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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal Year Ended December 31, 1999
COMMISSION FILE NO. 1-2714
ATLAS MINERALS INC.
-------------------
(Formerly Atlas Corporation)
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
COLORADO 84-1533604
- --------------- ---------------------
<S> <C>
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
370 Seventeenth Street, Suite 3010, Denver, CO 80202 303-629-2440
- ----------------------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code) (Registrant's telephone number)
(including area code)
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
- --------------------------------------------------------------------------------
Name Of Each Exchange
Title Of Each Class ---------------------
------------------- On Which Registered
- --------------------------------------------------------------------------------
Common Stock, par value $0.01 per NONE
share
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
Issuers revenues for its most recent fiscal year were $3,485,000
Aggregate market value of 2,981,967 shares of Common Stock held by non-
affiliates of the Registrant as of March 29, 2000 was $149,098.
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [X] No [ ]
As of March 29, 2000 Registrant had outstanding 4,483,878 shares of Common
Stock, $0.01 Par Value, its only class of voting stock.
Documents Incorporated by Reference - None
Transitional Small Business Disclosure Format Yes [ ] No [ X ]
1
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PART I
Item 1. Description of Business
-----------------------
Atlas Minerals Inc. (formerly Atlas Corporation) ("Atlas") filed a petition for
relief under Chapter 11 of the U.S. Bankruptcy Code on September 22, 1998.
Atlas Precious Metals Inc. ("APMI") and Atlas Gold Mining Inc. ("AGMI"), two of
the Company's subsidiaries, also filed petitions for relief under Chapter 11 on
January 26, 1999. On December 11, 1999, the Bankruptcy Court approved the plans
of reorganization of Atlas, APMI and AGMI (collectively the "Reorganization
Plan"). Atlas, APMI and AGMI have consummated the Reorganization Plan and
emerged from Chapter 11 on January 10, 2000. The case remains open, with the
Bankruptcy Court retaining limited jurisdiction, pending the entry of a final
decree closing the case.
Throughout this document, when we refer to the "Reorganized Company" or the
"Company", we are referring to Atlas Minerals Inc. and its subsidiaries from and
after December 11, 1999. When we refer to the "Predecessor Entity", we refer to
Atlas Minerals Inc. and its subsidiaries prior to December 11, 1999. References
to "Atlas", "Arisur", "APMI" and "AGMI" refer to each of the respective
companies on a stand-alone basis.
All statements other than statements of historical fact made in this Form 10-KSB
are forward looking. In particular, statements regarding industry prospects,
future results of operations or financial position, and statements preceded by,
followed by or that include the words "intends," "estimates," "believes,"
"expects," "anticipates," "should," "could," or similar expressions, are forward
looking statements and reflect our current expectations and are inherently
uncertain. Actual results may differ significantly from our expectations.
Factors that could cause actual results to differ include, among others: general
economic conditions, metal and mineral prices, political events in foreign
countries, the risks associated with foreign operations generally, the timing of
receipt of necessary governmental permits, climatic conditions, labor relations,
availability and cost of material and equipment, the actual configuration of ore
bodies, delays in anticipated start-up dates, environmental risks, the results
of financing efforts and other risk factors detailed in this Form 10-KSB and
Form 8-Ks filed with the Securities and Exchange Commission. Readers are
cautioned not to place undo reliance on forward-looking statements.
GENERAL
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Atlas is principally engaged in the exploration, development and exploitation of
mineral properties. The Reorganized Company was incorporated under the laws of
the State of Colorado on February 3, 2000. The principal office of Atlas is
located at Republic Plaza, 370 Seventeenth Street, Suite 3010, Denver, Colorado,
80202. The Company holds 100% ownership of two- subsidiaries: (i) Arisur Inc.
("Arisur"), a Grand Cayman corporation, which owns and operates mines in
Bolivia, South America through a Bolivian Branch and; (ii) Suramco Metals, Inc.
("Suramco"). In addition, Atlas owns approximately 85% of APMI, incorporated
under the laws of the State of Nevada, which holds the Grassy Mountain property.
APMI also owns approximately 63% of AGMI, incorporated under the laws of the
State of Nevada, which holds the mineral reserves and other assets and
infrastructure at the Gold Bar mine. Each of the properties are described
below.
Atlas employs 3 people at its headquarters in Denver, Colorado and 231 employees
at its subsidiaries.
2
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ARISUR INC.
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Arisur owns and operates the Andacaba Mine and Mill as well as the Don Francisco
and Koyamayu development properties. All three properties are underground lead,
zinc and silver operations located in southern Bolivia. Arisur processes ore
through its Andacaba Mill and in 1997 purchased the Koyamayu property and the
Comali Mill for expansion opportunities. In 1998, the operating company in
Bolivia, Compania Minera Andacaba S.A., was merged into Arisur Inc., the
Bolivian Branch, 100% controlled by Arisur.
Employees and Offices
Arisur's corporate office is located in La Paz, Bolivia and staffed by five
persons. Operations are directed out of Arisur's office in Potosi, which is
staffed by seven persons. Additionally, there are 218 miners, mill workers and
maintenance persons directly involved in operations.
Andacaba Mine
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Location
The property is located in the south central altiplano region of Bolivia near
the city of Potosi, a historic mining community, at an elevation of
approximately 4,500 meters (14,800 feet). The Andacaba property is accessible
by traveling south/southeast 37 kilometers (23 miles) by road from Potosi.
Property
The Andacaba facilities and mine are situated on 18 concessions controlled 100%
by Arisur comprising 4,500 hectares (11,120 acres).
Operations
The Andacaba lead, zinc and silver mine has been in operation since the early
1900s. The mining operations take place year round with an average of 28 days
per month for a total of 330 workdays per year. During 1999, the Andacaba mine
produced approximately 7,600 tonnes per month with average head grades of 1.82%
Pb, 5.91% Zn and 5.50 Troy ounces Ag per ton. The Andacaba Mill processes ore
from all three of Arisur's mining properties and presently has excess capacity
to perform custom milling. Lead and zinc concentrates are shipped by truck to
Potosi, and then by rail to open-air storage at Portezuelo Station, near the
Chilean seaport of Antofagasta, prior to shipment to smelters in various
markets.
Mining Methods
The mining method is shrinkage stoping with the mined out area being filled with
waste rock or left open. Due to the narrow width of the veins, stopes are
worked in panels 40 meters high and 30 meters long. Lateral development follows
the vein and box holes are driven up the vein. Access to a stope panel is by
entrance at each end and no opening is made to the upper level. All breaking is
by up-holes. Cut off grades at the Andacaba Mine are 1.60% Pb, 5.50% Zn and
5.14 ounces Ag per tonne at prices of $500 per tonne Pb, $1,000 per Tonne Zn and
$5.00 per ounce Ag.
3
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Mill Concentration
Two concentrates are produced at the Andacaba Mill, one lead-silver, and one
zinc-silver. After the ore is first crushed by a jaw crusher to minus 3/4-inch,
grinding through four ball mills further reduces the size to 80% minus 100 mesh.
After conditioning, the slurry reports to the lead recovery circuit, and then
the zinc circuit. Zinc and lead concentrates are separately thickened prior to
the transport.
Condition
Service facilities at the mine site are basic and require upgrading as part of
the mine expansion for which financing efforts are underway. The Andacaba Mill
capacity was expanded in 1997 to 550 tonnes per day. A direct power line from
the Velarde II substation near Potosi was completed in August 1997. Water for
the mill is supplied from underground sources at the mine. The city of Potosi
provides a source of supplies and labor.
Geology/Mineralogy
The mineralized veins at Andacaba are enclosed in Tertiary porphyritic quartz
latite or rhyodacite volcanic rocks. The volcanics are part of an igneous
complex that includes an elliptical-shaped biotite granodiorite pluton that
outcrops south of the mine area. The pluton is believed to be 40 kilometers
long and 14 kilometers wide. Volcanic breccias can be observed in the mine area.
Paleozoic sediments outcrop west of the mine and lead, zinc and silver veins are
known to occur in the sediments beyond the property boundary. The thickness of
the volcanic package is not known and at deeper levels in the mine the host
volcanics may be underlain by Paleozoic sediments or possibly granodiorite. On
the surface the veins are oxidized to a depth of about 20 meters. Minerals in
the oxidized zone include limonite, hematite, goethite, quartz and clay. In the
sulfide zone the primary minerals are marmatite, galena, jamesonite,
boulangerite, sphalerite, tetrahedrite, stephanite, quartz, pyrite, pyrrhotite,
chalcopyrite, arsenopyrite, siderite, and others. Wall rocks show very little
alteration. There is possibly some silicification of the rhyodacite.
Reserves/Resources
Three reserve estimates have been performed since October 1996, Mineria Tecnica
Consultores Asociados ("MINTEC") in October 1996, Arisur in February 1997 and
Jose E. Del Solar ("Del Solar"), an independent consulting engineer, in August
1998. A summary of these estimates is as follows:
<TABLE>
<CAPTION>
Proven/Probable
Source Date (metric tonnes) Lead (%) Zinc (%) Ag (oz/t)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mintec October 1996 547,000 2.68 8.26 9.13
Arisur February 1997 561,000 2.68 7.19 6.01
Del Solar August 1998 544,000 2.44 8.78 9.70
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Arisur has historically been able to replace mined reserves through continued
development of the ore body. Current reserves will provide production for
approximately 5 years at current rates. The average grade of lead, zinc and
silver reported in the mill head grades for 1999 of
4
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1.82% Pb, 5.91% Zn and 5.50 Troy ounces per tonne are below reserve grades. The
difference between reserve grades and those reported at the mill is caused by
dilution from increased development and a reduced percentage of production from
the larger, higher grade San Juan/San Jose veins.
During the fall of 1999, the Company began sinking two internal shafts at the
Andacaba mine to access two lower levels of its San Juan/San Jose veins, the
minus 190 and minus 220 levels. Preliminary assays of ore grades at the minus
190 level have yielded grades consistent with those seen at higher levels of
these veins, which are significantly higher than other veins in the mine. With
the access to these lower levels, the percentage of ore coming from the San
Juan/San Jose veins is expected to increase to approximately 50% by the end of
2000. If the minus 190 and minus 220 levels continue to produce ore with grades
consistent with the preliminary assays, then average ore grades would be
expected to increase during 2000 back to reserve grade.
Don Francisco Project
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Location
The property is accessible by road 77 kilometers (48 miles) in a southerly
direction from Potosi or 64 kilometers (40 miles) from the Andacaba mine. The
Don Francisco project is at an elevation of 3,000 meters (9,800 feet).
Property
Arisur owns 100% of five concessions covering 227 hectares (approximately 560
acres).
Operations
The Don Francisco project produced approximately 3,900 tonnes during 1999. Head
grades averaged 12.31% Zn and 2.25 Troy ounces Ag per tonne. Ore is trucked to
Andacaba for processing. Limited exploration and development continues at Don
Francisco to provide for approximately 7,500 tonnes to be milled during 2000, at
similar grades, as a supplement to ore feed from Andacaba. There has been no
recent audit of reserves or estimate of resources by an independent third party.
Conditions
Sufficient water is available to conduct the mining operations. Electrical
power is presently supplied by generator but a recently completed power line
supplies electrical power to within 2 kilometers of the project. Facilities are
situated on the property for the mineworkers and a radio communication system is
in place between Don Francisco and Andacaba.
Geology
The structural setting is similar to Andacaba in that there is one main
structure - the Veta Principal located south of the river, which flows across
the property and the Veta Cumbre north of the river with secondary splits off
the footwall of the main vein. Host rocks are Ordovician calcareous shales,
siltstones and sandstones which have been folded into a series of
5
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synclines and anticlines. The Veta Principal occupies both flanks and the axial
portion (for a short distance) of a major anticline.
Koyamayu Project
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In August 1997 the Predecessor Entity completed the acquisition of the Koyamayu
lead, zinc and silver property, located in southern Bolivia, for $100,000.
Approximately 1,500 tonnes were mined and processed during 1998 with average
head grades of 3.01% Pb, 11.18% Zn, and 4.35 Troy ounces Ag per tonne. During
1999, 4,300 tonnes of ore were mined and processed with average head grades of
1.95% Pb, 13.35% Zn, and 3.28 Troy ounces Ag per tonne. During 2000, the
Company expects to mine approximately 10,000 tonnes of ore from Koyamayu, at
similar head grades as 1999, to be processed at the Andacaba Mill.
Comali Mill
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Arisur executed agreements to acquire the Comali Mill in late 1996 for $250,000
and the acquisition was completed in January 1998. The facility requires
additional capital expenditures of an estimated $150,000 to achieve operations
of 120 tonnes per day. Its flotation circuits are designed to recover lead,
zinc and silver in separate lead and zinc concentrates. The Company intends to
make use of Comali as a regional mill for Koyamayu ore and for toll milling ore
from third parties. The Comali Mill is situated near the community of
Toropalca, 30 kilometers south of Don Francisco.
GRASSY MOUNTAIN PROPERTY
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Project Status
On February 14, 2000, Atlas signed a purchase option agreement for the Grassy
Mountain property with Seabridge Resources Inc. ("Seabridge"). Under the terms
of the agreement, Seabridge paid to Atlas $150,000 (non-refundable) for the
exclusive option to acquire the Grassy Mountain property anytime on or before
December 31, 2001. In order to maintain the option for the full term of the
agreement, Seabridge must make additional option payments of $50,000 on or
before July 31, 2000, $100,000 on or before December 31, 2000 and $50,000 on or
before July 31, 2001. Seabridge may exercise its option at any time during the
option period to acquire the Grassy Mountain property for $1.7 million. The
purchase price will consist of a $250,000 cash payment, $750,000 of Seabridge
common shares and a $700,000, 5% promissory note payable in three equal
installments of $233,333 every six months from the date of the promissory note.
Under the terms of the Reorganization Plan, proceeds from the sale of Grassy
Mountain will first be utilized to pay administrative expenses of Atlas
(approximately $196,000 at December 31, 1999), then excess proceeds will be
distributed amongst APMI creditors, Atlas creditors and Atlas such that Atlas
will receive approximately 21% of the excess proceeds.
Location
The Grassy Mountain project is located in northern Malheur County, Oregon,
approximately 22 miles southwest of Vale, Oregon. The property is accessed by
traveling four miles west from Vale on U.S. Highway 20, then south on the Twin
Springs County Road for 23 miles, or by driving south from Nyssa on U.S. Highway
95 to Owyhee and then west to Rock Springs
6
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Canyon and by gravel road for 14 miles. The project elevation ranges from 3,300
to 4,300 feet.
Property
The Grassy Mountain property encompasses approximately 6 square miles. Atlas
owns 138 unpatented lode claims and an additional 46 unpatented lode and placer
claims are controlled under two separate mineral lease or lease/option to
purchase agreements. Approximately 1,000 acres of fee surface, 240 acres of fee
surface and minerals, and 80 acres of fee minerals are held under two
lease/option agreements.
Geology
The rocks exposed at Grassy Mountain are part of a late to middle-Miocene Grassy
Mountain Formation, a sequence of volcanic and volcaniclastic rocks made up of
primarily olivine-rich basalt and intercalated tufaceous siltstones, sandstones,
and conglomerates. The rocks have been dated through mammalian fossils and
Potassium-Argon chronology to be approximately 10 million years old. The
sediments are primarily flat lying with a slight regional dip to the east. The
structural trend of the area is N10W to N30E. Later post mineralization east
west faulting probably cut these features.
Mineralization is associated with a low-grade gold siliceous hot springs system
with enrichment along multi-stage quartz-adularia veins and favorable
lithologies. Explosive brecciation and overpressuring of the rock, common in
these systems, was minimized due to the un-lithified nature of the sediments.
The mineralized rock is highly silicified and locally brecciated in the vicinity
of the feeder structures. As silicification decreases so does grade. Away from
the feeder zones lithology also plays an important role in gold deposition. The
finer grained siltstones contain the bulk of the lower grade material. The
higher grades are found in the coarser arkosic sandstones. The feeder or vein
zones contain grades as high as 20 ounces of gold/ton ("oz. Au/t").
History
There was no significant mining or major mineral occurrence known in the area
prior to the Predecessor Entity's acquisition of the Grassy Mountain project in
1986.
Detailed mapping and sampling were completed in 1986 and several drill targets
were defined. Hole 26-9 is considered the discovery hole with 145 feet of
mineralization averaging 0.075 oz. Au/t. The claim block was expanded at this
time and exploration work continued through 1991. The Predecessor Entity
completed 388 drill holes for a total of approximately 221,500 feet on the
property.
Newmont Grassy Mountain Corporation ("Newmont"), a wholly owned subsidiary of
Newmont Exploration Company leased the property from the Predecessor Entity in
September, 1992 and continued property evaluation through August, 1994
completing an additional 13 core and reverse circulation holes.
In September 1996 the Predecessor Entity executed an agreement with Newmont,
(the "Agreement"), which provided for the reconveyance of the Grassy Mountain
property to the Predecessor Entity. Pursuant to the Agreement, Atlas paid an
amount of $206,000 to
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Newmont, issued a $500,000 unsecured, non-interest-bearing promissory note
(originally due September 18, 1997, but subsequently extended, then defaulted)
and assumed bonding requirements for exploration reclamation of approximately
$146,000.
On January 9, 1998 the Predecessor Entity signed an option agreement with
Tombstone Explorations Company Ltd. ("Tombstone"), granting to Tombstone an
exclusive option to purchase 100% of the Grassy Mountain property for $4
million. The payments were to be made over four years approximating $1 million
each year. On July 15, 1998, Tombstone terminated its option and returned 100%
of the property to Atlas.
Exploration work during Tombstone's program at Grassy Mountain included 8,500
feet of reverse circulation and core drilling in ten drillholes. Tombstone
completed an extensive review of previous work at the property and commissioned
an economic review and scoping study by Pincock Allen & Holt ("PA&H"). The 1997
review indicated the potential for the existing resource to be economically
recoverable through underground mining methods. The review also concluded that
significant additional exploration potential exists to identify additional high
grade and bulk mineable low grade deposits.
Reserves
As part of a detailed feasibility study conducted by Kilborn SNC-Lavalin, Inc.
("Kilborn") in 1990, PA&H developed an open pit mine model. The feasibility
study resulted in the definition of a mineable reserve of 996,000 ounces at a
$350 gold price from 16 million tons at grades 0.062 oz. Au/t of mill and heap
leach ores. Neither the recovered silver nor low-grade leach ores were
considered. The contained silver is approximately 2,467,000 ounces.
PA&H completed a feasibility study in 1990. The database utilized for this
study consisted of 180 drill holes in the main deposit area. The drilling is
predominantly vertical and angle reverse circulation rotary drill holes with
some core holes. Using a 0.02 oz. Au/t cutoff, PA&H calculated a geologic
resource of 17,217,000 tons at a grade of 0.061 oz. Au/t for a total of
1,051,500 ounces and 2,610,000 ounces of contained silver.
Underground Study
Two underground feasibility studies were commissioned to evaluate 200 tons per
day ("tpd") and 1,000 tpd production options by Kilborn and Dynatec Mining
Corporation, respectively. The 200-tpd study indicated diluted mineable reserves
of 131,000 tons at a grade of 1.132 oz. Au/t for 149,000 contained ounces. The
second, larger scale underground study at 1,000 tpd used an 0.08 oz. Au/t cutoff
and identifies diluted mineable reserves as 1.9 million tons at a grade of 0.262
oz. Au/t for 497,000 contained ounces.
Exploration
An additional resource was drilled out approximately 1 mile west of the main
deposit. The Crabgrass target contains a near surface geologic resource at a
0.02 oz. Au/t cutoff of 24,000 ounces contained in 600,000 tons grading 0.038
oz. Au/t. Several drilled and undrilled areas within the Grassy Mountain claim
block have potential for additional resources.
8
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GOLD BAR MINE
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Project Status
In August 1999, the Predecessor Entity reached an agreement with Vengold, Inc.
("Vengold") giving Vengold the option to acquire 100% of 603 unpatented lode
claims and 6 patented lode claims at the Gold Bar property. Vengold is
obligated under the agreement to incur $200,000 in exploration costs on the
property by December 31, 2001. The Company will retain a 2% net smelter royalty
interest in the property if the option is exercised. Of the remaining mining
claims at Gold Bar, the Company has retained 53 unpatented claims as well as the
remaining patented land at the Gold Bar site for its own use. The remaining
claims on the Gold Bar property, comprising approximately 80% of the entire
claim block, were dropped on August 31, 1999 in order to avoid paying the annual
holding fees on the claims of approximately $260,000.
On January 11, 2000, Atlas entered into an exclusive agreement with Machinery
and Equipment Company, Inc. ("M&E") to dismantle, salvage and sell the mill and
related equipment at the Gold Bar property. M&E will receive a 25% commission
on all proceeds received under the agreement.
Under the terms of the Reorganization Plan, proceeds from the sale of Gold Bar
will first be utilized to pay certain priority claims, including administrative
expenses of Atlas (approximately $220,000 at December 31, 2000) and
approximately $92,000 to other creditors. Proceeds in excess of these amounts
will be distributed amongst AGMI creditors, APMI creditors, Atlas creditors and
Atlas such that Atlas will receive approximately 15% of any excess proceeds.
Location
The Gold Bar property is located in and adjacent to the Roberts Mountains in
Eureka County, Nevada, at elevations ranging from 6,400 to 8,800 feet above sea
level. The area is reached by traveling 22 miles west of Eureka, Nevada, on
U.S. Highway No. 50 and 17 miles northeast along the Three Bars Road.
Property
The Gold Bar property area encompasses approximately 20 square miles. There are
655 unpatented lode-mining claims 100% owned by Atlas. Atlas also owns 6
patented lode claims and 8 patented millsite claims.
Geology
All of the mineralization found occurs as sediment-hosted "Carlin-type"
deposits. These deposits are hosted in carbonate-rich sedimentary rocks of the
Devonian Nevada Formation. Mineralization is characterized by micron-size gold
and a distinct hydrothermal alteration suite of the decalcification and
silicification. Gold mineralization and alteration are characteristically
enriched in the trace elements and minor silver.
9
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History
Regional reconnaissance exploration led the Predecessor Entity to the Battle
Mountain Trend area in the summer of 1983. Focused reconnaissance along the
southern Roberts Mountains identified widespread hydrothermal alteration with
anomalous gold geochemistry along the western range front. Detailed exploration
in the area subsequently led to acquisition of land, target development, and
drilling. Since then, the Predecessor Entity has discovered five gold deposits:
Gold Bar, Goldstone, Gold Ridge, Gold Pick, and Gold Canyon. From inception
through cessation of operations in 1994, 485,200 ounces of gold were recovered
from 7,514,600 tons of ore grading .074 ounces of gold per ton milled.
Mill construction was completed in 1986 with the first gold poured in January
1987. The mill was originally designed and constructed for 1,500-tpd
throughput, later expanded in 1989 to the current 3,200-tpd rate.
Mining operations were suspended in February 1994 pending additional drilling
and further study of cost cutting measures. The confirmatory drill program
included 303 surface and 55 underground holes.
In late 1994 the Predecessor Entity decided to accelerate the exploration of the
claim block by entering into joint venture agreements with Rayrock Yellowknife
Resources Inc. and Homestake Mining Company. Rayrock's work consisted of
geological mapping and sampling, geophysical CSAMT lines and 65 reverse
circulation drill holes. Homestake completed additional geophysical CSAMT and
gravity lines as well as 26 reverse circulation drill holes.
In the summer of 1995, exploration by the Predecessor Entity produced
encouraging drill results near the Gold Bar Mill. To accelerate the delineation
of the newly discovered Millsite deposit the Predecessor Entity entered into an
exploration and development agreement with Vista Gold Corp. whose work included
33 reverse circulation drill holes.
All of these exploration joint venture agreements were terminated in 1995 and
1996 at which time the Predecessor Entity began a search for a partner for the
entire property. On June 6, 1997 Barrick Gold Exploration Inc. ("Barrick")
completed the purchase from the Predecessor Entity of more than 90% of the Gold
Bar property, with an option to acquire the balance within two years. The
Predecessor Entity received $1,000,000 in cash from Barrick, and Barrick
purchased one million Atlas Common Shares at $1 per share. Under the terms of
the purchase, Barrick was required to spend $3,000,000 on the property prior to
June of 1999.
In December 1998, the Predecessor Entity negotiated a Mutual Termination
Agreement with Barrick, which returned the property to Atlas. Barrick also paid
the Predecessor Entity $150,000 in satisfaction of its remaining obligation.
Barrick had spent $2.7 million of the required $3.0 million obligation on
geologic mapping, geophysics and exploratory drilling, and the results of the
work suggested they would not continue to perform under the agreement. The
bankruptcy court approved this Mutual Termination Agreement in January 1999.
Resources
After completion of the drill program noted above in 1994, the mine plan for the
Gold Pick and Gold Ridge deposits established proven and probable mineable
reserves, which were independently audited by Mine Reserve Associates of Denver,
Colorado in December 1994,
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and confirmed by Pincock, Allen & Holt, Inc. of Denver, Colorado as part of its
independent review of the Gold Bar Resource Area, dated December 13, 1995. The
reserves were as follows at a gold price of $400:
Proven and Probable Reserves
December 1996
<TABLE>
<CAPTION>
Contained
Ore tons Grade (oz Au/t) Ounces/(1)/
-------------------------------------------------------------
<S> <C> <C> <C>
Gold Pick East 1,278,000 0.073 93,939
Gold Pick West 1,009,000 0.069 69,909
Gold Ridge 391,000 0.059 23,077
-------------------------------------------------------------
Total 2,678,000 0.070 186,925
=============================================================
</TABLE>
/(1)/ Estimated recoverable ounces of 157,000 based upon an overall 84% recovery
rate.
Measured & Indicated
Mineralized Material *
<TABLE>
<CAPTION>
Tons Contained
(000) Grade (oz Au/t) Ounces
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Advanced Prospects** 3,369 0.031 104,000
</TABLE>
* "Mineralized Material" is precious metal bearing rock that has been
physically delineated by one or more of a number of methods including drilling,
underground sampling and surface trenching and sampling. This material has been
found to contain a sufficient amount of mineralization of an average grade of
metals to have economic potential that warrants further exploration and
evaluation. Estimates of tonnage and grade are made on the continuity, size and
shape of the mineralization and have taken into account effects of waste mining
and dilution.
** Advanced prospects include Cabin Creek, Hunter, Gold Canyon and Pot Canyon.
At December 31, 1999 the market price of gold was $288 per ounce. The foregoing
reserves and mineralized material are not economic at this price.
RISK FACTORS
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Prices
- ------
The Company's profitability has and continues to be significantly affected by
metal prices. These prices may fluctuate widely and are affected by numerous
factors beyond the Company's control, including global and regional demand,
production costs, transportation and smelting charges, political and economic
conditions, the strength of the United States dollar and exchange rates.
Gold, lead, zinc and silver are products that can be easily sold on numerous
markets throughout the world. It is not difficult to ascertain the market price
for these metals at any particular time, and these metals can be sold to a large
number of refiners or metal dealers on a competitive basis. The Company normally
sells its metal production through major dealers and in some cases may use
hedging programs.
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Environmental Issues
- --------------------
The Company is required to comply with various federal, state and local
regulations relating to environmental matters at its properties. The Company is
required to obtain permits from various governmental agencies in order to mine
and mill metals. The Company has obtained all of the necessary permits relating
to its on-going operations. The Company cannot anticipate whether increasing
costs of environmental compliance for its properties will have a material
adverse impact on planned operations or competitive position.
Competition
- -----------
The Company competes with substantially larger companies in the acquisition of
properties and the production and sale of metals. The Company does not believe
that it or any other competitor is a material factor in these markets, and the
price it receives for its production depends almost entirely upon market
conditions over which it has no control. The Company believes that it can
promptly sell at current market prices all of the metals that it can produce.
Liquidity
- ---------
The Company expects that it will continue to incur losses in the near future,
and that its return to profitability will depend on, among other things, its
ability to refinance its debt with Corporacion Andina de Fomento (CAF) (see
"Item 6. Management's Discussion and Analysis or Plan of Operation") and to find
additional financing to fund its near term operations. While the Company
continues to generate limited cash flow at its Bolivian mines, the amount of
cash flow available for acquisitions, investments, exploration and development
is very limited. The Company's loan agreement with CAF also limits the use of
any excess cash to the Arisur operation. As a result, the Company is carefully
monitoring its discretionary spending while it seeks financing alternatives.
There is no guarantee that the Company will be able to obtain the necessary
financing to enable it to return to profitability. These concerns raise
substantial doubt about the Company's ability to continue as a going concern. As
a result of these concerns, the independent auditors' report, which accompanies
the financial statements included in this report, contains a going concern
explanatory paragraph.
Mining and Processing
- ---------------------
The Company's business operations are subject to risks and hazards inherent in
the mining industry, including but not limited to unanticipated variations in
grade and other geological problems, water conditions, surface or underground
conditions, metallurgical and other processing problems, mechanical equipment
performance problems, the unavailability of materials and equipment, accidents,
labor force and transportation disruptions, unanticipated transportation costs
and weather conditions, any of which can materially and adversely affect, among
other things, the development of properties, production quantities and rates,
costs and expenditures and production commencement dates.
Risk of International Operations
- --------------------------------
Many of the mineral rights and interests of the Company are subject to
governmental approvals, licenses and permits. Such approvals, licenses and
permits are, as a practical matter, subject to the discretion of the applicable
governments or governmental officials. No assurance can be given that the
Company will be successful in obtaining any or all of the
12
<PAGE>
various approvals, licenses and permits it seeks, that it will obtain them in a
timely fashion, or that it will be able to maintain them in full force and
effect without modification or revocation.
In certain countries in which the Company has assets and operations, such assets
and operations are subject to various political, economic and other
uncertainties, including, among other things, the risks of war or civil unrest,
expropriation, nationalization, renegotiation or nullification of existing
concessions, licenses, permits, approvals, contracts, taxation policies, foreign
exchange and repatriation restrictions, changing political conditions,
international monetary fluctuations, and currency controls. In addition, in the
event of a dispute arising from foreign operations, the Company may be subject
to the exclusive jurisdiction of foreign courts or may not be successful in
subjecting foreign persons to the jurisdiction of courts in the United States.
The Company also may be hindered or prevented from enforcing its rights with
respect to a governmental instrumentality because of the doctrine of sovereign
immunity. It is not possible for the Company to accurately predict such
developments or changes in law or policy or to what extent any such developments
or changes may have a material adverse effect on the Company's operations.
Impact of Year 2000
- -------------------
During 1999, the Company completed a review of the potential impact of the year
2000 on the ability of the Company's and its third party supplier's computer
systems to accurately process information that may be date sensitive. Programs
that recognize a date using "00" as the year 1900 rather than the year 2000
could result in errors or system failures. Through March 2000, the Company has
not experienced any year 2000 problems. The Company has no information that
indicates key vendors, service providers, or any other third parties, may be
unable to sell or purchase from the Company because of any Year 2000 compliance
problems they may have.
Item 2. Description of Property
-----------------------
The Company's materially important properties consist of the Andacaba Mine and
Mill which produce lead, zinc and silver in Bolivia, and the Gold Bar and Grassy
Mountain gold properties which contain gold resources, described under "Item 1.
Business".
- --------
Item 3. Legal Proceedings
-----------------
See discussion of the Chapter 11 reorganization in item 1 - "business" and item
6 - "management's discussion and analysis or plan of operation."
Atlas is in an adversary proceeding TRW, Inc. ("TRW") and the United States
Environmental Protection Agency (the "EPA") pending before the Bankruptcy
Court. This action was brought by Atlas seeking a declaratory judgment that
Atlas' obligations under a Consent Decree between Atlas, TRW and the EPA (the
"Decree") have been discharged under its confirmed Reorganization Plan. TRW and
the EPA have asserted that obligations under the Decree are not dischargeable
under Federal bankruptcy laws. Management believes that it has arguments that
the obligations under the Decree are subject to discharge under Federal
bankruptcy laws. However, because this matter is in its very preliminary stages,
management is unable to predict the ultimate outcome or any potential damages to
the Company.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of the security holders during the quarter
ended December 31, 1999.
13
<PAGE>
PART II
-------
Item 5. Market for Common Equity and Related Stockholder Matters
--------------------------------------------------------
Atlas' common stock is traded on the OTC under the symbol ATMR. The high
- --------------------------------------------------------------
and low sales prices for the common stock for each quarterly period are as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1999 1998
-----------------------------------------------------
Quarter Ended High Low High Low
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31 0.090 $0.040 $0.420 $0.150
June 30 0.059 0.025 0.410 0.170
September 30 0.080 0.025 0.350 0.040
December 31 0.095 0.025 0.090 0.030
- -----------------------------------------------------------------------------
</TABLE>
The above quotations reflect inter-dealer prices, without retail mark-up, mark-
down or commission and may not represent actual transactions. Since the change
of the Company's trading symbol to ATMR, a result of the reorganization, there
has been no discernable market for the Company's stock.
No dividends were declared in the year ended December 31, 1999. At March 27,
2000, there were approximately 420 holders of record of the Company's common
stock.
Item 6. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and accompanying notes.
GENERAL OVERVIEW
- ----------------
As previously noted, on September 22, 1998, Atlas filed a petition for relief
under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy
Court for the District of Colorado. On January 26, 1999, APMI and AGMI also
filed petitions for relief under Chapter 11. The Company has not, and does not
intend to seek protection under any applicable bankruptcy laws for Arisur. On
December 11, 1999, the Bankruptcy Court approved the Reorganization Plan of
Atlas, APMI and AGMI. Atlas, APMI and AGMI have consummated the Reorganization
Plan and emerged from Chapter 11 on January 10, 2000. The case remains open,
with the Bankruptcy Court retaining limited jurisdiction, pending the entry of a
final decree closing the case.
The Predecessor Entity's largest pre-petition liability was its approximately
$21 million obligation to decommission and reclaim its uranium millsite (the
"Millsite") located near Moab, Utah. On April 28, 1999, the Company, along with
the U.S. Nuclear Regulatory Commission ("NRC"), the State of Utah, ACSTAR
(surety provider for Atlas) and others, executed the Moab Utah Millsite Transfer
Agreement ("MUMTA"), which absolved the Company from all future liability with
respect to the Millsite. The agreement, approved by the Bankruptcy Court on
June 22, 1999, was reached to avoid lengthy and expensive litigation over the
future of the Millsite. As consideration for this release, Atlas contributed
certain Millsite related assets to a Reclamation Trust to be controlled by the
government. The assets include all current and future Title X receivables
(Federal cost reimbursement program for uranium reclamation costs
14
<PAGE>
incurred), Atlas' water rights and land at the Millsite and $5,250,000 of
restricted cash. Additionally, ACSTAR and the Reclamation Trust each will
receive 2.5% of the stock in the Reorganized Company. The Company recognized a
gain of $756,000 on the transaction which is included in "Extraordinary item:
net gain from extinguishment of debt" in the consolidated statement of
operations for the period ended December 11, 1999.
The majority of the remaining claims against the Predecessor Entity were treated
as unsecured claims (the "Creditors") in the Bankruptcy proceeding. Under the
Reorganization Plan, these claims are entitled to receive stock representing
67.5% of the Reorganized Company. In addition, the creditors will receive a
percentage distribution upon the sale/realization of certain assets of the
Reorganized Company. Those assets include; 1) proceeds from the salvaging of
the Company's Gold Bar mill facility and related equipment located near Eureka,
Nevada (reorganization value of $940,000, 75% to Creditors); 2) proceeds from
the sale of the Company's Grassy Mountain property located in eastern Oregon
(reorganization value of $925,000, 75% to Creditors) and 3) proceeds from
commercial general liability claims ("CGL Claims") against various insurance
carriers for reimbursement of costs incurred at the Millsite (reorganization
value of $1.5 million, Creditors receive 10% of the first $1.5 million of
proceeds, 50% thereafter).
The Reorganization Plan also provided for the distribution of stock representing
12.5% of the Reorganized Company to Management and employees of the Company as
recognition for their efforts in the reorganization process. The remaining 15%
of the Reorganized Company will remain with the equity holders of the
Predecessor Entity.
Although the Company has emerged from Chapter 11, recurring operating losses of
the Company and the Predecessor Entity, a negative working capital position at
December 31, 1999, and difficulty/restrictions on the Company's ability to raise
additional debt or equity financing raise substantial doubt about the Company's
ability to continue as a going concern. The Company's business plan is to
continue to expand/improve operations at its Andacaba mine while at the same
time searching for merger partners or an equity infusion into the Company.
As a result of the Reorganization Plan, the Predecessor Entity ceased to exist
on December 11, 1999 and the Reorganized Company came into existence on the same
date. For reporting purposes, the periods from January 1, 1999 to December 11,
1999 and from December 12, 1999 to December 31, 1999 have been shown separately
in this Form 10-KSB and the financial statements contained herein (Item 7).
However, for purposes of the following discussion, these periods have been
combined in order to present a more informative and comparable analysis of the
Company's financial condition and results of operations. Accordingly,
references to the "Company" in the discussion that follows will refer both to
the Predecessor Entity and the Reorganized Company. The Company's results of
operations for the period subsequent to December 11, 1999 have not been prepared
on a basis of accounting consistent with its results of operations for periods
prior to December 11, 1999 due to the implementation of fresh-start reporting
upon Atlas' emergence from bankruptcy. The reorganization adjustments primarily
affect depreciation and amortization.
During the period from December 12, 1999 to December 31, 1999, there were no
significant events or operational changes that warrant separate disclosure.
Arisur generally sells one lot of each the zinc concentrate and the lead
concentrate each month. During December 1999,
15
<PAGE>
these sales fell in the second half of the month and accordingly have been
recorded in the period from December 12, 1999 to December 31, 1999. Production
costs for this period include the usual and customary costs allocated to cost of
sales including mine management for the full month of December. All other costs
recorded during the period from December 12, 1999 to December 31, 1999 were
recorded either on a pro-rata basis for the month of December or on a specific
charge basis as appropriate in the circumstances.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------------------------
During 1999 working capital decreased by $2.4 million from $.1 million to a
deficit of $2.3 million at December 31, 1999. This is largely a result of cash
used in operations of $1.7 million during the year and capital expenditures of
$718,000. The primary components of the $1.7 million were shutdown, general and
administrative payments of $900,000, interest paid of $443,000 and
reorganization costs of approximately $400,000. Also attributing to the decrease
was the reclassification of debt of $1.2 million to Corporacion Andina de
Fomento ("CAF") (see below) from long-term debt at December 31, 1998 to short-
term debt at December 31, 1999. These amounts were offset by fresh-start and
early extinguishment of debt adjustments recorded to revalue the Reorganized
Company, which increased working capital by $1,046,000. (see "Item 8. Financial
Statements and Supplementary Data, Note 2").
During the year ended December 31, 1999, the Company had capital expenditures of
$718,000 consisting primarily of development expenditures at its Andacaba mine
in Bolivia. This amount includes capital expenditures for the sinking of the
mine shaft described below. In 1998, capital expenditures were $479,000
substantially all of which related to mine development at Andacaba.
On May 9, 1999, Arisur defaulted on a payment of $478,000 due under the loan
agreement with CAF. Subsequently, by letter dated July 28, 1999 and revised on
October 26, 1999, CAF agreed to restructure the remaining balance of the debt
under the condition that the Company, by June 30, 2000, demonstrate that it has
a minimum of four years of proven reserves at a production rate of 400 tonnes
per day at the Andacaba mine. In the event that the above condition is met, CAF
has stated it is willing to restructure the existing debt, the terms of which
are subject to negotiation. Also, Atlas has agreed to subordinate its interest
in Arisur to CAF such that no funds may be repatriated from Arisur to Atlas
during the term of the loan agreement with CAF.
Also during 1999, Arisur increased its outstanding advances from Glencore
International AG ("Glencore") from $1,089,000 at December 31, 1998 to $1,778,000
at December 31, 1999. Glencore has expressed its concern with the large increase
during the year and has requested that Arisur take actions to reduce this amount
in 2000. The Company intends to use all excess cash flow from operations to
reduce the Glencore debt and is also in discussions with CAF for CAF to finance
the Glencore debt. In the event that Glencore were to discontinue future
advances under the agreement, Arisur would not have sufficient funding to
continue the operation.
During the fall of 1999, the Company began sinking two internal shafts at the
Andacaba mine to access two lower levels of its San Juan/San Jose veins, the
minus 190 and minus 220 levels. The purpose of the program was to add
additional, higher-grade reserves to the mine in order to refinance Arisur's
debt with CAF as described above and to increase the amount of ore
16
<PAGE>
coming from the higher grade San Juan/San Jose veins. Preliminary assays of ore
grades at the minus 190 level have yielded grades consistent with those seen at
higher levels of these veins, which are significantly higher than from other
veins in the mine. With the access to these lower levels, the percentage of ore
coming from the San Juan/San Jose veins is expected to increase to approximately
50% by the end of 2000. If the minus 190 and minus 220 levels continue to
produce ores consistent with the preliminary assays, then average ore grades
would be expected to increase during 2000 back to reserve grade.
The mining operations in Bolivia have consistently generated positive cash flow
before debt and capital expenditures. With the expected increase in ore grades
discussed above, operating cash flow is expected to improve in 2000 with greater
increases expected in 2001. However, as all excess cash flow from operations
will be utilized to service the Company's debt to Glencore and CAF, there will
be no excess funds available to satisfy corporate overhead expenses of Atlas.
The Company expects to generate cash to cover general and administrative
expenses through the sale/realization of its North American assets. These
assets include the salvaging of the Gold Bar mill (see "Item 1. Business, Gold
Bar Mine"), sale of the Grassy Mountain property (see "Item 1. Business, Grassy
Mountain Property") and the pursuit of insurance claims against various
insurance carriers for costs incurred to reclaim the Moab uranium tailings pile.
While the Company is confident in the ultimate realization of these assets, it
cannot be certain as to the timing or the exact amount of proceeds that will be
received. Accordingly, the Company will need to seek other means of financing
until cash flow from operations is sufficient to cover operating expenses. The
Company is actively pursuing alternative sources of financing to satisfy its
working capital requirements including loans against the assets noted above,
equity financing as well as pursuing acceptable merger opportunities.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement, as amended by SFAS No. 137,
is effective for fiscal years beginning after June 15, 2000. Currently, the
Company does not have any derivative financial instruments and does not
participate in hedging activities; therefore, management believes that SFAS No.
133 will not impact the Company's financial statements.
As discussed above, recurring operating losses of the Company and the
Predecessor Entity, a negative working capital position at December 31, 1999,
and difficulty/restrictions on the Company's ability to raise additional debt or
equity financing raise substantial doubt about the Company's ability to continue
as a going concern. As a result, the independent auditors' report, which
accompanies the financial statements included in this report, contains a going
concern explanatory paragraph. Management's plan to resolve the Company's
immediate financial difficulties and improve its financial position is described
above.
RESULTS OF OPERATIONS
- ---------------------
The following table summarizes production statistics at the Andacaba Mill, which
includes feed from Andacaba, Don Francisco, Koyamayu and mill tailings, for the
1999 and 1998 years:
17
<PAGE>
<TABLE>
<CAPTION>
Period from Period from
January 1, December 12, Year ended Year ended
1999 to 1999 to December December
December 11, December 31, 31, 31,
1999 1999 1999 1998
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Tonnes milled 117,290 6,772 124,062 119,535
Tonnes of lead concentrate produced 1,775 112 1,887 2,258
Tonnes of lead concentrate sold 1,810 144 1,955 2,256
Grade of lead concentrate produced:
Lead 63.64% 63.06% 63.61% 64.57%
Silver (ounces per ton) 118.4 109.2 117.81 135.0
Tonnes of zinc concentrate produced 11,797 681 12,478 12,346
Tonnes of zinc concentrate sold 11,090 1,056 12,146 13,219
Grade of zinc concentrate produced:
Zinc 45.75% 46.00% 45.76% 46.32%
Silver (ounces per ton) 21.87 20.77 21.81 23.64
Average price received:
Lead (per tonne) $ 506 $ 500 $ 505 $ 555
Zinc (per tonne) $ 994 $ 1,090 $ 1,002 $ 1,053
Silver (per ounce) $ 5.16 $ 5.13 $ 5.15 $ 5.69
</TABLE>
The increased mill production in 1999 was a result of increased ore feed from
lower grade veins at the Andacaba mine and the processing of tailings located at
the mill site to produce a zinc concentrate. This is also the reason for the
overall decline in the grade of lead and zinc concentrates as shown above. With
the increased access to the San Juan/San Jose veins described above, the Company
anticipates that ore grades, and the resulting concentrate grades should improve
during 2000.
Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998
- -------------------------------------------------------------------------
Revenues
During the year ended December 31, 1999, the Company had mining revenue of
$3,485,000 compared to $5,109,000 in the year ended December 31, 1998. Average
prices received were significantly lower in 1999 than 1998 (see above). This
fact, combined with the lower tonnes of zinc and lead concentrate sold as well
as the lower grade of concentrate in 1999 resulted in the lower revenue for the
year.
Production Costs and Depreciation, Depletion and Amortization
Cash production costs during the year ended December 31, 1999 were $3,657,000,
or $259 per tonne of concentrate sold. This compares to $4,267,000, or $276 per
tonne of concentrate sold for the same period in 1998. The lower per tonne
costs are a result of operating cost reductions and efficiencies implemented at
the end of 1998 and early 1999.
18
<PAGE>
Depreciation, depletion and amortization increased to $1,009,000 in the year
ended December 31, 1999, from $999,000 in 1998 as a result of the increase in
tonnes milled during the year.
Shutdown and standby costs
Shutdown and standby costs at Gold Bar were $346,000 in 1999 compared to
$355,000 in 1998. Cost cutting measures during 1999 were offset by costs
incurred for the marketing of the Gold Bar property during the year of $36,000.
Geological costs
Geological costs for the year ended December 31, 1999 were $106,000 compared to
$78,000 in the year ended December 31, 1998. In 1998, certain costs were
charged to Barrick including land holding costs of $8,000, labor costs of
approximately $14,000 and other miscellaneous costs of approximately $5,000,
resulting in a lower overall cost in that year.
General and administrative expenses
General and administrative expenses for the year ended December 31, 1999 were
$720,000, which compares to $1,230,000 for the year ended December 31, 1998.
The Company has successfully continued its efforts to reduce such expenses.
Legal fees were reduced from $234,000 in 1998 to $38,000 in 1999 as several
legal actions have been resolved or settled. As a result of staff reductions at
the Company's headquarters, salaries and benefits have been reduced over this
same period from $345,000 to $254,000. Shareholder services and public
relations were reduced from $127,000 in 1998 to $48,000 in 1999. Other areas of
reduction included taxes and licenses, insurance, accounting and auditing fees
and directors fees.
Other
Interest expense incurred during the year ended December 31, 1999 was $352,000
compared to $593,000 for the same period in 1998. Interest accruals on all
outstanding loans of Atlas and APMI ceased as a result of filing for Chapter 11,
resulting in a decrease of $154,000 during the year. The remainder of the
difference is due to a lower loan balance on the CAF debt during 1999 and lower
average interest rates during 1999 than in 1998.
Other income/expense in 1998 of $491,000 included a charge of $639,000 relating
to the settlement of a lawsuit with the former owners of Arisur. Other amounts
in both years were primarily from asset sales.
Reorganization costs during 1999 were $834,000 compared to $148,000 for the year
ended December 31, 1998. The 1999 amount includes a charge of $383,000 for
stock issued to management and employees of the Company as compensation for
their efforts during the reorganization. Additionally, 1999 includes a full
year of reorganization expenses whereas 1998 includes expenses incurred from
September 22, 1998 to December 31, 1998 only.
During the period ended December 11, 1999, the Predecessor Entity recorded a
charge for "fresh-start revaluation" of $3,349,000, determined as a result of a
revaluation of the Reorganized Company's assets/liabilities which is required
under generally accepted accounting principals. This amount consists of $4.1
million write down in the carrying value of Arisur, a $1.3 million write down of
the Gold Bar assets, a gain recorded on the adjustment to fair value of
19
<PAGE>
Grassy Mountain of $255,000, a gain from the recording of the CGL claim of $1.5
million and other miscellaneous gains totaling $259,000 (see "Item 7. Financial
Statements, Note 2").
The $4.1 million write down in the carrying value of Arisur and $1.3 million
write down of the Gold Bar assets relates primarily to decisions made in
connection with the Reorganization Plan. With regard to Gold Bar, The Company
did not have sufficient funding in 1999 to renew approximately 80% of the claim
block. Under the Reorganization Plan, the Reorganized Company will salvage the
mill and related infrastructure rather than attempt to sell or develop the
property as a continuing mining operation. Therefore, the reorganization value
of Gold Bar was less than the Company anticipated earlier in 1999. With regard
to Arisur, with the combination of lower than expected metal prices, lower than
expected ore grades, and a deteriorating working capital position in 1999,
management reassessed the recoverability of the carrying value of the Arisur
assets at the end of 1999 and concluded that a write down was appropriate.
The Predecessor Entity also recorded an extraordinary gain from extinguishment
of debt of $9,199,000 for the period ended December 11, 1999 as a result of the
discharge of debt resulting from the Reorganization Plan (see "Item 7. Financial
Statements, Note 2")
ENVIRONMENTAL MATTERS
- ---------------------
The Company is subject to extensive federal, state and local environmental laws
and regulations. These laws, which are constantly changing, regulate the
discharge of materials into the environment and may require the Company to
mitigate any environmental effects caused by its past and present operations.
The Company believes that it has taken reasonable steps to be in substantial
compliance with all federal, state and local environmental regulations
applicable to its current and discontinued operations.
20
<PAGE>
Item 7. Financial Statements
--------------------
<TABLE>
<CAPTION>
Index to Financial Statements Page
<S> <C>
Consolidated Statements of Operations for the Period from December 12, 1999
to December 31, 1999, the Period from January 1, 1999 to December 11, 1999
and the Year Ended December 31, 1998 22
Consolidated Balance Sheets as of December 31, 1999 and December 11, 1999 23
Consolidated Statements of Stockholders' Equity (Deficit) for the Period from
December 12, 1999 to December 31, 1999, the Period from January 1, 1999 to
December 11, 1999 and the Year Ended December 31, 1998 24
Consolidated Statements of Cash Flows for the Period from December 12, 1999 to
December 31, 1999, the Period from January 1, 1999 to December 11, 1999 and the
Year Ended December 31, 1998 25
Notes to Consolidated Financial Statements 26 - 41
Report of Independent Auditors 42
</TABLE>
21
<PAGE>
Atlas Minerals Inc.
(Formerly Atlas Corporation)
Consolidated Statements of Operations
(in thousands, except earnings per share)
<TABLE>
<CAPTION>
Reorganized Predecessor Entity
Company -----------------
Period from Period from
December 12, January 1,
1999 to 1999 Year ended
December 31, to December 11, December 31,
1999 1999 1998
=====================================================================================================================
<S> <C> <C> <C>
Mining revenue $ 338 $ 3,147 $ 5,109
- -------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Production costs 321 3,336 4,267
Depreciation, depletion and amortization 54 955 999
Impairment of mineral property - - 34
Shutdown and standby costs 9 337 355
General and administrative expenses 21 699 1,230
Geological and land holding costs 4 102 78
- -------------------------------------------------------------------------------------------------------------------
Gross operating loss (71) (2,282) (1,854)
- -------------------------------------------------------------------------------------------------------------------
Other (income) and expense:
Loss on asset held for sale (Note 8) - - 1,165
Income from joint venture agreement (Note 5) - - (1,213)
Interest expense 22 330 593
Interest income (1) (126) (308)
Other (income) expense, net - (58) 491
- -------------------------------------------------------------------------------------------------------------------
Loss before reorganization items, fresh-start revaluation,
income taxes and extraordinary item (92) (2,428) (2,582)
Reorganization items:
Professional fees - (377) (141)
Other (Note 2) - (457) (7)
Fresh-start revaluation (Note 2) - (3,349) -
- -------------------------------------------------------------------------------------------------------------------
Loss before income taxes and extraordinary item (92) (6,611) (2,730)
Provision for income taxes (Note 14) - - -
- -------------------------------------------------------------------------------------------------------------------
Loss before extraordinary item (92) (6,611) (2,730)
Extraordinary item: net gain from extinguishment of debt (Note 2) - 9,199 -
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (92) $ 2,588 $(2,730)
===================================================================================================================
Basic and diluted earnings per share of common stock (Note 13)
Loss before extraordinary item $ (0.02) $ (7.16) $ (2.99)
Extraordinary item - 9.96 -
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (0.02) $ 2.80 $ (2.99)
===================================================================================================================
Weighted average common shares outstanding 6,064 924 914
===================================================================================================================
</TABLE>
See accompanying notes
22
<PAGE>
Atlas Minerals Inc.
Consolidated Balance Sheets
(Formerly Atlas Corporation)
(In thousands)
<TABLE>
<CAPTION>
Reorganized Predecessor
Company Entity
December 31, December 11,
1999 1999
=================================================================================================================
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 202 $ 205
Accounts receivable - trade 583 512
Accounts receivable - other 183 166
Assets held for sale (Notes 2 and 10) 735 735
Inventories (Note 3) 1,036 1,037
Prepaid expenses and other current assets (Notes 2 and 10) 425 428
- -----------------------------------------------------------------------------------------------------------------
Total current assets 3,164 3,083
- -----------------------------------------------------------------------------------------------------------------
Property, plant and equipment (Note 5) 4,732 4,702
Less: Accumulated depreciation, depletion and amortization (54) -
- -----------------------------------------------------------------------------------------------------------------
4,678 4,702
Assets held for sale (Notes 2 and 10) 1,130 1,130
Other assets (Notes 2 and 10) 1,122 1,122
- -----------------------------------------------------------------------------------------------------------------
$ 10,094 $ 10,037
=================================================================================================================
liabilities
Current liabilities:
Trade accounts payable $ 549 $ 510
Accrued liabilities 767 851
Short-term debt (Note 9) 3,849 3,655
Estimated reorganization liabilities (Note 2) 304 304
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 5,469 5,320
- -----------------------------------------------------------------------------------------------------------------
Estimated reorganization liabilities (Note 2) 1,029 1,029
Other liabilities, long-term 627 628
- -----------------------------------------------------------------------------------------------------------------
Total long-term liabilities 1,656 1,657
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 7,125 6,977
- -----------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 12)
Stockholders' equity (Notes 2, 5, 6, and 7)
Preferred stock, par value $1 per share; authorized 1,000,000;
issued and outstanding, 0 at December 31,
1999 and December 11, 1999
Common stock to be issued (5,154,000 shares) 2,601 2,601
Common stock, par value $0.01 per share; authorized
100,000,000; issued and outstanding, 909,548 at December 31,
1999 and December 11, 1999 9 9
Capital in excess of par value 450 450
Deficit (92) -
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,968 3,060
- -----------------------------------------------------------------------------------------------------------------
$ 10,094 $ 10,037
=================================================================================================================
</TABLE>
See accompanying notes
23
<PAGE>
Atlas Minerals Inc.
(Formerly Atlas Corporation)
Consolidated Statements of Stockholders' Equity (Deficit)
(In thousands)
<TABLE>
<CAPTION>
Common Capital in
Common stock to Common Excess of
shares be issued stock par value Deficit Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Predecessor Entity:
Balance at December 31, 1997 909 $ - $ 909 $ 93,108 $(93,486) $ 531
Shares issued to 401(k) plan 4 - 4 19 - 23
Interest on debenture 4 - 4 19 - 23
Transfer of capital - - (908) 908 - -
Current year loss - - - - (2,730) (2,730)
- ---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 917 - 9 94,054 (96,216) (2,153)
Shares issued to 401(k) plan 22 - - 24 - 24
Shares voided in reorganization (29) - - - - -
Common shares to be issued in
Reorganization (Note 2) - 2,601 - - - 2,601
Restatement of accumulated
deficit (Note 2) - - - (93,628) 93,628 -
Current period income - - - - 2,588 2,588
- ---------------------------------------------------------------------------------------------------------------------
Balance at December 11, 1999 910 2,601 9 450 - 3,060
Reorganized Company:
Current period loss - - - - (92) (92)
- ---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 910 $2,601 $ 9 $ 450 $ (92) $ 2,968
=====================================================================================================================
</TABLE>
See accompanying notes
24
<PAGE>
Atlas Minerals Inc.
(Formerly Atlas Corporation)
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Reorganized
Company
Period from Predecessor Entity
---------------------------------
December 12, Period from
1999 to January 1, Year ended
December 31, 1999 to December 31,
1999 December 11, 1998
1999
=====================================================================================================================
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ (92) $ 2,588 $ (2,730)
Adjustments to reconcile net income (loss) to net cash used
in operations (Note 11) 54 (4,514) 1,002
Changes in operating assets and liabilities (Note 11) (129) 871 502
- ---------------------------------------------------------------------------------------------------------------------
(167) (1,055) (1,226)
Discontinued operations:
Net increase (decrease) in estimated reclamation costs - (478) 256
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in Operations (167) (1,533) (970)
- ---------------------------------------------------------------------------------------------------------------------
Investing activities:
Additions to property, plant and equipment (30) (688) (479)
Investment in asset held for sale - - (808)
Sale proceeds from asset held for sale - 2,643 -
Proceeds from sale of equipment and reduction in other assets - 71 1,663
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (30) 2,026 376
- ---------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from borrowings on short-term debt 194 712 871
Repayment of short-term debt - (1,006) (856)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 194 (294) 15
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (3) 201 (579)
Cash and cash equivalents at beginning of period 205 4 583
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 202 $ 205 $ 4
=====================================================================================================================
</TABLE>
See accompanying notes
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial statements
include the accounts of Atlas Minerals Inc. ("Atlas") (formerly Atlas
Corporation) and its wholly-owned subsidiary, Arisur Inc. ("Arisur") and its
approximately 85% ownership of Atlas Precious Metals Inc. ("APMI"), which in
turn owns approximately 63% of Atlas Gold Mining Inc. ("AGMI") (collectively the
"Company" or "Reorganized Company"). Prior to December 11, 1999, the date of
confirmation of its plan of reorganization under the U.S. Bankruptcy Code (Note
2), APMI was wholly-owned by Atlas which in turn owned 100% of AGMI (the
"Predecessor Entity"). References to the Predecessor Entity throughout the
financial statements refer to Atlas and its subsidiaries to December 11, 1999
and references to the Reorganized Company refer to Atlas and its subsidiaries
from and after December 12, 1999. A vertical black line is shown in the
consolidated financial statements to separate the Reorganized Company and the
Predecessor Entity since they have not been prepared on a consistent basis of
accounting. In connection with the reorganization, the Company completed a 1 for
30 reverse stock split. All share and per share amounts in the accompanying
financial statements have been restated to reflect the reverse split.
Fresh-Start Reporting - Financial accounting during a Chapter 11 proceeding is
prescribed in the American Institute of Certified Public Accountants' Statement
of Position ("SOP") 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code." The emergence from the Chapter 11 proceeding
resulted in the creation of a new reporting entity without any accumulated
deficit and with the Company's assets restated to their estimated values (Note
2). Due to the application of fresh-start reporting, the financial statements
for periods after the reorganization are not comparable in all respects to the
financial statements for periods prior to the reorganization, primarily with
respect to depreciation, depletion and amortization.
Basis of Presentation - The Company is principally engaged in the exploration,
development and exploitation of mineral properties. The accompanying financial
statements have been prepared assuming that Atlas and its subsidiaries will
continue as a going concern. The Company has incurred operating losses of
$92,000, $6,611,000, and $2,730,000 for the periods ended December 31, 1999,
December 11, 1999 and the year ended December 31, 1998 respectively. At December
31, 1999 the Company has a working capital deficit of $2,305,000. These
considerations raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty. The Company's business plan is to continue to
expand/improve operations at its Andacaba mine while at the same time searching
for merger partners or an equity infusion into the Company.
Inventories - Inventories are recorded at the lower of average cost or net
realizable value.
Property, Plant and Equipment - Property, plant and equipment are stated at the
lower of cost, or estimated net realizable value, as of December 10, 1999, and
at fair market value at December 11, 1999. Subsequent additions are recorded at
cost. Property, plant and equipment was revalued at December 11, 1999 in
connection with the adoption of fresh-start reporting. Depreciation of milling
facilities and depletion of mining properties is determined by the units of
production method. The Company regularly assesses its ability to recover the
carrying value of its assets and recognizes an impairment when it is determined
that unamortized costs cannot be recovered from undiscounted cash flows over the
remaining project life. Leasehold improvements are amortized on a straight-line
basis over the terms of related leases or, if shorter, estimated useful life.
26
<PAGE>
Expenditures for maintenance and repairs are charged to operations as incurred.
Expenditures for additions and major renewals are added to the property, plant
and equipment accounts. Interest expense allocable to the acquisition or
construction of capital assets and deferred mine development is capitalized
until operations commence.
Foreign Currencies - The functional currency of all foreign subsidiaries is the
U. S. Dollar. Gains and losses on foreign currency transactions are included in
determining consolidated earnings/losses.
Development Properties - All properties identified as having the potential to
add to proven and probable reserves, the direct costs of acquisition,
exploration and development are capitalized as they are incurred. Determination
as to reserve potential is based on results of feasibility studies, which
indicate whether a property is economically feasible. After drilling has
confirmed the shape and continuity of mineralization, initial feasibility
studies are optimized. If production commences, these costs are transferred to
deferred exploration and development costs and amortized against earnings using
the units of production method. If a project is determined not to be
commercially feasible, unrecovered costs are expensed in the year in which the
determination is made.
Exploration Costs - The costs of exploration programs not anticipated to result
in additions to reserves and other mineralization in the current year are
expensed as incurred.
Mining Revenue - Revenues on base metals are recorded at the time of shipment.
Reclamation - Estimated reclamation, site restoration and closure costs for each
mine are charged to operations over the expected life of the mine using the
units of production method.
Income Taxes - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
Income tax information is disclosed in Note 14 to the consolidated financial
statements.
Cash Equivalents - The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents.
Earnings per Share - Basic income (loss) per share is computed by dividing
income (loss) applicable to common shareholders by the weighted-average number
of common shares outstanding for the period. Diluted income (loss) per share
reflects the potential dilution that could occur if dilutive securities and
other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the Company, unless the effect is to reduce a loss or increase
earnings per share. The Company had no potential common stock instruments, which
would result in diluted income (loss) per share in 1999 or 1998.
Environmental Remediation Liabilities - The Company accounts for environmental
remediation liabilities under Statement of Position 96-1 "Environmental
Remediation Liabilities",
27
<PAGE>
which requires the accrual of environmental remediation liabilities when the
criteria for SFAS No. 5 "Accounting for Contingencies" are met.
Comprehensive Income - SFAS No. 130, "Reporting Comprehensive Income", requires
companies to classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position. During 1999, and 1998 the
Company had no items of comprehensive income.
Derivative Instruments - In June 1998, the FASB issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities". This statement as amended by
SFAS No. 137 is effective for fiscal years beginning after June 15, 2000.
Currently, the Company does not have any derivative financial instruments and
does not participate in hedging activities. Therefore, management believes that
SFAS No. 133 will not have an impact on its financial position or results of
operations.
Accounting Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. REORGANIZATION
In September 1998, the Predecessor Entity filed a petition for relief under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
of the District of Colorado (the "Court"). On January 26, 1999, APMI and AGMI
also filed for relief under Chapter 11. The Company's other subsidiary, Arisur
did not file for Chapter 11 protection. Under a plan of reorganization approved
by the Court on December 11, 1999 (the "Reorganization Plan"), primarily all of
Atlas', APMI, and AGMI's liabilities were discharged for consideration of stock
in the Reorganized Company and contingent cash distributions to be made upon the
sale/realization of certain assets of the Reorganized Company. Arisur's
liabilities were not affected by the reorganization.
The Company recorded the transactions related to the reorganization effective
December 11, 1999, the confirmation date of the Reorganization Plan, in
accordance with SOP 90-7. Adjustments to pre-petition liabilities are treated as
an extraordinary item - gain from early extinguishment of debt, and adjustments
to assets and liabilities in the revaluation of the Reorganized Company are
recorded as fresh-start adjustments in the accompanying consolidated statement
of operations of the Predecessor Entity for the period ended December 11, 1999.
Approximately 5,154,000 shares of common stock will be issued in connection with
the Reorganization Plan resulting in 6,064,000 shares outstanding. These shares
will be issued subsequent to December 31, 1999 and are recorded as "common
stock to be issued" in the accompanying consolidated balance sheets as of
December 31, 1999 and December 11, 1999. Following is a summary of the major
Reorganization Plan transactions.
The Predecessor Entity's largest pre-petition liability was its approximately
$21 million obligation to decommission and reclaim its uranium millsite (the
"Millsite") located near Moab, Utah. On April 28, 1999, the Company, along with
the U.S. Nuclear Regulatory Commission ("NRC"), the State of Utah, ACSTAR
(surety provider for Atlas) and others, executed the Moab Utah Millsite Transfer
Agreement ("MUMTA"), which absolved the Company from all future liability with
respect to the Millsite. The agreement was reached to avoid lengthy and
expensive litigation over the future of the Millsite. As consideration for this
release, Atlas contributed certain Millsite related assets to a Reclamation
Trust to be controlled by the government. The assets include all current and
future Title X receivables (Federal cost reimbursement program for uranium
reclamation costs), Atlas' water rights and land at the Millsite and $5,250,000
of restricted cash. Additionally, ACSTAR and the Reclamation Trust will each
receive 2.5% of the stock in the Reorganized Company.
28
<PAGE>
The majority of the remaining claims against the Predecessor Entity were treated
as unsecured claims (the "Creditors") in the Bankruptcy proceeding. Under the
Reorganization Plan, these claims are entitled to receive stock representing
67.5% of the Reorganized Company. In addition, the creditors will receive a
percentage distribution upon the sale/realization of certain assets of the
Reorganized Company. Those assets include; 1) proceeds from the salvaging of the
Company's Gold Bar mill facility located near Eureka, Nevada (reorganization
value of $940,000, 75% to Creditors); 2) proceeds from the sale of the Company's
Grassy Mountain property located in eastern Oregon (reorganization value of
$925,000, 75% to Creditors) and 3) proceeds from commercial general liability
claims ("CGL Claims") against various insurance carriers for reimbursement of
costs incurred at the Millsite (reorganization value of $1.5 million, Creditors
receive 10% of the first $1.5 million of proceeds, 50% thereafter).
The Reorganization Plan also provided for the distribution of stock representing
12.5% of the Reorganized Company to Management and employees of the Company as
recognition for their efforts in the reorganization process. The Predecessor
Entity recorded reorganization expense of $383,000 related to the transaction.
The remaining 15% of the Reorganized Company will remain with the equity holders
of the Predecessor Entity.
In determining the value of the Reorganized Company under fresh-start reporting,
the Company utilized several valuation techniques, depending upon the nature of
the asset being valued. Arisur was valued using a discounted cash flow model,
representing the discounted value of projected cash flows over the remaining
reserve life, adjusted for liabilities of Arisur and expected liquidation values
at the end of the mine life. Other assets were valued based upon estimates of
liquidation values from the most reliable source available including appraisals
and professional estimates of value and recent or proposed transactions of a
similar nature. Estimated reorganization liabilities, representing estimated
payments to be made to the Creditors upon liquidation of the assets discussed
above, were recorded at the calculated amount under the Reorganization Plan
given the estimated realizable value of the underlying asset. Based upon the
above analysis, the post-confirmation going concern value of the Reorganized
Company was estimated to be $3.1 million.
The effects of the aforementioned adjustments on the Consolidated Balance Sheet
as of December 11, 1999 are as follows:
29
<PAGE>
<TABLE>
<CAPTION>
Predecessor Early Reorganized
Entity Extinguish- Fresh- Company
December ment of start December
11, 1999 Debt adjustments 11, 1999
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash & cash equivalents $ 205 $ - $ - $ 205
Accounts receivable - trade 512 - - 512
Title X receivable 123 (123) - -
Accounts receivable - other 171 - (5) 166
Asset held for sale - - 735 735
Inventories 816 - 221 1,037
Other current assets 41 - 387 428
----------- ---------- ------------ -----------
Total current assets 1,868 (123) 1,338 3,083
----------- ---------- ------------ -----------
Property, plant & equipment 59,502 - (54,800) 4,702
Accumulated depreciation,
depletion and amortization (47,625) - 47,625 -
----------- ---------- ------------ -----------
11,877 - (7,175) 4,702
Restricted cash 6,241 (6,241) - -
Assets held for sale - - 1,130 1,130
Title X receivable 14,109 (14,109) - -
Other assets 72 - 1,050 1,122
----------- ---------- ------------ -----------
$ 34,167 $ (20,473) $ (3,657) $ 10,037
=========== ========== ============ ===========
Liabilities:
Current Liabilities
Accounts payable $ 510 $ - $ - $ 510
Accrued liabilities 986 (134) (1) 851
Short-term debt 3,655 - - 3,655
Estimated reorganization liabilities - 304 - 304
----------- ---------- ------------ -----------
Total current liabilities 5,151 170 (1) 5,320
----------- ---------- ------------ -----------
Estimated reorganization liabilities - 1,029 - 1,029
Other long-term liabilities 459 - 169 628
Liabilities subject to compromise:
Accounts payable 1,724 (1,724) - -
Accrued liabilities 1,653 (1,653) - -
Convertible debenture 3,500 (3,500) - -
Estimated uranium reclamation costs 20,632 (20,632) - -
Mine reclamation accruals 3,264 (3,264) - -
Other 2,792 (2,316) (476) -
----------- ---------- ------------ -----------
Total liabilities 39,175 (31,885) (308) 6,977
----------- ---------- ------------ -----------
Stockholders' equity (deficit):
Common stock to be issued - 2,218 383 2,601
Common stock 9 - 9
Capital in excess of par 94,078 - (93,628) 450
Retained earnings (deficit) (99,095) 9,199 89,896 -
----------- ---------- ------------ -----------
Total stockholders' equity (deficit) (5,008) 11,417 (3,349) 3,060
----------- ---------- ------------ -----------
$ 34,167 $ (20,473) $ (3,657) $ 10,037
=========== ========== ============ ===========
</TABLE>
30
<PAGE>
3. INVENTORIES
Inventories consisted of the following:
Reorganized Predecessor
Company Entity
December 31, December 11,
(In thousands) 1999 1999
- -------------------------------------------------------------- -------------
Zinc and lead concentrates $ 157 $ 128
Stockpiled ore 620 648
Materials and supplies 259 261
------------- -------------
$ 1,036 $ 1,037
============= =============
4. FINANCIAL INSTRUMENTS
Financial instruments consist of the following:
Reorganized Company Predecessor Entity
December 31, 1999 December 11, 1999
--------------------- ---------------------
Carrying Carrying
(In thousands) Value Fair Value Value Fair Value
--------------------- ---------------------
Assets
Short-term assets $1,703 $1,703 $1,618 $1,618
Liabilities
Short-term liabilities 5,469 5,469 5,320 5,320
Short-Term Assets and Liabilities: The fair value of cash and cash equivalents,
marketable equity securities, accounts receivable, assets held for sale,
accounts payable, other accrued liabilities and short-term debt approximates
their carrying value due to the short-term nature of these instruments.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
Accumulated
Depreciation,
Reorganized Company Acquisition Depletion & Net Book
December 31, 1999 (In thousands) Costs Amortization Value
- --------------------------------------------------------------------------------
Property and leaseholds $ 472 $ - $ 472
Deferred exploration and development costs 312 1 311
Buildings and equipment 3,882 53 3,829
Other 66 - 66
-----------------------------------
Total $ 4,732 $ 54 $ 4,678
===================================
31
<PAGE>
Accumulated
Depreciation,
Predecessor Entity Acquisition Depletion & Net Book
December 11, 1999 (In thousands) Costs Amortization Value
- --------------------------------------------------------------------------------
Property and leaseholds $ 472 $ - $ 472
Deferred exploration and development costs 308 - 308
Buildings and equipment 3,857 - 3,857
Other 65 - 65
----------------------------------
Total $4,702 $ - $4,702
==================================
On June 6, 1997, Barrick Gold Exploration Inc. ("Barrick") completed the
purchase from the Predecessor Entity of more than 90% of the Gold Bar claim
block with an option to acquire the balance within two years. The Predecessor
Entity received $1,000,000 in cash from Barrick and Barrick purchased one
million Predecessor Entity common shares at $1 per share. Under the terms of the
agreement, Barrick agreed to spend $3,000,000 on the property prior to June of
1999.
In December 1998, the Predecessor Entity and Barrick mutually agreed to
terminate the purchase agreement thereby returning the Gold Bar property to
Atlas. Barrick agreed to pay the Predecessor Entity $150,000 in satisfaction of
its remaining exploration obligations of approximately $300,000. The Predecessor
Entity recorded the $150,000 along with the remaining unamortized gain on the
original sale of $1,063,000 as income from joint venture agreement in the year
ended December 31, 1998 in the accompanying Consolidated Statements of
Operations.
6. STOCKHOLDERS' EQUITY
The Reorganized Company is authorized to issue 1,000,000 shares of preferred
stock, par value $1 per share. The preferred stock is issuable in series, with
designations, rights and preferences to be fixed by the Board of Directors.
At December 31, 1998 there were 875,000 shares of common stock reserved for the
conversion of an outstanding Convertible Debenture and 6,577,566 shares of
common stock reserved for Option Warrants. All of the above option warrants and
conversion rights were voided in the Reorganization Plan.
7. EMPLOYEE INCENTIVE PLANS
The Predecessor Entity's Long Term Incentive Plan (the "LTIP") provided that key
employees may be granted options to purchase common stock at the fair value of
the shares on the date of grant. During 1999, the Board of Directors voted to
terminate the LTIP effective immediately.
32
<PAGE>
Predecessor Entity:
Balance outstanding as of December 31, 1997 1,140,300
Canceled (287,800)
----------
Balance outstanding as of December 31, 1998 852,500
Canceled (852,500)
----------
Reorganized Company:
Balance outstanding as of December 11, 1999 and December 31, 1999 -
==========
No options were granted in 1999 or 1998. However certain options granted prior
to January 1, 1998 were for services performed in 1999 and 1998. The Company has
elected to follow Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25) and related Interpretations in accounting
for its employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options were equal to the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share as required by
Statement No. 123 has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the Black-
Scholes option pricing model with the following weighted-average assumptions for
1998 and 1999: risk-free interest rate of 5.09% and 5.71% respectively; dividend
yields of 0.0%; volatility factor of the expected market price of the Company's
common stock of 0.462; and a weighted-average expected life of the options of 4
years.
The Black-Scholes option valuation model was developed for the use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option pricing models require the input of
highly subjective assumptions, including expected stock price volatility.
Because the Company's employee stock options had characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
has been amortized to expense over the option's vesting period. The Company's
pro forma information for the periods ended December 31, 1999 and December 11,
1999 and for the year ended December 31 1998, is as follows (in thousands except
for earnings per share)
Reorganized
Company Predecessor Entity
------------------
Period from Period from
December 12, January 1, Year ended
1999 to 1999 to December
December 31, December 11, 31,
1999 1999 1998
------------------------------------------
Pro forma net income (loss) $ (92) $2,588 $(2,734)
Pro forma earnings (loss) per share:
Basic $(0.02) $ 2.80 $ (2.99)
Diluted $(0.02) $ 2.80 $ (2.99)
33
<PAGE>
A summary of the Company's stock option activity, and related information is as
follows:
<TABLE>
<CAPTION>
Reorganized Company Predecessor Entity
------------------
Period from December Period from January
12, 1999 to 1, 1999 to Year ended
December 31, 1999 December 11, 1999 December 31, 1998
-------------------------------------------------------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
(In thousands) Options price Options price Options price
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -
beginning of period - $ - 852 $ 1.35 1,140 $ 1.27
Granted - - - - - -
Exercised - - - - - -
Forfeited/canceled - - (852) 1.35 (288) 1.04
-------------------------------------------------------------------
Outstanding-end
of period - $ - - $ - 852 1.35
===================================================================
Exercisable at end
of period - $ - - $ - 852 $ 1.35
===================================================================
</TABLE>
8. INVESTMENTS
In December 1997, the Predecessor Entity made the decision to sell its 61%
interest in Cornerstone Industrial Minerals Corporation ("Cornerstone") and
reclassified its investment to assets held for sale. The Predecessor Entity's
loss related to Cornerstone of $1,165,000 for the year ended December 31, 1998
is included in loss on assets held for sale in the accompanying consolidated
statements of operations.
In February 1999, the Predecessor Entity completed the sale of Cornerstone to
Seven Peaks Mining Inc. for proceeds of approximately $2.9 million, less selling
and holding costs of approximately $250,000.
9. SHORT-TERM DEBT
Reorganized Predecessor
Company Entity
(In thousands) December 31, December 11,
1999 1999
------------- ------------
Advances on sales of concentrates /(1)/ $ 1,778 $ 1,606
Corporacion Andina de Fomento /(2)/ 1,917 1,917
Other 154 132
------------- ------------
Total short-term debt $ 3,849 $ 3,655
============= ============
34
<PAGE>
(1) Under the terms of its agreement with Glencore International AG for the
sale of zinc/silver and lead/silver concentrates, the Company may take
advances of up to 80% of the estimated value of the concentrates available
for shipment via rail from the Company's warehouse in Potosi, Bolivia, and
an additional 10% of this amount may be advanced once the concentrate is
ready for shipment from port in Chile. Interest is payable on the advances
at the "New York" prime rate plus 1.5% (10.0% at December 31, 1999).
(2) The loan from Corporacion Andina de Fomento ("CAF") was repayable in equal
semi-annual principal installments (May and November) plus outstanding
interest. The loan bears interest at the six month LIBOR rate plus 4.5%
(10.63% at December 31, 1999). The loan is collateralized by certain
property, plant and equipment of Arisur with a carrying value of
approximately $4,500,000. On May 9, 1999, Arisur defaulted on a payment of
$478,000 due under the loan agreement with CAF. Subsequently, by letter
dated July 28, 1999 and revised on October 26, 1999, CAF has agreed to
restructure the remaining balance of the debt under the condition that the
Company, by June 30, 2000, can demonstrate that it has a minimum of four
years of proven reserves at a production rate of 400 tonnes per day at the
Andacaba mine. In the event that the above condition is met, CAF has stated
it is willing to restructure the existing debt, the terms of which are
subject to negotiation.
10. DETAILS OF CERTAIN BALANCE SHEET CAPTIONS
A summary of assets held for sale is as follows:
Reorganized Predecessor
Company Entity
December 31, December 11,
(In thousands) 1999 1999
- -------------------------------------------------------------------------------
Gold Bar mill facility $ 940 $ 940
Grassy Mountain property 925 925
---------------------------------
$1,865 $1,865
=================================
Current portion $ 735 $ 735
Long-term portion 1,130 1,130
---------------------------------
$1,865 $1,865
=================================
A summary of other assets is as follows:
Reorganized Predecessor
Company Entity
December 31, December 11,
(In thousands) 1999 1999
- -------------------------------------------------------------------------------
CGL receivable $ 1,500 $ 1,500
Other 47 50
------------------------------------
1,547 1,550
Less current portion (425) (428)
------------------------------------
$ 1,122 $ 1,122
====================================
35
<PAGE>
11. DETAILS OF CERTAIN STATEMENTS OF CASH FLOW CAPTIONS
The components of the adjustment to reconcile loss to net cash used in
operations as reflected in the Consolidated Statements of Cash Flows are as
follows:
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Entity
------------------
Period from Period from
December 12, January 1, Year ended
1999 to 1999 to December
December 31, December 11, 31,
(In thousands) 1999 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation, depletion and amortization $ 54 $ 954 $ 1,016
Loss from assets held for sale - - 1,165
Impairment of mineral property - - 34
Income from joint venture agreement - - (1,213)
Reorganization expenses - 382 -
Fresh-start revaluation - 3,349 -
Extraoardinary gain - early extinguishment of
debt - (9,199) -
-------------------------------------------
$ 54 $(4,514) $ 1,002
===========================================
Decrease (increase) in trade/other accounts
receivable $ (88) $ 1,114 $ (11)
Decrease in inventories 1 98 51
Decrease (increase) in prepaid expense and
other current assets 3 (29) 24
Decrease (increase) in other assets and
restricted cash and securities - (91) 113
Increase (decrease) in trade accounts payable 40 (230) 256
Increase (decrease) in accrued liabilities (84) (1) 689
Increase (decrease) in other liabilities, long-term (1) 10 (620)
-------------------------------------------
$(129) $ 871 $ 502
===========================================
</TABLE>
Net cash required for operating activities reflects cash payments for interest
and income taxes as follows:
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Entity
------------------
Period from Period from
December 12, January 1, Year Ended
1999 to 1999 to December
December 31, December 11, 31,
(In thousands) 1999 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $ 5 $ 438 $ 511
Income taxes - - -
</TABLE>
36
<PAGE>
12. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
On June 20, 1997 the Predecessor Entity was served with a Complaint in the
matter of Curt Goldschmidt and Ana Maria Goldschmidt (the "Goldschmidts) vs.
Atlas Corporation; Suramco Metals, Inc.; Arisur Inc.; and Harold R. Shipes and
Eileen A. Shipes in the Superior Court of the State of Arizona. In December
1994 Suramco and Arisur purchased all of the shares of Cia Minera Andacaba S.A.,
which held mining properties in Bolivia. Subsequently, the Predecessor Entity
acquired both Suramco and Arisur. The Goldschmidts, the former owners of Cia
Minera Andacaba S.A., asserted that the consideration under the purchase
agreement was not paid in full and they were seeking damages in the amount of
$800,000 plus expenses. Subsequent to the Arizona Complaint, in La Paz,
Bolivia, the Goldschmidts initiated action to seek satisfaction of the purported
damages. On June 25, 1998, the Predecessor Entity entered into a settlement
agreement and mutual release of all claims (the "Settlement Agreement") with the
Goldschmidts. The Settlement Agreement provided for the payment by the
Predecessor Entity of $80,000 to the Goldschmidts on the date of signing of the
Settlement Agreement. In addition, at the election of the Goldschmidts, the
Predecessor Entity agreed to purchase from the Goldschmidts 2,000,000 shares of
the Predecessor Entity's stock for $400,000 on September 11, 1998 and 250,000
shares of the Predecessor Entity's stock for $50,000 on December 11, 1998. In
return the Goldschmidts released all claims against the Predecessor Entity, its
subsidiaries and affiliates. The Predecessor Entity defaulted on payment of the
$400,000 due on September 11, 1998.
On September 19, 1997 the Predecessor Entity filed a Complaint in U. S. Federal
District Court in Colorado for breach of contract and for indemnity against H.
Roy Shipes, et. al. ("Shipes Parties"). The Predecessor Entity claimed that the
Shipes Parties are duty bound to defend and indemnify the Predecessor Entity as
a result of the Goldschmidt claims against the Predecessor Entity (see above).
The duty arose out of the contract with the Shipes Parties to sell Suramco to
the Predecessor Entity. On October 1, 1997 the Shipes Parties filed a claim
against the Predecessor Entity. The Complaint sought damages for alleged
misrepresentations in connection with the purchase of 50% of Arisur from the
Shipes Parties.
On January 25, 1999, the Predecessor Entity, the Goldschmidts and the Shipes
Parties executed a Settlement Agreement, which was approved by the Bankruptcy
Court and closed in April 1999. Under the terms of the agreement, the
Predecessor Entity agreed to allow a general unsecured claim in its bankruptcy
proceeding of $580,000 to the Shipes Parties and $450,000 to the Goldschmidts.
In addition, the Shipes Parties were allowed a subordinated unsecured debt claim
of $2,250,000.
Atlas is in an adversary proceeding against TRW, Inc. ("TRW") and the United
States Environmental Protection Agency (the "EPA") that is pending before the
Bankruptcy Court. This action was brought by Atlas seeking a declaratory
judgment that Atlas' obligations under a Consent Decree between Atlas, TRW and
the EPA (the "Decree") have been discharged under its confirmed Reorganization
Plan. TRW and the EPA have asserted that obligations under the Decree are not
dischargeable under Federal bankruptcy laws. Management believes that is has
arguments that the obligations under the Decree are subject to discharge under
Federal bankruptcy laws. However, because this matter is in its very preliminary
stages, management is unable to predict the ultimate outcome or any potential
damages to the Company.
37
<PAGE>
The Predecessor Entity had a trusteed and insured retirement plan (the
"Retirement Plan") covering substantially all salaried employees. Effective
October 27, 1999, the Predecessor Entity and the Pension Benefit Guaranty
Corporation ("PBGC") reached agreement for the termination of the Retirement
Plan and appointment of PBGC as statutory trustee of the Retirement Plan. Under
the terms of the agreement, the PBGC received an allowed, unsecured claim of $3
million in the Reorganization Plan. Also, under certain "events of default", the
PBGC has the right to require Atlas to purchase all of PBGC's rights, title, and
interest in the shares of Atlas that will be received by PBGC in settlement of
its unsecured claim (the "Put Option"). The purchase price of the shares would
be the fair market value of the shares during the 60 business days immediately
before or after the "event of default" triggering the Put Option, but in no
event would it be less than $500,000. The reorganized Company has no future
liability with respect to the Retirement Plan.
Other Commitments
The Reorganized Company had no non-cancelable operating leases having a
remaining term in excess of one year at December 31, 1999.
Amounts charged to rent expense for the periods ended December 31, 1999
(Reorganized Company), December 11, 1999 and the year ended December 31, 1998
(Predecessor Entity) were $2,000, $78,000 and $113,000 respectively.
13. EARNINGS PER SHARE
The following sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Entity
------------------
Period from Period from
December 12, January 1, 1999 Year Ended
1999 to December 31, to December 11, December 31,
(In thousands) 1999 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Income (loss) from continuing operations $ (92) $ 2,588 $ (2,730)
-------------------------------------------------------------
Denominator:
Weighted average shares outstanding (1), (2) 6,064 924 914
-------------------------------------------------------------
Basic and diluted earnings (loss) per share $ (0.02) $ 2.80 $ (2.99)
=============================================================
</TABLE>
(1) Amounts for all years have been adjusted for a 1 for 30 reverse stock split
effective on January 10, 2000.
(2) Weighted average shares outstanding assumes the issuance of all "common
shares committed to be issued" in accordance with the Reorganization Plan
since all accounting adjustments necessary to reflect the issuance of the
shares have been made effective December 11, 1999.
38
<PAGE>
14. INCOME TAXES
The Company's provision for income tax from continuing operations consists of
the following:
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Entity
------------------
Period from Period from
December 12, January 1, 1999 Year Ended
1999 to to December 11, December 31,
December 31,
(In thousands) 1999 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred $ - $ - $ -
Current - - -
Operating loss and credit carryovers - - -
----------------------------------------------------
Income tax expense $ - $ - $ -
====================================================
</TABLE>
Deferred income taxes result from temporary differences in the timing of income
and expenses for financial and income tax reporting purposes. The primary
components of deferred income taxes result from exploration and development
costs; depreciation, depletion and amortization expenses; impairments; and
reclamation accruals.
The net deferred tax balances in the accompanying December 31, 1999 and December
11, 1999 balance sheets include the following components:
<TABLE>
<CAPTION>
Reorganized Predecessor
Company Entity
December 31, December 11,
(In thousands) 1999 1999
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss ("NOL") carryovers $ 8,072 $ 8,056
Capital loss ("CL") carryovers 4,284 4,284
Impairment of mineral properties 1,287 1,287
Post retirement benefit accrual 59 59
Depreciation, depletion and amortization 5,197 5,197
------------------------------------
Total deferred tax assets 18,899 18,883
Deferred tax asset valuation allowance (18,899) (18,883)
------------------------------------
Net deferred tax assets - -
Deferred tax liabilities - -
------------------------------------
Net deferred tax balances $ - $ -
====================================
</TABLE>
39
<PAGE>
The change in the Company's valuation allowance is summarized as follows:
<TABLE>
<CAPTION>
Reorganized
Company
Predecessor Entity
-----------------------------------
Period from Period from
December 12, January 1, 1999 Year Ended
1999 to December 31, to December 11, December 31,
(In thousands) 1999 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Valuation allowance, beginning of period $ 18,883 $ 20,945 $ 21,446
Continuing operations 35 2,296 956
Extraordinary gain - (3,205) -
Restriction of carryforwards - (836) (1,365)
Other (19) (317) (92)
--------------------------------------------------------------
$ 18,899 $ 18,883 $ 20,945
==============================================================
</TABLE>
A reconciliation of expected federal income taxes on income from continuing
operations at statutory rates with the expense for income taxes is as follows:
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Entity
-----------------------------------
Period from Period from
December 12, January 1, 1999 Year Ended
1999 to December 31, to December 11, December 31,
(In thousands) 1999 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax at statutory rates $ (35) $ (2,296) $ (956)
Increase in deferred tax asset
valuation allowance 35 2,296 956
-------------------------------------------------------------
Income tax expense $ - $ - $ -
=============================================================
</TABLE>
At December 31, 1999 the Company has unused U.S. NOL carryovers of $100,070,000
which commence expiring in 2000, CL carryovers of $29,506,000 which commence
expiring in 2001 and investment tax credit (ITC) carryovers of $44,000 which
commence expiring in 2000. The Company also has U.S. alternative minimum tax
credit (AMT) carryovers of $127,000, which can be carried forward indefinitely,
and Bolivian NOL carryovers of $3,685,000, which commence expiring in 2000. The
U.S. carryovers are subject to restriction due to a change of ownership, as
defined by U.S. tax laws, occurring on October 8, 1996 when the Company issued
stock for the acquisition of Arisur. Due to the change of ownership, utilization
of the Company's NOL, ITC, CL and AMT credit carryovers existing as of October
8, 1996 is limited to offset approximately $858,000 of taxable income per year.
At December 31, 1999 the Company has unrestricted U.S. NOL and CL carryovers of
$9,605,000 and $12,240,000, respectively, which are available to offset future
taxable income.
40
<PAGE>
15. GEOGRAPHIC SEGMENTS
Financial information regarding geographic segments is set out below:
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Entity
-----------------------------------
Period from Period from
December 12, January 1, 1999 Year Ended
1999 to December 31, to December 11, December 31,
(In thousands) 1999 1999 1998
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Revenue
United States $ - $ - $ -
Bolivia 338 3,147 5,109
Loss before income taxes
United States (38) (5,342) (2,365)
Bolivia (54) (1,269) (365)
Provision for income tax - - -
------------------------------------------------------
Loss before extraordinary gain (92) (6,611) (2,730)
Extraordinary gain - 9,199 -
------------------------------------------------------
Net income (loss) $ (92) $ 2,588 $ (2,730)
======================================================
</TABLE>
<TABLE>
<CAPTION>
Reorganized Predecessor
Company Entity
December 31, December 11,
Balance Sheet 1999 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
United States $ 3,601 $ 3,641
Bolivia 6,493 6,396
------------------------------------
$ 10,094 $ 10,037
====================================
</TABLE>
16. SIGNIFICANT CONCENTRATIONS
Arisur sells all of its lead and zinc concentrates to Glencore International AG
("Glencore"), an international metal trader. Glencore sells the concentrates to
various metal smelters throughout the world. Due to the liquid nature of the
metals markets, the Company believes that it would be able to replace Glencore,
if necessary, with minimal disruption to its operations.
41
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Atlas Minerals Inc.
We have audited the accompanying consolidated balance sheets of Atlas Minerals
Inc. (formerly Atlas Corporation) and subsidiaries as of December 31, 1999
(Reorganized Company) and December 11, 1999 (Predecessor Entity) and the related
consolidated statements of operations, Stockholders' equity (deficit) and cash
flows for the period December 12, 1999 to December 31, 1999 (Reorganized Company
period) and for the period January 1, 1999 to December 11, 1999 (Predecessor
Entity period). These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance 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 aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of Atlas Minerals Inc.
and subsidiaries as of December 31, 1999 (Reorganized Company) and December 11,
1999, (Predecessor Entity) and the results of their operations and their cash
flows for the Reorganized Company period and the Predecessor Entity period in
conformity with generally accepted accounting principles.
As discussed in Notes 1 and 2 to the consolidated financial statements, on
December 11, 1999, Atlas Minerals Inc. and two of its subsidiaries emerged from
bankruptcy. The consolidated financial statements of the Reorganized Company
reflect the impact of adjustments to reflect the fair value of assets and
liabilities under fresh start reporting. As a result, the consolidated financial
statements of the Reorganized Company are presented on a different basis than
those of the Predecessor Entity and, therefore, are not comparable in all
respects.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's recurring losses from
operations and working capital deficit raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Horwath Gelfond Hochstadt Pangburn, P.C.
Denver, Colorado
March 16, 2000
42
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
Not Applicable.
43
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
-------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------
DIRECTORS
The Board of Directors are elected at the annual meeting of the shareholders.
Each Director is elected to hold office until the next annual meeting of
shareholders and until the director's successor is elected and qualified. There
are currently seven directors.
Information Concerning Directors
The following table sets forth certain information concerning each director.
<TABLE>
<CAPTION>
Principal Occupation, Past Five Year's Business
Director Experience
Name Since and Other Directorships Held Age
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guillermo A. Blacker 2000 Currently a consultant to industry worldwide. 52
Previously Director, Business Development for Jacobs
Engineering Group Inc. and prior to 1997, was
founding Director and Executive Vice President of
MinCorp Ltd. and Chief Executive of MinCorp
Engineers and Constructors.
Richard E. Blubaugh 1998 Executive Vice President of the Company since 1998 52
and prior to that served as Vice President of
Environmental and Governmental Affairs.
Mario Caron 1996 Presently an independent management consultant. 46
Formerly President, Chief Executive Officer and
director of Eden Roc Mineral Corp. from February
1997 to March 31, 1999. Chief Executive Officer of
Atlas Corporation from September 1996 to January
1997. From 1993 to 1996, President and Chief
Executive Officer of MSV Resources Inc. Mr. Caron
also is director of three junior Canadian
exploration companies.
David J. Carroll 2000 Stockbroker and registered principal with Mericka & Co., 58
a NASD member firm. Also owner and operator of Carroll
Resources, an oil and gas producer.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation, Past Five Year's Business
Director Experience
Name Since And Other Directorships Held Age
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Douglas R. Cook 1988 President of Cook Ventures, Inc., a geological 74
consulting firm.
C. Thomas Ogryzlo 1993 Currently President and CEO of Canatec Development 60
Corporation. Prior to 2000, President and CEO of Black
Hawk Mining Inc., formerly Triton Mining Corporation
before the merger of the two companies in May 1998.
Prior to August 1997 Chairman of Kilborn
SNC-Lavalin, a world class engineering firm;
Director of Franco Nevada Gold Corporation, Tiomin
Resources and Vista Gold Corp.
Dr. Henry J. Sandri 2000 Currently is a Senior Associate and Principal with 47
Behre Dolbear & Company, Inc., a mining industry
consulting firm. Previously Mr. Sandri held the
positions of assistant Vice President - Planning and
Business Development for Inco Ltd., and Senior
Corporate Planner for Burlington Northern Inc.
Director of U.S. Cobalt Inc. and Bravo Resource
Partners Inc.
</TABLE>
BOARD AND COMMITTEE MEETINGS
The Company has an Audit Committee and a Compensation Committee of which
the Board of Directors appoints all members. The Compensation Committee
consists of Messrs. Ogryzlo and Cook. The Audit Committee consists of Messrs.
Caron, Carroll and Sandri. The principal functions of the Audit Committee are
to recommend the selection of the Company's auditors, review with the auditors
the scope and anticipated cost of their audit and receive and consider a report
from the auditors concerning their conduct of the audit. The principal
functions of the Compensation Committee are to recommend changes in compensation
plans and the adoption of new compensation plans and to recommend compensation
for senior officers of the Company.
COMPENSATION OF DIRECTORS
Fees paid to non-employee directors consist of a $1,000 fee for each
Board of Directors meeting attended in person, a $500 fee for each Board of
Directors meeting attended by telephone and a $500 fee for each committee
meeting attended. Employee directors receive no fees for their services as a
director.
EXECUTIVE OFFICERS
Set forth below is the age and certain other information regarding each person
currently serving as an executive officer of the Company.
45
<PAGE>
Richard E. Blubaugh, age 52, currently serves as Executive Vice President since
September 1998 and has served as Vice President of Environmental and
Governmental Affairs since October 1, 1990, and has been with Atlas for 18
years. He has been involved in the environmental, health and safety field for
over 24 years, has managed environmental and regulatory functions for mining
firms in seven western states, and also has experience as a regulator and a
consultant.
James R. Jensen, age 40, currently serves as Chief Financial Officer since
September 1998 and has served as Treasurer and Secretary since February 1997.
Mr. Jensen joined the Company in August of 1989, as Accounting Manager and was
promoted to Controller in September 1993. Prior to his employment with the
Company, Mr. Jensen was a manager with the accounting firm of KPMG Peat Marwick.
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
Under Section 16 of the Exchange Act, the Company's directors and executive
officers and persons holding more than 10% of the Company's common stock are
required to report their initial ownership of common stock and subsequent
changes to that ownership to the Securities and Exchange Commission by specified
due dates. To the Company's knowledge all of these filing requirements were
satisfied with respect to transactions during the year ended December 31, 1999.
Item 10. Executive Compensation
The following table sets forth all compensation paid by the Company, for
the years ended December 31, 1999 and 1998 to Messrs. Gregg B. Shafter and
Richard E. Blubaugh. Except for Messrs. Shafter and Blubaugh, no person who was
serving as an executive officer of the Company during the year ended December
31, 1999 had total cash and cash-equivalent remuneration, which exceeded
$100,000 during the year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Other
Annual All Other
Year or Period Compen- Compen-
Name and Principal Position Ended Salary sation sation
- ----------------------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C>
Gregg B. Shafter, President (1) Dec. 31, 1999 $ 115,337 $ - $ 3,498 (3)
Dec. 31, 1998 108,505 1,546 (2) 6,510 (3)
Dec. 31, 1997 86,395 7,445 (2) 5,100 (3)
Richard E. Blubaugh, Dec. 31, 1999 100,695 - 6,042 (3)
Executive VP Dec. 31, 1998 99,194 2,372 (2) 5,951 (3)
Dec. 31, 1997 91,690 9,768 (2) 5,501 (3)
</TABLE>
(1) Mr. Shafter resigned as President and a Director on February 10, 2000
(2) Includes certain perquisites, such as car allowances and life insurance
premiums paid by the Company.
(3) Includes contributions by the Company to the Investment Savings Plan for
Employees of Atlas.
46
<PAGE>
Investment and Savings Plan. The Atlas Investment and Savings Plan (the
"Plan") benefits employees of the Company and its subsidiaries who have
completed six months of service. Each participant under the Plan must be at
least 21 years of age. Under the Plan, an employee may elect to contribute,
pursuant to a salary reduction election, not less than 1% and not more than 10%
of the employee's annual compensation. The Company makes a matching
contribution of 100% of the amount contributed by the employee, but not more
than 6% of the employee's annual compensation. In addition, the Company may
make special contributions to the Plan, but these special contributions may not
exceed the maximum amount deductible under Section 404(a)(3)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"). Employee contributions may be
invested in a number of investment options, but not common stock of the Company.
All matching and special contributions to the Plan are invested in shares of
common stock of the Company.
OFFICER CONTRACTS
All officer contracts in place at December 31, 1998 were cancelled as part
of the Reorganization Plan.
Under the terms of the Reorganization Plan, Richard E. Blubaugh, Vice
President of Environmental and Governmental Affairs, will receive a two year
consulting contract with a retainer of $30,000 per year payable in six equal
monthly installments due on the 15th day of the month after termination of his
regular employment. The payments to Mr. Blubaugh under the consulting contract
for the second year shall be made only if he fulfills his consulting contract
for the first year.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1999 are identified above
under the heading Board and Committee Meetings. No member of the Compensation
Committee is or has been at any time an officer of the Company or any of its
subsidiaries (except for Mr. Cook who served as a non-executive Chairman of the
Company during 1998). During 1999 no executive officer of the Company served as
a director or as member of the Compensation Committee of another entity whose
executive officers served as a director or as a member of the Compensation
Committee of the Company.
47
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 15, 2000
regarding the beneficial ownership, including shares of Atlas common stock which
may be acquired upon the exercise of stock options or warrants, or the
conversion of any securities, within 60 days of March 15, 2000, of the Company's
common stock by (i) persons known to the Company to own more than 5% of the
Company's common stock, (ii) each director of the Company, (iii) each executive
officer named in the Summary Compensation Table set forth above, and (iv) all
directors and executive officers as a group:
Security Ownership Table
<TABLE>
<CAPTION>
Number of Shares
and Nature of
Name Beneficial Ownership(1) Percent of Class
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Lindner Dividend Fund, Inc. 960,755 /(2)/ 15.83%
7711 Carondelet Avenue, Suite 700
St. Louis, MO 63105
Pension Benefit Guaranty Corporation 823,504 /(2)/ 13.57%
1200 K. Street N.W., Suite 870
Washington, D.C. 20005
H. R. Shipes 790,564 /(2)/ 13.03%
11251 E. Camino del Sahuaro
Tucson, AZ 85711
Guillermo A. Blacker Nil *
Richard E. Blubaugh 193,605 /(3)/ 3.19%
Mario Caron 83,960 /(2)/ 1.38%
David J. Carroll 22,099 (4) *
Douglas R. Cook 25,595 /(5)/ *
C. Thomas Ogryzlo 3,294 /(2)/ *
Dr. Henry J. Sandri Nil *
All current executive officers and
directors as a group (8 persons) 506,861 /(6)/ 8.35%
</TABLE>
* Represents less than 1% ownership interest.
48
<PAGE>
(1) For purposes of this security ownership table, shares allocated under the
Reorganization Plan are assumed to be issued only to claims currently
approved by the Bankruptcy Court. There are currently bankruptcy claims
against the Predecessor Entity totaling $7.2 million (the "Claims") which,
if allowed, would significantly affect the amount of shares allocated to
individual creditors. The Company has objected to the Claims on the grounds
that the Claims were filed after the bar date for such claims and that the
claimants have not established "excusable neglect" for its failure to
timely file claims. The Company believes that its objections to the Claims
will be upheld by the Court. In the event that the Court approves the
Claims, the ownership percentages in the above table would be as follows:
Lindner Dividend Fund, Inc. - 10.66%, Pension Benefit Guaranty Corporation
-9.13%, H. R. Shipes - 8.77%, Richard E. Blubaugh - 3.08% and all current
executive officers and directors as a group - 8.03%. All other percentages
would remain the same as detailed above. Additionally, Hartford Specialty
Company, P.O. Box 2073, Hartford, Connecticut 06145-2073 would own 20.23%
of the Reorganized Company.
(2) Shares were, or will be issued in accordance with the Reorganization Plan
of Atlas.
(3) Includes (i) 185,134 issuable in accordance with the Reorganization Plan of
Atlas and (ii) 8,471 shares held in Mr. Blubaugh's account under the
Company's 401(k) Plan.
(4) Includes 19,166 shares directly owned by Mr. Carroll, 1,600 shares held
beneficially in Mr. Carroll's retirement account, and 1,333 shares held as
custodian for Mr. Carroll's minor child.
(5) Includes 66 shares of common stock directly owned and 25,529 shares issued
or issuable in accordance with the Reorganization Plan of Atlas.
(6) Includes (i) 19,625 shares of common stock directly owned, (ii) 471,941
shares issued or issuable in accordance with the Reorganization Plan of
Atlas and (iii) 14,322 shares held beneficially under retirement accounts
and (iv) 1,333 shares held as a custodian for a minor child.
Item 12. Certain Relationships and Related Transactions
None.
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a) Exhibits:
Exhibit
Number Exhibits
----------------------------------------------------------------
2.1 Atlas Corporation's second amended plan of
reorganization (filed as Exhibit 2.1 to the
Company's report on Form 8-K filed on February 4,
2000 and incorporated herein by reference).
2.2 Atlas Precious Metals Inc.'s second amended plan of
reorganization (filed as Exhibit 2.2 to the
Company's report on Form 8-K filed on February 4,
2000 and incorporated herein by reference).
2.3 Atlas Gold Mining Inc.'s revised second amended
plan of reorganization (filed as Exhibit 2.3 to the
Company's report on Form 8-K filed on February 4,
2000 and incorporated herein by reference).
49
<PAGE>
2.4 Stock Purchase Agreement between the Company and
Arimetco International Inc. dated October 7, 1996.
(filed as Exhibit 2.2 to the Company's annual
report on Form 10-K for the year ended December 31,
1996 and incorporated herein by reference).
2.5 Asset Purchase Agreement between the Company, Atlas
Gold Mining Inc. and Atlas Precious Metals Inc. and
Barrick Gold Exploration Inc. dated June 3, 1997
regarding the Company's Gold Bar property. (Filed
as exhibit 2.4 to the Company's annual report on
Form 10-K for the year ended December 31, 1997 and
incorporated herein by reference.)
3.1 Articles of Incorporation of Atlas Minerals Inc.
dated February 3, 2000 (filed as Exhibit 3.1 to the
Company's report on Form 8-K dated February 4, 2000
and incorporated herein by reference).
3.2 Bylaws of Atlas Minerals Inc. dated February 10,
2000.
10.1 Moab Utah Millsite Transfer Agreement dated April
28, 1999 between Atlas Corporation, the Official
Unsecured Creditors Committee, the NRC, the State
of Utah and ACSTAR Insurance Companies (filed as
Exhibit 10.1 to the Company's quarterly report on
Form 10-QSB filed on August 13, 1999 and
incorporated herein by reference).
10.2 Revised second amended joint disclosure statement
of Atlas Corporation, Atlas Gold Mining Inc. and
Atlas Precious Metals Inc. (filed as Exhibit 10.1
to the Company's quarterly report on Form 10-QSB
filed on November 12, 1999 and incorporated herein
by reference).
10.3 Deposit Agreement between Seven Peaks Mining, Inc.
and Atlas Corporation dated October 2, 1998 (filed
as Exhibit 10.13 to the Company's annual report on
Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
10.5 Mutual Termination Agreement dated December 16,
1998 between Barrick Gold Exploration Inc. and
Atlas Corporation, Atlas Gold Mining Inc. and Atlas
Precious Metals Inc. (filed as Exhibit 10.14 to the
Company's annual report on Form 10-K for the year
ended December 31, 1998 and incorporated herein by
reference).
21 Subsidiaries of the Company.
27 Financial Data Schedule
(b) The Registrant did not file any reports on Form 8-K during the fourth
quarter of 1999.
50
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ATLAS MINERALS INC.
By: /s/ Richard E. Blubaugh
-----------------------
Name: Richard E. Blubaugh
Title: Executive Vice President
(Principal Executive Officer)
Date: March 29, 2000
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.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ James R. Jensen Chief Financial Officer March 29, 2000
- -------------------------------
James R. Jensen (Principal Financial Officer
& Principal Accounting
Officer)
/s/ Guillermo A. Blacker Director March 29, 2000
- -------------------------------
Guillermo A. Blacker
/s/ Richard E. Blubaugh Director March 29, 2000
- -------------------------------
Richard E. Blubaugh
/s/ David J. Carroll Director March 29, 2000
- -------------------------------
David J. Carroll
/s/ Mario Caron Director March 29, 2000
- -------------------------------
Mario Caron
/s/ Douglas R. Cook Director March 29, 2000
- -------------------------------
Douglas R. Cook
/s/ C. Thomas Ogryzlo Director March 29, 2000
- -------------------------------
C. Thomas Ogryzlo
/s/ Henry J. Sandri Director March 29, 2000
- -------------------------------
Henry J. Sandri
</TABLE>
51
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
ATLAS MINERALS INC.
ARTICLE I
OFFICES
1. Offices.
1.1 The principal office of the Corporation shall be designated from
time to time by the Corporation and may be within or outside of Colorado or the
United States.
1.2 The Corporation may have such other offices, either within or
outside Colorado, as the Board of Directors may designate or as the business of
the Corporation may require from time to time.
1.3 The registered office of the Corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not be,
identical with the principal office, and the address of the registered office
may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
1. Annual Meeting.
1.1 The annual meeting of the shareholders shall be held each year on
a date and at a time fixed by the Board of Directors of the Corporation (or by
the Chief Executive Officer or President in the absence of action by the Board
of Directors), beginning with the year 2000, for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If the election of directors is not held on the day fixed as provided
herein for any annual meeting of the shareholders, or any adjournment thereof,
the Board of Directors shall cause the election to be held at a special meeting
of the shareholders as soon thereafter as it may conveniently be held.
1.2 A shareholder may apply to the district court in the county in
Colorado where the Corporation's principal office is located or, if the
Corporation has no principal office in Colorado, to the district court of the
county in which the Corporation's registered office is located to seek an order
that a shareholder meeting be held (i) if an annual meeting was not held within
six (6) months after the close of the Corporation's most recently ended fiscal
year or fifteen (15) months after its last annual meeting, whichever is earlier,
or (ii) if the shareholder participated in a proper call of or proper demand for
a special meeting and notice of the special meeting was not given within thirty
(30) days after the date of the call or the date the last of the demands
necessary to require calling of the meeting was received by the Corporation
pursuant to Section 7-107-102(1)(b) of the Colorado Business Corporation Act, or
the special meeting was not held in accordance with the notice.
<PAGE>
2. Special Meetings. Unless otherwise prescribed by statute, special
meetings of the shareholders may be called for any purpose by the Chairman of
the Board of Directors, the Chief Executive Officer, the President or by the
Board of Directors. The Chief Executive Officer or the President shall call a
special meeting of the shareholders if the Corporation receives one or more
written demands for the meeting, stating the purpose or purposes for which it is
to be held, signed and dated by holders of shares representing at least ten
percent (10%) of all the votes entitled to be cast on any issue proposed to be
considered at the meeting.
3. Place of Meeting. The Board of Directors may designate any place,
either within or outside Colorado, as the place for any annual meeting or 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 outside Colorado, as the place for such meeting. If no designation is
made, or if a special meeting is called other than by the Board of Directors,
the place of meeting shall be the principal office of the Corporation.
4. Notice of Meeting.
4.1 Written notice stating the place, date, and hour of the
meeting shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, except (i) if the number of authorized shares is
to be increased, at least thirty (30) days' notice shall be given, or (ii) if
any other longer notice period is required by the Colorado Business Corporation
Act. Notice of a special meeting shall include a description of the purpose or
purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the Articles of
Incorporation of the Corporation, (ii) a merger or share exchange in which the
Corporation is a party and, with respect to a share exchange, in which the
Corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the Corporation or of another entity which
this Corporation controls (if a shareholder vote is required), in each case with
or without the goodwill, (iv) a dissolution of the Corporation, or (v) any other
purpose for which a statement of purpose is required by the Colorado Business
Corporation Act. Notice shall be given personally or by mail, private carrier,
telegraph, teletype, electronically transmitted facsimile or other form of wire
or wireless communication by or at the direction of the Chief Executive Officer,
the President, the Secretary, or the officer or persons calling the meeting, to
each shareholder of record entitled to vote at such meeting. If notice is given
by mail, such notice shall be deemed to be given and effective when deposited in
the United States mail, addressed to the shareholder at his address as it
appears in the Corporation's current record of shareholders, with postage
prepaid. If notice is given other than by mail, the notice is given and
effective on the date received by the shareholder.
4.2 If requested by the person or persons lawfully calling such
meeting, the Secretary shall give notice thereof at the Corporation's expense.
No notice need be sent to any shareholder if three successive notices mailed to
the last known address of such shareholder have been returned as undeliverable
until such time as another address for such shareholder is made known to the
Corporation by such shareholder. In order to be entitled to receive notice of
any meeting, a shareholder shall advise the Corporation in writing of any change
in such shareholder's mailing address as shown on the Corporation's books and
records.
2
<PAGE>
4.3 When a meeting is adjourned to another date, time or place,
notice need not be given of the new date, time or place if the new date, time or
place of such meeting is announced before adjournment at the meeting at which
the adjournment is taken. At the adjourned meeting the Corporation may transact
any business which may have been transacted at the original meeting. If the
adjournment is for more than one hundred twenty (120) days, or if a new record
date is fixed for the adjourned meeting, a new notice of the adjourned meeting
shall be given to each shareholder of record entitled to vote at the meeting as
of the new record date.
4.4 A shareholder may waive notice of a meeting before or after
the time and date of the meeting by a writing signed by such shareholder. Such
waiver shall be delivered to the Corporation for filing with the corporate
records. Further, by attending a meeting either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meeting unless the shareholder objects at the beginning of the meeting to the
holding of the meeting or the transaction of business at the meeting because of
lack of notice or defective notice. By attending the meeting, the shareholder
also waives any objection to consideration at the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
5. Fixing of Record Date.
5.1 For the purpose of determining shareholders entitled to (i)
notice of or vote at any meeting of shareholders or any adjournment thereof,
(ii) receive distributions or share dividends, or (iii) demand a special
meeting, or to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix a future date as the record date for any
such determination of shareholders, such date in any case to be not more than
seventy (70) days, and, in case of a meeting of shareholders, not less than ten
(10) days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the date on which notice of the meeting is
mailed to shareholders, or the date on which the resolution of the Board of
Directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this Section, such determination shall apply to any
adjournment thereof unless the Board of Directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than one hundred twenty
(120) days after the date fixed for the original meeting.
5.2 Notwithstanding the above, the record date for determining
the shareholders entitled to take action without a meeting or entitled to be
given notice of action so taken shall be the date a writing upon which the
action is taken is first received by the Corporation. The record date for
determining shareholders entitled to demand a special meeting shall be the date
of the earliest of any of the demands pursuant to which the meeting is called.
6. Voting Lists.
6.1 The Secretary shall make, at the earlier of ten (10) days
before each meeting of shareholders or two (2) business days after notice of the
meeting has been given, a complete list of the shareholders entitled to be given
notice of such meeting or any adjournment thereof. The list shall be arranged by
voting groups and within each voting group by class or series of shares, shall
be in alphabetical order within each class or series, and shall show the address
of and the number of shares of each class or series held by each shareholder.
For the period beginning the earlier of ten (10) days prior to the meeting or
two (2) business days after notice of the meeting is given and
3
<PAGE>
continuing through the meeting and any adjournment thereof, this list shall be
kept on file at the principal office of the Corporation, or at a place (which
shall be identified in the notice) in the city where the meeting will be held.
Such list shall be available for inspection on written demand by any shareholder
(including for the purpose of this Section 6 any holder of voting trust
certificates) or his agent or attorney during regular business hours and during
the period available for inspection. The original stock transfer books shall be
prima facie evidence as to the shareholders entitled to examine such list or to
vote at any meeting of shareholders.
6.2 Any shareholder, his agent or attorney may copy the list
during regular business hours during the period it is available for inspection,
provided (i) the shareholder has been a shareholder for at least three (3)
months immediately preceding the demand or holds at least five percent (5%) of
all outstanding shares of any class of shares as of the date of the demand, (ii)
the demand is made in good faith and for a purpose reasonably related to the
demanding shareholder's interest as a shareholder, (iii) the shareholder
describes with reasonable particularity the purpose and the records the
shareholder desires to inspect, (iv) the records are directly connected with the
described purpose, and (v) the shareholder pays a reasonable charge covering the
costs of labor and material for such copies, not to exceed the estimated cost of
production and reproduction.
7. Recognition Procedure for Beneficial Owners. The Board of
Directors may adopt by resolution a procedure whereby a shareholder of the
Corporation may certify in writing to the Corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the Corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the Corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the Board deems necessary
or desirable. Upon receipt by the Corporation of a certificate complying with
the procedure established by the Board of Directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
8. Quorum and Manner of Acting.
8.1 A majority of the votes entitled to be cast on a matter by a
voting group shall constitute a quorum of that voting group for action on the
matter. If less than a majority of such votes are represented at a meeting, a
majority of the votes so represented may adjourn the meeting from time to time
without further notice, for a period not to exceed one hundred twenty (120) days
for any one adjournment. If a quorum is present at such adjourned meeting, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business for the remainder of the meeting and for any
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, unless a new record date is or shall be set for the adjourned
meeting.
8.2 If a quorum exists, action on a matter other than the
election of directors by a voting group is approved if the votes cast within the
voting group favoring the action exceed the votes cast within the voting group
opposing the action, unless the vote of a greater number or voting by classes is
required by law or the Articles of Incorporation.
4
<PAGE>
9. Proxies.
9.1 At all meetings of shareholders, a shareholder may vote by
proxy by signing an appointment form or similar writing, either personally or by
his duly authorized attorney-in-fact. A shareholder may also appoint a proxy by
transmitting or authorizing the transmission of a telegram, teletype, or other
electronic transmission providing a written statement of the appointment to the
proxy, a proxy solicitor, proxy support service organization, or other person
duly authorized by the proxy to receive appointments as agent for the proxy, or
to the Corporation. The transmitted appointment shall set forth or be
transmitted with written evidence from which it can be determined that the
shareholder transmitted or authorized the transmission of the appointment. The
proxy appointment form or similar writing shall be filed with the Secretary of
the Corporation before or at the time of the meeting. The appointment of a proxy
is effective when received by the Corporation and is valid for eleven (11)
months unless a different period is expressly provided in the appointment form
or similar writing.
9.2 Any complete copy, including an electronically transmitted
facsimile, of an appointment of a proxy may be substituted for or used in lieu
of the original appointment for any purpose for which the original appointment
could be used.
9.3 Revocation of a proxy does not affect the right of the
Corporation to accept the proxy's authority unless (i) the Corporation had
notice that the appointment was coupled with an interest and notice that such
interest is extinguished is received by the Secretary or other officer or agent
authorized to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the Secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the Corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
9.4 The death or incapacity of the shareholder appointing a
revocable proxy does not affect the right of the Corporation to accept such
proxy's authority unless notice of the death or incapacity is received by the
Secretary or other officer or agent authorized to tabulate votes before the
proxy exercises his authority under the appointment.
9.5 The Corporation shall not be required to recognize an
appointment made irrevocable if it has received a writing revoking the
appointment signed by the shareholder (including a shareholder who is a
successor to the shareholder who granted the proxy) either personally or by his
attorney-in-fact, notwithstanding that the revocation may be a breach of an
obligation of the shareholder to another person not to revoke the appointment.
9.6 Subject to Article II, Section 11 and any express limitation
the proxy's authority appearing on the appointment form, the Corporation is
entitled to accept the proxy's vote or other action as that of the shareholder
making the appointment.
10. Voting of Shares.
10.1 Each outstanding share, regardless of class, shall be
entitled to one vote, except in the election of directors, and each fractional
share shall be entitled to a corresponding
5
<PAGE>
fractional vote on each matter submitted to a vote at a meeting o f
shareholders, except to the extent that the voting rights of the shares of any
class or classes or series are otherwise different as expressly set forth in the
Articles of Incorporation. Cumulative voting shall not be permitted in the
election of directors or for any other purpose. Each record holder of stock
shall be entitled to vote in the election of directors and shall have as many
votes for each of the shares owned by him as there are directors to be elected
and for whose election he has the right to vote.
10.2 At each election of directors, that number of candidates
equaling the number of directors to be elected, having the highest number of
votes cast in favor of their election, shall be elected to the Board of
Directors.
10.3 Except as otherwise ordered by a court of competent
jurisdiction upon a finding that the purpose of this Section would not be
violated in the circumstances presented to the court, the shares of this
Corporation are not entitled to be voted if they are owned, directly or
indirectly, by a second corporation, domestic or foreign, and this Corporation
owns, directly or indirectly, a majority of the shares entitled to vote for
directors of the second corporation, except to the extent the second corporation
holds the shares in a fiduciary capacity.
10.4 Redeemable shares are not entitled to be voted after notice
of redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares or such payment has been made directly to the holders of
the Corporation.
11. Corporation's Acceptance of Votes.
11.1 If the name signed on a vote, consent, waiver, proxy
appointment, or proxy appointment revocation corresponds to the name of a
shareholder, the Corporation, if acting in good faith, is entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and
give it effect as the act of the shareholder. If the name signed on a vote,
consent, waiver, proxy appointment or proxy appointment revocation does not
correspond to the name of a shareholder, the Corporation, if acting in good
faith, is nevertheless entitled to accept the vote, consent, waiver, proxy
appointment or proxy appointment revocation and to give it effect as the act of
the shareholder if:
(i) the shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an
administrator, executor, guardian or conservator representing the shareholder
and, if the Corporation requests, evidence of fiduciary status acceptable to the
Corporation has been presented with respect to the vote, consent, waiver, proxy
appointment or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation requests,
evidence of this status acceptable to the Corporation has been presented with
respect to the vote, consent, waiver, proxy appointment or proxy appointment
revocation;
6
<PAGE>
(iv) the name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the Corporation
requests, evidence acceptable to the Corporation of the signatory's authority to
sign for the shareholder has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants
or fiduciaries and the name signed purports to be the name of at least one of
the co-tenants or fiduciaries, and the person signing appears to be acting on
behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper under rules
established by the Corporation that are not inconsistent with this Section 11.
11.2 The Corporation is entitled to reject a vote, consent,
waiver, proxy appointment or proxy appointment revocation if the Secretary or
other officer or agent authorized to tabulate votes, acting in good faith, has
reasonable basis to doubt the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
11.3 Neither the Corporation nor its officers nor any agent who
accepts or rejects a vote, consent, waiver, proxy appointment or proxy
appointment revocation in good faith and in accordance with the standards of
this Section is liable in damages for the consequences of the acceptance or
rejection.
12. Informal Action by Shareholders.
12.1 Any action required or permitted to be taken at a meeting
of the shareholders may be taken without a meeting if a written consent (or
counterparts thereof) that sets forth the action so taken is signed by all of
the shareholders entitled to vote with respect to the subject matter thereof and
received by the Corporation. Such consent shall have the same force and effect
as a unanimous vote of the shareholders and may be stated as such in any
document. Action taken under this Section is effective as of the date the last
writing necessary to effect the action is received by the Corporation, unless
all of the writings specify a different effective date, in which case such
specified date shall be the effective date for such action. If any shareholder
revokes his consent as provided for herein prior to what would otherwise be the
effective date, the action proposed in the consent shall be invalid. The record
date for determining shareholders entitled to take action without a meeting is
the date the Corporation first receives a writing upon which the action is
taken.
12.2 Any shareholder who has signed a writing describing and
consenting to action taken pursuant to this Section may revoke such consent by a
writing signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the Corporation before the effectiveness of the action.
12.3 Notwithstanding the foregoing, if the rules of any
securities exchange, market or quotation system on which the Corporation's
shares or securities are traded shall not permit the taking of action without a
meeting, then, for so long as such rules shall apply to the Corporation, the
provisions of this Section 12 shall be of no force or effect.
7
<PAGE>
13. Organization. Meetings of shareholders shall be presided
over by the Chairman of the Board if any, or in his absence by the Vice Chairman
of the Board of Directors, if any, or in his absence by the Chief Executive
Officer, or in his absence by the President, or in his absence by a Vice
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
14. Meetings by Telecommunication. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
1. General Powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the Corporation shall
be managed under the direction of its Board of Directors, except as otherwise
provided in the Colorado Business Corporation Act or the Articles of
Incorporation.
2. Number, Qualification and Tenure. The number of directors of
the Corporation shall be fixed from time to time by the Board of Directors,
within a range of not less than four (4) nor more than eight (8). A director
shall be a natural person who is eighteen (18) years of age or older. A director
need not be a resident of Colorado or the United States or a shareholder of the
Corporation. The board of directors shall be elected at the annual meeting of
the shareholders or at a special meeting called for that purpose. Each director
shall be elected to hold office until the next annual meeting of shareholders
and until the director's successor is elected and qualified.
3. Vacancies. Any director may resign at any time by giving
written notice to the Corporation. Such resignation shall take effect at the
time the notice is received by the Corporation unless the notice specifies a
later effective date. Unless otherwise specified in the notice of resignation,
the Corporation's acceptance of such resignation shall not be necessary to make
it effective. Subject to applicable law and provisions of the Articles of
Incorporation relating to the rights of holders of any class or series of stock
having a preference over the common stock as to dividends or upon liquidation or
to elect directors under specified circumstances, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the term of the director who was replaced
and until such director's successor shall have been elected and qualified. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
4. Removal. A director may be removed from office only for
cause and only by (a) the affirmative vote of the holders of not less than a
majority of the number of shares of common stock then outstanding or (b) the
affirmative vote of a majority of the entire Board of Directors then in office.
Except as otherwise provided by law or fixed by, or pursuant to, the provisions
of the Articles
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<PAGE>
of Incorporation relating to the rights of holders of any class or series of
stock having a preference over the common stock as to voting dividends or upon
liquidation or to elect directors under specified circumstances, this Section 4
shall not apply with respect to any director elected by the holders of any such
class or series having a preference.
5. Regular Meetings. A regular meeting of the Board of Directors
shall be held without notice 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 outside Colorado, for the holding of
additional regular meetings without other notice.
6. Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the Chief Executive Officer, 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 outside Colorado, as
the place for holding any special meeting of the Board of Directors called by
them, provided that no meeting shall be called outside the State of Colorado
unless a majority of the Board of Directors has so authorized.
7. Notice.
7.1 Notice of any special meeting shall be given at least two
(2) days (provided that such notice must also be given at least one (1) business
day) prior to the meeting by written notice either personally delivered or
mailed to each director at his business address, or by notice transmitted by
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be given and
to be effective on the earlier of (i) three (3) business days after such notice
is deposited in the United States mail, properly addressed, with postage
prepaid, or (ii) the date shown on the return receipt, if mailed by registered
or certified mail return receipt requested. If notice is given by telex,
electronically transmitted facsimile or other similar form of wire or wireless
communication, such notice shall be deemed to be given and to be effective when
sent, and with respect to a telegram, such notice shall be deemed to be given
and to be effective when the telegram is delivered to the telegraph company. If
a director has designated in writing one or more reasonable addresses or
facsimile numbers for delivery of notice to him, notice sent by mail, telegraph,
telex, electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
7.2 A director may waive notice of a meeting before or after the
time and date of the meeting by a writing signed by such director. Such waiver
shall be delivered to the Corporation for filing with the corporate records.
Further, a director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless at the beginning of the meeting, or
promptly upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. 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.
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8. Quorum.
8.1 A majority of the number of directors fixed by the Board of
Directors or, if no number is fixed, a majority of the number in office
immediately before the meeting begins, shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors.
8.2 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, for a period not to exceed sixty (60) days at any one adjournment.
9. Manner of Acting. Except as otherwise provided in these Bylaws,
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. The directors present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
10. Compensation. By resolution of the Board of Directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the Corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
11. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors or committee of the Board at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless (i) the director objects at the beginning of the
meeting, or promptly upon his arrival, to the holding of the meeting or the
transaction of business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting, (ii) the director contemporaneously
requests that his dissent or abstention as to any specific action taken be
entered in the minutes of the meeting, or (iii) the director causes written
notice of his dissent or abstention as to any specific action to be received by
the presiding officer of the meeting before its adjournment or by the
Corporation promptly after the adjournment of the meeting. A director may
dissent to a specific action at a meeting, while assenting to others. The right
to dissent to a specific action taken at a meeting of the Board of Directors or
a committee of the Board shall not be available to a director who voted in favor
of such action.
12. Committees.
12.1 By resolution adopted by a majority of all the directors in
office when the action is taken, the Board of Directors may designate from among
its members an executive committee and one or more other committees, and appoint
one or more members of the Board of Directors to serve on them. To the extent
provided in the resolution, each committee shall have all the authority of the
Board of Directors, except that no such committee shall have the authority to
(i) authorize distributions, (ii) approve or propose to shareholders actions or
proposals required by the Colorado Business Corporation Act to be approved by
shareholders, (iii) fill vacancies on the Board of Directors or any committee
thereof, (iv) amend the Articles of Incorporation, (v) adopt, amend or repeal
the Bylaws, (vi) approve a plan of merger not requiring shareholder approval,
(vii) authorize or approve the reacquisition of shares unless pursuant to a
formula or method prescribed by the Board of Directors, or (viii) authorize or
approve the issuance or sale of shares, or contract for the sale of shares or
determine the designations and relative rights, preferences and limitations of a
class
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or series of shares, except that the Board of Directors may authorize a
committee or officer to do so within limits specifically prescribed by the Board
of Directors. If so authorized, the committee shall then have full power within
the limits set by the Board of Directors to adopt any final resolution setting
forth all preferences, limitations and relative rights of such class or series
and to authorize an amendment of the Articles of Incorporation stating the
preferences, limitations and relative rights of a class or series for filing
with the Secretary of State under the Colorado Business Corporation Act.
12.2 Sections 5, 6, 7, 8, 9, 13 and 14 of Article III, which govern
meetings, notice, waiver of notice, quorum, voting requirements, action without
a meeting of the Board of Directors and telephonic meetings, shall apply to
committees and their members appointed under this Section 12.
12.3 Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the Board of
Directors or a member of the committee in question with his responsibility to
conform to the standard of care set forth in Article III, Section 15 of these
Bylaws.
13. Information Action by Directors. Any action required or permitted to
be taken at a meeting of the directors or any committee designated by the Board
of Directors may be taken without a meeting if a written consent (or
counterparts thereof) that sets forth the action so taken is signed by all of
the directors entitled to vote with respect to the action taken. Such consent
shall have the same force and effect as a unanimous vote of the directors or
committee members and may be stated as such in any document. Unless the consent
specifies a different effective date, action taken under this Section 13 is
effective at the time the last director signs a writing describing the action
taken, unless, before such time, any director has revoked his consent by a
writing signed by the director and received by the Chief Executive Officer, the
President or the Secretary of the Corporation.
14. Telephonic Meetings. The Board of Directors may permit any director
(or any member of a committee designated by the Board) to participate in a
regular or special meeting of the Board of Directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
15. Standard of Care.
15.1 A director shall perform his duties as a director, including
without limitation his duties as a member of any committee of the Board of
Directors, in good faith, in a manner he reasonably believes to be in the best
interests of the Corporation, and with the care an ordinarily prudent person in
a like position would exercise under similar circumstances. In performing his
duties, a director shall be entitled to rely on information, opinions, reports
or statements, including financial statements and other financial data, in each
case prepared or presented by the persons herein designated. However, he shall
not be considered to be acting in good faith if he has knowledge concerning the
matter in question that would cause such reliance to be unwarranted. A director
shall not be liable to the Corporation or its shareholders for any action he
takes or omits to take as a director if, in connection with such action or
omission, he performs his duties in compliance with this Section 15.
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15.2 The designated persons on whom a director is entitled to rely
are (i) one or more officers or employees of the Corporation whom the director
reasonably believes to be reliable and competent in the matters presented, (ii)
legal counsel, public accountant, or another person as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the Board of Directors on which the director
does not serve if the director reasonably believes the committee merits
confidence.
ARTICLE IV
OFFICERS AND AGENTS
1. General. The officers of the Corporation shall be a President and a
Secretary, each of whom shall be a natural person eighteen (18) years of age or
older. The Board of Directors or an officer or officers authorized by the Board
may appoint such other officers, assistant officers, committees and agents,
including a Chairman of the Board of Directors, Vice Chairman of the Board of
Directors, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Vice Presidents, Treasurer, Controller, Assistant Secretaries and
Assistant Treasurers, as they may consider necessary. The Board of Directors or
the officer or officers authorized by the Board shall from time to time
determine the procedure for the appointment of officers, their term of office,
their authority and duties and their compensation. One person may hold more than
one office. In all cases where the duties of any officer, agent or employee are
not prescribed by the Bylaws or by the Board of Directors, such officer, agent
or employee shall follow the orders and instructions of the Chief Executive
Officer or the President of the Corporation.
2. Appointment and Term of Office. The officers of the Corporation shall
be appointed by the Board of Directors at each annual meeting of the Board held
after each annual meeting of the shareholders. If the appointment of officers is
not made at such meeting or if an officer or officers are to be appointed by
another officer or officers of the Corporation, such appointments shall be made
as soon thereafter as conveniently may be. Each officer shall hold office until
the first of the following occurs: his successor shall have been duly appointed
and qualified, his death, his resignation, or his removal in the manner provided
in Section 3.
3. Resignation and Removal.
3.1 An officer may resign at any time by giving written notice of
resignation to the Corporation. The resignation is effective when the notice is
received by the Corporation unless the notice specifies a later effective date.
3.2 Any officer or agent may be removed at any time with or without
cause by the Board of Directors or an officer or officers authorized by the
Board. Such removal does not affect the contract rights, if any, of the
Corporation or of the person so removed. The appointment of an officer or agent
shall not in itself create contract rights.
4. Vacancies. A vacancy in any office, however occurring, may be
filled by the Board of Directors, or by the officer or officers authorized by
the Board of Directors, for the unexpired portion of the officer's term. If an
officer resigns and his resignation is made effective at a later date, the Board
of Directors, or officer or officers authorized by the Board of Directors, may
permit the officer to remain in office until the effective date and may fill the
pending vacancy before the effective date if the Board of Directors or officer
or officers authorized by the Board of Directors provide that the successor
shall not take office until the effective date. In the alternative, the Board
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of Directors, or officer or officers authorized by the Board of Directors, may
remove the officer at any time before the effective date and may fill the
resulting vacancy.
5. Chairman and Vice Chairman of the Board. The Chairman of the
Board of Directors, if there be one, or in the absence of the Chairman, the Vice
Chairman of the Board of Directors, if there be one, shall preside at all
meetings of the shareholders and of the Board of Directors, and shall perform
such other duties as may from time to time be assigned to them by the Board of
Directors. To be eligible to serve, the Chairman of the Board and the Vice
Chairman must be directors of the Corporation.
6. Chief Executive Officer. The Chief Executive Officer shall have
the responsibility for implementation of the policies of the Corporation, as
determined and directed by the Board of Directors and for the administration of
the business affairs of the Corporation. All powers of the President (described
in Section 9 below) shall be conferred on the Chief Executive Officer if one
shall be appointed.
7. Chief Operating Officer. The Chief Operating Officer shall have
the responsibilities and duties in respect of the operation of the business of
the Corporation as set forth by the Board of Directors or the Chief Executive
Officer.
8. Chief Financial Officer. The Chief Financial Officer shall have
responsibility for the financial affairs of the Corporation, including the
financing of the Corporation's business, accounting for its assets, liabilities
and operations, and the implementation and maintenance of internal accounting
controls, subject to direction and control by the Chief Executive Officer and
the Board of Directors (including any audit committee).
9. President. Subject to the direction and supervision of the Board
of Directors and unless a Chief Executive Officer has been appointed, the
President shall be the Chief Executive Officer of the Corporation, and shall
have general and active control of its affairs and business and general
supervision of its officers, agents and employees. Unless otherwise directed by
the Board of Directors, the President shall attend in person or by substitute
appointed by him, or shall execute on behalf of the Corporation written
instruments appointing a proxy or proxies to represent the Corporation, at all
meetings of the shareholders of any other corporation in which the Corporation
holds any stock. On behalf of the Corporation, the President may in person or
by substitute or by proxy execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the
President, in person or by substitute or proxy, may vote the stock held by the
Corporation, execute written consents and other instruments with respect to such
stock, and exercise any and all rights and powers incident to the ownership of
said stock, subject to the instructions, if any, of the Board of Directors. The
President shall have custody of the Treasurer's bond, if any.
10. Vice Presidents. When and if appointed, the Vice Presidents
shall assist the President and shall perform such duties as may be assigned to
them by the President or by the Board of Directors. In the absence of the
President, the Vice President, if any (or, if more than one, the Vice Presidents
in the order designated by the Board of Directors, or if the Board makes no such
designation, then the Vice President designated by the President, or if neither
the Board nor the President makes any such designation, the Senior Vice
President as determined by first election to that office), shall have the powers
and perform the duties of the President.
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11. Secretary.
11.1 The Secretary shall (i) prepare and maintain as permanent
records the minutes of the proceedings of the shareholders and the Board of
Directors, a record of all actions taken by the shareholders or Board of
Directors without a meeting, a record of all actions taken by a committee of the
Board of Directors in place of the Board of Directors on behalf of the
Corporation, and a record of all waivers of notice of meetings of shareholders
and of the Board of Directors or any committee thereof, (ii) see that all
notices are duly given in accordance with the provisions of these Bylaws and as
required by law, (iii) serve as custodian of the corporate records and of the
seal of the Corporation and affix the seal to all documents when authorized by
the Board of Directors, (iv) keep at the Corporation's registered office or
principal place of business a record containing the names and addresses of all
shareholders in a form that permits preparation of a list of shareholders
arranged by voting group and by class or series of shares within each voting
group, that is alphabetical within each class or series and that shows the
address of, and the number of shares of each class or series held by, each
shareholder, unless such a record shall be kept at the office of the
Corporation's transfer agent or registrar, (v) maintain at the Corporation's
principal office the originals or copies of the Corporation's Articles of
Incorporation, Bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three (3) years, all
written communications within the past three (3) years to shareholders as a
group or to the holders of any class or series of shares as a group, a list of
the names and business addresses of the current directors and officers, a copy
of the Corporation's most recent corporate report filed with the Secretary of
State, and financial statements showing in reasonable detail the Corporation's
assets and liabilities and results of operations for the last three (3) years,
(vi) have general charge of the stock transfer books of the Corporation, unless
the Corporation has a transfer agent, (vii) authenticate records of the
Corporation, and (viii) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors. Assistant secretaries, if any,
shall have the same duties and powers, subject to supervision by the Secretary.
The directors and/or shareholders may however respectively designate a person
other than the Secretary or Assistant Secretary to keep the minutes of their
respective meetings.
11.2 Any books, records, or minutes of the Corporation may be in
written form or in any form capable of being converted into written form within
a reasonable time.
12. Treasurer.
12.1 When and if appointed, the Treasurer shall be the principal
financial officer of the Corporation, shall have the care and custody of all
funds, securities, evidences of indebtedness and other personal property of the
Corporation and shall deposit the same in accordance with the instructions of
the Board of Directors. He shall receive and give receipts and acquittances for
money paid in on account of the Corporation, and shall pay out of the
Corporation's funds on hand all bills, payrolls and other just debts of the
Corporation of whatever nature upon maturity. He shall perform all other duties
incident to the office of the Treasurer and, upon request of the Board of
Directors, shall make such reports to it as may be required at any time. He
shall, if required by the Board of Directors, give the Corporation a bond in
such sums and with such sureties as shall be satisfactory to the Board of
Directors, conditioned upon the faithful performance of his duties and for the
restoration to the Corporation of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the Corporation. He shall have such other powers and perform such other duties
as may from time to time be prescribed by the Board of Directors or the
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President. The Assistant Treasurers, if any, shall have the same powers and
duties, subject to the supervision of the Treasurer.
12.2 The Treasurer shall also be the principal accounting officer of
the Corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the President and the Board of
Directors statements of account showing the financial position of the
Corporation and the results of its operations.
ARTICLE V
STOCK
1. Certificates. The Board of Directors shall be authorized to issue
any of its classes of shares with or without certificates. The fact that the
shares are not represented by certificates shall have no effect on the rights
and obligations of shareholders. If the shares are represented by certificates,
such shares shall be represented by consecutively numbered certificates signed,
either manually or by facsimile, in the name of the Corporation by one or more
persons designated by the Board of Directors. In case any officer who has
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, such
certificate may nonetheless be issued by the Corporation with the same effect as
if he were such officer at the date of its issue. Certificates of stock shall
be in such form and shall contain such information consistent with law as shall
be prescribed by the Board of Directors. If shares are not represented by
certificates, within a reasonable time following the issue or transfer of such
shares, the Corporation shall send the shareholder a complete written statement
of all of the information required to be provided to holders of uncertificated
shares by the Colorado Business Corporation Act.
2. Consideration for Shares. Certificated or uncertificated shares
shall not be issued until the shares represented thereby are fully paid. The
Board of Directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the Corporation,
including cash, promissory notes, services performed or other securities of the
Corporation. Future services shall not constitute payment or partial payment
for shares of the Corporation. The promissory note of a subscriber or an
affiliate of a subscriber shall not constitute payment or partial payment for
shares of the Corporation unless the note is negotiable and is secured by
collateral, other than the shares being purchased, having a fair market value at
least equal to the principal amount of the note. For purposes of this Section
2, "promissory note" means a negotiable instrument on which there is an
obligation to pay independent of collateral and does not include a non-recourse
note.
3. Lost Certificates. In case of the alleged loss, destruction or
mutilation of a certificate of stock, the Board of Directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the Board may prescribe. The Board of Directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
4. Transfer of Shares.
4.1 Upon surrender to the Corporation or to a transfer agent of the
Corporation of a certificate of stock duly endorsed or accompanied by proper
evidence of succession, assignment or
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authority to transfer, and receipt of such documentary stamps as may be required
by law and evidence of compliance with all applicable securities laws and other
restrictions, the Corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the Corporation which shall be kept at
its principal office or by the person and the place designated by the Board of
Directors.
4.2 Except as otherwise expressly provided herein, and except for the
assertion of dissenters' rights to the extent provided in Article 113 of the
Colorado Business Corporation Act, the Corporation shall be entitled to treat
the registered holder of any shares of the Corporation as the owner thereof for
all purposes, and the Corporation shall not be bound to recognize any equitable
or other claim to, or interest in, such shares or rights deriving from such
shares on the part of any person other than the registered holder, including
without limitation any purchaser, assignee or transferee of such shares or
rights deriving from such shares, unless and until such other person becomes the
registered holder of such shares, whether or not the Corporation shall have
either actual or constructive notice of the claimed interest of such other
person.
5. Transfer Agent, Registrars, and Paying Agents. The Board may at
its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
Corporation. Such agents and registrars may be located either within or outside
Colorado. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI
INDEMNIFICATION OF CERTAIN PERSONS
1. Indemnification of Directors and Officers.
1.1 For purposes of Article VI, a "Proper Person" means any director
or officer of the Corporation who was or is a party or is threatened to be made
a party to any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, and whether formal or
informal, by reason of the fact that he is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, fiduciary or
agent of any foreign or domestic profit or nonprofit corporation or of any
partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company, or other enterprise or employee benefit
plan. The Corporation shall indemnify any Proper Person against reasonably
incurred expenses (including attorneys' fees), judgments, penalties, fines
(including any excise tax assessed with respect to an employee benefit plan) and
amounts paid in settlement reasonably incurred by him in connection with such
action, suit or proceeding if it is determined by the groups set forth in
Section 4 of this Article that he conducted himself in good faith and that he
reasonably believed (i) in the case of conduct in his official capacity with the
Corporation, that his conduct was in the Corporation's best interests, or (ii)
in all other cases (except criminal cases), that his conduct was at least not
opposed to the Corporation's best interests, or (iii) in the case of any
criminal proceeding, that he had no reasonable cause to believe his conduct was
unlawful. A Proper Person will be deemed to be acting in his official capacity
while acting as a director, officer, employee or agent on behalf of this
Corporation and not while acting on this Corporation's behalf for some other
entity.
1.2 No indemnification shall be made under this Article VI to a
Proper Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper Person was
adjudged liable to the Corporation or in connection with
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any proceeding charging that the Proper Person derived an improper personal
benefit, whether or not involving action in an official capacity, in which he
was adjudged liable on the basis that he derived an improper personal benefit.
Further, indemnification under this Section in connection with a proceeding
brought by or in the right of the Corporation shall be limited to reasonable
expenses, including attorneys' fees, incurred in connection with the proceeding.
2. Right to Indemnification. The Corporation shall indemnify any Proper
Person who was wholly successful, on the merits or otherwise, in defense of any
action, suit, or proceeding as to which he was entitled to indemnification under
Section l of this Article VI against expenses (including attorneys' fees)
reasonably incurred by him in connection with the proceeding without the
necessity of any action by the Corporation other than the determination in good
faith that the defense has been wholly successful.
3. Effect of Termination of Action. The termination of any action, suit
or proceeding by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent shall not of itself create a presumption that
the person seeking indemnification did not meet the standards of conduct
described in Section l of this Article VI. Entry of a judgment by consent as
part of a settlement shall not be deemed an adjudication of liability, as
described in Section 2 of this Article VI.
4. Groups Authorized to Make Indemnification Determination. Except where
there is a right to indemnification as set forth in Sections 1 or 2 of this
Article or where indemnification is ordered by a court in Section 5, any
indemnification shall be made by the Corporation only as authorized in the
specific case upon a determination by a proper group that indemnification of the
Proper Person is permissible under the circumstances because he has met the
applicable standards of conduct set forth in Section l of this Article. This
determination shall be made by the Board of Directors by a majority vote of
those present at a meeting at which a quorum is present, which quorum shall
consist of directors not parties to the proceeding ("Quorum"). If a Quorum
cannot be obtained, the determination shall be made by a majority vote of a
committee of the Board of Directors designated by the Board of Directors, which
committee shall consist of two or more directors not parties to the proceeding,
except that directors who are parties to the proceeding may participate in the
designation of directors for the committee. If a Quorum of the Board of
Directors cannot be obtained and the committee cannot be established, or even if
a Quorum is obtained or the committee is designated and a majority of the
directors constituting such Quorum or committee so directs, the determination
shall be made by (i) independent legal counsel selected by a vote of the Board
of Directors or the committee in the manner specified in this Section 4 or, if a
Quorum of the full Board of Directors cannot be obtained and a committee cannot
be established, by independent legal counsel selected by a majority vote of the
full Board (including directors who are parties to the action) or (ii) a vote of
the shareholders.
5. Court Ordered Indemnification. Any Proper Person may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction for mandatory indemnification under Section 2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If the court determines that such Proper Person
is fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he met the standards of conduct set forth in
Section l of this Article or was adjudged liable in the proceeding, the court
may order such indemnification as the court deems proper except that if the
Proper Person has been adjudged liable, indemnification shall be limited to
reasonable expenses
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incurred in connection with the proceeding and reasonable expenses incurred to
obtain court-ordered indemnification.
6. Advance of Expenses. Reasonable expenses (including attorneys'
fees) incurred in defending an action, suit or proceeding as described in
Section 1 may be paid by the Corporation to any Proper Person in advance of the
final disposition of such action, suit or proceeding upon receipt of (i) a
written affirmation of such Proper Person's good faith belief that he has met
the standards of conduct prescribed by Section l of this Article VI, (ii) a
written undertaking, executed personally or on the Proper Person's behalf, to
repay such advances if it is ultimately determined that he did not meet the
prescribed standards of conduct, (iii) a determination is made by the proper
group (as described in Section 4 of this Article VI) that the facts as then
known to the group would not preclude indemnification. Determination and
authorization of payments shall be made in the same manner specified in Section
4 of this Article VI, and (iv) appropriate security or bond if and as determined
by the proper group (as described in Section 4 of this Article VI).
7. Witness Expenses. The sections of this Article VI do not limit
the Corporation's authority to pay or reimburse expenses incurred by a director
in connection with an appearance as a witness in a proceeding at a time when he
has not been made a named defendant or respondent in the proceeding.
8. Indemnification of Employees, Fiduciaries and Agents. The
Corporation may indemnify and advance expenses to any employee, fiduciary, or
agent (who is not a director or officer of the Corporation) who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal, by reason of the fact that he is
or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee, fiduciary or agent of any foreign or domestic profit
or nonprofit corporation or of any partnership, joint venture, trust, profit or
nonprofit unincorporated association, limited liability company, or other
enterprise or employee benefit plan, to the same extent as a Proper Person.
9. Report to Shareholders. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the Corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
Board of Directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
ARTICLE VII
PROVISION OF INSURANCE
By action of the Board of Directors, notwithstanding any interest of the
directors in the action, the Corporation may purchase and maintain insurance, in
such scope and amounts as the Board of Directors deems appropriate, on behalf of
any person who is or was a director, officer, employee, fiduciary or agent of
the Corporation, or who, while a director, officer, employee, fiduciary or agent
of the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of any other
foreign or domestic corporation or of any partnership, joint venture, trust,
profit or nonprofit unincorporated association, limited liability company or
other enterprise or employee benefit plan, against any liability asserted
against, or incurred by, him in that capacity or arising out of his status as
such, whether or not the Corporation
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would have the power to indemnify him against such liability under the
provisions of Article VI or applicable law. Any such insurance may be procured
from any insurance company designated by the Board of Directors of the
Corporation, whether such insurance company is formed under the laws of Colorado
or any other jurisdiction of the United States or elsewhere, including any
insurance company in which the Corporation has an equity interest or any other
interest, through stock ownership or otherwise.
ARTICLE VIII
MISCELLANEOUS
1. Dividends. Subject to the restrictions contained in the Colorado
Business Corporation Act and any restrictions contained in the Articles of
Incorporation, the Board of Directors may declare and pay dividends upon the
shares of capital stock of the Corporation.
2. Corporate Seal. The corporate seal of the Corporation shall be
circular in form and shall contain the name of the Corporation and the words,
"Seal, Colorado."
3. Deposits. All funds of the Corporation 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 approve or designate, and all such
funds shall be withdrawn only upon checks signed by such one or more officers or
employees as the Board of Directors shall from time to time determine.
4. Fiscal Year. The fiscal year of the Corporation shall be as
established by the Board of Directors.
5. Amendments to Bylaws. In furtherance of and not in limitation of the
powers conferred by statute, the Board of Directors of the Corporation is
expressly authorized from time to time to make, alter, amend, supplement or
repeal the Bylaws of the Corporation in any respect, subject to the right of the
shareholders entitled to vote with respect thereto to adopt, alter, amend and
repeal bylaws made by the Board of Directors. The shareholders also shall have
the power to make, amend or repeal the Bylaws of the Corporation at any annual
meeting or at any special meeting called for that purpose.
6. Gender. The masculine gender is used in these Bylaws as a matter of
convenience only and shall be interpreted to include the feminine and neuter
genders as the circumstances indicate.
7. Conflicts. In the event of any irreconcilable conflict between these
Bylaws and either the Corporation's Articles of Incorporation or applicable law,
the latter shall control.
8. Definitions. Except as otherwise specifically provided in these
Bylaws, all terms used in these Bylaws shall have the same definition as in the
Colorado Business Corporation Act.
9. Rules of Order. At any meeting of shareholders or directors of the
Corporation at which a question of procedure arises, the person presiding at the
meeting may rely upon the Robert's Rules of Order, Newly Revised as then in
effect to resolve any such question.
19
<PAGE>
DATED this _____ day of ________________, 2000.
________________________ _______________________
Director Director
________________________ _______________________
Director Director
20
<PAGE>
EXHIBIT 21
ATLAS CORPORATION
LIST OF SUBSIDIARIES OF THE REGISTRANT
Atlas Precious Metals Inc. (incorporated in Nevada)
Atlas Gold Mining Inc. (incorporated in Nevada), a subsidiary of Atlas Precious
Metals, Inc.
Arisur Inc. (organized under the laws of Grand Cayman).
Suramco Metals, Inc. (incorporated in Nevada).
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 202
<SECURITIES> 0
<RECEIVABLES> 1,023
<ALLOWANCES> 0
<INVENTORY> 1,036
<CURRENT-ASSETS> 3,421
<PP&E> 4,518
<DEPRECIATION> (54)
<TOTAL-ASSETS> 10,137
<CURRENT-LIABILITIES> 5,513
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 2,959
<TOTAL-LIABILITY-AND-EQUITY> 10,137
<SALES> 3,698
<TOTAL-REVENUES> 3,825
<CGS> 4,666
<TOTAL-COSTS> 5,838
<OTHER-EXPENSES> 4,338
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 382
<INCOME-PRETAX> (6,703)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,703)
<DISCONTINUED> 0
<EXTRAORDINARY> 9,199
<CHANGES> 0
<NET-INCOME> 2,496
<EPS-BASIC> 2.78
<EPS-DILUTED> 2.78
</TABLE>
