Flat property is not
in production at the end of said five year period, the annual minimum royalty
payment will no longer be credited against future production royalty. In no
event, however, will the production royalty due the Company/Hydro be less than
$150,000 per year.
At various times in July and August 1996, the Company sold all its holdings
totaling 191,250 shares of common stock in Alta for combined net proceeds of
$674,173. In accordance with the agreement, Alta paid the Company $55,781 in
September 1996 which represented the difference between $4.00 per share and the
market price per share on the second anniversary date of the agreement.
The Company/Hydro also granted Alta a Right of First Refusal on the royalty
interest held. Alta will have sixty days from the date it is notified to
exercise its Right of First Refusal. The Right of First Refusal granted will
have a term of 10 years from the date Alta exercises its option to purchase the
Copper Flat property.
In conjunction with its reorientation of its business objectives, the
Company terminated all cost for full-time employees and entered into a contract
for the sale of its New Mexico office building. The sale transaction was
completed in August 1996 with the Company receiving net proceeds of $92,294. The
Company anticipates that for the near term, the Company's operating expenditures
will continue to be strictly limited and that cash proceeds from sale of common
stock in Alta and from sale of its New Mexico office building will provide
adequate working capital to sustain the Company's operations.
Cash and cash equivalents increased from $48,976 to $419,280, a net
increase of $370,304 for the year ended June 30, 1997. For the fiscal year ended
June 30, 1997 the Company provided $446,550 of cash from operating activities
compared to net cash used by operating activities of $47,247 for the prior year.
On a consolidated basis as of June 30, 1997 the Company had working capital of
$966,428 and a current ratio of 24.2 to 1.0 compared to working capital of
$754,564 and a current ratio of 8.0 to 1.0 as of June 30, 1996.
At present, the Company plans to remain a public entity operating
principally in the minerals and oil and gas business. The Company holds
interests in several oil and gas prospects and its royalty interest in the
Copper Flat property.
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RESULTS OF OPERATIONS
1997 COMPARED TO 1996
The Company reported mining royalty income for the current and prior year
of $76,500 and $76,500, respectively. The royalty income reflects the Company's
proportionate share of the annual minimum royalty payment related to the Copper
Flat property. For additional information concerning the Copper Flat property,
see Notes to Consolidated Financial Statements and Note 6 thereof. Interest and
other income totaled $23,960 for the year ended June 30, 1997 compared to $856
for the previous year. The increase is due to increased funds available for
investment.
There were oil and gas property lease expenses of $4,226 during the current
year compared to $6,190 for the prior year. Depreciation, depletion and
amortization was $9,538 and $24,040 for each respective years ended June 30,
1997 and 1996. General and administrative expenses increased marginally to
$145,817 for the year ended June 30, 1997 compared to $110,349 for the prior
year. These expenses continue at relatively low levels primarily as a result of
management's efforts to impose strict limitations on operating expenditures.
General and administrative expenses for the year ended June 30, 1997 and 1996
primarily included limited administrative, legal, consulting and other
professional services and general expenses. During the current year, the Company
participated in the drilling of an exploratory well which was determined to be
not commercially productive. As a result, the Company recorded dry hole expense
of $23,712 for the year ended June 30, 1997.
The Company realized net losses on the sale of marketable equity securities
for the current year of $148,006 compared to a gain of $6,297 in the prior year.
Such losses resulted from the sale of common stocks and other various
investments. The Company also completed the sale of its office building in
Albuquerque, New Mexico which resulted in a net gain on sale of $27,000 during
the current year ended June 30, 1997.
The Company had net unrealized gain on marketable equity securities for the
current year of $330,674 compared to a unrealized gain of $11,794 in the prior
year. Such gain resulted from the sale of oil and gas interests for common
stock.
Primarily reflecting the factors discussed above, the Company reported net
earnings of $126,835 for the year ended June 30, 1997 compared to a net loss of
$45,492 for the prior year ended June 30, 1996.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculation causing disruption of business activities.
Based on ongoing assessments, the Company believes that no significant
modifications of existing computer software will be required. The Company
believes that for applications in which computer systems are utilized, such
computer systems will function properly with respect to dates in the year 2000
10
<PAGE> 13
and thereafter. The Company also believes that costs related to the Year 2000
issue will not be significant.
The Company is currently assessing its relationships with suppliers and
major customers to determine the extent to which the Company is vulnerable to
any third party's failure to remedy their own Year 2000 issues. Based on
preliminary assessments, management believes that significant exposure does not
exist with respect to third parties.
INFORMATION REGARDING AND FACTORS AFFECTING FORWARD LOOKING STATEMENTS
The Company is including the following cautionary statement in this
Quarterly Report on Form 10-K to make applicable and take advantage of the safe
harbor provision of the Private Securities Litigation Reform Act of 1995 for any
forward looking statements made by, or on behalf of the Company. Forward looking
statements include statements concerning plans, objectives, goals, strategies,
future events or performance and underlying assumptions and other statements
which are other than statements of historical facts. Certain statements
contained herein are forward looking statements and, accordingly, involve risks
and uncertainties which could cause actual results or outcomes to differ
materially from those expressed in the forward looking statements. Such risks
and uncertainties include, among others, the following: (i) the level of
business opportunities available to the Company and the Company's ability to
negotiate such business opportunities on a favorable basis; (ii)regulatory
requirements affecting the Company; (iii) the failure to properly manage growth;
and, (iv) the ability of the Company to finance growth. The factors described
above could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements made by or on behalf of the Company.
The Company's expectations, beliefs and projections are expressed in good faith
and are believed by the Company to have a reasonable basis, including without
limitations, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectation, beliefs or
projections will result, or be achieved, or be accomplished.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In connection with certain business transactions in the past, the Company
received shares of stock of publicly traded companies. The Company has sold
certain amounts of such shares. Further, the Company invests in shares of stock
of publicly traded companies from time to time for trading purposes.
ITEM 8. FINANCIAL STATEMENTS
The information required hereunder is included in this report as set forth
in the "Index to Financial Statements" on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
(a) The Company has recently engaged Ham, Langston & Brezina, L.L.P.
("Ham, Langston & Brezina") as its independent accountants effective
immediately. The decision to engage Ham, Langston & Brezina as the
Company's independent accountants was recommended and approved by the
chairman of the Company's Board of Directors.
11
<PAGE> 14
(b) Coopers & Lybrand, L.L.P. last reported on the Company's financial
statements since the fiscal year ended June 30, 1992 and such report
did not contain an adverse opinion or disclaimer of opinion, nor was
such report qualified or modified as to uncertainty, audit scope, or
accounting principles. However, the Company has not engaged an
independent accountant since that date.
(c) During the Company's two fiscal years ended June 30, 1997 and the
subsequent interim period preceding the decision to engage independent
accountants, there were no "reportable events" (hereinafter defined)
requiring disclosure pursuant to Section 229.304(a)(1)(v) of
Regulation S-K. As used herein, the term "reportable event" means any
of the items listed in paragraphs (a)(1)(v)(A)-(D) of Section 304 of
Regulation S-K.
(d) Effective June 11, 1998, the Company engaged Ham, Langston & Brezina
as its independent accountant. During the two fiscal years ended June
30, 1997 and the subsequent interim period preceding the decision to
engage independent accountants, neither the Company nor anyone on its
behalf consulted Ham, Langston & Brezina regarding either the
application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might
be rendered on the Company's financial statements, nor has Ham,
Langston & Brezina provided to the Company a written report or oral
advice regarding such principles or audit opinion.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth the directors and executive officers of the
Company
NAME AGE POSITION
---- --- --------
Charles Cobb IV 68 Chairman, President and CEO
H. Wesley Griggs 50 Director
Christy Foster 29 Director
Directors are to be elected annually and hold office until the next annual
meeting of the stockholders of the Company or until their successors are elected
and qualified. However, elections have not been held for four years. Officers
serve at the discretion of the Board of Directors. There is no family
relationship between or among any of the directors and executive officers of the
Company.
Mr. Cobb is the father of Ms. Foster. Mr. Cobb is the uncle of Mr. Griggs.
Ms. Foster and Mr. Griggs are cousins.
BIOGRAPHIES
Charles Cobb IV serves as Chairman, President and CEO of the Company. He
has been a Director and the President of the Company since 1992.
12
<PAGE> 15
H. Wesley Griggs has been a Director of the Company since 1992. He has been
an attorney since 1974. Mr. Griggs has a B.A. Degree from Rice University and a
J.D. Degree from the University of Texas.
Christy Foster has been a Director of the Company since 1992. From 1992
until 1993, Ms. Foster was a travel agent with CUC International. During 1994,
Ms. Foster attended Sam Houston State University. During 1995, Ms. Foster was
with Court's Saddlery in a sales position. During 1996, Ms. Foster attended
Stephen F. Austin State University. Beginning in 1997 through the present, Ms.
Foster has been employed at East Texas Tack and Veterinarian Supply.
CERTAIN SECURITIES FILINGS
The Company believes that the reports required by Section 16(a) of the
Exchange Act have not been filed timely by Messrs. Cobb and Griggs and Ms.
Foster.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------------
SECURITIES PAYOUTS
NAME AND ANNUAL COMPENSATION RESTRICTED UNDERLYING -------
PRINCIPAL ------------------------ STOCK OPTIONS/ LTIPS ALL OTHER
POSITION YEAR SALARY BONUS OTHER AWARDS SARS PAYOUTS COMPENSATION
- -------- ---- ------ ----- ----- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles Cobb IV 1997 $63,420 $-0- $-0- $-0- $-0- $-0- $-0-
Chief Executive 1996 34,009 -0- -0- -0- -0- -0- -0-
Officer 1995 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
DIRECTOR COMPENSATION
The Company does not currently pay any cash director's fees, but it pays
the expenses, if any, of its directors in attending board meetings.
13
<PAGE> 16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
the following table sets forth certain information as of June 22, 1998 with
respect to the beneficial ownership of shares of Common Stock by (I) each person
who is know to the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) each executive
officer of the Company and (iv) all executive officers and directors of the
Company as a group. Unless otherwise indicated, each stockholder has sole voting
and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF PERCENT CLASS OF
NAME SHARES OWNED OF CLASS SECURITIES
---- ------------- -------- ----------
<S> <C> <C> <C>
Charles Cobb IV 4,250,000 (1) 49.8% Common Stock
302 East Jackson
West Columbia, Texas 77486
H. Wesley Griggs -0- -0- Common Stock
302 East Jackson
West Columbia, Texas 77486
Christy Foster -0- -0- Common Stock
302 East Jackson
West Columbia, Texas 77486
</TABLE>
(1) Includes an option to purchase 250,000 shares of the Company's common stock
at an exercise price of $0.06 per share which expires on July 10, 2004.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The current Board of Directors of the Company has adopted a policy that
Company affairs will be conducted in all respects by standards applicable to
publicly-held corporations.
14
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
(a)(1) Financial statements:
Audited Financial Statements:
Consolidated Balance Sheets as of June 30, 1997 and 1996.
Consolidated Statements of Operations for the years ended June 30,
1997 and 1996.
Consolidated Statements of Stockholders' Equity for the years ended
June 30, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended June 30,
1997 and 1996.
(a)(2) Financial statement schedules: NONE.
(a)(3) Compensation Plans: NONE.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the Company's last fiscal
quarter of 1997.
(c) EXHIBITS
3.1 * Articles of Incorporation as amended
3.2 * Bylaws
10.1 * Alta Gold Company Agreement
10.2 * Royalty Deed related to Exhibit 10.1
16.1 * Letter from Coopers & Lybrand, L.L.P.
27.1 * Financial Data Schedule
* Filed herewith
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COBB RESOURCES CORPORATION
Date: July 15, 1998 By: /s/ Charles Cobb IV
------------------------------
Charles Cobb, IV
Director, President and Chief
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
Date: July 15, 1998 By: /s/ Charles Cobb IV
------------------------------
Charles Cobb, IV
Director, President and Chief
Accounting Officer
Date: July 15, 1998 By: /s/ H. Wesley Griggs
------------------------------
H. Wesley Griggs
Director
Date: July 15, 1998 By: /s/ Christy Foster
------------------------------
Christy Foster
Director
16
<PAGE> 19
COBB RESOURCES CORPORATION
----------
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
Report of Independent Auditors F-2
Audited Financial Statements
Consolidated Balance Sheets as of June 30,
1997 and 1996 F-3
Consolidated Statements of Operations for the
years ended June 30, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity
for the years ended June 30, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the
years ended June 30, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Cobb Resources Corporation
We have audited the accompanying consolidated balance sheets of Cobb Resources
Corporation as of June 30, 1997 and 1996, and the related statements of
operations, stockholders' equity and cash flows for the years then ended. 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cobb Resources
Corporation as of June 30, 1997 and 1996, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Ham, Langston & Brezina, LLP
Houston, Texas
June 17, 1998
F-2
<PAGE> 21
COBB RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
----------
<TABLE>
<CAPTION>
ASSETS JUNE 30,
------ ------------------------------
1997 1996
(RESTATED) (RESTATED)
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 419,280 $ 48,976
Certificate of deposit 10,000 --
Marketable equity securities 518,879 697,903
Accounts receivable - mining royalty 60,000 115,781
---------- ----------
Total current assets 1,008,159 862,660
Property and equipment, net 34,124 69,739
Oil and gas properties 10,555 105,322
Notes receivable 72,500 12,500
---------- ----------
Total assets $1,125,338 $1,050,221
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term debt $ 10,134 $ 105,250
Accounts payable and accrued liabilities 31,597 2,846
---------- ----------
Total current liabilities 41,731 108,096
Long-term debt, net of current portion 23,919 3,692
---------- ----------
Total liabilities 65,650 111,788
---------- ----------
Contingencies (Note 8)
Stockholders' equity:
Common stock, $0.10 par value; 25,000,000 shares authorized; 8,534,257 shares
issued and outstanding at June 30, 1997
and 1996 853,426 853,426
Additional paid-in capital 6,156,172 6,156,172
Accumulated deficit (5,845,339) (5,972,174)
Treasury stock, 60,000 shares at cost (6,000) (6,000)
Receivable from a stockholder (98,571) (92,991)
---------- ----------
Total stockholders' equity 1,059,688 938,433
---------- ----------
Total liabilities and stockholders'
equity $1,125,338 $1,050,221
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 22
COBB RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
----------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1997 1996
(RESTATED) (RESTATED)
---------- ----------
<S> <C> <C>
Revenues:
Mining royalty income, net $ 76,500 $ 76,500
Gain on sale of property 27,000 --
Other income 23,960 856
Realized gain on marketable equity
securities -- 6,297
Unrealized gain on marketable equity
securities 330,674 11,794
---------- ----------
Total revenues 458,134 95,447
---------- ----------
Costs and expenses:
Property lease expenses 4,226 6,190
Dry hole expense 23,712 -
Depreciation expense 9,538 24,400
General and administrative 141,224 107,718
Realized loss on marketable equity
securities 148,006 --
Interest expense 4,593 2,631
---------- ----------
Total costs and expenses 331,299 140,939
---------- ----------
Net income (loss) $ 126,835 $ (45,492)
========== ==========
Net income (loss) per common share $ 0.01 $ (0.01)
========== ==========
Weighted average shares outstanding 8,534,257 8,534,257
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 23
COBB RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
----------
<TABLE>
<CAPTION>
ADDITIONAL
RECEIVABLE
COMMON STOCK PAID-IN ACCUMULATED TREASURY
-------------------------
FROM
SHARES AMOUNT CAPITAL DEFICIT STOCK
--------- ---------- ---------- ------------ ---------
STOCKHOLDER TOTAL
----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1995,
as previously reported 8,534,257 $ 853,426 $6,156,172 $(6,424,582) $ (6,000)
$ -- $ 579,016
Prior period adjustments
(See Note 2) -- -- -- 497,900 --
---------- ---------- ---------- ----------- --------
(65,000) 432,900
---------- ----------
Balance at June 30, 1995,
as restated 8,534,257 853,426 6,156,172 (5,926,682) (6,000)
(65,000) 1,011,916
Advances to stockholder -- -- -- -- --
(27,991) (27,991)
Net loss for the year
ended June 30, 1996, as
restated -- -- -- (45,492) --
---------- ---------- ---------- ----------- --------
-- (45,492)
---------- ----------
Balance at June 30, 1996,
as restated 8,534,257 853,426 6,156,172 (5,972,174) (6,000)
(92,991) 938,433
Advances to stockholder -- -- -- -- --
(5,580) (5,580)
Net income for the year
ended June 30, 1997, as
restated -- -- -- 126,835 --
---------- ---------- ---------- ----------- --------
-- 126,835
---------- ----------
Balance at June 30, 1997,
as restated 8,534,257 $ 853,426 $6,156,172 $(5,845,339) $ (6,000)
========== ========== ========== =========== ========
$ (98,571) $1,059,688
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 24
COBB RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1997 1996
(RESTATED) (RESTATED)
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 126,835 $ (45,492)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation expense 9,538 24,400
Gain on sale of property (27,000) --
Realized (gain) loss on marketable equity
securities 148,006 (6,297)
Unrealized gain on marketable equity
securities (330,674) (11,794)
Dry hole expense 23,712 --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 55,781 (55,781)
Decrease in marketable equity securities 411,601 48,039
Increase (decrease) in accounts payable
and accrued liabilities 28,751 (322)
---------- ----------
Net cash provided by (used in) operating
activities 446,550 (47,247)
---------- ----------
Cash flows from investing activities:
Capital expenditures (4,501) (35,161)
Proceeds from sale of building 92,294 --
Purchased certificate of deposits (10,000) --
Decrease (increase) in notes receivable (34,500) 18,750
Increase in receivable from a stockholder (5,580) (27,991)
---------- ----------
Net cash provided by (used in) investing
activities 37,713 (44,402)
---------- ----------
Cash flows from financing activities:
Principal payments on notes payable (113,959) (4,920)
Advances on note payable -- 100,000
---------- ----------
Net cash provided by (used in) financing
activities (113,959) 95,080
---------- ----------
Net increase in cash and cash equivalents 370,304 3,431
Cash and cash equivalents at beginning of
period 48,976 45,545
---------- ----------
Cash and cash equivalents at end of period $ 419,280 $ 48,976
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $ 4,593 $ 2,631
========== ==========
Cash paid for income taxes $ -- $ --
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 25
COBB RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Cobb Resources Corporation (the "Company") is a New Mexico Corporation
that holds a royalty interest in a New Mexico copper property and has
historically been involved in oil and gas exploration and development.
The Company has sold or written off substantially all of its oil and gas
working interests and now invests in publicly traded oil and gas
companies that management feels are undervalued. Following is a summary
of the Company's significant accounting policies.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after elimination of all significant
intercompany accounts and transactions.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities 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. These estimates primarily involve the useful lives
of property and equipment, the valuation of investments and deferred tax
assets and the realizability of accounts receivable.
REVENUE RECOGNITION
Royalty income is recognized ratably over the year in which it is earned.
The Company is paid annually.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which subject the Company to concentrations of
credit risk include cash, marketable equity securities and accounts
receivable. The Company maintains its cash in well known banks selected
based upon management's assessment of the banks' financial stability.
Balances periodically exceed the $100,000 federal depository insurance
limit; however, the Company has not experienced any losses on deposits.
Accounts receivable generally arise from a U.S. mining company operating
in New Mexico and relate to the Company's minimum royalty on certain
copper properties.
F-7
<PAGE> 26
COBB RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
----------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all
short-term investments with an original maturity of three months or less
to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed
principally by the straight-line method over the estimated useful lives
of 5 years for office furniture and equipment, and 3 years for
transportation equipment.
INCOME TAXES
The Company uses the liability method in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and income tax carrying
amounts of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected
to reverse.
INVESTMENTS
Marketable equity securities are classified as trading and are carried at
quoted market values. The change in unrealized gain or loss with respect
to these securities is recorded currently in operations.
EARNINGS PER SHARE
Earnings per share are computed based upon the weighted average number of
shares of common stock outstanding.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company includes fair value information in the notes to financial
statements when the fair value of its financial instruments is different
from the book value. When the book value approximates fair value, no
additional disclosure is made.
F-8
<PAGE> 27
COBB RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
----------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RECENTLY ISSUED PRONOUNCEMENTS
In February 1997, effective for the Company's fiscal 1998 consolidated
financial statements, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings Per Share". This new standard simplifies the method for
computing earnings per share ("EPS") whereby the Company will report
basic EPS without the effect of any outstanding potentially dilutive
stock options and diluted EPS with the effect of those outstanding stock
options that are potentially dilutive. SFAS 128 is not expected to have a
significant impact on reported earnings per share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. It
requires (a) classification of the components of other comprehensive
income by their nature in a financial statement and (b) the display of
the accumulated balance of the other comprehensive income separate from
retained earnings and additional paid-in capital in the equity section of
a statement of financial position. SFAS 130 is effective for years
beginning after December 15, 1997 and is not expected to have a material
impact on financial position or results of operations.
2. PRIOR PERIOD ADJUSTMENTS
The Company's financial statements for the years ended June 30, 1997 and
1996 were previously issued without audit. Subsequent to the issuance of
such financial statements, the Company engaged auditors and has restated
its financial statements for the years ended June 30, 1997 and 1996 to
reflect adjustments principally related to the timing of when certain
recurring costs are recognized. These adjustments relate primarily to
unrealized gains and losses on marketable equity securities, recognition
of dry hole expenses and recognition of compensation expense. Following
is an analysis of the effect of such prior period adjustments on
previously reported retained earnings and results of operations:
F-9
<PAGE> 28
COBB RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
----------
2. PRIOR PERIOD ADJUSTMENTS, CONTINUED
<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Income (loss) before income taxes:
As previously reported $ 371,000 $ (35,000)
As restated 126,835 (45,492)
Net income (loss):
As previously reported $ 371,000 $ (35,000)
As restated 126,835 (45,492)
Net income (loss) per common share:
As previously reported $ .04 $ .00
As restated .01 (.01)
Accumulated deficit:
As previously reported $(6,092,000) $(6,463,000)
As restated (5,845,339) (5,972,174)
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Land $ -- $ 49,875
Office building -- 182,563
Computer and equipment -- 92,319
Vehicles 43,106 48,855
Furniture and fixtures -- 19,127
---------- ----------
43,106 392,739
Less accumulated depreciation (8,982) (323,000)
---------- ----------
$ 34,124 $ 69,739
========== ==========
</TABLE>
During the year ended June 30, 1997, the Company sold its New Mexico
office building and related business assets for proceeds of $92,294 and
recognized a gain of $27,000 on the sale.
F-10
<PAGE> 29
COBB RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
----------
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Bank line of credit in the amount of $100,000 payable
in July 1996, with monthly installments of interest
at prime (8.25% at June 30, 1996) plus 3%,
collateralized by marketable securities $ -- $ 100,000
Bank note payable in monthly installments of $473,
including interest at 6.50%, through February 1998,
collateralized by a vehicle -- 8,942
Bank note payable in monthly installments of $633,
including interest at 8.75%, through August 2000,
collateralized by a vehicle 20,343 --
Bank note payable in monthly installments of $437,
including interest at 8.25%, through June 2000,
collateralized by a vehicle 13,710 --
---------- ----------
34,053 108,942
Less current portion (10,134) (105,250)
---------- ----------
$ 23,919 $ 3,692
========== ==========
</TABLE>
Future annual maturities of long-term debt at June 30, 1997 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30,
-----------
<S> <C>
1998 $ 10,134
1999 11,101
2000 12,818
----------
$ 34,053
==========
</TABLE>
F-11
<PAGE> 30
COBB RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
----------
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $1,762,394 $2,053,095
General business tax credit
carryforward 13,322 13,322
Deferred compensation for tax
purposes 39,881 11,581
---------- ----------
Total deferred tax assets 1,815,597 2,067,998
Valuation allowance on deferred
tax assets 1,705,193 1,924,387
---------- ----------
110,404 143,611
Deferred tax liabilities:
Cumulative unrealized gains on
marketable equity securities 110,404 143,611
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
</TABLE>
The difference between the Federal statutory rate and the Company's
effective income tax rate was as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------
1997 1996
-------------------- ----------------------
AMOUNT RATE AMOUNT RATE
--------- ------ -------- ------
<S> <C> <C> <C> <C>
Provision (benefit) at Federal
statutory rate $ 43,124 34% $(15,468) 34%
Change in valuation allowance (219,194) (173)% 13,811 30%
Utilization of net operating loss
carryforward (112,894) (89)% -- --%
Expiration of net operating loss
carryforwards and other 288,964 228% 1,657 4%
--------- ---- -------- ---
$ -- --% $ -- --%
========= ==== ======== ===
</TABLE>
F-12
<PAGE> 31
COBB RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
----------
7. INCOME TAXES, CONTINUED
At June 30, 1997, for federal income tax reporting purposes, the Company
has approximately $5,184,000 of unused net operating losses available for
carryforward to future years. The benefit from carryforward of such net
operating losses will expire during the years 1998 to 2012. The benefit
from utilization of net operating loss carryforwards could be subject to
limitations if significant ownership changes occur in the Company.
8. CONTINGENCIES
On October 30, 1990, a mining joint venture (the "Venture") in which the
Company was previously involved, received notice from the United States
Environmental Protection Agency ("EPA") that the Venture was believed by
the EPA to be a "potentially responsible party" for the release of
certain allegedly hazardous substances at a site located in central
Colorado. The Venture operated the facility for only a brief period, but
may be required to bear its share of any costs incurred in connection
with this matter. Any such amounts for which the Company may ultimately
be held liable may not be adequately covered by insurance.
The Company believes that other parties have taken appropriate response
action required at this central Colorado site and have obtained EPA
approval of their cleanup actions. In the opinion of the Company's
management and based on independent advice from professional experts
engaged to assess the site, it appears unlikely that the Company will be
responsible to bear material liability in this matter.
The Company was notified by the operator of the Venture that the Venture
had received on December 8, 1991 a notice of violation from the Colorado
Department of Health ("Department") in connection with alleged
noncompliance with certain amended standards of water discharge permits
at a gold mine owned by the Venture from July 1991 through October 1991.
To this date, while the Department has not assessed any fines, the
Company is not able to assess fully the extent to which response or
remedial action may be required. The mine and the Company may be held
responsible for any such required actions. There can be no assurance that
the ultimate resolution of this matter will not have a material adverse
effect on the Company in the future.
F-13
<PAGE> 32
COBB RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
----------
9. MAJOR CUSTOMERS
The Company received 100% of its mining royalty income from a single U.S.
mining company during the years ended June 30, 1997 and 1996.
10. RELATED PARTY TRANSACTIONS
Notes receivable at June 30, 1997 include a $60,000 note receivable from
a director of the Company. This note originated in connection with cash
advances to the director and the sale of certain oil and gas properties.
The note bears interest at 12% per year and is due December 31, 1998.
During the years ended June 30, 1997 and 1996, the Company made
non-interest bearing advances to the Company's President, who is also the
Company's most significant stockholder, as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Beginning balance $ 92,991 $ 65,000
Cash Advance 69,000 62,000
Amount recognized as compensation (63,420) (34,009)
---------- ----------
Ending balance $ 98,571 $ 92,991
========== ==========
</TABLE>
11. NON-CASH INVESTING AND FINANCING ACTIVITIES
The Company engaged in certain non-cash investing and financing
activities during the year ended June 30, 1997, as follows:
<TABLE>
<S> <C>
Exchanged interest in certain oil and
gas properties for marketable equity
securities. $ 49,909
Exchanged interest in certain oil and
gas properties for note receivable. $ 25,500
Purchased transportation equipment in
exchange for directly related long-
term debt. $ 39,070
</TABLE>
F-14
<PAGE> 33
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
3.1 * Articles of Incorporation as amended
3.2 * Bylaws
10.1 * Alta Gold Company Agreement
10.2 * Royalty Deed related to Exhibit 10.1
16.1 * Letter from Coopers & Lybrand, L.L.P.
27.1 * Financial Data Schedule
* Filed herewith
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
HYDRO NUCLEAR CORPORATION
We, the undersigned natural persons of the Age of twenty-one years or
more, acting as incorporators of a corporation under the New Mexico Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation:
ARTICLE I.
The name of the corporation shall be: HYDRO NUCLEAR CORPORATION.
ARTICLE II.
The period of its duration is perpetual.
ARTICLE III.
The purpose for which this corporation is organized is to engage in all
phases of mining, exploration, leaching, purchase and sale of any and all
minerals of all types, to engage in all other activities related to such
business, and to engage in and do any lawful act concerning any or all lawful
business for which corporations may be organized under the laws of New Mexico,
now or hereafter in affect.
ARTICLE IV.
The aggregate number of shares which the corporation shall have authority
to issue are as follows:
(a) 5,000,000 shares of common stock, each share having a par value of
10 cents; and
(b) 5,000,000 shares of preferred stock, each share having a par value of
10 cents, the designations, preferences, and relative participating,
optional or other special rights, qualifications, limitations or
restrictions with respect to such shares, including whether or not
the preferred shares are convertible into shares of common stock, to
be determined in a Resolution or Resolutions providing for the issue
of such stock adopted by the Board of Directors.
ARTICLE V.
Cumulative voting of shares shall not be permitted.
<PAGE> 2
ARTICLE VI.
The corporation will not commence business until consideration of the
value of at least one thousand dollars ($1,000) has been received for the
issuance of shares.
ARTICLE VII.
Shareholders shall not have pre-emptive rights to acquire additional or
treasury shares of the corporation. All lawful restrictions on the sale or
other disposition of shares may be placed upon all or a portion or portions of
the certificates evidencing the corporation's shares. No shareholder or
subscriber to the capital stock of the corporation shall be under any
obligation to the corporation or its creditors with respect to such stock other
than the obligation to pay the corporation the full consideration for which
stock was issued or is to be issued.
ARTICLE VIII.
The address of the initial registered office is 457-J Washington, S.E.,
Albuquerque, New Mexico, 87108 and the name of its initial registered agent at
such address is Malcolm G. Colberg.
ARTICLE IX.
The address of the corporation's place of business is Suite 1400 "G", First
National Bank Building, East, Albuquerque, New Mexico, 87108.
ARTICLE X.
The names and post office addresses of the incorporators are as follows:
MALCOLM G. COLBERG
457-J Washington SE
Albuquerque, New Mexico
GEORGE O. LOTSPEICH
609 Sycamore NE
Albuquerque, New Mexico
ROBERT R. HURST
1400 Virginia NE, Apt. #77
Albuquerque, New Mexico
J. DOUGLAS HENRY
1015 Cardenas SE, Apt. #5
Albuquerque, New Mexico
- 2 -
<PAGE> 3
ARTICLE XI.
The affairs of the corporation shall be conducted by a Board of Directors
and such officers as the Directors may elect or appoint. The number of
Directors constituting the initial Board of Directors of the corporation is
four, and the names and post office addresses of the persons who are to serve
as Directors until the first annual meeting of shareholders or special meeting
called for the election of Directors, and until their successors are elected and
shall qualify are:
Name Address
- --------------------------- -----------------------------
Malcolm G. Colberg 457-J Washington SE
Albuquerque, New Mexico
George O. Lotspeich 609 Sycamore NE
Albuquerque, New Mexico
Robert R. Hurst 1400 Virginia NE, Apt. #77
Albuquerque, New Mexico
J. Douglas Henry 1015 Cardenas SE, Apt. #5
Albuquerque, New Mexico
The number of Directors to be elected at the annual meeting of shareholders or
at any specific meeting called for the election of Directors shall not be less
than three or more than seven, the exact number to be fixed by the By-Laws. All
directorships to be filled by reason of an increase in the number of Directors
shall be filled by election at an annual meeting or at a special meeting of
shareholders called for that purpose.
ARTICLE XII.
Shareholders shall not have pre-emptive rights to acquire additional or
treasury shares of the corporation. All lawful restrictions on the sale or
other disposition of shares may be placed upon all or a portion or portions of
the certificates evidencing the corporation's shares. No shareholder or
subscriber to the capital stock of the corporation shall be under any
obligation to the corporation or its creditors with respect to such stock other
than the obligation to pay the corporation the full consideration for which
stock was issued or is to be issued.
- 3 -
<PAGE> 4
ARTICLE XIII.
Shareholders shall be entitled to one vote per share upon each matter
submitted to a vote at a meeting of the shareholders. One-third of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders.
ARTICLE XIV.
The officers, Directors and other members of management of this
corporation shall be subject to the doctrine of corporate opportunities only
insofar as it applies to business opportunities in which this corporation has
expressed an interest as determined from time to time by the corporation's Board
of Directors as evidenced by resolutions appearing in the corporation's Minutes.
When such areas of interest are delineated, all such business opportunities
within such areas of interest which come to the attention of the officers,
Directors and other members of management of this company shall be disclosed
promptly to this corporation and made available to it. The Board of Directors
may reject any business opportunity presented to it and thereafter any officer,
Director or other member of management may avail himself of such opportunity.
Until such time as this corporation, through its Board of Directors, has
designated an area of interest, the officers, Directors and other members of
management of this corporation shall be free to engage in such areas of interest
on their own and this doctrine shall not limit the rights of any officer,
Director or other member of management of this corporation to continue a
business existing prior to the time that such area of interest is designated by
this corporation. This provision shall not be construed to release any employee
of the corporation (other than an officer, Director or member of management)
from any duties which he may have to the corporation.
ARTICLE XV.
No contract or other transaction between this corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by this corporation, and no act of this
corporation shall be in any way affected or invalidated by the fact that any of
the Directors, officers or other members of the management of this corporation
are pecuniarily or otherwise interested in or are Directors, officers or members
of management of such other corporation. Any Director, officer or other member
of management of this corporation individually, or any firm of which such
Director, officer or member of management may be a member, may be a party to, or
may be pecuniarily or otherwise interested in, any contract or transaction of
this corporation, provided, however, that the fact that he or such firm is so
interested shall be disclosed or shall have been known to the Board of Directors
of this corporation or a majority thereof; and any Director of this corporation
who is also a Director,
- 4 -
<PAGE> 5
officer or member of management of such other corporation, or who is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of this corporation that shall authorize such
contract or transaction, and may vote thereat to authorize such contract or
transaction, with like force and effect as if he were not such Director, officer
or member of management of such other corporation or not so interested.
ARTICLE XVI.
The corporation shall indemnify each Director and each officer, his heirs,
executors and administrators, against expenses reasonably incurred or liability
incurred by him in connection with any action, suit or proceeding to which he
may be made a party by reason of his being or having been a Director or officer
of the corporation, except in relation (i) to matters as to which he shall be
finally adjudged in such action, suit or proceeding to be liable for fraud or
misconduct, and (ii) to liabilities under the Securities Act of 1933, as
amended, or other applicable securities laws. In the event of a settlement
before or after action or suit, indemnification shall be provided only in
connection with such matters covered by the settlement as to which the
corporation is advised by counsel that the person to be indemnified was not
guilty of such fraud or misconduct. The foregoing right of indemnification shall
not exclude other rights to which he may be entitled.
ARTICLE XVII.
The Board of Directors of this corporation is authorized to adopt, confirm,
ratify, alter, amend, rescind and repeal By-Laws or any portion thereof from
time to time.
DATED May 14, 1969
/s/ MALCOLM G. COLBERG
----------------------------
Malcolm G. Colberg
/s/ GEORGE O. LOTSPEICH
-----------------------------
George O. Lotspeich
/s/ ROBERT R. HURST
------------------------------
Robert R. Hurst
/s/ J. DOUGLAS HENRY
------------------------------
J. Douglas Henry
- 5 -
<PAGE> 6
STATE OF NEW MEXICO )
)ss.
COUNTY OF BERNALILLO )
The foregoing instrument was acknowledged before me this 14 day of May,
1969, by Malcolm G. Colberg, George O. Lotspeich, Robert R. Hurst, and J.
Douglas Henry.
/s/ [ILLEGIBLE]
------------------------------
Notary Public
SEAL
My commission expires:
June 30, 1971
- 6 -
<PAGE> 7
FILED IN OFFICE OF
STATE CORPORATION COMMISSION
OF NEW MEXICO
JUN 30 1977
CORPORATION AND
FRANCHISE TAX DEPTS.
AMENDMENT TO ARTICLES OF INCORPORATION
OF
HYDRO NUCLEAR CORPORATION
1. The name of the corporation is Hydro Nuclear Corporation.
2. The amendment so adopted is: Change of name, Hydro Nuclear
Corporation to Cobb Nuclear Corporation.
3. This amendment was adopted by the shareholders on June 17, 1977.
4. There are 934,498 shares outstanding and entitled to vote.
5. 670,779 shares voted for the change of name, and 625 shares cast
against the change.
/s/ GEORGE O. LOTSPEICH
----------------------------------
GEORGE O. LOTSPEICH, President
/s/ MALCOLM G. COLBERG
----------------------------------
MALCOLM G. COLBERG, Secretary
V E R I F I C A T I O N
MALCOLM G. COLBERG being first duly sworn on oath, STATES: That he
is the Secretary of Hydro Nuclear Corporation, that he knows the contents of
the Articles of Amendment which he has fully read and the matters stated
therein are true and correct.
/s/ MALCOLM G. COLBERG
----------------------------------
MALCOLM G. COLBERG
SUBSCRIBED AND SWORN to before me this 27th day of June, 1977.
/s/ D. CALLAHAN
----------------------------------
NOTARY PUBLIC
My Commission Expires:
4-23-78
- ----------------------
RECEIVED
JUN 30 1977
N.M. ST. CORP. COMM.
Corp./Franchise Tax Depts.
<PAGE> 8
FILED IN OFFICE OF
STATE CORPORATION COMMISSION
OF NEW MEXICO
JUN 30 1977
CORPORATION AND
FRANCHISE TAX DEPTS.
CERTIFICATION
I hereby certify that the copy of the Minutes attached hereto is a true
and correct copy of the Annual Stockholders' Meeting of June, 17, 1977.
/s/ MALCOLM G. COLBERG
----------------------------------
MALCOLM G. COLBERG, Secretary
RECEIVED
JUN 30 1977
N.M. ST. CORP. COMM.
Corp./Franchise Tax Depts.
<PAGE> 9
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
COBB NUCLEAR CORPORATION
Pursuant to the provisions of the New Mexico Business Corporation
Act, the undersigned corporation adopts the following Articles of Amendment to
its Articles of Incorporation:
FIRST: The name of the corporation is COBB NUCLEAR CORPORATION.
SECOND: The following amendments to the Articles of Incorporation
were adopted by the Shareholders of the corporation at the Annual Meeting of
Shareholders held on December 19, 1980, in the manner prescribed by the New
Mexico Business Corporation Act:
(1) Article I hereby is repealed and a new Article I is
adopted as follows:
ARTICLE I.
The name of the corporation is Cobb Resources Corporation.
(2) Article IV hereby is repealed and a new Article IV is
adopted as follows:
ARTICLE IV.
The aggregate number of shares which the corporation shall have
authority to issue are as follows:
(a) 25,000,000 shares of common stock, each share having a par
value of $0.10; and
RECEIVED
JUN 29 1981
N.M. ST. CORP. COMM.
Corp./Franchise Tax Depts.
<PAGE> 10
(b) 5,000,000 shares of preferred stock, each share having a par
value of $0.10, the designations, preferences, and relative
participating, optional or other special rights, qualifications,
limitations or restrictions with respect to such shares,
including whether or not the preferred shares are convertible
into shares of common stock, to be determined in a Resolution or
Resolutions providing for the issue of such stock adopted by the
Board of Directors.
THIRD: The number of shares of the corporation outstanding at the time
such Amendment was adopted was 2,425,053, and the number of shares entitled to
vote thereon was 2,425,053.
FOURTH: The corporation has only one class of stock outstanding, it
being $0.10 par value common stock.
FIFTH: The number of shares voted as regards such Amendments were as
follows:
(1) Change of Name: For: 1,965,898; Against: 100; Abstain: 767.
(2) Increase in Authorized Common Stock: For: 1,962,997; Against:
3,368; Abstain: 400.
SIXTH: The Amendments do not provide for an exchange, reclassification
or cancellation of issued shares.
SEVENTH: The Amendments do not effect a change in the amount of stated
capital.
Dated: January 2, 1981
-----------------
COBB NUCLEAR CORPORATION
a New Mexico corporation
By /s/ GEORGE O. LOTSPEICH
------------------------------
George O. Lotspeich, President
S E A L
Attest:
/s/ MALCOLM G. COLBERG
- -------------------------------
Malcolm G. Colberg, Secretary
- 2 -
<PAGE> 11
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
On January 2, 1981, before me, Doris A. Lake, a Notary Public in and for
said county and state, personally appeared George O. Lotspeich, who acknowledged
before me that he is President of Cobb Nuclear Corporation, a New Mexico
corporation, and that he signed the foregoing Articles of Amendment as his free
and voluntary act and deed for the uses and purposes therein set forth.
IN WITNESS WHEREOF I have hereunto set my hand and seal on January 2, 1981.
My commission expires:
6-21-81
/s/ DORIS A. LAKE
------------------------------
Notary Public
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
COBB RESOURCES CORPORATION
OFFICES
Section 1. The principal office of the corporation in the state of New
Mexico shall be located at Albuquerque, New Mexico. The corporation may have
such other offices, either within or without the state of New Mexico, as the
Board of Directors may designate or as the business of the corporation may
require from time to time.
SHAREHOLDERS
Section 2. Annual Meetings. The annual meeting of the shareholders shall
be held during the months of October, November or December of each year at such
time and place as the President, Vice President or Secretary shall designate,
for the purpose of electing Directors and for the transaction of such other
business as may come before the meeting.
Section 3. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than one-tenth of all the
outstanding shares of the corporation entitled to vote at the meeting.
Section 4. Place of Meeting. The Board of Directors may designate any
place, either within or without the state of New Mexico, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the state of New
Mexico, as the place for the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall
be the registered office of the corporation in the state of New Mexico.
Section 5. Notice of Meeting. Written or printed notice stating the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten not more than fifty days before the date of the meeting, either
personally or by mail, by or at the direction of the President or the
Secretary, or the officer or persons calling the meeting, to each shareholder
of record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States Mail, addressed to
the shareholder at
- 1 -
Exhibit A
<PAGE> 2
his address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
Section 6. Closing of transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than fifty days, and, in case of a meeting of shareholders, not less
than ten days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
Section 7. Quorum. One-third of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than one-third of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 8. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
- 2 -
<PAGE> 3
Section 9. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
By-laws of such corporation may prescribe, or in the absence of such provision,
as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority to do so be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
Section 10. Voting. There shall be no cumulative voting of shares.
Section 11. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
BOARD OF DIRECTORS
Section 12. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors.
Section 13. Number, Tenure and Qualifications. The number of Directors of
the corporation shall be four. Each Director shall hold office until the next
annual or special meeting of shareholders at which a new Board of Directors is
elected and until his successor shall have been elected and qualified.
Directors need not be residents of New Mexico or shareholders of the
corporation.
- 3 -
<PAGE> 4
Section 14. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this By-law immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without New
Mexico,for the holding of additional regular meetings without other notice than
such resolution.
Section 15. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place, either within or without the state of New Mexico, as the
place for holding any special meeting of the Board of Directors called by them.
Section 16. Notice. Notice of any special meeting shall be given at least
two days previous thereto by written notice delivered personally or mailed to
each director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States Mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except in cases in which a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 17. Quorum. A majority of the number of directors fixed by
Section 13 shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
Section 18. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 19. Vacancies. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office. Any directorship to be filled by reason of an increase in the number of
directors may be filled by the Board of Directors for a term of office
continuing only until the next election of directors by the shareholders.
- 4 -
<PAGE> 5
Section 20. Compensation. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 21. Presumption of Assent. A Director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
Section 22. Committees. (a) The Board of Directors, by a resolution or
resolutions adopted by a majority of the members of the whole Board, may
appoint an Executive Committee and such other committees as it may deem
appropriate. Each committee shall have and may exercise such powers as shall be
conferred or authorized by the resolution appointing it. A majority of any such
committee may determine its action and may fix the time and place of its
meetings, unless provided otherwise by the Board of Directors. The Board of
Directors shall have the power at any time to determine the size and membership
of, to fill vacancies in, to change the size or membership of, and to discharge
any such committee.
(b) Each such committee shall keep a written record of its acts and
proceedings and shall submit such record to the Board of Directors at each
regular meeting thereof and at such other times as requested by the Board of
Directors. Failure to submit such record, or failure of the Board to approve
any action indicated therein will not, however, invalidate such action to the
extent it has been carried out by the Corporation prior to the time the record
of such action was, or should have been, submitted to the Board of Directors as
herein provided.
Section 23. Informal Action by Directors. Any action required to be taken
at a meeting of the Directors, or a committee appointed by the Directors, or
any other action which may be taken at a meeting of the Directors, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the Directors with respect to the subject matter
thereof.
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<PAGE> 6
OFFICERS
Section 24. Officers. The officers of the corporation shall be the
Chairman of the Board of Directors, the President, one or more Vice Presidents,
a Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors and such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two or
more offices may be held by the same persons, except the offices of President
and Secretary.
Section 25. Election and Term of Office. The officers of the corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.
Section 26. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed.
Section 27. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 28. Chairman of the Board. The Chairman of the Board shall
preside at meetings of the Board of Directors. Except where, by law, the
signature of the President is required, the Chairman shall possess the same
power as the President to act on behalf of the corporation, to sign all
certificates, contracts, and other instruments of the corporation "which may be
authorized by the Board of Directors or required by laws or otherwise
necessary."
Section 29. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all the business and affairs
of the corporation. He shall, when present, preside at all meetings of the
shareholders. In the absence of the Chairman of the Board of Directors or in
the event of his death, inability or refusal to act, the President shall
preside at meetings of the Board of Directors. The President may sign, with
the Secretary, Assistant Secretary or any other proper
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<PAGE> 7
officer of the corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation, any deeds, mortgages, bonds,
contracts or other instruments which the Board of Directors has authorized to
be executed, except in cases in which the signing and execution thereof shall
be expressly delegated by the Board of Directors or by the By-laws to some
other officer or agent of the corporation, or shall be required by law to be
otherwise signed or executed; and in general shall perform all duties incident
to the office of President, and such other duties as may be prescribed by
the Board of Directors from time to time.
Section 30. The Vice-Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice-President (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election), if there be a Vice-President, shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. Any
Vice-President may sign, with the Secretary or an Assistant Secretary,
certificates for shares of the corporation; and shall perform such other duties
as from time to time may be assigned to him by the President or the Board of
Directors.
Section 31. The Secretary. The Secretary shall: (a) keep the minutes of
the shareholders and of the Board of Directors meetings in one or more books
provided for the that purpose; (b) see that all notices duly are given in
accordance with the provisions of these By-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal duly is authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder; (e) sign with the President, or a
Vice-President, certificates for shares of the corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors; (f)
have general charge of the stock transfer books of the corporation; and (g) in
general perform all duties incident to the office of the Secretary and such
other duties as from time to time may be assigned to him by the President or by
the Board of Directors.
Section 32. The Treasurer. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of Directors shall determine.
He shall: (a) have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for monies due and
payable to the corporation from any source what-
- 7 -
<PAGE> 8
soever, and deposit all such monies in the name of the corporation in such
banks, trust companies, or other depositories as shall be selected; and (b) in
general perform all of the duties incident to the offices of Treasurer and such
other duties as from time to time may be assigned to him by the President or by
the Board of Directors.
Section 33. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries, when authorized by the Board of Directors, may sign with
the President or a Vice-President certificates for shares of the corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall respectively, if required by the Board
of Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President or the Board of Directors.
Section 34. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
corporation.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 35. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into contracts or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 36. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 37. Checks, Drafts, etc. All checks, drafts or other order for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 38. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
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<PAGE> 9
MISCELLANEOUS
Section 39. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman of the Board of
Directors, the President or a Vice President and by the Secretary or an
Assistant Secretary. All certificates for shares shall be consecutively numbered
or otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, destroyed or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
Section 40. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be the owner thereof for all purposes.
Section 41. Dividends. The Board of Directors may from time to time
declare, and the corporation may pay, dividends on its outstanding shares and
also may declare stock dividends and stock splits in the manner and upon the
terms and conditions provided by law.
Section 42. Seal. The Board of Directors shall provide a corporate seal
which shall be circular in form and shall have inscribed thereon the name of
the corporation and the state of incorporation and the words, "Corporate Seal."
Section 43. Waiver of Notice. Whenever any notice is required to be given
to any shareholder or director of the corporation under the provisions of these
By-laws or under the provisions of the Articles of Incorporation or under the
provisions of the New Mexico Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
Section 44. Amendments. These By-laws may be altered, amended or repealed
and new By-lays may be adopted by the Board of Directors at any regular or
special meeting of the Board of Directors.
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<PAGE> 1
EXHIBIT 10.1
AGREEMENT
This Agreement is made and entered into among Alta Gold Co., a Nevada
corporation ("Alta") and Cobb Resources Corporation ("Cobb") and Hydro
Resources Corporation ("Hydro"), both New Mexico corporations (collectively
"Cobb/Hydro"), as of the 13th day of May, 1994.
RECITALS
A. Pursuant to the terms of that certain Agreement between Alta and
Cobb/Hydro dated the 26th day of January, 1994 (the "Agreement"), Alta was to
provide to Cobb/Hydro 375,000 restricted shares of Alta $.001 par value common
stock (the "Stock") within 30 days of Alta's acquisition of that certain
property located in Sierra County, New Mexico known as the Copper Flat Property
(the "Copper Flat Property") which Copper Flat Property is more particularly
described on Exhibit "A" attached hereto and incorporated herein by this
reference, according to terms and conditions and for the consideration set forth
in said Agreement.
B. The parties desire to enter into this Agreement to more fully
evidence and memorialize the intent of the parties hereto.
NOW, THEREFORE, for good and valuable consideration, and in
consideration of the execution and delivery by Cobb and Hydro of that certain
Royalty Deed and Right of First Refusal of even date herewith and in
consideration of the execution and delivery of that certain Right of First
Refusal by the shareholders of Hydro of even date herewith, and in
consideration of the execution and delivery by Hydro of that certain Lease
Agreement of even date herewith, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Transaction Subject to Closing. The parties hereto understand and
agree this Agreement is entered into in contemplation of Alta exercising its
option to acquire, and proceeding to close the acquisition of the Copper Flat
Property in accordance with its agreement with Gold Express. If Alta fails to
acquire the Copper Flat Property then this Agreement shall be of no affect and
shall be null and void.
2. Transfer to Hydro. Cobb and Hydro agree and acknowledge that,
though the Special Warranty Deed dated November 16, 1989 ("Deed") reserved
certain rights to Cobb only, Cobb subsequently transferred 49 percent of its
interest to Hydro and that Alta make all payments contemplated by the Deed in
accordance with Cobb's 51 percent ownership and Hydro's 49 percent ownership of
the rights reserved to the grantor under the Deed.
3. Alta Stock. Upon closing by Alta of the purchase of the Copper
Flat Property from Gold Express Corporation, Alta shall, within 30 days of the
date of such closing issue and deliver to Cobb and Hydro, in the percentages
set forth below, certificates evidencing 375,000 shares of the $.001 par value,
common stock of Alta. Hydro shall receive 49 percent
<PAGE> 2
or 183,750 shares and Cobb shall receive 51 percent or 191,250 shares. Such
Stock shall be fully paid and nonassessable restricted stock in accordance with
applicable state and federal securities laws and regulations and shall bear
thereon restrictive legends as provided on Exhibit B attached hereto and
incorporated herein by this reference. Said Stock shall be sent to the
respective addresses of Cobb and Hydro as described in paragraph 11 hereof.
4. Repurchase Option.
a. Cobb agrees and grants to Alta the right, exercisable at any
time within two years from the earlier of the issuance of the Stock to Cobb or
30 days after the Closing of Alta's purchase of the Copper Flat Property, to
purchase from Cobb up to 63,750 shares of Stock conveyed pursuant to paragraph
3 hereof at a purchase price of $4.00 per share upon the giving of 30 days
prior written notice by Alta to Cobb. During such two year period, Cobb agrees
that Cobb shall not sell, assign, transfer, convey, or dispose of more than
127,500 shares of such Stock and agrees that it will not encumber, pledge, or
hypothecate said Stock for an amount in excess of the repurchase option price
which can be paid by Alta for said Stock and shall maintain ownership of and
not otherwise convey the 63,750 shares of Stock which are the subject of this
repurchase option.
b. Hydro agrees and grants to Alta the right, exercisable at any
time within two years from the earlier of the issuance of the Stock to Hydro or
30 days after the Closing of Alta's purchase of the Copper Flat Property, to
purchase from Hydro up to 61,250 shares of Stock conveyed pursuant to paragraph
3 hereof at a purchase price of $4.00 per share upon the giving of 30 days
prior written notice by Alta to Hydro. During such two year period, Hydro
agrees that Hydro shall not sell, assign, transfer, convey, or dispose of more
than 122,500 shares of such Stock and agrees that it will not encumber, pledge,
or hypothecate said Stock for an amount in excess of the repurchase option
price which can be paid by Alta for said Stock and shall maintain ownership of
and not otherwise convey the 61,250 shares of Stock which are the subject of
this repurchase option.
5. Make Whole Amount.
a. Cobb shall have the option upon written demand to Alta
provided within 30 days after the second anniversary date of the date the Stock
is delivered by Alta to Cobb pursuant to the provisions of paragraph 3 hereof,
to require Alta to pay to Cobb the difference between $4.00 per share and the
average price per share for the Stock as quoted on the NASDAQ Stock Exchange on
such second anniversary date, should such price be less than $4.00 per share
for up to the lesser of 127,500 shares or the number of shares of the Stock
then owned by Cobb (the "Make Whole Amount"). Upon receipt of written demand
from Cobb, Alta shall have sixty days from the date of said demand to pay such
Make Whole Amount.
b. Hydro shall have the option upon written demand to Alta
provided within 30 days after the second anniversary date of the date the Stock
is delivered by Alta to Hydro pursuant to the provisions of paragraph 3 hereof,
to require Alta to pay to Hydro the difference between $4.00 per share and the
average price per share for the Stock as quoted on the NASDAQ Stock Exchange on
such second anniversary date should such price be less
2
<PAGE> 3
than $4.00 per share, for up to the lesser of 122,500 shares or the number of
shares of the Stock then owned by Hydro. Upon receipt of written demand from
Hydro, Alta shall have sixty days from the date of said demand to pay such Make
Whole Amount.
6. Representations and Warranties of Alta. Alta hereby warrants and
represents to Cobb/Hydro as follows:
a. The execution, delivery and performance of the terms and
provisions of this Agreement have been duly authorized by all necessary
corporate action.
b. The execution, delivery and performance of this Agreement by
Alta shall not require the consent of any third party or lender.
7. Representations and Warranties of Cobb/Hydro. Cobb and Hydro each
hereby warrant and represent Alta as follows:
a. The execution, delivery and performance of the terms and
provisions of this Agreement have been duly authorized by all necessary
corporate action.
b. The execution, delivery and performance of this Agreement by
Cobb and by Hydro, shall not require the consent of any third party or lender.
8. Investment. Each of Cobb and Hydro (i) understand that the Stock
of Alta to be received by Cobb and Hydro, respectively, if and when issued to
Cobb and Hydro, will constitute "restricted securities" as that term is defined
in Rule 144, promulgated under the Securities Act of 1933, as amended
("Securities Act") and as such may not be transferred except pursuant to an
effective registration statement filed under the Securities Act or pursuant to a
valid exemption from the registration requirements of the Securities Act; (ii)
understand that the Stock has not been, and will not be, registered under the
Securities Act, or under any state securities laws, and is being offered and
sold in reliance upon federal and state exemptions for transactions not
involving any public offering, (iii) is acquiring the Stock solely for its own
account for investment purposes only, and not with a present view to, or for
resale in connection with any distribution directly or indirectly of the Stock
or any interest therein, and it has no direct or indirect participation in any
such undertaking or in the underwriting of such undertaking; (iv) is a
sophisticated investor with knowledge and experience in business and financial
matters, (v) has received certain information concerning Alta and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Stock; (vi) is able to bear the
economic risk and lack of liquidity inherent in holding the Stock; (vii) is an
Accredited Investor as defined in Regulation D promulgated under the Securities
Act; (viii) agrees to sign a standard investment letter to the effect of the
representations set forth in subparagraphs, (i)-(vii) above upon the issuance of
the Stock. A legend reflecting the restrictions on the transfer of the Stock
shall be placed upon the certificate or certificates representing the Stock and
Alta may place a "stop transfer order" regarding the Stock with its transfer
agent.
9. Securities. Each of Cobb and Hyde hereby acknowledge that Alta has
delivered to it Alta's Annual Report on Form 10-K for the year ended December
31, 1992, its quarterly
3
<PAGE> 4
report on Form 10-Q for the quarters ended March 31, 1993, June 30, 1993 and
September 30, 1993, respectively and its proxy statement for the 1993 Annual
Meeting of Shareholders. Each of Cobb and Hydro has had the opportunity to
review and discuss the foregoing documents with Alta and has had the
opportunity to ask questions and make inquiries of representatives of Alta
respecting Alta's financial condition, assets and operations, and each of Cobb
and Hydro has received satisfactory answers to such questions and inquiries.
10. Miscellaneous.
a. Notices. All notices required to be given under the terms of
this Agreement shall be in writing and shall be deemed to have been duly given,
when delivered personally or sent by telecopy, or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties at
the following addresses or at such other addresses as shall be specified by the
parties by like notice:
If to Alta Gold Co.: 601 Whitney Ranch Drive
Suite 10
Henderson, Nevada 89014
If to Cobb Resources Corporation: 302 East Jackson Street
P.O. Box 458
West Columbia, Texas 77486
If to Hydro Resources Corporation: George Lotspeich
4011 Mesa Verde N.E.
Albuquerque, New Mexico 87110
b. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada without giving
effect to principles of conflicts of laws.
c. Assignment. This Agreement shall not be assigned by
assignment, by operation of law, or by change in control, without the written
consent of the other parties hereto. Any assignment in noncompliance with this
section shall be null and void.
d. Severability. Any term or provision of this Agreement which is
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement unless as a
result of such invalidity the relative benefits and obligations of the parties
hereto are materially altered. If any provision of this Agreement is so broad
as to be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.
e. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto.
4
<PAGE> 5
f. Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original, but all of which shall
constitute one and the same agreement.
g. Attorneys' Fees. In the event of a breach of any of the terms
and provisions of this Agreement, the nondefaulting party shall be entitled to
a reimbursement of any and all attorneys' fees, costs and expenses incurred by
such nondefaulting party in enforcing their rights under this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
ALTA GOLD CO.
By /s/ ROBERT N. PRATT
-------------------------
Its President
------------------------
COBB RESOURCES CORPORATION
By /s/ CHARLES COBB
-------------------------
Its President
------------------------
HYDRO RESOURCES CORPORATION
By /s/ George Lotspeich
-------------------------
Its President
------------------------
5
<PAGE> 1
EXHIBIT 10.2
ROYALTY DEED AND RIGHT OF FIRST REFUSAL
This Royalty Deed and Right of First Refusal (the "Royalty Deed") is
made as of the 13th day of May, 1994, by COBB RESOURCES CORPORATION, a New
Mexico corporation ("Cobb"), HYDRO RESOURCES CORPORATION, a New Mexico
corporation ("Hydro"), 4011 Mesa Verde N.E., Albuquerque, N.M. 87110
(collectively "Cobb/Hydro"), and ALTA GOLD CO., a Nevada corporation ("Alta"),
601 Whitney Ranch Drive, Suite 10, Henderson, Nevada 89014.
RECITALS:
A. Pursuant to the terms of that certain Special Warranty Deed (the
"Special Warranty Deed"), dated November 16, 1989 and pursuant to that certain
Agreement for Purchase and Sale of Mining Properties dated July 25, 1989
between Cobb Resources Corporation, and Copper Flat Mining Company, Ltd.
(collectively the "Deed"), Cobb reserved for itself a non-participating
production royalty equal to 5 percent Net Smelter Returns as described on page
2, paragraph (iii) of the Special Warranty Deed. The Special Warranty Deed was
recorded with the Sierra County, New Mexico Recorder's office on November 17,
1989 in Mining Deed Book N at pages 756-773.
B. Pursuant to the terms of that certain Agreement between Alta, Cobb
and Hydro, dated January 26, 1994 (the "Agreement"), the parties made certain
agreements respecting the 5 percent Net Smelter Returns royalty, and future
royalty obligations and rights respecting the non-participating production
royalty of Cobb described in the Deed.
C. Cobb/Hydro and Alta desire to enter into this Royalty Deed to
accomplish the purposes of the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Cobb/Hydro, Cobb for itself and
Hydro for itself, do hereby grant, sell, transfer, convey and deliver to Alta
the 5 percent Net Smelter Returns royalty described in paragraph (iii), page 2
of the Deed, free and clear of all liens, encumbrances, reservations and
exceptions, except the following:
A. Reservations and exceptions contained in Patents from the United
States of America, provided, however, that Cobb/Hydro hereby represent to Alta
that the said Patents do not contain a reservation of the mineral estate in the
said lands to the United States of America;
B. Rights of way and easements for roads, ditches, canals, pipelines
and telephone lines of record on the date hereof; and
C. Taxes and assessments for 1994 and subsequent years.
1. Minimum Advance Royalty. Cobb and Hydro hereby agree that the
Minimum Advance Royalty referred to in paragraph (i), page 2 of the Special
Warranty Deed will be
<PAGE> 2
credited against future production royalties after Alta acquires the property
known as the Copper Flat Property. For purposes of this Royalty Deed, the
Copper Flat Property shall be defined as the property described on Exhibit "A"
attached hereto and incorporated herein by this reference. Alta agrees that if
the Copper Flat Property is not in production within a period of five years
from the date Alta acquires such Copper Flat Property, the Minimum Advance
Royalty described in paragraph (i), page 2, of the Special Warranty Deed will no
longer be credited against the future production royalties. In no event,
however, will the future production royalty due Cobb/Hydro be less than
$150,000 in any year.
2. Right of First Refusal. Cobb and Hydro to the extent of Hydro's
interest therein, hereby grant to Alta a right of first refusal to acquire the
retained perpetual non-participating production royalty described on page 2,
paragraphs (i) and (ii) of the Special Warranty Deed. Cobb and Hydro agree that
if Cobb and/or Hydro at any time propose to sell or transfer any or all of said
non-participating production royalty (the "Royalty") described in paragraphs
(i) and (ii), page 2, of the Special Warranty Deed, whether by sale, gift or
otherwise, Cobb, or as applicable Hydro, shall first make a written offer to
sell such Royalty to Alta according to the terms and conditions of a bona fide
proposed sale. The offer shall state the name of the proposed transferee and
all of the terms and conditions of the proposed transfer. Alta shall have a
period of thirty (30) days after receipt of the offer in which to elect to
purchase all or any portion of the offered Royalty. In the event of an exercise
of its option to purchase the Royalty offered by Cobb and/or Hydro, Alta shall
give written notice of its election to acquire such Royalty, or any portion
thereof, pursuant to this paragraph. Any portion of the Royalty not purchased
pursuant to the foregoing may be transferred by Cobb or Hydro to the proposed
transferee named in the offer to Alta, according to the terms of such offer.
However, if such transfer is not made within thirty (30) days following the
termination of Alta's right of first refusal to purchase, or if the terms of
such proposed transfer differs from the offer made to Alta, a new offer must be
made to Alta before Cobb or Hydro can transfer any portion of the Royalty and
the provisions of this paragraph shall again apply to such new offer and
transfer.
3. Notices. All notices under the provisions of this Royalty Deed
shall be given by registered mail, postage prepaid, return receipt requested,
and shall be effective when mailed to the addresses as follows:
If to Alta Gold Co.: 601 Whitney Ranch Drive
Suite 10
Henderson, Nevada 89014
If to Cobb Resources Corporation: 302 East Jackson Street
P.O. Box 458
West Columbia, Texas 77486
If to Hydro Resources Corporation: 4011 Mesa Verde N.E.
Albuquerque, New Mexico 87110
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<PAGE> 3
4. Form of Transfer. In the event of exercise by Alta of the
right of first refusal, evidence of such transfer of the Royalty, or any part
thereof, shall be made by Royalty Deed in form and substance reasonably
acceptable to Alta.
5. Term. The right of first refusal granted hereby shall continue for
a period of ten years from May 13, 1994.
6. Approvals. Cobb and Hydro warrant and represent that they have
obtained all necessary approvals required to effectuate the purposes of this
Royalty Deed and that the execution, delivery and performance of this Royalty
Deed by Cobb and Hydro have been duly authorized by all necessary corporate
action, and does not conflict with or violate any provisions of the Articles of
Incorporation or Bylaws of Cobb or Hydro and does not constitute a default
under any agreement, document or paper to which Cobb or Hydro are a party, or
by which they are bound.
7. Definitions. The parties understand and agree that the definitions
not otherwise defined in this Agreement and defined in the Special Warranty
Deed shall, as applicable, apply to the terms and provisions of this Royalty
Deed.
8. Deed. The Deed shall, in all other respects, remain unchanged.
9. Additional Documentation. Cobb and Hydro will execute and deliver
all such other and additional documents and will do all such other acts and
things as may be necessary to more fully assure to Alta, its successors and
assigns, all of the rights and interests hereby conveyed.
10. Attorneys' Fees. In the event of a breach of any of the terms and
provisions of this Royalty Deed and Right of First Refusal, the nondefaulting
party shall be entitled to a reimbursement of any and all attorneys' fees,
costs and expenses incurred by such nondefaulting party in enforcing their
rights under this Royalty Deed and Right of First Refusal.
11. Applicable Law. This Royalty Deed shall be governed by and
construed in accordance with the laws of the State of New Mexico.
EXECUTED as of the date first above written.
COBB RESOURCES CORPORATION
By /s/ CHARLES COBB
---------------------------
Its President
--------------------------
3
<PAGE> 4
HYDRO RESOURCES CORPORATION
BY: /s/ GEORGE LOTSPEICH
------------------------
ITS: President
-----------------------
ALTA GOLD CO.
BY: /s/ ROBERT N. PRATT
------------------------
ITS: President
-----------------------
4
<PAGE> 5
STATE OF Texas )
: ss.
COUNTY OF Brazoria )
The foregoing instrument was acknowledged before me this 1st day of
June, 1994, by Charles Cobb, the President of Cobb Resources Corporation.
[SEAL] JENNIE LIND /s/ JENNIE LIND
NOTARY PUBLIC, STATE OF TEXAS -----------------------------------
MY COMMISSION EXPIRES NOTARY PUBLIC
APRIL 30, 1996 Residing at: West Columbia, Tx.
----------------------
My Commission Expires:
4.30.96
- ----------------------
STATE OF New Mexico )
: ss.
COUNTY OF Bernalillo )
The foregoing instrument was acknowledged before me this 7th day of
June, 1994, by GEORGE O. LOTSPEICH, the President of Hydro Resources
Corporation.
[SEAL] OFFICIAL SEAL /s/ MILDRED W. BOARDMAN
MILDRED W. BOARDMAN -----------------------------------
NOTARY PUBLIC, STATE OF NEW MEXICO NOTARY PUBLIC
Notary Bond Filed With Secretary of State Residing at: 501 Dyian Rd. #101
Albuquerque, NM 81102
MY Commission Expires 5/6/97 ----------------------
My Commission Expires:
5/6/97
- ----------------------
5
<PAGE> 6
STATE OF Nevada )
: ss.
COUNTY OF Clark )
The foregoing instrument was acknowledged before me this 24th day of
May, 1994, by Robert N. Pratt, the President of Alta Gold Co.
/s/ MARGO R. BERGESON
------------------------------------------------
NOTARY PUBLIC
Residing at: Henderson, NV
------------------------------------
---------------------------------------
Notary Public-State Of Nevada
COUNTY OF CLARK
[SEAL] MARGO R. BERGESON
My Commission Expires
My Commission Expires: December 30, 1997
DEC. 30, 1997 ---------------------------------------
- ---------------------
6
<PAGE> 1
EXHIBIT 16.1
June 11, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Cobb Resources Corporation and,
under the date of October 9, 1992 we reported on the financial statements of
Cobb Resources Corporation as of June 30, 1992 and 1991 and for the years then
ended. On June 11, 1998, our appointment as principal accountants was
terminated. We have read Cobb Resources Corporation's statements included
under Item 4 of its Form 8-K dated June 11, 1998. We agree with such
statements, except that we are not in a position to agree or disagree with Cobb
Resources Corporation's statement that the change was recommended and approved
by the Company's board of directors and we are not in a position to agree or
disagree with Cobb Resources Corporation's statement that Ham, Langston &
Brezina, L.L.P. was not consulted or did not provide a written report or oral
advice regarding the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on Cobb Resources Corporation's financial statements.
Very truly yours,
/s/ Coopers & Lybrand, L.L.P.
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 419,280
<SECURITIES> 518,879
<RECEIVABLES> 132,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,008,159
<PP&E> 53,661
<DEPRECIATION> 8,982
<TOTAL-ASSETS> 1,125,338
<CURRENT-LIABILITIES> 41,731
<BONDS> 0
0
0
<COMMON> 853,426
<OTHER-SE> 206,262
<TOTAL-LIABILITY-AND-EQUITY> 1,125,338
<SALES> 0
<TOTAL-REVENUES> 458,134
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 326,706
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,593
<INCOME-PRETAX> 126,835
<INCOME-TAX> 0
<INCOME-CONTINUING> 126,835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 126,835
<EPS-PRIMARY> .01
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