As filed with the Securities & Exchange Commission on December 22, 1997
Registration No. ___________________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0180496
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
James S. Chapin, Chief Executive Officer
Brush Creek Mining and Development Co., Inc.
970 E. Main Street, Suite 200 970 E. Main Street, Suite 200
Grass Valley, California 95945 Grass Valley, California 95945
(916) 477-5961 (916) 477-5961
(Address, including zip code, and (Name, address, including zip
telephone number, including area code, and telephone number,
code of registrant's principal including area code of
executive offices) agent for service)
Copies to:
David M. Kaye, Esq.
Danzig Garubo & Kaye, LLP
P.O. Box 333, 30A Vreeland Road
Florham Park, New Jersey 07932-0333
(973) 443-0600
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act") other than securities offered
only in connection with dividend or interest reinvestment plans, check the
following box: [ x ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM AMOUNT
SECURITIES OFFERING AGGREGATE OF
TO BE AMOUNT TO BE PRICE PER OFFERING REGISTRA-REGISTERED
REGISTERED SHARE (1) PRICE (1) TION FEE
Common Stock,
par value
$.0001
per share(2) 30,097,883 $1.0625 $31,979,000 $9,433.81
TOTAL REGISTRATION FEE $9,433.81
_____________________
(1) Calculated in accordance with Rule 457(c) using the average of the bid
and asked price for the Common Stock on December 17, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION DATED DECEMBER 22, 1997
Prospectus
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
30,097,883 Shares of Common Stock
The shares offered hereby (the "Shares") consist of 30,097,883 shares
of common stock, par value $.0001 per share (the "Common Stock"), of Brush
Creek Mining and Development Co., Inc., a Nevada corporation (the
"Company"). The Shares may be offered from time to time by certain
stockholders (the "Selling Stockholders") identified herein. See "Selling
Stockholders". The Company will not receive any part of the proceeds from
the sales of the Shares. All expenses of registration incurred in
connection herewith are being borne by the Company, but all selling and
other expenses incurred by the Selling Stockholders will be borne by the
Selling Stockholders.
The Selling Stockholders have not advised the Company of any specific
plans for the distribution of the Shares covered by this Prospectus, but it
is anticipated that the Shares will be sold from time to time primarily in
transactions (which may include block transactions) on the National
Association of Securities Dealers Automated Quotation (NASDAQ) System at
the market price then prevailing or at prices related to prevailing prices,
although sales may also be made in negotiated transactions at negotiated
prices or otherwise. See "Plan of Distribution".
The Company's Common Stock is traded and quoted on the Nasdaq SmallCap
Market under the symbol BCMD.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS",
INCLUDING "LACK OF PROFITABILITY; CONTINUING LOSSES; AND DOUBTFUL ABILITY
TO CONTINUE AS A GOING CONCERN", COMMENCING ON PAGE 8 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ________________, 1998
No dealer, salesperson or other person has been authorized to give any
information or to make any representations, other than those contained or
incorporated by reference in this Prospectus, in connection with the
offering contained herein and, if given or made, such information must not
be relied upon as having been authorized by the Company or the Selling
Stockholders. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in
such jurisdiction. Neither the delivery of this Prospectus nor any sale
made hereunder shall under any circumstances create any implication that
there has been no change in the affairs of the Company since the date
hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy and information statements filed by the Company may be
inspected and copied at the Public Reference Section of the Commission at
450 Fifth Street, N.W. Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, 13th Floor, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can also be obtained
from the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street N.W., Washington D.C. 20549 at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding the Company; the
address of such site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement"), under the Securities Act of 1933,
as amended (the "Act"), with respect to the Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration
Statement certain parts of which are omitted in accordance with the rules
and regulations of the Commission. Copies of the Registration Statement,
including all exhibits thereto, may be obtained from the Commission's
principal office in Washington D.C. upon payment of the fees prescribed by
the Commission or may be examined without charge at the offices of the
Commission as described above.
The Company's securities are quoted on the Nasdaq SmallCap Market.
Reports and other information about the Company may be inspected at the
offices maintained by the National Association of Securities Dealers, Inc.,
NASDAQ Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company
with the Commission are incorporated by reference in this Prospectus:
(a) the Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1997 which contains consolidated financial statements
of the Company and certain other information regarding the Company;
(b) the Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1997;
(c) the description of the Common Stock as set forth in the
Registration Statement on Form 8-A, filed with the Securities and Exchange
Commission on August 10, 1984; and
(d) all other reports filed by the Company pursuant to Sections
13(a) and 15(d) of the Exchange Act since the end of the Company's fiscal
year ended June 30, 1997.
Each document filed subsequent to the date of this Prospectus by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
prior to the termination of the offering to which this Prospectus relates
shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents. Any
statement contained in a document, all or a portion of which is
incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained or incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, upon the written or
oral request of any such person, a copy of any or all such documents which
are incorporated herein by reference (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference into the
documents that this Prospectus incorporates). Written or oral requests for
copies should be directed to: Brush Creek Mining and Development Co., Inc.,
970 East Main Street, Suite 200, Grass Valley, California 95945, telephone
number (916) 477-5961.
THE COMPANY
Introduction
Brush Creek Mining and Development Co., Inc. (the "Company") was
incorporated in Nevada in 1982 and is engaged in the exploration and
development of gold and diamond mining properties. From its incorporation
until April 1989, the Company operated as a mining and mineral development
company at which time its mining operations, conducted through the Brush
Creek Joint Venture of which the Company owned 40%, were terminated.
Shortly thereafter, the Company became actively engaged in acquiring
additional mineral properties, raising capital, and preparing properties
for resumed production. The Company did not have any significant operations
or activities from April 1989 through June 1989, and suspended all mining
operations and reduced its activities to a care and maintenance level.
Accordingly, the Company is deemed to have reentered the development stage
effective July 1, 1989.
Gold Mining
The Company currently owns the Brush Creek, Carson, High Commission,
Gardner's Point and Pioneer Mines. The Company also has leases with options
to purchase the Ruby, Rising Sun, Kate Hardy and Omega Mines. In addition,
in fiscal 1997, the Company acquired options to purchase the New California
Placer Mine and Wilbank's Placer and Loade Mine. All of these mines, except
for the Gardner's Point and Pioneer Mines, are located in the
Allegheny-Forest-Downieville mining districts on the western slope of the
Sierra Nevada mountain range in northern California and comprise
approximately 6,300 acres. Because of the proximity of the mines to each
other, the Company believes it can efficiently mine and operate these
properties since it will be able to take advantage of economies of scale by
sharing personnel, mill facilities and equipment.
Based on previous studies completed in December 1990, management
believed that the Company's mines had sufficient mineralization to warrant
feasibility studies and in January 1991 engaged Keewatin Engineering to
conduct and document those studies. The Company received Phase I and Phase
II reports from Keewatin Engineering, the Phase II report being dated
October 1992. The Phase I and Phase II reports were exploration and
development reports of the Allegheny-Forest-Downieville mining district and
mining properties of the Company, including an evaluation of the
underground hard-rock system and surface geology studies to identify
precious metal rock units, and additional structural geology studies within
the district. The Ruby Mine was the Company's original focus because of its
rich production history and because permits were in place for placer
production and hard rock exploration.
The Company filed its plan of operation for the Ruby and Carson Mines
with the United States Forestry Department, and has obtained all necessary
permits for continued production and milling at the Ruby Mine of up to 225
tons of material per day. In order to continue the underground development
of the Carson vein system, a more extensive geologic evaluation using
diamond drilling on surface and subsurface should be completed. As this was
a capital intensive expense the Company decided to detain further
development of the Carson Mine until the Company decides to integrate this
program into its future development budget.
From February 1992 when the Company began limited production at the
Ruby Mine to December 1992 when the Company ceased production due to
inclement weather, the Company milled approximately 7,300 tons of
mineralized placer material and recovered approximately 200 ounces of gold,
an amount which is inconsistent with historical production at the Ruby Mine
in the early 1940's. However, the Company's management believes that these
preliminary results are too small to be a reliable representative sample of
the expected placer grades.
During fiscal 1997, the Company decided that, under the right
conditions, it would be in the best interest of shareholders to secure a
joint venture partner to aid in developing the Company's properties.
Accordingly, the Company engaged an investment banker to approach qualified
mining companies. See "Recent Developments". At the same time, the Company
began rehabilitating and permitting the lower Brush Creek Mine in an effort
to access 9,000 tons of remnant pillars and 50,000 tons of potential ore
blocks. In June 1997, the Company received interim approval from the
United States Forest Service to transport thirty tons of ore per day from
the lower Brush Creek Mine to the Ruby mill site. The historical grade of
the lower Brush Creek Mine is approximately one ounce gold per ton of ore
milled. Keewatin Engineering stated in its 1991 report on the mines that
Nealon and Associates sampled one of the ore blocks, taking twelve six-foot
chip samples which assayed from .002 to 273 ounces per ton gold. By
combining the assays with records of production from 1958 to 1962, Nealon
estimated that the ore blocks would yield approximately .5 ounces per ton
milled.
The Company intends also to explore in the lower Brush Creek for a
parallel ore shoot which may exist to the south of the known ore shoot on a
flatter trajectory and for the potential continuation of the known ore-
shoot offset to the north of the post mineral dyke. However, the real
potential in the lower Brush Creek is the down-dip extension of the Golden
Gate ore shoot. The vein was mined to a distance of six hundred feet below
current workings. There, it began to pinch and steepen. The Company
intends to follow its established plan to drill at intervals up to 1,000
feet beneath the old workings in an effort to block a resource of 129,000
ounces of gold.
In an effort to strengthen the Company's mining staff to better enable
the Company to successfully extract ore on its own or with the assistance
of a strategic investor, the Company has hired a new mine superintendent,
mine geologist, mining engineer and mill superintendent. Although no
assurance can be given, management is confident that, to the extent funds
are available, the newly added personnel will successfully pursue the
Company's plan to steadily increase production and block new reserves.
Diamond Mining
Diamonds have been reported from gold workings since 1849 in the
paleoplacer gold deposits of Butte, Plumas, Sierra, Nevada, El Dorado and
Amador counties, California. The principal district of reported diamonds
was in the Cherokee District of Butte County due west of Gardners Point.
Diamonds have also been recovered from Brush Creek's Gardners Point
property. In 1872 a diamond recovered from the Gardners Point property was
cut into a one carat stone. Another diamond was also recovered at the time
from the Gardners Point Property but was "lost by the foreman, who did not
know its value". These two diamonds were recovered from a 109 square foot
area of a 30 foot thick section of the paleoplacer gold deposit. A third
diamond was recovered from hydraulic tailings in Slate Creek which probably
came from the Gardners Point hydraulic workings.
During fiscal 1997 the Company tested Gardners Point for diamond
indicator minerals. Encouraging results prompted further evaluation
upstream toward the Poker Flat area. There the Company located diamond
indicator minerals in a hard-rock breccia source.
RECENT DEVELOPMENTS
On November 20, 1997, the Company entered into an Exploration,
Development and Mine Operating Agreement (the "November 1997 Agreement")
with Sterling Mining L.L.C. ("Sterling") pursuant to which Sterling has
agreed to participate with the Company (Sterling and the Company being
referred to herein as the "Participants") in the exploration, evaluation
and development of mineral resources within the Company's gold mining
properties (the "Operations"). In connection therewith, Sterling as its
initial contribution (the "Initial Contribution") has agreed to fund the
Operations by contributing $9,000,000 payable as follows: (i) $500,000
upon execution of the November 1997 Agreement; (ii) $700,000 on or before
January 5, 1998; (iii) $1,200,000 on or before June 30, 1998; (iv)
$1,200,000 on or before January 5, 1999; (v) $1,800,000 on or before June
30, 1999; (vi) $1,800,000 on or before January 5, 2000; and (vii)
$1,800,000 on or before June 30, 2000.
Sterling may, on or before February 1, 1998, give written notice to
the Company advising the Company that Sterling desires to exercise an
option to acquire an additional interest (the "Additional Interest") by
increasing the Initial Contribution to $15,000,000. In such event, a
payment of $800,000 will be due within 30 days of exercising said option to
acquire the Additional Interest. Thereafter, a second installment shall be
$800,000 which installment shall be due on or before six months after
payment of the initial installment of $800,000; a third installment shall
be $800,000 which installment shall be due before six months after payment
of the second installment; a fourth installment shall be $1,200,000 which
installment shall be due on or before six months after payment of the third
installment; a fifth installment shall be $1,200,000 which installment
shall be due on or before six months after payment of the fourth
installment; and a sixth installment shall be $1,200,000 which installment
shall be due on or before six months after payment of the fifth
installment. The Agreement provides that Sterling shall be entitled to
deduct for each of the above payments a 10% finder's fee.
With regard to the interests of the Participants, after Sterling's
Initial Contribution and provided Sterling does not acquire the Additional
Interest reflected above, the Company shall have a participating interest
of 70% and Sterling shall have a participating interest of 30%. In the
event Sterling elects to acquire the Additional Interest reflected above,
the Company shall have a participating interest of 51% and Sterling shall
have a participating interest of 49%.
The Agreement also provides for the establishment of a Management
Committee in order to determine overall policies, objectives, procedures,
methods and actions, which Committee will initially consist of one member
appointed by the Company (James S. Chapin, Chief Executive Officer of the
Company), one member appointed by Sterling (Robert Danial, a principal of
Sterling) and one member appointed jointly by the Participants (Kenneth
Friedman, a director of the Company).
In conjunction with the November 1997 Agreement, the Company has
granted a stock option to Sterling pursuant to a Stock Option Agreement
dated November 20, 1997 (the "Option Agreement") to acquire 6,000,000
shares of the Company's Common Stock (the "Initial Option"), and in the
event Sterling exercises its option to acquire the Additional Interest
described above, Sterling shall have the option to purchase an additional
4,000,000 shares of the Company's Common Stock (the "Additional Option").
The purchase price of the shares covered by the Initial Option shall be
$.25 per share without commission for the first 3,000,000 shares and $.35
per share for the second 3,000,000 shares. The purchase price for the
Additional Option shall be $.25 per share without commission for the first
2,000,000 shares and $.35 per share for the second 2,000,000 shares.
The Initial Options exercisable at $.25 per share shall become
exercisable on the day on which Sterling has contributed $3,600,000 of the
Initial Contribution and expire if the first installment of the Initial
Option is not exercised by July 30, 2000. The $.35 Initial Options shall
become exercisable on each of the last three installments of the Initial
Contribution. The Additional Options shall become exercisable in two
installments as follows: (i) the $.25 Additional Options shall become
exercisable on the date on which Sterling has contributed $2,400,000 of the
installments on the Additional Interest and expire if the $.25 Additional
Options are not exercised by July 5, 2000. The $.35 Additional Options
shall become exercisable on the date on which Sterling contributes each of
the final three installments on the Additional Interest and expire if not
exercised by July 30, 2000. The Option Agreement further provides that the
Company shall in good faith attempt to register the options and the
underlying shares in advance of the date on which the options provided for
thereunder are exercisable under said Option Agreement.
Sterling and James S. Chapin, the Company's Chief Executive Officer,
have also executed a Voting Agreement dated as of November 19, 1997
pursuant to which Sterling has agreed to vote all shares of Common Stock
now or any time hereafter held by it with respect to electing directors of
the Board of the Company in favor of the directors selected by Mr. Chapin.
The Voting Agreement has a term of five years provided however that the
Voting Agreement shall be renewed automatically for succeeding terms of two
years unless at least sixty days before the expiration of any such term any
party gives written notice to the other of its intention not to renew the
Voting Agreement.
RISK FACTORS
In addition to the other information contained or incorporated by
reference in this Prospectus, prospective investors should carefully
consider the following matters in evaluating the Company and its business
before purchasing the shares of Common Stock offered hereby.
Lack of Profitability; Continuing Losses; and Doubtful Ability to Continue
as a Going Concern.
The Company has incurred losses of $39,279,422 from inception to June
30, 1997 and had not realized economic production as of June 30, 1997. As a
result of the Company's cumulative losses from operations, and the fact
that the Company has not realized economic production from its mineral
properties, the Company's independent auditor's report, dated August 29,
1997, for the year ended June 30, 1997, states that these conditions raise
substantial doubt about the Company's ability to continue as a going
concern. Management continues to actively seek additional sources of
capital to fund current and future operations. There is no assurance that
the Company will be successful in continuing to raise additional capital,
establishing probable or proven ore reserves, or determining if the mineral
properties can be mined economically. Additionally, the Company in fiscal
1997 defaulted on the leases of certain of its mining properties. The
lessors have not taken action to foreclose on the leases and the Company is
making every effort to fulfill the agreements. The loss of these leases
would have a material adverse effect on the Company.
Need for Additional Financing; Lack of Liquidity; No Material Revenues.
The mining industry is capital intensive. During the fiscal year ended
June 30, 1997, the Company raised $2,111,101 from the sale of 16,387,113
shares of Common Stock. At June 30, 1997, the Company had a working capital
deficit of $2,332,905 and had no material revenues from mining operations.
Additional financing will be required in order for the Company to cover its
future mining and development costs and to engage in full scale mining
operation. Although the Company has entered into the Exploration,
Development and Mine Operating Agreement (see "Recent Developments" above)
as of November 1997, no assurances can be given that the cash therefrom
will be sufficient to satisfy the Company's capital requirements. If the
Company is unable to obtain sufficient funds from future financings and/or
operations, the Company may not be able to achieve its business objectives
and may have to scale back its development plans. In addition, the Company
may have to sell its assets in order to meet its obligations and may lose
some of its properties for failure to make lease payments. In fiscal 1997,
the Company sold equipment in order to meet some of its obligations. In
addition, the Company could lose some of its properties for failure to make
lease payments. On March 23, 1997, the Company's lease on the Kate Hardy
mine expired. However, the Company paid $10,000 to the Kate Hardy lessor to
extend the lease agreement on the Kate Hardy mine for an additional three
months. The Company is required to pay an additional $10,000 to extend the
lease for another three month period. The Company also negotiated a
modification agreement with Ruby Development Co., Inc. to pay, in cash, one
lease payment in arrears for the Ruby mine, to pay in cash, one month lease
payment in arrears for the Rising Sun, increase the amount of equipment
held as collateral pursuant to the Ruby mine lease agreement by filing a
UCC-l financing statement listing the additional equipment, all right,
title and interest of certain "ore specimens" for which Ruby Development
Co., Inc. will credit the value against past due minimum royalty payments,
and grant Ruby Development Co., Inc., an option to purchase up to 50,000
shares of the Company's common stock at a price of $.25 per share until
July 1, 1999.
Possible Delisting of Securities from Nasdaq System; Risks Relating to
Low-Priced Stocks.
The Company's Common Stock is currently listed on the Nasdaq SmallCap
Market. The Securities and Exchange Commission recently approved
substantial changes in Nasdaq's SmallCap Market maintenance standards. The
continued listing requirements will be effective in February 1998. The new
minimum maintenance requirements will require net tangible assets of
$2,000,000, or market capitalization of $35,000,000, or $500,000 in net
income for two of the last three years. In addition, continued inclusion on
Nasdaq will require a public float of 500,000 shares, a $1,000,000 market
value for the public float, 300 shareholders, a bid price of $1.00 per
share and two market makers. From August 1996 to October 1997, the bid
price for the Company's Common Stock was not $1.00 or more per share.
Since November 1997, the bid price has ranged from $0.75 to $1.375 per
share. Accordingly, unless the price for the Company's Common Stock
improves, the Company may not be in compliance with the new maintenance
criteria once such criteria are in effect as of February 1998. A company
will not be deemed in compliance with the minimum bid price of $1.00 per
share when its stock drops below $1.00 for thirty days. The company will be
notified of delisting proceedings unless the stock closes at $1.00 or more
for ten consecutive days, within 90 days of falling out of compliance. The
failure to meet these maintenance criteria in the future may result in the
delisting of the Company's securities from Nasdaq, and trading if any, in
the Company's securities would thereafter be conducted in the non-Nasdaq
over-the-counter market. As a result of such delisting, an investor could
find it more difficult to dispose of, or to obtain accurate quotations as
to the market value of, the Company's securities. In addition, if the
Common Stock were to become delisted from trading on Nasdaq and the trading
price of the Common Stock were to remain below $5.00 per share, trading in
the Common Stock would also be subject to the requirements of certain rules
promulgated under the Securities Exchange Act of 1934, as amended, which
require additional disclosure by broker-dealers in connection with any
trades involving a stock (generally, any non-Nasdaq equity security that
has a market price of less than $5.00 per share, subject to certain
exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and
the risks associated therewith, and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors (generally institutions).
For these types of transactions, the broker-dealer must make a special
suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The
additional burdens imposed upon-broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in the Common Stock,
which could severely limit the market liquidity of the Common Stock.
Lack of Proven or Probable Ore Reserves of Commercial Quantity at the
Mines.
Although the Company has begun preliminary exploration activities on
its mining properties, the Company has not yet established proven or
probable ore reserves. Consequently, the Company has been unable to
ascertain with certainty whether adequate ore reserves sufficient for
profitable operations exist. Management believes, however, that an
evaluation of the Company's mines completed in May 1991 indicates the
existence of sufficient mineralization to warrant continued exploration.
There can be no assurance that proven or probable ore reserves will be
established.
Government Regulation; Environmental Matters.
The Company's mining facilities and operations are subject to
substantial government regulation, including federal, state and local laws
concerning mine safety, land use and environmental protection. The Company
must comply with local, state and federal requirements regarding
exploration operations, public safety, employee health and safety, use of
explosives, air quality, water pollution, noxious odor, noise and dust
controls, reclamation, solid waste, hazardous waste and wildlife as well as
laws protecting the rights of other property owners and the public.
Although the Company believes that it is in substantial compliance with
such regulations, laws and requirements with respect to the mines currently
in operation, failure to comply could have a material adverse effect on the
Company, including substantial penalties, fees and expenses, significant
delays in the Company's operations and the potential shutdown of the
Company's operations.
The Company must also obtain and comply with local, state and federal
permits, including waste discharge requirements, other environmental
permits, use permits, plans of operation and other authorizations.
Obtaining these permits can be very costly and take significant amounts of
time. Although the Company foresees no material problems or delays, no
assurances can be given that the Company can obtain the necessary permits
or commence mining operations, or that, if permits are obtained, there will
be no delay in the Company operations or the Company can maintain economic
production in compliance with the necessary permits.
Competition.
The Company operates in an industry that is characterized by intense
competition for resources, equipment and personnel. Some of the Company's
principal competitors are substantially larger, have substantially greater
resources, and expend considerably larger sums of capital than the Company
for exploration, rehabilitation and development.
Risks in Mining Operations, Insurance Coverage and Uninsured Losses.
The Company's activities are subject to all the risk and hazards
commonly associated with mining operations, including, but not limited to
unforeseen geological formations, cave-ins, environmental concerns and
personal injury. The Company has insurance covering personal injury,
workers' compensation and damage to property and equipment, although in
view of recent trends in damage awards in personal injury lawsuits, such
insurance may be insufficient to satisfy large losses or judgments against
the Company. Furthermore, certain types of insurance coverage (generally
against losses caused by natural disasters and Acts of God) are either
unattainable or prohibitively expensive. Substantial damage awards against
the Company or substantial damages not covered by insurance will affect the
Company's ability to continue as a going concern and may force the Company
to seek protection under the federal bankruptcy laws.
Volatile Market Prices for Gold.
The price of gold has a material effect on the Company's financial
operations. Following deregulation, the market price for gold has been
highly speculative and volatile. Since the end of 1987 the price of gold
has declined from a high of approximately $500 per ounce to approximately
$332 per ounce at September 30, 1997. Instability in the price of gold may
affect the profitability of the Company's operations. No assurances can be
given that the Company's mines contain ore in commercial quantities or, if
ore in commercial quantities is discovered, that gold could be produced at
a profit given the recent market price range for gold.
Litigation; Administrative Proceedings.
The Company has been involved in various litigation matters. During
fiscal 1996, the Company entered into two significant settlement agreements
involving two of such matters. In connection with one of such matters, the
Company in fiscal 1997 defaulted under its obligations under the Settlement
Agreement relating thereto. Thereafter, the Company entered into revised
settlement terms which provide for various significant cash payments to be
made. No assurance can be given that the Company will be able to meet its
obligations thereunder. Any default thereunder will have a materially
adverse effect on the Company which could result in the Company seeking
protection under the bankruptcy laws. Also, the Company was notified in
fiscal 1996 that it was the subject of an informal inquiry being conducted
by the staff of the Securities and Exchange Commission in connection with
the Company's financing activities pursuant to Regulation S under the
Securities Act. An adverse determination could have a material adverse
effect on the Company. See "Legal Proceedings" in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1997.
INCOME TAX CONSIDERATIONS
Each prospective purchaser should consult his or her own tax advisor
with respect to the income tax issues and consequences of holding and
disposing of the Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Stockholders.
SELLING STOCKHOLDERS
The Shares offered hereby consist of (i) 26,932,882 restricted shares
of Common Stock sold by the Company in 1997 in a private placement (the
"Private Placement Shares"); (ii) 271,667 restricted shares of Common Stock
issued to certain persons in 1997 (the "Additional Restricted Shares");
(iii) 2,460,000 shares of Common Stock which may be issued upon conversion
of certain options held by directors of the Company (the Option Shares");
and (iv) 433,334 shares of Common Stock (the "Forbearance Shares") issued
to certain persons pursuant to the terms of Amendment No. 2 to the
Forbearance Agreement (as described in Item 3 in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1997).
The following table sets forth the number of Shares offered
hereunder by each Selling Stockholder. To the knowledge of the Company,
none of the Selling Stockholders has a material relationship with the
Company except as set forth in the footnotes to the following table or as
more fully described elsewhere in this Prospectus.
TOTAL NUMBER OF
SHARES TO BE
OFFERED FOR
NAME OF SELLING
SELLING STOCKHOLDER'S
STOCKHOLDER ACCOUNT
PRIVATE PLACEMENT SHARES
Terry Alcorn 125,000
Abdul Aziz Saleh Al-Rebdi 1,000,000
Ariel Holdings LLC(1) 4,000,000
Gary A. Baggs 500,000
Charles Benzivengo 366,677
Richard Berger 450,000
Paul Body 100,000
Everett Bostwick 250,000
Robert Burke 200,000
James S. Chapin(2) 500,000
Vasant Chheda 1,654,545
C.L. Baggs Revocable Trust 500,000
David Cornish 590,000
Frank J. Crocco 800,000
Stanley Edelstein 250,000
Four M International 400,000
Kenneth Friedman(3) 500,000
Len Gissiner 200,000
Donald J. Guilmette 133,333
Bruce Hambro 250,000
Home Design Service, Ltd. 133,333
R. Curtis Jordan 400,000
Howard Kalodner(4) 400,000
Amram Kass P.C. Defined
Benefit Pension Plan 2,000,000
David Kinney 150,000
Ferris Kleem 400,000
David Kramer 400,000
Rick Lesch 25,000
Jarvis Littlefield 500,000
Gary May 133,328
Kevin McCaffrey 200,000
David Mersereau 200,000
Albert Miller(5) 150,000
Issac Perlstein 2,000,000
Milton Rabinowitz 450,000
R.D. Capital Inc. 400,000
Derick J. Rosinky and
Lavonne Michaeli 100,000
Gerald Schwartz 125,000
Leonard Schweitzer 150,000
Howard Usher 250,000
Alexander Waters 80,000
Stephen Weinstein 100,000
David Werner 4,100,000
Lyell M. Williams 366,666
Roland Vandekerckhove 950,000
ADDITIONAL RESTRICTED SHARES
Colburn & Meredith, Inc. 62,667
Mina Furo 115,000
David Mersereau 94,000
OPTION SHARES(6)
James Chapin(2) 975,000
Kenneth Friedman(3) 485,000
Howard Kalodner(4) 500,000
Albert Miller(5) 500,000
FORBEARANCE SHARES
Werner Aeberhard 82,857
Tania Bruntiffield 51,429
Chris Lambrianos 71,429
Jacques Philippou 45,715
Estate of Dinos N. Samuel 57,143
Mikis Theodosiou 62,857
Anthony Warrender 61,904
(1) Robert Danial, who is a principal of Ariel Holdings LLC, is also a
principal of Sterling Mining L.L.C. See "Recent Developments".
(2) Mr. Chapin is Chief Executive Officer, Chief Financial Officer and a
Director of the Company.
(3) Mr. Friedman is a Director of the Company.
(4) Mr. Kalodner is a Director of the Company.
(5) Mr. Miller is a Director of the Company.
(6) Represents shares issuable upon the exercise of certain options to
purchase shares of Common Stock.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell some or all of the Shares in
transactions involving broker/dealers, who may act as agent or acquire the
Shares as principal. Any broker/dealer participating in such transactions
as agent may receive a commission from the Selling Stockholders (and, if
they act as agent for the purchaser of such Shares, from such purchaser).
Usual and customary brokerage fees will be paid by the Selling
Stockholders. Broker/dealers may agree with the Selling Stockholders to
sell a specified number of Shares at a stipulated price per Share and, to
the extent such broker/dealer is unable to do so acting as agent for the
Selling Stockholders, to purchase as principal any unsold Shares at the
price required to fulfill the respective broker/dealer's commitment to the
Selling Stockholders. Broker/dealers who acquire Shares as principals may
thereafter resell such Shares from time to time in transactions (which may
involve cross and block transactions and which may involve sales to and
through other broker/dealers, including transactions of the nature
described above) in the over-the-counter market, in negotiated transactions
or otherwise, at market prices prevailing at the time of sale or at
negotiated prices, and in connection which such resales may pay to or
receive commissions from the purchasers of such Shares. The Selling
Stockholders also may sell some or all of the Shares directly to purchasers
without the assistance of any broker/dealer.
The Company is bearing all costs relating to the registration of the
Shares, provided that, any commissions or other fees payable to
broker/dealers in connection with any sale of the Shares will be borne by
the Selling Stockholders or other party selling such Shares.
The Selling Stockholders must comply with the requirements of the Act
and the Exchange Act and the rules and regulations thereunder in the offer
and sale of the Shares. In particular, during such times as the Selling
Stockholders may be deemed to be engaged in a distribution of the Common
Stock, and therefore be deemed to be an underwriter under the Act, it must
comply with Rules 10b-6 and 10b-7 under the Exchange Act, as amended, and
will, among other things:
(a) not engage in any stabilization activities in connection with the
Company's securities;
(b) furnish each broker/dealer through which Shares may be offered
such copies of this Prospectus, as amended from time to time, as may be
required by such broker/dealer; and
(c) not bid for or purchase any securities of the Company or attempt
to induce any person to purchase any securities of the Company other than
as permitted under the Exchange Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of
the Company's Common Stock offered hereby will be passed upon for the
Company by Danzig Garubo & Kaye, LLP, Florham Park, New Jersey.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
1997 have been audited by Brown Armstrong Randall & Reyes Accountancy
Corporation, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting
and auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission registration fee $ 9,433.81
Accounting fees and expenses 2,500.00
Legal fees and expenses 25,000.00
Blue Sky fees and expenses 2,000.00
Miscellaneous 4,000.00
Total $42,933.81
All amounts are estimates other than the Commission's registration
fee. No portion of these expenses will be borne by the Selling
Stockholders.
Item 15. Indemnification of Directors and Officers.
Nevada Revised Statute 78.751 ("NRS 78.751") permits the Company's
board of directors to indemnify any person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with any threatened pending or
completed action, suit or proceeding in which such person is made a party
by reason of his being or having been a director, officer, employee or
agent of the Company, in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of
1933, as amended. The NRS 78.751 provides that indemnification pursuant to
its provisions is not exclusive of other rights of indemnification to which
a person may be entitled under any by-law, agreement, vote of stockholders
or disinterested directors, or otherwise.
Item 16. Exhibits.
Exhibit
Number Description
5.1 Opinion of Danzig Garubo & Kaye, LLP regarding the
legality of the securities being registered.
23.1 Consent of Brown Armstrong Randall & Reyes Accountancy
Corporation, independent auditors.
23.2 Consent of Danzig Garubo & Kaye, LLP, included in the
Opinion of Counsel filed as Exhibit 5.1.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in the Registration
Statement; provided, however, that the undertakings set forth in paragraphs
(i) and (ii) above do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") that
are incorporated by reference in this Registration Statement.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered hereby which remain unsold
at the termination of the offering.
4. That, for the purpose of determining any liability under the
Securities Act each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnifications for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item
15 above, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act, and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Grass Valley, State of
California on December 19, 1997.
BRUSH CREEK MINING
AND DEVELOPMENT CO., INC.
By: /s/James S. Chapin
James S. Chapin,
Chief Executive Officer,
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/James S. Chapin Chief Executive Officer, 12/19/97
James S. Chapin Chief Financial Officer,
Chairman of the Board
and Director (Principal
Executive Officer and
Principal Financial and
Accounting Officer)
/s/Howard I. Kalodner Director 12/18/97
Howard I. Kalodner
/s/Albert Miller Director 12/17/97
Albert Miller
/s/Kenneth Friedman Director 12/18/97
Kenneth Friedman
EXHIBIT INDEX
Exhibit Page
Number Description Number
5.1 Opinion of Danzig Garubo & Kaye, LLP
regarding the legality of the
securities being registered.
23.1 Consent of Brown Armstrong Randall &
Reyes Accountancy Corporation,
independent auditors.
23.2 Consent of Danzig Garubo & Kaye, LLP,
included in the Opinion of Counsel
filed as Exhibit 5.1.
EXHIBIT 5.1
[Letterhead of DANZIG GARUBO & KAYE, LLP]
December 19, 1997
Brush Creek Mining and Development Co., Inc.
970 E. Main Street
Suite 200
Grass Valley, CA 95945
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
You have requested our opinion as counsel for Brush Creek Mining and
Development Co., Inc., a Nevada corporation (the "Company"), in connection
with the registration under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, and the public offering by a
certain selling stockholders (the "Selling Stockholders") of up to
30,097,883 shares of the Company's common stock (the "Shares").
We have examined the Company's Registration Statement on Form S-3 in the
form to be filed with the Securities and Exchange Commission (the
"Registration Statement").
We have also examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction, of such records of the Company,
agreements and other instruments, certificates of officers and
representatives of the Company, certificates of public officials and other
documents as we have deemed necessary or appropriate as a basis for the
opinion expressed herein.
In connection with our examination, we have assumed the genuineness of the
signatures, the authenticity of all documents tendered to us as originals,
the legal capacity of natural persons and the conformity to original
documents of all documents submitted to us as certified, conformed,
photostatic or facsimile copies.
Brush Creek Mining and Development Co., Inc.
December 19, 1997
Page 2
Based on the foregoing, and subject to the qualifications and limitations
set forth herein, we are of the opinion that when the Shares have been
issued, delivered and paid for as contemplated in the Prospectus forming a
part of the Registration Statement and upon issuance by the Company and
sale by the Selling Stockholders in the manner described in the
Registration Statement, the Shares will be legally issued, fully paid and
non-assessable.
We express no opinion with respect to the laws other than those of the
States of New Jersey and New York and the federal laws of the United
States, and we assume no responsibility as to the applicability or the
effect of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
We are furnishing this opinion to the Company solely for its benefit in
connection with the Registration Statement. It is not to be used,
circulated, quoted or otherwise referred to for any other purpose. Other
than the Company, no one is entitled to rely on this opinion.
Very truly yours,
/s/Danzig Garubo & Kaye, LLP
DANZIG GARUBO & KAYE, LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statement
on Form S-3 of Brush Creek Mining and Development Co., Inc. of our report
dated August 29, 1997 with respect to the consolidated financial statements
of Brush Creek Mining and Development Co., Inc. included in its Annual
Report on Form 10-KSB, filed with the Securities and Exchange Commission,
which has been incorporated by reference in its entirety in the
Registration Statement on Form S-3. We also consent to the reference to
our firm under the caption "Experts".
BROWN ARMSTRONG RANDALL & REYES
ACCOUNTANCY CORPORATION
/s/Brown Armstrong Randall & Reyes
Accountancy Corporation
Bakersfield, California
December 18, 1997
