<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1997.
REGISTRATION NO. 333-17423
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEVADA MANHATTAN MINING INCORPORATED
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
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<S> <C> <C>
NEVADA 1041 88-0219765
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
5038 NORTH PARKWAY CALABASAS, SUITE 100
CALABASAS, CALIFORNIA 91302
(818) 591-4400
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE
OF BUSINESS)
------------------------
JEFFREY S. KRAMER
CHIEF FINANCIAL OFFICER
NEVADA MANHATTAN MINING INCORPORATED
5038 PARKWAY CALABASAS, SUITE 100
CALABASAS, CALIFORNIA 91302
(818) 591-4400
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
LLOYD S. PANTELL, ESQ.
LLOYD S. PANTELL, APLC
10940 WILSHIRE BOULEVARD, SUITE 1550
LOS ANGELES, CALIFORNIA 90024
TELEPHONE (310) 443-9559
FACSIMILE (310) 443-3281
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this Registration Statement.
------------------------
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM PRICE MAXIMUM OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY(1) PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value(2)..................... $ $22,755,000 $6,896
- --------------------------------------------------------------------------------------------------
Total............................................................................ $6,896
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(1) Estimated solely for the purpose of completing the amount of the
registration fee pursuant to Rule 457 based upon a bona fide estimate of the
maximum offering price.
(2) Includes 2,100,000 shares of Common Stock held by, or to be issued to,
certain shareholders referred to in the Prospectus as "Selling
Shareholders."
THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
NEVADA MANHATTAN MINING INCORPORATED
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM SB-2
<TABLE>
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FORM SB-2 REGISTRATION
STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
---------------------------------------------------------- -------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front Cover of
Prospectus................................................ Outside Front Cover
2. Inside Front and Outside Back Cover Pages of Prospectus... Inside Front Cover Page
3. Summary Information and Risk Factors...................... Summary of Offering; Risk
Factors and Special Material
Considerations
4. Use of Proceeds........................................... Use of Proceeds
5. Determination of Offering Price........................... Risk Factors and Special
Material Considerations
6. Dilution.................................................. Risk Factors and Special
Material Considerations;
Description of Securities Being
Offered
7. Selling Security Holders.................................. Principal and Selling
Shareholders
8. Plan of Distribution...................................... Plan of Distribution
9. Legal Proceedings......................................... Legal Matters, Auditors, and
Legal Proceedings
10. Directors, Executive Officers, Promoters and Control
Persons................................................... Management; Principal and
Selling Shareholders
11. Security Ownership of Beneficial Owners and Management.... Management; Principal and
Selling Shareholders
12. Description of Securities................................. Description of Securities Being
Offered
13. Interest of Named Experts and Counsel..................... Management
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................ Management -- Limitations on
Director and Officer Liability
15. Organization Within Last Five Years....................... Inapplicable
16. Description of Business................................... Description of Company's
Business and Property
17. Management's Discussion and Analysis of Financial Position
and Results of Operations................................. Management's Discussion and
Analysis of Financial Position
and Results of Operations
18. Description of Property................................... Description of Company's
Business and Property
19. Certain Relationships and Related Transactions............ Management -- Significant
Employees and Consultants;
Management -- Summary
Compensation Table;
Management -- Options and Stock
Appreciation Rights;
Description of Company's
Business and Property -- the
Nevada Property
</TABLE>
<PAGE> 3
<TABLE>
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FORM SB-2 REGISTRATION
STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
---------------------------------------------------------- -------------------------------
<C> <S> <C>
20. Market for Common Equity and Related Stockholder
Matters................................................... Summary of Offering; Risk
Factors and Special Material
Considerations; Plan of
Distribution; Principal and
Selling Shareholders;
Description of Securities Being
Offered
21. Executive Compensation.................................... Management -- Significant
Employees and Consultants;
Management -- Executive
Compensation
22. Financial Statements...................................... Financial Statements of Company
23. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure....................... Inapplicable
</TABLE>
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1997
NEVADA MANHATTAN MINING, INC.
MINING - DEVELOPMENT - EXPLORATION
SHARES
OF COMMON STOCK
($.01 PAR VALUE)
AT $ PER SHARE
Nevada Manhattan Mining, Inc. (The "Company"), is a Nevada corporation
which was formed in 1985 (originally under the name "Epic Enterprises, Ltd.")
for the purpose of engaging in the mining of precious metals with an emphasis in
the mining of gold and silver.
On the terms and conditions which follow, the Company and certain of its
existing shareholders (the "Selling Shareholders") hereby offer a minimum of
shares and a maximum of shares of its common stock (the
"Common Stock") at a price of $ per share which shall be issued, if at all,
on or before the Offering Commitment Date (presently scheduled for October 31,
1997). The minimum investment for each prospective Investor will be 500 shares
of Common Stock. Of the amount hereby offered, up to 1,500,000 shares represent
Common Stock offered by the Company. The balance of the shares hereby offered
represent Common Stock in the possession of the Selling Shareholders and up to
1,500,000 shares which are required to be registered in order to effect the
conversion of convertible debt securities recently issued by the Company. The
Common Stock will be offered only to persons who meet the suitability
requirements outlined elsewhere in this Prospectus. To the extent that
sufficient investment Subscriptions are accepted by the Offering Termination
Date, the Company intends to utilize the Net Proceeds received from such
Subscriptions to further develop the mining property known as the Manhattan
property (the "Nevada Property"); to enter into a binding agreement with New
Concept Mining, Inc. ("New Concept Mining") to purchase an interest in the mill
currently located in the vicinity of the Nevada Property; to provide for mill
services and/or to purchase various crushing, grinding, gravity separation,
cyanide leach flotation and thickening equipment and to construct its own mill
on site at the Property; to explore and develop the gold and coal mining
properties located on the Indonesian portion of the island of Borneo known as
Kalimantan and on the island of Sumatra, Indonesia (the "Indonesian
Concessions"); to acquire additional timber properties or concessions adjacent
to, in the vicinity of, or compatible with its existing timber properties
located in the state of Para, Brazil (the "Brazilian Timber Properties"); and/or
for working capital.
The offering represented by this Prospectus (the "Offering") involves
certain factors which should be considered by all prospective Investors. See
"RISK FACTORS AND SPECIAL MATERIAL CONSIDERATIONS."
(Cover continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
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- ---------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
- ---------------------------------------------------------------------------------------------------------
Per Unit..................................... $ $ $
- ---------------------------------------------------------------------------------------------------------
Total Minimum................................ $ $ $
- ---------------------------------------------------------------------------------------------------------
Total Maximum................................ $ $ $
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</TABLE>
(1) The minimum amount of shares which may be purchased by a prospective
Investor will be Five Hundred (500) shares at a price of Dollars ($ .00)
per share or a total of Thousand Dollars ($ ,000). The Company reserves
the right to sell the Common Stock in additional increments of one hundred
(100) shares provided the minimum number of shares (500) is purchased.
(2) The Company intends to offer the Common Stock on a best-efforts basis. Sales
will only be made by Affiliates of the Company including the Company's board
of directors and executive officers. The Company may also enter into
Underwriting Agreements with broker-dealers who are members of the National
Association of Securities Dealers, Inc. It is anticipated that sales and
underwriting commissions equal to ten percent (10%) of Subscriptions will be
paid to those persons or entities entering into Underwriting Agreements.
(3) Does not include the provision of up to One Hundred Twenty Thousand Dollars
($120,000) for Organization and Offering Expenses or the use of proceeds
relative to the sale of Common Stock by the Selling Shareholders. See
Section of the Prospectus entitled "USE OF PROCEEDS."
THE DATE OF THIS PROSPECTUS IS , 1997.
LOGO
<PAGE> 5
(Cover page continued)
In particular, prospective Investors should consider that:
- the Company intends to expend up to approximately One Million Five
Hundred Thousand Dollars ($1,500,000) of the Net Proceeds for the further
development of the Nevada Property up to approximately One Million Five
Hundred Thousand Dollars ($1,500,000) in exploration costs relative to
the Indonesian Concessions, up to approximately Three Million Four
Hundred Fifteen Thousand Two Hundred Dollars ($3,415,200) to acquire and
develop existing and additional timber properties or concessions in
Brazil and up to One Million Dollars ($1,000,000) for general and
administrative expenses.
- the Company is a development-stage company which has recently commenced
the mining and extraction of precious metals from the Nevada Property,
timber production on certain of the Brazilian Timber Properties, and
exploration activities on certain of the Indonesian Concessions. The
Company has generated $ in revenues as of , 1997 all
due from its operations in Brazil. No revenue has been generated to date
from the Nevada Property or from the Indonesian Concessions. No assurance
can be given that the Company will be able to profitably conduct mining
or timber operations even if all Subscriptions are sold pursuant to this
Offering.
- mining and natural resources operations are speculative by their nature.
Even though the Company has located what it believes are commercial
quantities of precious metals on the Nevada Property, has generated
positive cash flow from its Brazilian Timber Properties, and has
commenced exploration on the Indonesian Concessions, Prospective
Investors should consider that unexpected problems, expenses, and delays
are typically encountered in the development of complex mining and timber
properties thereby further complicating the ability of companies to
successfully develop its mining properties.
- having completed the initial phase of exploration and development on the
Nevada Property and having received permits to commence operations
thereon, additional development and other expenses and further permitting
related to the Nevada Property is likely to be ongoing.
- the Company's operations are subject to substantial governmental
regulation including federal, state, and local regulations concerning
mine safety and environmental protection. Compliance with these
regulations may cause significant delays in the ongoing permitting
process or may prevent the Company from ultimately maintaining the
permits necessary to continue commercial mining operations on the Nevada
Property, to continue operations on the Brazilian Timber Properties,
and/or continue its operations on the Indonesian Concessions.
- prospective Investors who subscribe to the Common Stock will be subject
to an immediate dilution of up to Dollars Cents ($ ) per
share.
- the Company does not currently intend to pay dividends and the rights of
shareholders of the Common Stock to receive dividends are subordinate to
the holders of the Company's Preferred Stock.
- this Prospectus contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Prospective
Investors are cautioned that such statements assume the existence of
events in the future which cannot be assured will occur or even predicted
with any reasonable level of certainty.
- while the Company is currently trading on the Electronic Bulletin Board
of NASDAQ and has applied for listing on the American Stock Exchange, no
assurance that the current market for the Common Stock can be maintained.
i
<PAGE> 6
SUMMARY OF THE OFFERING
This summary is provided for quick reference only and is qualified in its
entirety by the terms and conditions outlined in the remainder of this
Prospectus and by the financial statements including the notes thereto appended
to this Prospectus. Prospective Investors are urged to carefully review the
entire Prospectus and to consult with their legal and/or professional advisors
before reaching an investment decision.
THE COMPANY
Nevada Manhattan Mining Incorporated (the "Company") was formed on June 10,
1985, in the state of Nevada under the name of Epic Enterprises, Ltd. On
September 11, 1987, the Company amended its Articles of Incorporation changing
its name to Nevada Manhattan Mining Incorporated. The Company's articles
currently authorize the issuance of 49,750,000 shares of Common Stock with a par
value of one cent ($.01) per share and 250,000 shares of Series A Preferred
Stock with a par value of $1.00 per share (the "Preferred Stock") convertible
into Common Stock on the terms and conditions described elsewhere in this
Prospectus. There were 12,208,412 shares of the Company's Common Stock and
228,919 shares of the Preferred Stock issued and outstanding as of February 28,
1997. The average price per share paid for the Common Stock issued directly by
the Company has been approximately $2.00 per share. Holders of the Preferred
Stock have paid $10.00 per share with an effective purchase price for the Common
Stock (after giving effect to the conversion thereof on a one-for-ten basis) of
$1.00 per share. In addition, the Company has recently issued $2,000,000 of 8%
Senior Secured Convertible Debentures in a privately-negotiated transaction to
Silenus Limited.
The Company was formed primarily to develop the Nevada Property, other gold
mining properties which it had previously owned, and certain gold mining
properties which it has recently acquired. Pursuant to prior action of both the
Company's directors and its shareholders, certain gold mining properties have
been abandoned. The Company has recently acquired the rights to seven (7) gold
mining concessions and three (3) coal mining concessions in Indonesia, as well
as three (3) timber properties in Brazil.
The Company has its principal executive offices at 5038 North Parkway
Calabasas, Suite 100, Calabasas, California 91302. Its telephone number is (818)
591-4400 and its facsimile number is (818) 591-4411.
Management of the Company presently consists of a five-member board of
directors (two of which are neither executive officers nor employees) and
employs two (2) full-time executive officers and seven (7) full-time employees
at its principal offices. The Company's subsidiary, Equatorial Resources, Ltd.,
also employs 62 persons with respect to current operations on the Brazilian
Timber Properties. In 1989, the Company formed a Shareholder Advisory Committee
(the "Advisory Committee") comprised of up to 12 outside shareholders. The
purpose of the Advisory Committee is to participate in directors' meetings and
compensation meetings, as well as planning meetings related to all aspects of
corporate development. Members are selected annually from a group of
shareholders who respond to Company inquiries regarding interest in
participating on the Advisory Committee. Membership is rotated annually. One of
the primary purposes of this Committee is to provide independent, shareholder
participation in critical decisions relating to overall corporate strategy.
The Company has contracted with Harrison Western Mining and Construction,
Lakeland, Colorado, to supply labor, service, materials and equipment for its
operations on the Nevada Property. The Company has also entered into agreements
with: Gold King Mines Corporation to provide mining consulting services with
respect to the Nevada Property; Behre Dolbear & Company, Inc., to provide
oversight and third-party validation services relative to the exploration and
development activities on the Indonesian Concessions; Eco-Rating International,
Inc., to provide an economic and environmental evaluation of the Company's
Brazilian Timber Properties; with Thyssen Sudamerica N.V. to market and sell all
timber harvested and milled by the Company with respect to the Jonasa
Concessions; and with British Far East Holdings Ltd. to provide certain
financial and management consulting services. See "MANAGEMENT," "PRINCIPAL AND
SELLING SHAREHOLDERS," and "DESCRIPTION OF SECURITIES BEING OFFERED."
1
<PAGE> 7
PRINCIPAL OBJECTIVES OF THIS OFFERING
The Net Proceeds derived from this Offering will be used for the purposes
of:
1. Expending approximately One Million Five Hundred Thousand Dollars
($1,500,000) to further develop the Nevada Property consistent with the
Company's business plan prepared by William R. Wilson and dated as of July
1995 (the "Nevada Business Plan");
2. Expanding and/or delineating (to increase reserves and potential
reserves of) the Nevada Property and, to the extent that it enters into a
binding agreement with New Concept Mining, acquiring up to a fifty percent
(50%) interest in the mill currently operating approximately one mile from
the Nevada Property. In addition or in the alternative, the Company may
enter into a contract for milling services with New Concept Mining or
purchase all of the equipment necessary to construct a mill on site at the
Nevada Property;
3. Expending up to Three Million Four Hundred Fifteen Thousand Two
Hundred Dollars ($3,415,200) to further develop the Brazilian Timber
Properties and to acquire and develop additional timber concessions or
properties located adjacent to, in the vicinity of, or in areas compatible
with the Brazilian Timber Properties.
4. Expending up to One Million Five Hundred Thousand Dollars
($1,500,000) to explore and develop the Indonesian Concessions;
5. Paying up to One Million Dollars ($1,000,000) in general and
administrative expenses and/or retaining all or a portion of said sum as
working capital.
THE OFFERING
The Offering represents a proposal by the Company to sell up to
shares of the Common Stock at $ per share and to register up to 2,100,000
shares of outstanding Common Stock held by or which may be issued to the Selling
Shareholders.
The Offering will expire at 5:00 p.m. (PDT) on October 31, 1997 (the
"Offering Commitment Date"), unless extended by the Company for a period or
periods up to and through March 31, 1998 (the "Offering Termination Date"), or
unless this Offering is terminated prior to such date by the Company. The
Company has designated U.S. Stock Transfer Corporation, Glendale, California,
its current transfer agent and registrar, to act as Transfer Agent. Prior to the
Offering Commitment Date, all Subscription funds will be held in an escrow
account with (the "Bank"). Provided the minimum number of
Subscriptions are accepted by the Offering Commitment Date, the Company will
offer and sell shares of the Common Stock through the Offering Termination Date.
If the minimum amount of Subscription funds are not accepted by the Offering
Commitment Date (i.e. $1,500,000), all funds held in the escrow account will be
returned to the prospective Investors who tendered such funds. Any interest
earned on Subscription funds will be distributed to the prospective Investors
tendering such funds upon activation or termination of the Offering, as the case
may be. The minimum Subscription will be 500 shares or $ . The Company
reserves the right to sell additional one hundred (100) share lots of the Common
Stock provided each prospective Investor agrees to subscribe to a minimum of 500
shares.
SUITABILITY REQUIREMENTS
Offers and sales of shares of Common Stock will only be made to persons who
meet the following minimum suitability requirements:
1. He/she (either alone or together with his/her spouse) has a net
worth (exclusive of home, furnishings, and automobiles) in excess of Fifty
Thousand Dollars ($50,000); or
2. He/she (either alone or together with his/her spouse) has a net
worth (exclusive of home, furnishings, and automobiles) in excess of
Thirty-Five Thousand Dollars ($35,000) plus, during the year of investment,
anticipates gross income as defined by Internal Revenue Code section 61 in
excess of Sixty-Five Thousand Dollars ($65,000).
2
<PAGE> 8
PLAN OF DISTRIBUTION
The Common Stock will be offered by the Company and Affiliates on a
"best-efforts" basis to persons whom the Company believes to possess the minimum
suitability standards. In cases where offer and sales of the Common Stock are
affected by the Company and/or its Affiliates, no sales or underwriting
commissions will be paid. In the event the Company enters into Underwriting
Agreements with persons or entities who are broker-dealers and members of the
National Association of Securities Dealers, Inc. ("NASD"), the Company may allot
up to ten percent (10%) of the Subscription price for the Common Stock as sales
and underwriting commissions and an additional two percent (2%) of such
Subscription price as "due diligence" fees and expenses.
APPLICATION OF PROCEEDS
Net Proceeds derived from this Offering will be used to attain the
principal objectives of this Offering. If only the minimum Subscriptions are
accepted by the Company prior to the Offering Termination Date, only some of the
principal objectives of this Offering will be met. See "USE OF PROCEEDS."
NO BOARD RECOMMENDATION
An investment in the Common Stock must be made pursuant to a prospective
Investor's independent investment evaluation. The advisability of such an
investment will depend upon a number of factors unique to each prospective
Investor as well as such independent evaluation of the merits of an investment
in the Common Stock. Accordingly, the Company's board of directors makes no
recommendation to prospective Investors or others regarding whether they should
purchase Common Stock.
3
<PAGE> 9
RISK FACTORS AND SPECIAL MATERIAL CONSIDERATIONS
THE PURCHASE OF SHARES OF COMMON STOCK INVOLVES A SUBSTANTIAL DEGREE OF
RISK AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL MEANS WHO HAVE NO NEED FOR
LIQUIDITY IN THEIR INVESTMENT. THIS SECTION OF THE PROSPECTUS SETS FORTH THE
RISKS AND SPECIAL CONSIDERATIONS WHICH THE COMPANY BELIEVES MAY EXIST CONCERNING
AN INVESTMENT IN THE COMMON STOCK. PROSPECTIVE INVESTORS SHOULD RECOGNIZE THAT
FACTORS OTHER THAN THOSE SET FORTH BELOW MAY ULTIMATELY AFFECT AN INVESTMENT IN
A MANNER AND TO A DEGREE WHICH CANNOT BE FORESEEN AT THIS TIME. ALL PROSPECTIVE
INVESTORS ARE URGED TO CONSULT WITH THEIR ADVISORS PRIOR TO MAKING AN INVESTMENT
IN COMMON STOCK SO THAT THEY UNDERSTAND FULLY THE NATURE OF THE UNDERTAKING AND
THE RISKS WHICH MAY BE INVOLVED PRIOR TO INVESTING. FURTHERMORE, ALL PROSPECTIVE
INVESTORS ARE URGED TO REVIEW WITH THEIR COUNSEL, ACCOUNTANTS, AND PROFESSIONAL
ADVISORS THE FINANCIAL STATEMENTS ATTACHED TO THE PROSPECTUS. ANY DOCUMENTS
DESCRIBED IN THIS PROSPECTUS WHICH HAVE NOT BEEN ATTACHED AS EXHIBITS MAY BE
OBTAINED BY PROSPECTIVE INVESTORS AND/OR THEIR ADVISORS UPON REQUEST FROM THE
COMPANY. THIS PROSPECTUS ALSO CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS AND
INFORMATION THAT ARE BASED UPON MANAGEMENT'S BELIEFS AS WELL AS ON ASSUMPTIONS
MADE BY AND UPON INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT. WHEN USED IN
THIS PROSPECTUS, THE WORDS "EXPECT," "ANTICIPATE," "INTEND," "PLAN," "BELIEVE,"
"SEEK" AND "ESTIMATE" OR SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. HOWEVER, THIS PROSPECTUS ALSO CONTAINS OTHER
FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND
ASSUMPTIONS, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING RISK FACTORS, WHICH
COULD CAUSE THE COMPANY'S FUTURE RESULTS AND STOCK VALUES TO DIFFER MATERIALLY
FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY OR ON BEHALF OF
THE COMPANY. MANY OF SUCH FACTORS ARE BEYOND THE COMPANY'S ABILITY TO CONTROL OR
PREDICT. READERS ARE CAUTIONED NOT TO PUT UNDUE RELIANCE ON FORWARD-LOOKING
STATEMENTS. THE COMPANY DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE PUBLICLY
ANY AND ALL FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE.
FINANCIAL CONDITION OF COMPANY
Although the Company was formed in 1985 to engage in precious metal mining
activities, its net worth is limited. The Company is and still should be
considered in its development stage, having a net worth of $9,862,768 as of
February 28, 1997. Moreover, the Company's net worth and the value of its Common
Stock will ultimately be dependent upon the overall success of mining operations
conducted on the Nevada Property, the Indonesian Concessions, and upon timber
operations currently being conducted and to be conducted on the Brazilian Timber
Properties.
Under the terms of the Nevada Property Agreement, the sum of Three Hundred
Eighty-Four Thousand Eight Hundred Dollars ($384,800) was to be due and owing
under the Nevada Note and Deed of Trust on January 20, 1999. This amount has
been adjusted pursuant to the agreement entered into on February 6, 1997 with
the Selig Entities as described in more detail in the Section of this Prospectus
entitled "THE COMPANY'S BUSINESS & PROPERTIES." The Company made the first
payment of One Hundred Thousand Dollars ($100,000) in March 1997. The balance
remaining to be paid to the Selig Entities is currently being held in an escrow
account. In addition, the Company has recently executed a deed of trust in
principal amount of Two Million Dollars ($2,000,000) to Silenus Limited pursuant
to a privately-negotiated placement of 8% Senior Secured Convertible Debentures
described elsewhere in this Prospectus. Until such
4
<PAGE> 10
time as all obligations due under the February 6, 1997 agreement with the Selig
Entities are paid in full, the Debentures issued to Silenus Limited are paid,
converted or redeemed, and the encumbrances on the Nevada Property are
reconveyed to the Company, one of the primary assets of the Company, namely the
Nevada Property, will be subject to the terms and conditions of such
instruments. Any default under such agreement or the Deed of Trust which remains
uncured would subject the Company to the possible loss of the Nevada Property.
In addition, the Company, through its subsidiaries, has undertaken to
expend considerable amounts for exploration activities on certain of the
Indonesian Concessions and considerable amounts on timber-related activities
with respect to certain of the Brazilian Timber Properties. The failure to
generate the significant cash flow from its current operations may result in the
Company's inability to adequately develop its holdings thereby jeopardizing the
Company's ability to continue to hold such assets.
DEPENDENCE UPON MANAGEMENT
The business of the Company is and will be greatly dependent upon the
active participation of Christopher D. Michaels and Jeffery S. Kramer. The
Company also anticipates that it will be dependent upon the active participation
of other key personnel and/or consultants in the future. The Company presently
has employment agreements with both Mr. Michaels and Mr. Kramer and has entered
into agreements with key consultants; nevertheless, the loss of the services of
Mr. Michaels, Mr. Kramer and/or other key personnel (including such consultants)
regardless of reason could adversely affect the Company and the Company's
business. The Company does not maintain any life insurance policies enabling it
to receive benefits in the case of either Mr. Michaels' or Mr. Kramer's death.
To the extent that the services of Mr. Michaels or Mr. Kramer would be
unavailable to the Company for any reason, the Company might be required to
employ other executive personnel to manage and operate the Company. There is no
assurance that the Company under such circumstances would be able to employ
qualified persons on terms suitable to the Company to assure the fulfillment of
the objectives stated in this Prospectus.
LACK OF DIVERSIFICATION
The Company has, in the past, maintained other mining properties for
exploration and development. These properties were located in Bolivia, South
America and Vancouver, British Columbia. Through its board of directors and
shareholders, the Company previously elected to abandon such other properties.
The Company's primary assets presently consist of the Nevada Property, the
Indonesian Concessions and the Brazilian Timber Properties. No assurance can be
given that once the Company completes its present exploration and development of
the Company's properties in Nevada and increases or continues its timber
operations in Brazil as described in further detail in this Prospectus, it will
be able to establish and produce significant revenues from such operations or
become profitable. In addition, there can be no assurance that exploration
activities currently being conducted on the Indonesian Concessions will result
in the establishment of commercial quantities of mineralization. As a result,
persons reading this Prospectus should be aware that investment in the Common
Stock represents an additional risk because the Company's activities are
presently confined to the exploration, development and gold production of only
one mining property, preliminary exploration activities on certain of the
Indonesian Concessions and the continued conduct of timber operations on the
Brazilian Timber Properties.
RISKS ASSOCIATED WITH THE COMPANY'S OPERATIONS
There are a number of risks inherent in the mining of precious metals and
timber operations which may have a dramatic impact on the value of the Company
and the liquidity of the Common Stock. These risks include, but are not limited
to, the ability to obtain permits, licenses and other governmental approvals;
equipment availability; implementation of proper mining and milling techniques;
title problems; compliance with environmental laws, rules, and regulations;
accuracy of reserve forecasts; and dramatic fluctuations in the price of
precious metals and timber/lumber prices. Because of these and other risk
factors associated with natural resource operations, the Company can give no
assurance that its shareholders will be able to realize either a return on
investment or a return of capital.
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<PAGE> 11
TITLE TO THE NEVADA PROPERTY
Mineral interests in the United States are frequently owned by federal and
state governments and private parties. When a prospective mineral property is
owned by a private party or by a state, some type of property acquisition
agreement is necessary in order for a company to explore or develop such
property. Generally, these agreements take the form of purchase agreements, as
in the case of the mining agreement and property agreement discussed below, or
long-term mineral leases. All such purchase agreements and leases are generally
subject to termination in the event of a default.
In addition to the acquisition of mineral rights by state or private
parties, the Company also may acquire rights to explore for and produce minerals
on federally-owned lands. This acquisition is accomplished through the location
of unpatented mining claims upon unappropriated federal land pursuant to
procedures established by the General Mining Law of 1872, the Federal Land
Policy and Management Act of 1976 and various state laws (or the acquisition of
previously-located mining claims from a private party).
The location of a valid mining claim on federal lands requires the
discovery of a valuable mineral deposit, the erection of appropriate monuments,
the posting of a location notice at the point of discovery, the marking of the
boundaries of the claim in accordance with federal law and the laws of the state
in which it is located and the filing of a notice or certificate of location and
a map with the Bureau of Land Management and the real property recording
official of the county in which the claim is located. Failure to follow the
required procedures will render the mining claim void. If the statutes and
regulations for the location of a mining claim are complied with, the locator
obtains a valid possessory right to develop and produce minerals from the claim.
This right can be freely transferred and is protected against appropriation by
the government without just compensation.
The interests represented by unpatented mining claims possess certain
unique vulnerabilities not associated with other types of property interests.
For example, in order to maintain each unpatented mining claim, the claimant
must pay a claim maintenance fee or, if qualified to do so under the small miner
exemption, annually perform not less than $100-worth of work or improvements on
or for the benefit of the claim and must file with state and federal authorities
appropriate documentation. Failure to pay the claim maintenance fee or perform
assessment work will render the claim subject to being declared void or subject
to relocation by third parties. Failure to make the required filings will make
the property deemed to be abandoned. In addition, under applicable regulations
and court decisions, in order for an unpatented mining claim to be valid, the
claimant must be able to prove that the mineral deposit on which the claim is
based can be mined at a profit both at the time the claim is located and at all
times thereafter. Thus, it is conceivable that, during times of declining metal
prices, claims which were valid when located could be invalidated by the federal
government.
No generally applicable title opinions or title insurance has been obtained
with respect to the Nevada Property with the attendant risk that some titles may
be defective. In fact, the agreements which relate to the current ownership of
the parties (i.e. the 1993 Joint Venture Agreement and the Amended Joint Venture
Agreement) contain incomplete and inadequate descriptions of the mining claims.
However, on the basis of periodic status reports and reviews by the Company's
employees of the relevant land records, the Company has concluded that it has
satisfactory title to the Nevada Property subject to exceptions which the
Company does not believe materially impair the ability to continue to mine and
process the ore and to obtain the economic benefits thereof.
The Company first acquired its rights in and to the Nevada Property
pursuant to a mining agreement dated April 4, 1987 (the "Nevada Property
Agreement"), with Anthony C. Selig & Associates, Dixie Exploration Corporation
and Anthony C. Selig (the "Selig Entities"). The Selig Entities acquired their
rights pursuant to a lease and option to purchase agreement which it had entered
into on November 15, 1982 with Argus Resources, Inc. ("Argus"), pursuant to
which the Selig Entities leased all of Argus' patented and unpatented mining
claims comprising the Nevada Property. Under the terms of the Nevada Property
Agreement, the Company was required to pay the Selig Entities the purchase price
for the Nevada Property (ultimately determined to be $600,000). Additionally,
the Company was required to and did issue 1,300,000 shares of Common Stock to
Argus. The installment obligations owed to the Selig Entities were secured by a
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<PAGE> 12
deed of trust on the Nevada Property (the "Deed of Trust"). The stock issued to
Argus was subject to a one-for-ten reverse stock split approved by the Company's
shareholders and effected in 1995.
In 1992, the Company entered into an agreement with Argus, whereby Argus
was to control sixty percent (60%) of the Nevada Property and was to act as
operator in consideration of Argus' assumption of all remaining payments due to
the Selig Entities under the Nevada Property Agreement. Argus and the Company
subsequently entered into a joint venture agreement with Marlowe Harvey/Maran
Holdings, Inc. ("Marlowe Harvey"), whereby in consideration of Marlowe Harvey
assuming all of the then remaining obligations owed to the Selig Entities,
Marlowe Harvey would acquire a fifty-one percent (51%) interest in the joint
venture, Argus would earn a twenty-four and one-half percent (24.5%) interest in
the joint venture, and the Company would earn a twenty-four and one-half percent
(24.5%) interest in the joint venture. In turn, the Nevada Property was to be
conveyed to the joint venture.
The Company has executed agreements with interested parties which may
result in the Company increasing its interest in the joint venture from
twenty-four and one-half percent (24.5%) to a minimum fifty percent (50%)
interest in the joint venture. The rights and responsibilities of both the
Company and Marlowe Harvey/Maran Holdings, Inc., are currently the subject of a
lawsuit filed by the Company on November 4, 1996, in Nye County, Nevada. This
lawsuit, described in the section of this Prospectus entitled "LEGAL
PROCEEDINGS", will not affect the Company's right to its interest in the Nevada
Property acquired pursuant to the various agreements previously entered into by
the Company. As a result of the issues raised by the lawsuit, however, the
Company may be required to hold or pay a portion of the revenues generated from
mining operations for the benefit of Argus and Marlowe Harvey.
In March 1997, the Company entered into a Sale and Purchase Agreement with
the Selig Entities. Under the terms of this latest agreement, the Selig Entities
agreed to sell to the Company one hundred percent (100%) of their interests in
the Nevada Note, the Deed of Trust, and the Nevada Property for the sum of Three
Hundred Seventy Five Thousand Dollars ($375,000) payable as follows: One Hundred
Thousand Dollars ($100,000) in March 1997 and the balance plus all accrued and
unpaid interest (calculated at the rate of 5.25%) on or before February 6, 1999.
The Company in fact paid the first installment of One Hundred Thousand Dollars
($100,000) in March 1997. The balance of the funds due the Selig Entities is
currently being held in a trust account. The agreement also acknowledges that
the Company is the only person or entity legally entitled to conduct mineral
operations on the Nevada Property. The Company is also required to pay all U.S.
Bureau of Land Management annual maintenance fees associated with the claims
comprising the Nevada Property.
On April 14, 1997, the Company issued Two Million Dollars ($2,000,000) of
8% Senior Secured Convertible Debentures (the "Debentures") to Silenus Limited
("Silenus"). Pursuant to such issuance (described in greater detail elsewhere in
this Prospectus), the Company granted to Silenus a deed of trust encumbering the
Nevada Property. Until the Debentures are converted, redeemed or paid in full,
Silenus will be entitled to maintain such encumbrance on the Nevada Property.
TITLE TO THE INDONESIAN CONCESSIONS
Mineral interests in Indonesia are controlled exclusively by the federal
government through the Ministry of Mines and Energy. Title to a mineral property
in Indonesia is subject to obtaining various forms of licenses for the
extraction of commercial quantities of minerals after obtaining property rights
from the fee owner. Title is confirmed by the issuance of a government seal
affixed to specific property location maps.
Under Indonesian law, a foreign mining company may not own a mining
concession. Instead, it may obtain a "Contract of Work," known as a "COW" which
allows the foreign concern the right to conduct certain mining activities
including general surveying, mapping and limited exploration. The COW is
intended to provide assurances to the foreign concern that if commercial
mineralization is established, the government of Indonesia will issue guarantees
as to title, fix taxation rates, permit exports of profit and other conditions
defining the rights of the foreign concern to profit from the enterprise. While
awaiting COW approval, a foreign company may obtain a "SIPP" which allows the
company to conduct preliminary exploration work on a property pending approval
of a COW application.
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<PAGE> 13
In lieu of obtaining a COW, a foreign company may elect to enter into a
joint venture with an Indonesian limited liability company known as a "PT".
Under this approach, the PT would hold the various licenses issued by the
Ministry of Mines and Energy for the benefit of the joint venture.
Another alternative is to enter into a transfer agreement with a PT company
which holds the mining concession. Under this arrangement, the PT company would
agree to transfer its licenses to the foreign company at such time as the
foreign company received approval from Indonesian Investment Coordinating Board
(the "BKPM") to form and thereafter forms a "PP20" or "PMA" joint venture
company. The first step in establishing a PP20 or PMA company is to obtain the
approval of the President of Indonesia to form the company. No approval can be
obtained if the BKPM has identified a particular industry or line of business as
closed to foreign investment, and has identified such line on its "Negative
List." If such line of business is open to foreign investment, an application to
the BKPM is submitted for approval. If approved, the PMA or PP20 company may
hold the mining concession directly.
Because direct foreign ownership of mining concessions is difficult, if not
prohibited by Indonesian law, the Company and its subsidiary, Kalimantan
Resources, must rely upon its contractual rights under the various agreements
into which they and/or their predecessors have entered. These contracts are
described in greater detail elsewhere in this Prospectus. Should a dispute arise
as to the interpretation or enforcement of such agreements, resort to the
Indonesian judicial system will likely be required. It should be noted that
since members of the judicial branch are employed by the executive branch of the
government, a fair opportunity to assert a foreign company's rights under such
agreement may be limited.
The Company has not currently completed its title investigations with
respect to any of the Indonesian Concessions. However, prior to the time at
which any payments will be made to the current holders of the licenses, the
Company will have satisfied itself that either it, Kalimantan Resources, or the
parties with whom it has contracted (and/or their predecessors in interest) will
have good and merchantable title to the particular licenses purported to be
owned by such third parties.
Ownership of licenses to explore for and/or exploit natural resources in
foreign countries is also subject to political risks. The United States has
important economic, commercial and security interests in Indonesia because of
its growing economy and markets and its strategic location in relation to key
international straits. The U.S. and Indonesia maintain cordial and cooperative
relations, although the two countries are not bound by formal security treaties.
Indonesia is a republic based upon its 1945 constitution providing for a
limited separation of executive, legislative and judicial power. The president,
elected to a five-year term, is the overwhelmingly dominant government and
political figure. The president appoints the cabinet, currently composed of four
coordinating ministers (in the fields of political and security affairs,
economic and financial affairs, people's welfare and industrial and trade
affairs), thirteen state ministers, twenty-four ministers and three high
officials with the status of state ministers. Moreover, judges are employees of
the executive branch.
Unlike Western democratic systems, the legislative branch meets only once
during its five-year term, to formulate the overall principles and aims of the
government and to elect the president and vice president. Representative bodies
at all levels in Indonesia eschew voting, preferring to arrive at decisions
through "consultation and consensus."
The party system currently in place in Indonesia reflects the Soeharto
Government's determination to shift the political focus from Indonesia's deep
ethnic, religious and ideological differences which contributed to the collapse
of an earlier Parliamentary democracy in that country. Soeharto's preferred
strategy is an authoritarian program-based development-oriented politics.
The military, especially the army, has provided key advisors to Soeharto
and has wielded great influence on policy. Under a dual function concept,
military officers serve in the civilian bureaucracy at all government levels,
although there has been a recent tendency to somewhat reduce the military's
direct involvement in civilian bureaucracies.
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Because of the presence of a strong executive branch, some foreign
companies have been forced to accede to government demands to revise licenses to
include the participation of Indonesian-owned companies, larger foreign
companies and, in some instances, the Indonesian government. The inability of a
foreign company to effectively enforce its rights in licenses issued by the
Indonesian government represents a risk unique to doing business in a developing
country as compared to the United States.
TITLE TO BRAZILIAN TIMBER PROPERTIES
The Company has acquired its rights to the Brazilian Timber Properties
pursuant to agreements entered into by and between the Company's subsidiary,
Equatorial Resources, Ltd. ("Equatorial Resources"), and Madeira Intex, S.A.,
International Exports ("Madeira"), with respect to the two timber concessions
referred to in this Prospectus as the "Jonasa Concessions"; Joao Salim, et al.,
with respect to the timber concession referred to in this Prospectus as the
"Salim Concession"; and Dario Jose Balieiro Bernardes with respect to three
timber concessions referred to in this Prospectus as the "Bernardes
Concessions."
The Company has performed preliminary title work on the Jonasa Concessions
by examining the property files of Companhia Agropecuaria do Rio Jabuti, a
company formed under the laws of the Federative Republic of Brazil ("Jonasa"),
and has confirmed that Jonasa purchased its rights to the timber directly from
the state government of Para in 1961. While Equatorial Resources has commenced
timber production from the Jonasa Concessions pursuant to the terms of the
Madeira Joint Venture, there can be no assurance that title problems and other
claims hostile to the chain of title on which the Company has relied will not
arise in the future.
As of the date of this Prospectus, title work has not been completed on
either the Salim Concession or the Bernardes Concessions. Before any sums are
expended by the Company on timber operations on these concessions, the Company
intends to employ legal counsel to advise it of the status of title to these
concessions.
In addition to the title problems and environmental problems commonly
associated with the development of timber properties in the United States,
foreign ownership of timber rights in foreign countries subjects a U.S.-based
company to the additional risk of political instability. This risk would appear
to be minimal in light of Brazil's political history.
Brazil is a federative republic with broad powers granted to its federal
government. The country is divided into twenty-seven (27) states and a federal
district. It is a country rich in resources and natural advantages, but has
lagged behind its potential according to U.S. State Department publications. The
State Department further reports that the United States is Brazil's most
important commercial partner and largest investor. Bilateral agreements between
the two countries include a treaty of peace and friendship, an extradition
treaty, a joint participation agreement on communication satellites and
scientific cooperation, civil aviation, and maritime agreements. Brazil's
current federal government is headed by President Fernando Henrique Cardoso who
received 54% of the popular vote in 1994. President Cardoso's stated agendas for
Brazil include constitutional amendments for solidifying economic stabilization
and other measures designed to establish long-term stability and growth and to
improve Brazil's socioeconomic imbalances.
GOVERNMENTAL REGULATION
Mining operations on the Nevada Property are and will be subject to
substantial federal, state and local regulation concerning mine safety and
environmental protection. Some of the laws and regulations which will pertain to
mining operations include maintenance of air and water quality standards; the
protection of threatened, endangered and other species of wildlife and
vegetation; the preservation of certain cultural resources and the reclamation
of exploration, mining and processing sites. These laws are continually changing
and, as a general matter, are becoming more restrictive. The location of the
Nevada Property is found in an area which strongly encourages mining operation.
However, the Company's inability to comply with such federal, state or local
ordinances and regulations on an ongoing basis may cause significant delays in
the permitting process or in the operations anticipated to be conducted on the
Nevada Property. In addition, delays in such compliance could result in
unexpected and substantial capital expenditures. Although no such problems or
delays are anticipated, no assurances can be given that the Company will be able
to comply with
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<PAGE> 15
all applicable law and regulations and maintain all necessary permits, licenses
and approvals or, in the alternative, that compliance and/or permitting will be
obtained without substantial delays and/or expenses.
With regard to the Nevada Department of Conservation and Natural Resources,
Division of Environmental Protection ("NDEP"), the Company has received
authorization to proceed with its currently planned mining operations on the
Nevada Property pursuant to the applicable statutes and regulations relating to
a small mining operation. In the event, however, the Company's operations exceed
the designated limits for a limited mining operation, a full reclamation plan
will need to be prepared, submitted and approved by NDEP. The Company is
currently preparing such a reclamation plan. While the Company believes that it
will be able to obtain such approval, there is no guarantee that the required
approval will in fact be obtained by the Company.
A change in the nature or magnitude of the Company's presently anticipated
operations on the Nevada Property may trigger the need to obtain additional NDEP
and other federal, state or local governmental approvals, licenses or permits.
For example, water processing discharge needs may trigger the requirement that
the Company obtain a water pollution control permit. The Company is currently
preparing for submission of an application for a water pollution control permit.
Other significant permits, required by a change in operations on the Nevada
Property, might include an NDEP permit, air quality permit, waste management
permit, archeological clearance and wildlife permit. There is no guaranty that
the Company will be able to obtain any or all of the required federal, state or
local permits that might be required to expand its operations on the Nevada
Property.
Even if the Company does not change its currently planned operations on the
Nevada Property, the Company is nevertheless vulnerable to the various federal,
state and local laws and regulations governing regulations and protection of the
environment, occupational health, labor standards and other matters. The reason
for this is that these laws are continually changing, and as a general matter,
are becoming more restrictive.
To comply with these federal, state and local laws, the Company may in the
future be required to make capital and operating expenditures on environmental
projects both with respect to maintaining currently planned operations and the
initiation of new operations. Such projects may include, for example, air and
water pollution control equipment; treatment, storage and disposal facilities
for solid and hazardous waste; remedial actions required for the containment of
tailings pond seepage; continuous testing programs; data collection and analysis
land reclamation (specifically including existing mine and processing waste on
the Nevada Property); landscaping and construction projects. There is no
guaranty that the Company will technically or financially be able to comply with
any or all of these potential requirements.
ENVIRONMENTAL REGULATION AND LIABILITY
The Company's proposed mineral operations on the Nevada Property are and
will be subject to environmental regulation by federal, state and local
authorities. Under applicable federal and state law, the Company may become
jointly and severally liable with all prior property owners for the treatment,
cleanup, remediation and/or removal of substances discovered at the Property
which are deemed by federal and/or state law to be toxic or hazardous
("Hazardous Substances"). Liability may be imposed among other things for the
improper release, discharge, storage, use, disposal or transportation of
Hazardous Substances only in the areas which the Company disturbs.
Applicable law imposes strict joint and several liability on, among others,
"owners" and "operators" of properties contaminated with Hazardous Substances.
Such liability may result in any and all "owners", "operators" and
"transporters" of contaminated property being required to bear the entire cost
of remediation. The Company may utilize substances which have been deemed by
applicable law to be Hazardous Substances. The potential liability of the
Company under such laws will be derived from the Company's classification as
both an "owner" and "operator" of a contaminated property. While the Company
intends to employ all reasonably practicable safeguards to prevent any liability
under applicable laws relating to Hazardous Substances, mineral exploration by
its very nature will subject the Company to substantial risk that remediation
may be required. If the cleanup or remediation of hazardous substances is
required on the Nevada
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Property, substantial delays could occur in the permitting process and/or in the
further extraction of gold and other precious minerals on the Nevada Property.
Much like environmental laws found in the United States, both the federal
and state governments in Brazil have adopted laws and standards relating to the
harvesting and reclamation of forests. While the Company and its subsidiary,
Equatorial Resources, has not yet fully familiarized itself with all of these
laws and standards, Equatorial Resources has entered into an agreement with
Eco-Rating International, Incorporated ("Eco-Rating"), Zurich, Switzerland, to
better assist the Company and Equatorial Resources in understanding and
complying with such laws and standards. Under the terms of its agreement with
the Company, Eco-Rating has agreed to establish an "eco-efficiency model"
designed to enable Equatorial Resources to establish environmental management
guidelines for the conduct of activities on the Jonasa Concessions and
ultimately the remainder of the Brazilian Timber Properties consistent with all
applicable environmental laws and standards.
PUBLIC MARKET
The Company received approval for trading of its Common Stock on the
Electronic Bulletin Board (NASDAQ) in March 1996. From the period from December
1995 until March 1996, the Company published "bid" and "ask" prices on the "pink
sheets". The low and high prices for the Common Stock since commencement of
quotations are as follows:
<TABLE>
<CAPTION>
HIGH DATE LOW DATE
- ------ ---------------------------- ------ ----------------------------
<C> <S> <C> <C>
$14.25 March 3, 1997 $1.25 December 1995
</TABLE>
Since the commencement of trading on the Electronic Bulletin Board, the
average monthly volume of trading of the Company's Common Stock has been
approximately 200,000 shares. Prospective Investors should be aware that the
volume of trading on the Electronic Bulletin Board traditionally has been
limited and there can be no assurance that the Electronic Bulletin Board will
provide an effective market for a shareholder to sell his or her Common Stock of
the Company.
The Company has applied for listing with the American Stock Exchange
("AMEX") by requesting a preliminary listing eligibility opinion. The Company
anticipates that it will be admitted to list its Common Stock prior to or as of
the Effective Date of this Prospectus.
SEC INVESTIGATION
In May 1989, the Company received notice that the Securities and Exchange
Commission (the "Commission") had commenced an informal investigation into the
Company's compliance with the registration and disclosure requirements of the
Securities Act of 1933 (the " '33 Act") and the Securities Exchange Act of 1934
(the " '34 Act"). Thereafter the Commission commenced an extensive review of the
Company's books and records relating to the Company's business and mining
operations, its capital raising activities, and its financial condition and
history. Through all stages of the investigation, the Company cooperated with
the Commission.
The Commission and the Company agreed to terminate the Commission's
investigation by the entry of a consent judgment against the Company and certain
of the Company's past and present key employees. These key employees include
Christopher D. Michaels, Jeffrey Kramer and Stanley Mohr. The terms and
conditions of the consent judgment can be summarized as follows:
1. The Company neither admitted nor denied any of the allegations
alleged by the Commission;
2. The Company and its officers, agents, servants, employees, and
others receiving actual notice of the consent judgment are permanently
restrained and enjoined from selling securities in interstate commerce
unless and until a registration statement is in effect or the security or
transaction is exempt from the registration provisions of the '33 Act
and/or the '34 Act;
3. The Company and its officers, agents, servants, employees, and
others receiving actual notice of the consent judgment are permanently
restrained from engaging in any transaction, practice, or course of
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<PAGE> 17
conduct, employing any course of conduct, or obtaining any money or
property by means of an untrue statement of a material fact, or any
omission to state a material fact, necessary to make the statements made in
light of the circumstances under which they were made not misleading.
On April 7, 1994, the Company and the Commission entered into a stipulation
regarding the resolution of all outstanding issues which then existed, which
stipulation was entered as an order by the United States District Court for the
Central District of California. Such stipulation contained an acknowledgement
that the Company and its executive officers had received no ill-gotten gains as
a result of prior activities by the Company in offering and selling its
securities, and that the consent judgment resolved once and for all, all issues
raised by the Commission as a result of the Company's prior activities. The
Company was not required to pay any fines or required to disgorge any monies
previously received by it in connection with its securities.
RELATIONSHIP WITH OTHER OFFERINGS
This Offering has been registered pursuant to Regulation S-B promulgated by
the Commission pursuant to the Securities Act of 1933 and the Securities
Exchange Act of 1934 (the "Federal Securities Laws"). From the period March 1,
1994, through February 28, 1997, the Company has offered and sold 8,342,619
shares of its Common Stock and 228,919 shares of Preferred Stock. In addition,
the Company concluded a private placement of its Debentures in a negotiated
limitation with Silenus Limited more particularly described in the Section of
the Prospectus entitled "PRINCIPAL AND SELLING SHAREHOLDERS." With the exception
of the placement of the Debentures, these sales were made primarily to its
existing shareholders. The Company has relied upon applicable exemptions from
the registration requirements of the Federal Securities Laws and upon compatible
exemptions from securities registration under applicable state ("blue sky")
laws. In the event that it is determined that the Company sold and issued these
securities without complying with either the Federal Securities Laws or blue sky
laws, the purchasers of these securities may have the right to rescind the sale
of these securities and to recover the purchase price paid to the Company plus
interest accrued on such purchase price. The Company does not currently have
funds with which it could repay the purchase price and accrued interest from any
prior sale of securities. Moreover, it is doubtful that the Company could
continue operations if a significant number of existing shareholders were to
seek to rescind their purchases of securities. The financial statements of the
Company do not reflect a contingent liability for any such rescission rights.
FINANCIAL RISK OF PROPOSED ACTIVITIES
The Net Proceeds derived from this Offering may not be sufficient to
finance the completion of the exploration and development activities
contemplated pursuant to this Offering. Moreover, if not all of the Common Stock
offered pursuant to this Offering is sold, the Company's activities will be
financed through existing capital which the Company then possesses. If the
activities contemplated by the Company's Business Plan do not prove to be
profitable or successful, the Company may suffer a loss with respect to
operations conducted on the Properties, or in the alternative, will abandon
either or both of the Properties as noneconomic. If such is the case,
prospective Investors risk all or a substantial loss of their investment in the
Common Stock.
VALUATION OF COMMON STOCK
The price per share of the Common Stock has been established based upon the
current market price for the Common Stock. The current price is substantially
higher than the average share price paid by existing shareholders of the
Company. The Company has also considered several factors in determining the
purchase price per share for the Common Stock including the state of development
of the Properties, Company's management, the Company's current financial
condition, and the general condition of the securities market. Prospective
Investors should be advised that the price per share is not related to the
Company's value of its assets, net worth, or results of operations conducted on
the Properties. As a result, there is no assurance that prospective Investors
will be able to liquidate their investment in the Common Stock or on terms
resulting in any ultimately favorable return on their investment or upon any
terms.
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SIGNIFICANT DILUTION
The net book value of the Company per share as of February 28, 1997, was
approximately cents ($. ) per share. After taking into consideration
the conversion rights of the shareholders holding or entitled to hold Preferred
Stock as of February 28, 1997 (but exclusive of any dividends paid in stock),
the total number of shares of Common Stock outstanding as of February 28, 1997,
other transactions described elsewhere in this Prospectus requiring the Company
to issue shares to others within sixty (60) days, and assuming all 1,500,000
shares of the Company's Common Stock are sold pursuant to this Offering, the net
tangible book value of the Common Stock immediately after the Offering after
deducting One Million Thousand Dollars ($ ) in Organization and
Offering Expenses will be approximately Dollar and Cents ($ ) per
share of Common Stock. Investors who subscribe to shares of Common Stock will
therefore realize an immediate dilution of Dollars and Cents
($ ) per share of Common Stock. Assuming only the minimum number of shares
are sold pursuant to this Offering, the net tangible book value of the Common
Stock immediately after the Offering after deducting One Hundred Thousand
Dollars ($ ) in Organization and Offering Expenses will be approximately
cents ($. ) per share. Investors who subscribe to shares of Common Stock
under these circumstances will therefore realize an immediate dilution of
Dollars and Cents ($ ) per share. The price to be paid by Investors
pursuant to this Offering should be compared to the prices paid by and the
options granted to certain of the Company's executive officers, directors and
the Selling Shareholders. See "DESCRIPTION OF SECURITIES BEING OFFERED" and
"PRINCIPAL AND SELLING SHAREHOLDERS."
FLUCTUATION OF COMMODITY PRICES
Since its deregulation in August 1971, the market price for gold has been
highly speculative and volatile. Since 1980, gold has fluctuated from a high of
approximately $850 per ounce in January 1980 to a low of approximately $285 per
ounce in 1985. Currently gold is trading at approximately $350 per ounce. In
1996, gold averaged over $380 per ounce. Instability in gold prices may effect
the profitability of the Company's future operations.
Similarly coal and timber prices fluctuate. Natural resources have
traditionally evidenced volatile swings in pricing, thereby affecting overall
the relative profitability of engaging in these lines of business. For example,
timber prices increased fifty-two percent (52%) in 1996 while coal prices have
remained relatively stable for the past several years.
DIVIDENDS
The Company has not paid cash dividends on any of its Common Stock and does
not anticipate paying any cash dividends on any of its Common Stock for the
foreseeable future. Holders of the Preferred Stock are entitled to an annual
cash or stock dividend offered at the rate of eight percent (8%) per year
payable out of any funds legally available therefor and payable on January 1,
April 1, July 1, and October 1 of each year. Such dividends are cumulative so
that if the full dividends in respect of any previous dividend period is not
paid, holders of the Preferred Stock are entitled to receive any deficiency
before any dividend or other distribution may be made or declared by the Company
with respect to any other class of stock including other series of preferred
shares should the Company elect to issue such additional series.
As of the date of this Prospectus, no quarterly dividends have been paid to
holders of the Preferred Stock. Management of the Company is presently
scheduling payment of accrued dividends in Common Stock as authorized in the
Company's "Certificate of Determination of Preferences of Series A Preferred
Stock" filed with the Nevada Secretary of State on October 25, 1995.
FINANCIAL DATA
The financial information accompanying this Prospectus reflects the current
financial condition of the Company. It should be noted that the Company has not
reported a profit from operations since its inception to the present. Management
projects that the further exploration and development of its properties will
result in
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profitable operations although, for the reasons stated elsewhere in this
Prospectus, no guarantee to that effect can be made.
USE OF FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking statements" as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such statements
are found in the Sections of the Prospectus entitled "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION", "DESCRIPTION OF COMPANY'S BUSINESS AND
PROPERTY" and elsewhere. Prospective Investors are cautioned that the
assumptions upon which such statements are based cannot be guarantied by the
Company to occur in the future or that the overall success of the Company might
be materially adversely affected should such bases (or some of them) not occur.
ADDITIONAL RISK FACTORS
Prospective Investors should review the Company's audited financial
statements included with this Prospectus and the remainder of this Prospectus in
its entirety. Other sections of this Prospectus identify other potential risks
and special material considerations which should be analyzed by each prospective
Investor prior to a decision as to whether to invest in the Common Stock
pursuant to this Offering. Prospective Investors are also cautioned that, as
with any security, there may be other risks and special material considerations
which are not foreseeable at this time which may also materially adversely
affect an investment in the Common Stock.
TERMS OF THE OFFERING
GENERAL
The Company is hereby offering a minimum of shares and a maximum
of shares of its Common Stock at $ . An additional 2,100,000
shares of Common Stock held in the names of or which may be issued to the
Selling Shareholders are being registered pursuant to this Offering.
The primary purposes for which Net Proceeds derived from this Offering are
to be used include the following:
1. Further developing the Nevada Property consistent with the Nevada
Business Plan;
2. Expanding and/or delineating (to increase reserves and potential
reserves) the Nevada Property, acquiring up to a fifty percent (50%)
interest in the mill constructed approximately one mile from the Nevada
Property and/or constructing its own mill on the Property. In addition or
in the alternative, the Company may enter into a contract for milling
services with New Concept Mining or to purchase all of the equipment
necessary to construct a mill on site at the Nevada Property;
3. Expending up to One Million Five Hundred Thousand Dollars
($1,500,000) to explore and develop the Indonesian Concessions; and
4. Expending up to Three Million Four Hundred Fifteen Thousand Two
Hundred Dollars ($3,415,200) to further develop the Brazilian Timber
Properties and to acquire and develop additional timber concessions or
properties located adjacent to, in the vicinity of, or in areas comparable
with the Brazilian Timber Properties;
5. Paying up to One Million Dollars ($1,000,000) in general and
administrative expenses and/or retaining all or a portion of said sum as
working capital.
SUBSCRIPTION
There are hereby offered a total of 1,500,000 shares of the Company's
Common Stock at a price of $
per share. In addition, the Selling Shareholders are registering
shares pursuant to this Offering.
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Each prospective Investor must purchase a minimum of 500 shares of Common Stock.
In addition, each prospective Investor will have the right to purchase
additional blocks of 100-share lots of Common Stock.
The Offering Commitment Date is presently scheduled for October 31, 1997,
although the Company hereby reserves the right to extend this Offering through
March 31, 1998 (the "Offering Termination Date"). On or before the Offering
Commitment Date, the Company will be required to accept Subscriptions amounting
to the purchase of at least shares of Common Stock or to terminate the
Offering without having sold any of the Common Stock. The Company reserves the
right to accept Subscriptions through the Offering Commitment Date unless this
Offering is terminated by the Company prior to such date.
Each Subscription for the Common Stock will be held in an escrow account
established with ________ (the "Bank"). Until such time as a minimum number of
Subscriptions are accepted or the Offering Commitment Date is reached without
the acceptance of the minimum number of Subscriptions necessary to activate this
Offering, Subscription funds will be held in the escrow account but may be
invested in short-term certificates of deposit, short-term government
securities, demand deposits and bank money market accounts.
If Subscriptions amounting to at least $1,500,000 (i.e. shares) are
not accepted on or before the Offering Commitment Date, all Subscription funds
together with any interest earned on such funds held in the escrow account will
be returned to the persons whose funds were deposited in the escrow account. If
Subscriptions amounting to at least $1,500,000 are accepted by the Offering
Commitment Date, further Subscriptions which are accepted by the Company will be
deposited into an account opened up on behalf of the Company at the Bank and
will not be subject to the terms and conditions of the escrow account. Any
interest earned on Subscription funds will be distributed to prospective
Investors tendering such funds upon activation or termination of the Offering as
the case may be.
The Company reserves the right to discontinue this Offering at any time and
also reserves the right, in its absolute discretion, to reject, in whole or in
part, any Subscription. No assurance can be given that any or all of the Common
Stock will be sold.
SUITABILITY OF INVESTORS
Sales of Common Stock may be made pursuant to this Offering only to persons
who represent that they meet the following minimum requirements:
1. He/she (either alone or together with his/her spouse) has a net
worth (inclusive of home, furnishings, and automobiles) in excess of
$50,000; or
2. He/she (either alone or together with his/her spouse) has a net
worth (exclusive of home, furnishings, and automobiles) in excess of
$35,000 and during the year of investment anticipates gross income as
defined by Internal Revenue Code section 61 in excess of $65,000.
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PLAN OF DISTRIBUTION
The Common Stock will be offered by the Company through its Affiliates on a
"best-efforts" basis to prospective Investors who the Company believes to
possess the minimum suitability standards outlined elsewhere in this Prospectus.
In cases where offers and sale of the Common Stock are affected by the Company
and/or its Affiliates, no sales or underwriting commissions will be paid. In the
event the Company enters into Underwriting Agreements with persons or entities
who are broker-dealers and members of the National Association of Securities
Dealers, Inc. ("NASD"), the Company may allot up to ten percent (10%) of the
Subscription price for the Common Stock as sales and underwriting commissions
and an additional two percent (2%) of such Subscription price as "due diligence"
fees and expenses.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF COMPANY'S BUSINESS AND PROPERTY
THE COMPANY
Nevada Manhattan Mining Incorporated (the "Company") was formed on June 10,
1985, in the state of Nevada under the name of Epic Enterprises, Ltd. On
September 11, 1987, the Company amended its Articles of Incorporation changing
its name to Nevada Manhattan Mining Incorporated. The Company's articles
currently authorize the issuance of 49,750,000 shares of Common Stock with a par
value of one cent ($.01) per share and 250,000 shares of Series A Preferred
Stock with a par value of $1.00 per share (the "Preferred Stock") convertible
into Common Stock on the terms and conditions described elsewhere in this
Registration Statement. There were 12,208,412 shares of the Company's Common
Stock and 228,919 shares of the Preferred Stock issued and outstanding as of
February 28, 1997. The average price per share paid for the Common Stock issued
directly by the Company has been approximately $2.00 per share. Holders of the
Preferred Stock have paid $10.00 per share with an effective purchase price for
the Common Stock (after giving effect to the conversion thereof on a one-for-ten
basis) of $1.00 per share. In addition, the Company has recently issued
$2,000,000 of 8% Senior Secured Convertible Debentures in a privately-negotiated
transaction to Silenus Limited.
The Company was formed primarily to develop the Nevada Property, other gold
mining properties which it had previously owned, and certain gold mining
properties which it has recently acquired. Pursuant to prior action of both the
Company's directors and its shareholders, certain gold mining properties have
been abandoned. The Company has recently acquired the rights to seven (7) gold
mining concessions and three (3) coal mining concessions in Indonesia, as well
as three (3) timber properties in Brazil.
The Company has its principal executive offices at 5038 North Parkway
Calabasas, Suite 100, Calabasas, California 91302. Its telephone number is (818)
591-4400 and its facsimile number is 818 591-4411.
Management of the Company presently consists of a five-member board of
directors (two of which are neither executive officers nor employees) and
employs two (2) full-time executive officers as well as seven (7) full-time
employees at its principal offices. The Company's subsidiary, Equatorial
Resources, Ltd., also employs 62 persons with respect to current operations on
the Brazilian timber concessions. In 1989, the Company formed a Shareholder
Advisory Committee (the "Advisory Committee") comprised of up to 12 outside
shareholders. The purpose of the Advisory Committee is to participate in
directors' meetings and compensation meetings, as well as planning meetings
related to all aspects of corporate development. Members are selected annually
from a group of shareholders who respond to Company inquiries regarding interest
in participating on the Advisory Committee. Membership is rotated annually. One
of the primary purposes of this Committee is to provide independent, shareholder
participation in critical decisions relating to overall corporate strategy.
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The Company has contracted with Harrison Western Mining and Construction,
Lakeland, Colorado, to supply labor, service, materials and equipment for Nevada
property operations. The Company has also entered into agreements with: Gold
King Mines Corporation to provide mining consulting services with respect to the
Nevada Property; Behre Dolbear & Company, Inc. and its affiliates, to provide
oversight and third-party validation services relative to the exploration and
development activities on the Indonesian Concessions; Eco-Rating International,
Inc., to provide an economic and environmental evaluation of the Company's
Brazilian Timber Properties; with Thyssen Sudamerica N.V. to market and sell all
timber harvested and milled by the Company with respect to the Jonasa
Concessions; and with British Far East Holdings Ltd. to provide certain
financial and management consulting services.
THE COMPANY'S BUSINESS
The Company's business is the exploration and mining of precious metals and
coal in Nevada and Indonesia and the harvesting of timber and other wood
products in Brazil. To this end the Company has recently acquired the right to
conduct exploration activities on three (3) coal properties in Indonesia and the
right to develop and/or own three (3) timber properties located in the state of
Para, Brazil. The Company holds various rights in and to the following
properties: (i) twenty-eight (28) patented and sixty-five (65) unpatented claims
aggregating approximately 1,800 acres (the "Nevada Property") which are located
near the town of Manhattan, Nevada (approximately 45 miles northeast of Tonopah,
Nevada); (ii) seven (7) gold concessions aggregating 39,400 hectares (98,500
acres) which are located in both the gold belt area of Kalimantan, Indonesia,
and on the island of Sumatra (see "Indonesian Gold Concessions"); (iii) three
(3) coal properties located in Kalimantan, Indonesia, comprising 290,000
hectares (725,000 acres) (the "Indonesian Coal Concessions"); and (iv) three (3)
timber properties aggregating 693,000 hectares which are located in the state of
Para, Brazil (the "Brazilian Timber Properties"). A more thorough description of
the properties is contained within portions of this Section of this Prospectus
entitled "The Nevada Property," "The Indonesian Concessions" and "The Brazilian
Timber Properties."
Management of the Company generally reviews all proposed mining projects
submitted by third parties. The Company initially will be heavily dependent upon
the mill constructed approximately one mile from the Nevada Property which is
currently owned and operated by New Concept Mining, Inc. ("New Concept"). The
Company presently intends to use the New Concept mill for milling the ore
produced from the Nevada Property and selling bullion dore bars or concentrate
for sale to third party buyers. Under the terms of an agreement entered into
with the Company, New Concept has agreed to provide the Company with the
capacity to initially process between 1000-1200 tons of ore per month. New
Concept has also agreed to increase processing capacity once the Company's
development program expands. The Company has also been engaged in preliminary
discussions with New Concept to purchase up to one half of the mill for the sum
of Two Hundred Fifty Thousand Dollars ($250,000). These discussions have not yet
resulted in a binding agreement between the Company and New Concept. However,
the Company intends to reserve that amount in Net Proceeds to enable it to
purchase an interest in the mill should a definitive agreement with New Concept
be reached and the Company is successful in selling a sufficient number of
shares of Common Stock pursuant to this Offering. In the alternative, the
Company may use the amount so reserved from Net Proceeds to help finance the
cost of constructing its own mill on the Nevada Property.
The Company has budgeted the sum of One Hundred Thousand Dollars ($100,000)
from sums anticipated to be spent for compliance with applicable environmental
laws. However, the Company can provide no assurance that the amount so budgeted
for environmental compliance will be consistent with the amounts actually spent
for compliance or that the actual amount of such compliance may not be
substantially greater than that which has been projected to be spent by the
Company pursuant to the budget.
It should be noted that over the past three years, the Company has expended
almost dollars ($ ) on
research and development expenses on or relating to the Nevada Property. These
expenses relate primarily to developing the most effective means by which to
extract the ore and transport it to the New Concept mill approximately one mile
from the Nevada Property.
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THE NEVADA PROPERTY
The Nevada Property consists of twenty-eight (28) patented and sixty-five
(65) unpatented claims aggregating approximately 1,800 acres.
The Company originally acquired its rights to the Nevada Property pursuant
to a mining agreement dated April 4, 1987 (the "Nevada Property Agreement") with
Anthony C. Selig and related entities (the "Selig Entities"). On December 9,
1987, the Selig Entities and the Company entered into an amendment to the Nevada
Property Agreement reducing both the area of interest and the purchase price of
the Nevada Property from Two Million One Hundred Thousand Dollars ($2,100,000)
to Six Hundred Thousand Dollars ($600,000) and modifying, amongst other things,
the schedule of semiannual payments due from the Company to the Selig Entities
in consideration of the purchase of the Nevada Property.
On March 2, 1989, the Company entered into an agreement entitled "Manhattan
Mining Property Agreement" with Argus Resources, Inc., a Nevada corporation, and
Argus Mines, Inc., a Nevada corporation (the "Argus Companies"); and the Selig
Entities (the "Nevada Property Agreement"). This agreement was entered into
after a dispute had arisen between Argus Resources, Inc., and the Selig Entities
under the lease/purchase agreement which had been previously entered into
between such parties and which originally formed the basis upon which the
Company derived its rights to the Property. This agreement also modified certain
terms and conditions contained within the Nevada Property Agreement.
Under the terms of the Nevada Property Agreement, as amended, the Company
was required to pay, and did pay, to the other parties the sum of Twenty-Five
Thousand Dollars ($25,000) upon execution of the agreement. The Company also
agreed to pay the Argus Companies the additional sum of One Hundred Sixty-Five
Thousand Dollars ($165,000) in monthly installments of Seven Thousand Five
Hundred Dollars ($7,500) commencing on April 15, 1989, and continuing thereafter
until the entire sum was paid in full. The Nevada Property Agreement, as
amended, further required the Company to issue 1,000,000 (pre-reverse split)
shares of Common Stock as additional consideration to Argus Resources, Inc. In
fact, the Company paid the Argus Companies, Inc., and the Selig Entities all
amounts due under the Nevada Property Agreement, as amended, and issued 100,000
(post-reverse split) shares of Common Stock to Argus Resources, Inc.
Pursuant to the terms and conditions of the Nevada Property Agreement, as
amended, the Argus Companies executed a Corporation Quitclaim Deed conveying a
forty percent (40%) undivided interest in the Nevada Property to the Company on
March 9, 1989. Concurrently therewith, the Company delivered a Deed of Trust and
Assignment of Rents (the "Deed of Trust") to the Selig Entities to further
secure the obligations under the Nevada Property Agreement. Both the Corporation
Quitclaim Deed and the Deed of Trust were duly recorded in the office of the
county records by and for Nye County, Nevada.
In June 1993, the Company entered into a Joint Venture Agreement with
Marlowe Harvey/Maran Holdings, Inc. ("Marlowe Harvey"); Argus Resources, Inc.;
and the Selig Entities respecting the Nevada Property. Under the terms of the
Joint Venture Agreement, Marlowe Harvey was entitled to a fifty-one percent
(51%) interest in the Nevada Property in consideration of Marlowe Harvey
assuming certain obligations, including the purchase of the Deed of Trust from
the Selig Entities. The remaining forty-nine percent (49%) interest in the
Nevada Property was to be held equally by Argus Resources, Inc., and the Company
in consideration of their payment of their pro rata share of all amounts due
under the promissory note (the "Nevada Note") secured by the Deed of Trust
created by the Nevada Property Agreement, as amended. The failure of either
Argus Resources, Inc., or the Company to pay any amounts due under the note
during the first year of the joint venture was to be deemed a default requiring
the defaulting party to quitclaim its interest in the Nevada Property to the
remaining parties. The Argus Companies, Marlowe Harvey and the Company were also
responsible for their pro rata share of all property development expenses. At
the time, Marlowe Harvey was the operator of the Nevada Property and responsible
for all operations relating to maintaining the Nevada Property in accordance
with the Mining Agreement.
On October 20, 1995, the Company and Mr. Harvey "as an individual and for
Maran Holdings and Argus Resources" executed an agreement (the "Amended Joint
Venture Agreement") which purports to amend the
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June 1993 Joint Venture Agreement. The Amended Joint Venture Agreement obligates
Marlowe Harvey to convey to the Company within ten (10) days of the date of
execution of such Agreement fifty-two percent (52%) of the outstanding and
issued stock in Argus Resources, Inc.("Argus"), in exchange for the payment of
One Hundred Forty-Seven Thousand Dollars ($147,000) to be paid in the future
from a percentage of Argus' share of the net proceeds realized from the sale of
gold production on the Nevada Property. In addition, Marlowe Harvey agreed to
convey a one percent (1%) interest in the Nevada Property to the "management" of
the Company (Messrs. Michaels and Kramer) in exchange for a "production payment"
of Forty-Seven Thousand Dollars ($47,000) likewise to be paid from future
production attributable to Argus Resources, Inc. It was, and is, the intention
of the Company's officers to convey their rights under the Amended Joint Venture
Agreement to the Company in exchange for the Company's assumption of such
officers' obligations under such Agreement.
Both the obligations of the Company and its officers under the Amended
Joint Venture Agreement were to be secured by the pledge of Common Stock (in the
case of the Company, 1,235,429 shares) with "piggyback" registration rights to
be granted to Marlowe Harvey in two (2) years in the event $147,000 is not paid
from production by that time. If only a portion of the production payment is
made by October 20, 1997, the obligation to seek registration was to be ratably
reduced. The Company was further required to issue 1,186,981 shares of its
Common Stock to Maran Holdings, Inc., an affiliate of Argus, at the time at
which it was obligated to issue to Argus the shares to be used as security for
the production payment.
The Amended Joint Venture Agreement also required both the Company and its
joint venture partners to each make one-half of the property tax payments and
the payments due to the Selig Entities under the Nevada Property Agreement. Both
of these payments are due in January of each year.
In January 1996, the Company notified Marlowe Harvey that it had been
"ready, willing, and able" to convey the Common Stock pursuant to the terms of
the Amended Joint Venture Agreement. In addition, the Company made all of the
required property tax payments relating to the Nevada Property and the payments
due to the Selig Entities in reliance upon the terms of the Amended Joint
Venture Agreement. Marlowe Harvey has failed to reimburse the Company for its
one-half share of the property tax payments and the payments due to the Selig
Entities which were advanced on its behalf by the Company and has failed to make
the conveyances required by the terms and conditions of the Amended Joint
Venture Agreement. As a result, the Company instituted an action in Nye County,
Nevada, on November 4, 1996, originally seeking specific performance and damages
against Marlowe Harvey; Maran Holdings Inc.; Calais Resources Inc.; and Argus
Resources, Inc. The Company has recently amended the complaint to seek a
judicial determination that the Harvey Entities have forfeited all rights in and
to the Joint Venture Agreement and the Nevada Property. This action is described
in further detail under the Section of this Prospectus entitled "LEGAL MATTERS,
AUDITORS, AND LEGAL PROCEEDINGS." Regardless of the outcome of this action, the
Company will continue to operate this property and believes it will continue to
own the interest in the Nevada Property which it acquired by virtue of the
previous agreements it entered into which relate to the Nevada Property.
In March 1997, the Company entered into a Sale and Purchase Agreement with
the Selig Entities. Under the terms of this agreement, the Selig Entities agreed
to sell to the Company one hundred percent (100%) of their interests in the
Nevada Note, the Deed of Trust, and the Nevada Property for the sum of Three
Hundred Seventy Five Thousand Dollars ($375,000) payable as follows: One Hundred
Thousand Dollars ($100,000) in March 1997 and the balance plus all accrued and
unpaid interest (calculated at the rate of 5.25%) on or before February 6, 1999.
The Company in fact paid the first installment of One Hundred Thousand Dollars
($100,000) in March 1997. The agreement also acknowledges that the Company is
the only person or entity legally entitled to conduct mineral operations on the
Nevada Property. The Company is also required to pay all U.S. Bureau of Land
Management annual maintenance fees associated with the claims comprising the
Nevada Property.
The Company entered into a Subscription Agreement with Silenus Limited on
April 14, 1997 (the "Subscription Agreement"). As a result of entering into the
Subscription Agreement, the balance remaining under the March 1997 Sale and
Purchase Agreement with the Selig Entities is currently being held in a trust
account in anticipation of paying such balance and obtaining a reconveyance of
the Deed of Trust. In addition,
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the Company granted to Silenus Limited a $2,000,000 deed of trust encompassing
the Nevada Property until the Debentures issued to Silenus are converted,
redeemed or paid in full.
The Nevada Property is located in an historic mining district which has
experienced mining operations from 1866 to the present with the major activity
in the late 1860s, between 1906 and 1921 and from 1960 to the present. Placer
and lode mining took place principally in the Reliance Mine, the White Caps
Mine, the Union Amalgamated Mine, the Manhattan Consolidated Mine, the Earle
Mine, the Big Four Mine and the April Fool Mine. The United States Geological
Survey reports historic production through 1959 of 260,000 ounces of lode gold
and 206,000 ounces of placer gold mined in the Manhattan Mining District. Since
1959, the more significant gold production has occurred from the Echo Bay and
Nevada Gold Fields mines which border the Nevada Property. Such mines have
yielded production in excess of 500,000 ounces of gold.
The Nevada Property lies in several shallow gullies in a general area which
is located between 7,500 to 7,800 feet in elevation. Mineralization of the
Nevada Property appears to be structurally controlled by a series of parallel
east-northeast trending faults dipping from 50 to 75 degrees southwest and with
some cross or perpendicular faults. The Nevada Property consists of two distinct
areas which require different mining and production techniques. Gold
mineralization in the vicinity of "Litigation Hill" is near the surface and much
less expensive to mine. The lower grade ore can be "leached" while higher grades
of ore must be milled. Gold mineralization located in the White Caps Mine has
revealed two delineated ore bodies below the 600-foot level and a deeper
exploration target requiring substantially higher costs for extraction as
compared to "Litigation Hill." "Dewatering" the mine and driving a decline to
the 800-foot level could become quite costly. Additionally, gold ore obtained
from the White Caps Mine may be required to be processed using autoclave
technology or other proven methods in order to comply with environmental
regulations due to the ore's high content of antimony, mercury, arsenic and
sulphur; nevertheless, the Company believes that the deep ore bodies located
within the White Caps Mine may have sufficient potential to justify the large
development program. Both the "Litigation Hill" and White Caps Mine areas of the
Property will be discussed below.
The Nevada Property is adjacent to three (3) existing gold mines.
Immediately adjacent to the west of the Nevada Property is the Manhattan Mine
formerly owned by Echo Bay Minerals Company now a part of the Smokey Valley
Combined Operation. This mine has produced approximately 500,000 ounces of gold
over the last 10 to 15 years. Operations at this mine have been suspended.
Immediately to the south of the Nevada Property is the Keystone Mine which
was developed by Nevada Gold Fields Company. Proven reserves were reported at
100,000 tons of gold ore averaging .21 ounces per ton. Probable reserves were
reported at an additional 100,000 tons.
Approximately 14 miles to the north of the Property are the Smokey Valley
Combined Operation mining activities known as the Round Mountain Mine. This mine
is currently the largest producer of gold ore in the district with production
estimated at more than 350,000 ounces of gold per year and 7,000,000 ounces in
reserve and is one of the largest heap leach operations in the world.
The White Caps Mine was historically one of the more prolific gold mines in
the state of Nevada and is located in the Manhattan Mining District. Production
of gold began in 1911 and remained in production until 1935 when the vein was
lost and the lower levels of the mine encountered water. A total of 120,000
ounces of gold were produced during that period. The mine was closed in 1942 by
executive order relating to all "mining activities non-essential to the [World
War II] effort."
The mine was found to be flooded from its deepest point at the 1,300-foot
level to the 450-foot level. Beginning in 1957, a $400,000 program was put in
place to "dewater", renovate and reactivate the mine. Pumping of water began
that year and by 1958, the water level was down to the 800-foot level. At that
time some exploration resumed at the upper levels of the mine. At the 300-foot
level, antimony-mercury ore grading 60 percent and 8 percent, respectively, was
discovered.
An extensive antimony deposit (also containing gold and mercury values) was
located near the 500-foot level and plans were made to begin mining activities
after the renovation of the mine was completed. While
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continuing to explore for gold mineralization on the lower levels of the mine,
the owners leased out the right to mine antimony-gold-mercury ore above the
600-foot levels in 1962 and production thereafter began.
A diamond drilling program in 1962 relocated the gold ore vein which had
been lost in 1935 when it faulted out at the 600-foot level. Drilling of the
formation began at the head of the winze (i.e. incline shaft) and continued down
to the 1,200-foot level. Eight regularly-spaced holes of approximately 100 feet
in length were drilled. These holes revealed a gold mineralized area 65 feet
wide with values ranging as high as 7.7 ounces per ton and averages over .8
ounces per ton. This mineralization is found in the foot wall of the old winze.
The next phase of the 1962 drilling program consisted of diamond drilling a
"hole" starting at the 1,200-foot level. Six holes of approximately 100 feet in
length each were drilled and revealed gold values averaging over 3 ounces per
ton with a high of 6 ounces per ton. This drilling program blocked out a proven
ore reserve of over 14,000 ounces of gold according to a 1964 report published
by the California Mining Journal. The program also indicated that an ore body
containing several hundred thousand ounces of gold is present in the relocated
vein which runs from the 600-foot level down to the 800-foot level and from the
1,200-foot level down to at least the 1,300-foot level.
Before production could begin, a fire was accidentally started by a pumping
subcontractor at the 300-foot level. The ore bins, shaft and head frame were
destroyed and the mine was closed in 1964. The low price of gold (then $35 per
ounce), high costs to rebuild the damaged mine and the lack of funds caused the
White Caps Mine to close in 1964 and has remained closed since that time. The
Company's plans include reentering this mine and resuming gold exploration and
production.
By contrast, "Litigation Hill" was the site of both Earle and Consolidated
Mines, all early producers of high-grade ore until the veins ran out. Recent
geomagnetic activity and a drilling program have located several small
commercial-sized deposits of medium-grade gold ore which can be either milled or
heap leached.
The Company has conducted a geophysics and geochemical survey of
"Litigation Hill." A Schlumberger resistivity survey indicated gold
mineralization down to a depth of 1,000 feet (the limit of the instrument's
sensitivity). Bulk sampling of the ore dumps remaining at these mines indicated
that an overall average grade of the dumps was .206 ounces of gold per ton. Over
1,500 tons of ore were proven with another 500 tons considered to be probable
reserves.
The 1987 exploration of underground workings on "Litigation Hill" showed
that the Earle Mine had experienced massive cave-ins. Two samples were taken
from channel cuts. These samples indicated values of .120 ounces of gold per
ton. The Bath Mine was accessible through a stope which leads directly to the
main haulage decline. Channel cut samples were taken on pillars left in
previously-worked stopes. Values varied from .64 to 1.288 ounces of gold per
ton.
The Company initiated a rotary drilling program in 1988. Holes drilled
pursuant to the program varied in depth from 200 feet to 525 feet. Gold values
located in the carbonates at a depth of 70 feet indicate that open pit mining is
suitable for the lower grade ores which are present.
The Company commenced an exploration program during the years 1989 and
1990. This program consisted of two parts: conducting a magnetic survey of the
property and drilling 25 reverse circulation drill-angle holes varying in depth
from 50 to 150 feet. The magnetic survey identified the areas around "Litigation
Hill" and the White Caps Mine as strong targets for further exploration. The
drilling program located several areas of gold mineralization and a small ore
body of about 5,500 tons containing gold values of .18 ounces per ton.
In September 1993, the joint venture partners began a decline (i.e. tunnel)
in order to intercept a drill hole which had been drilled by Freeport Mining
Company in 1983. The drill hole revealed that from 465 feet to 505 feet below
the surface, an average gold grade of .886 ounces of gold per ton over 40 feet
existed. The decline was completed during the Spring of 1994 and drill stations
were prepared. Exploration and drilling activities commenced and are ongoing as
of the date of this Prospectus. The decline is approximately nine feet
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by nine feet and runs at an approximate twelve-degree grade. At the 500-foot
level, a turnaround or transfer bay has been added to enable the operators of
the mine to successfully remove ore in a cost-effective method.
The 1993 drilling program also included the mapping and sampling of the old
workings of the Consolidated Mine (which was closed in 1939) as well as the
drilling and sampling of the decline itself in the immediate potential ore zones
contained within the decline.
In July 1995, the Company engaged the services of William R. Wilson, a
minerals industry consultant, to prepare a plan to develop the Nevada Property
(the "Nevada Business Plan"). According to the Nevada Business Plan, two
alternative plans for exploration and development of the Property exist. The
first plan would extend the existing decline in the White Caps Mine to the
565-foot level, rehabilitate and mine old workings in the Consolidated Manhattan
Mine, drift and mine a new area near the drill hole which was intercepted by the
decline formed during the 1993 program, rehabilitate the White Caps Shaft, and
mine the 565-foot level, 670-foot level, 800-foot level, 910-foot level,
1,120-foot level, 1,200-foot level and 1,300-foot level of the White Caps Mine.
According to the Nevada Business Plan, the major advantage to this
alternative would be that access to the lower levels of the White Caps Mine
would be considerably improved. It is anticipated that the lower levels may
yield higher grade ore as compared to the yields anticipated at current levels
of the mine.
A cash analysis pertaining to the first alternative projected capital costs
during the first year of operations to be $1,463,290, operating costs of
$1,719,699 and production of 7,960 ounces of gold resulting in revenues of
$3,088,430. As a result, the cash analysis prepared for the first alternative
projected a positive cash flow of $92,804 after taking into account
depreciation, depletion and amortization.
The second alternative identified in the Nevada Business Plan would extend
the decline in the White Caps Mine to the 565-foot level, rehabilitate and mine
old workings in the Consolidated Manhattan Mine, drift and mine a new area near
the drill hole which was intercepted by the decline formed during the 1993
program, mine the 565-foot level only in the White Caps Mine and conduct
underground sampling in the White Caps Mine in the 670-foot through 1,300-foot
levels.
The Nevada Business Plan identifies the major advantage to this alternative
to be significantly reduced capital costs combined with the opportunity to
sample underground the White Caps Mine without rehabilitating the White Caps
shaft. The disadvantages of this alternative are that mining access to the lower
portions of the White Caps Mine may not be completed and it is still not known
whether access can be obtained to each of the levels below the 560-foot level.
A cash analysis pertaining to the second alternative projected capital
costs during the first year of operations to be $605,840, operating costs of
$1,046,063 and production of 4,568 ounces of gold resulting in revenues of
$1,772,539. As a result, the cash analysis prepared for this second alternative
projected a positive cash flow of $425,326 after taking into account
depreciation, depletion and amortization.
The Nevada Business Plan concludes by recommending the second alternative
as the preferable alternative for the Company to follow. In June 1996, the
Company initiated the second alternative by contracting with Harrison Western
Mining and Construction Company, Lakeland, Colorado, to execute this plan.
In July 1995, the Company notified Marlowe Harvey and related companies,
then the operator of the Nevada Property, that Marlowe Harvey was not in
compliance with contractual operations under the Nevada Property Agreement as
well as several applicable mining laws and regulations. At that time the Company
assumed the position of operator and continues to act in this capacity.
The Company has begun to establish near-surface gold deposits. Initial
exploration of this nature has revealed two near-surface targets showing
commercial grades and quantities. These are now being developed for processing
and the Company has established an ongoing exploration plan of this nature due
to this success.
All permits for this operation have been issued and the Company is in
compliance with all state, federal and environmental regulations to the best of
its knowledge and belief.
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The Company's operations in Nevada initially will be heavily dependent upon
the mill constructed approximately one mile from the Nevada Property which is
currently owned and operated by New Concept Mining, Inc. ("New Concept"). The
Company presently intends to use the New Concept mill for milling the ore
produced from the Nevada Property and selling gold bullion dore bars or
concentrate for sale to third-party buyers. Under the terms of an agreement
entered into with the Company, New Concept has agreed to provide the Company
with the capacity to initially process between 1,000-1,200 tons of ore per
month. New Concept has also agreed to increase processing capacity once the
Company's development program expands. The Company has also been engaged in
preliminary discussions with New Concept to purchase up to one half of the mill.
These discussions have not yet resulted in a binding agreement between the
Company and New Concept.
The Company has also budgeted the sum of One Hundred Thousand Dollars
($100,000) to be spent in the foreseeable future for compliance with applicable
environmental laws. However, the Company can provide no assurance that the
amount so budgeted for environmental compliance will be consistent with the
amounts actually spent for compliance or that the actual amount of such
compliance may not be substantially greater than that which has been projected
to be spent by the Company pursuant to the budget.
Over the past three (3) years, the Company has expended approximately One
Million Five Hundred Thousand Dollars ($1,500,000) on development expenses on or
relating to the Nevada Property. These expenses relate primarily to developing
the most effective means by which to extract the ore and transport it to the New
Concept mill approximately one mile from the Nevada Property.
THE INDONESIAN CONCESSIONS
General. In August 1996, the Company entered into an agreement to acquire a
fifty-one percent (51%) interest in a gold exploration property comprising
10,000 hectares (25,000 acres) located in East Kalimantan, Indonesia (the
"Kalimantan Property"). More recently, the Company has entered into two (2)
additional agreements to acquire an additional six (6) gold mining concessions
aggregating over 23,400 hectares (58,500 acres) and three (3) coal mining
concessions comprising 290,000 hectares (725,000 acres). In January 1997, the
Company and Maxwells Energy and Metals Technology Ltd., a Bahamian Company
("Maxwells"), agreed to substitute the original 10,000 hectare property (i.e.
the Kalimantan Property) for a 16,000 hectare (40,000 acre) tract (the "Sopang
Property") located elsewhere on the island of Kalimantan. Ownership of the
Indonesian Concessions will be acquired through the Company's new wholly-owned
subsidiary formed under the laws of the British Virgin Islands known as
Kalimantan Resources, Ltd. ("Kalimantan Resources").
Mineralization of the Indonesian islands known as Kalimantan (the
Indonesian section of Borneo) and Sumatra occurred as a result of rifting of the
earth's crust at the ocean floor. There are approximately fifteen known
mineralized "arcs" comprising all of Indonesia. Six (6) of these arcs contain
the majority of the gold and copper deposits currently discovered in Indonesia.
The Central Kalimantan Arc is the area which has evidenced the majority of
recent attention of mineral exploration efforts although significant work is
also being undertaken in other areas. Located within the Central Kalimantan Arc
is the Kelian Mine which has been operating since 1992 and produces
approximately 450,000 ounces of gold per annum from ore grading approximately
1.8 grams per tonne of gold. Over seventy (70) tonnes of gold has been produced
to date. Based upon current estimated reserves, the mine is scheduled to operate
until 2003. Further south is the Mt. Muro Mine. Production for 1996 at this mine
was 187,000 ounces of gold. At present, it is impossible to predict whether the
Indonesian Concessions possesses any recoverable reserves of gold ore or whether
the yields noted in the above-described mines will be indicative of the yields
to be established on the Indonesian Concessions.
Three (3) agreements cover the various concessions which the Company and
Kalimantan Resources have acquired: (i) the Principles of Agreement by and
between the Company and Maxwells, as amended; (ii) the Acquisition Agreement
dated January 26,1997 by and between Kalimantan Resources and Singkamas Agung
Ltd.; and (iii) the Acquisition Agreement dated February 18, 1997, by and
between Kalimantan Resources and Kaliman Jaya Ltd.
As described in further detail elsewhere in this Prospectus, the Company
has developed a business plan (the "1997 Business Plan") relating to the
activities to be conducted on the concessions acquired under the
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above-described agreements as well as the Brazilian Timber Properties. The
proposed activities described in this section of this Prospectus summarizes a
portion of the 1997 Business Plan.
The Sopang Property. The Company acquired its interest in the Sopang
Property pursuant to a document entitled "Principles of Agreement" dated August
19, 1996 ("POA"). The parties to the POA are Maxwells and the Company. The
Company and Maxwells originally agreed to conduct exploration activities on a
10,000 hectare tract, but pursuant to an addendum to the POA, substituted the
16,000 hectare Sopang Property.
In exchange for a fifty-one percent (51%) interest in the concession
relating to the Sopang Property, the Company agreed to convey to Maxwells Four
Hundred Thousand (400,000) shares of its Common Stock. In addition, the Company
must issue an additional Four Million (4,000,000) shares of its Common Stock to
Maxwells should an investment banker confirm by independent appraisal that the
Sopang Property is valued to be at least Twelve Million Dollars ($12,000,000
U.S.) and/or such investment banker provides financing to the Company based upon
an evaluation of at least Twelve Million Dollars ($12,000,000 U.S.) or upon the
appreciation of the Common Stock in an aggregate amount exceeding Twelve Million
Dollars ($12,000,000) within ninety (90) days of an announcement by the Company
of its acquisition of the Indonesian Property. The POA further required the
Company to issue One Million shares (1,000,000) of Common Stock regardless of
whether the Company receives financing or the above-referenced appraisals are
performed if the Company's Common Stock traded consecutively for a period of at
least thirty (30) days. The Company recently received a letter from Maxwells
acknowledging that other than the issuance of 10,800 shares, no additional
shares of Common Stock will be required to be issued until the independent
appraisal mentioned above has been performed. A provision of the POA allows
Maxwells to obtain a "nondilutive" percentage ownership in the Common Stock to
be issued under the POA should the Sopang Property produce at least 2,000,000
ounces of gold. As of the date of this Registration Statement, Three Hundred
Eighty Nine Thousand Two Hundred (389,200) of the Four Hundred Thousand
(400,000) shares required to be issued to Maxwells have in fact been issued
(200,000 shares of which are currently held in the name of Singkamas Agung, Ltd.
but which will be reissued in the name of Maxwells).
While the Company was entitled to defer exploration activities for six (6)
months, exploration activities have commenced and are ongoing on the Sopang
Property.
Under the POA, the Company is responsible for one hundred percent (100%) of
all exploration and operating expenses relating to the Sopang Property. Maxwells
also enjoys antidilution rights with respect to the Common Stock to be issued
under the POA provided exploration activities result in a valuation evidencing a
yield of at least two million (2,000,000) ounces of gold.
Maxwells has agreed to provide a voting trust in favor of existing
management. Maxwells is not, however, required to vote its shares with existing
management in connection with the registration of Common Stock issued or to be
issued to Maxwells. Maxwells' consent is also required in the case of any
issuance of the Company's capital stock exceeding Two Hundred Fifty Thousand
Dollars ($250,000).
The Company has undertaken efforts to confirm the chain of title which it
believes to exist with respect to the Sopang Property.
Silobat Property. On January 26, 1997, the Company's wholly-owned
subsidiary, Kalimantan Resources, entered into an Acquisition Agreement with
Singkamas Agung Ltd., a Bahamian corporation ("Singkamas"), relating to one (1)
gold mining concession and three (3) coal mining concessions located in
Kalimantan, Indonesia (the "Acquisition Agreement"). Singkamas is an affiliate
of Maxwells and is owned and controlled by the same persons who own and control
Maxwells.
The gold mining concession subject to the Acquisition Agreement relates to
a 62-hectare (155-acre) tract located in West Kalimantan and is known as the
"Silobat Property." Currently, PT Kajiwahida Mandiri, an Indonesian limited
liability company ("PT Kajiwahida"), holds a Kuasa Pertambangan Eksploitasi
license ("KPE") and a Kuasa Pertambangan Pengangkutan and Penjualan license
("KPPE") issued by the Indonesian Directorate General of General Mining and the
Ministry of Mines and Energy on October 7, 1996. On December 21, 1996, PT
Kajiwahida entered into a Mining Authorization Transfer Agreement with PT
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Duta Sena Rahayu, an Indonesian limited liability company ("PT Duta"), whereby
PT Kajiwahida agreed to transfer its KPE and KPPE licenses to PT Duta in
exchange for $5,000,000 payable as follows: $100,000 at the time of execution of
the Acquisition Agreement; four consecutive installment payments of $100,000
each on the fourth days of February, March, April and May 1997; and a final
payment of $4,500,000 at such time as official test results from exploration
activities demonstrate the existence of at least 2,000,000 ounces of gold
reserves. Should exploration activities reveal gold reserves of less than
2,000,000 ounces, the final payment is to be adjusted in relation to the amount
of gold reserves so established. In addition, PT Kajiwahida is obligated to seek
the appropriate governmental authority to expand its licenses to include a
2,000-hectare tract contiguous to the 62-hectare tract currently comprising the
Silobat Property.
On December 21, 1996, the shareholders of PT Duta and Kalimantan Resources
entered into a Cooperation Agreement whereby in exchange for assuming the
financial responsibilities under the Transfer Agreement, the shareholders of PT
Duta agreed to hold the shares of such limited liability company for the benefit
of Kalimantan Resources. On the same date, Kalimantan Resources entered into a
Participation Agreement with Singkamas whereby Kalimantan Resources agreed to
grant to Singkamas a net profits interest derived from the exploitation of the
Silobat Property.
The Acquisition Agreement with Singkamas requires Kalimantan to secure the
issuance by the Company of Four Million (4,000,000) shares of Common Stock as
follows: Two Hundred Thousand (200,000) upon execution of the Acquisition
Agreement and the balance to be issued upon verification by an independent
evaluation that the value of the Silobat Property and the three (3) Indonesian
Coal Concessions equal or exceed Forty Million Dollars ($40,000,000). In the
case of the initial issuance of shares and twenty-five percent (25%) of the
balance of the shares of Common Stock to be issued, Singkamas is entitled to
"piggyback" registration rights. The Company has issued Four Hundred Thousand
(400,000) shares of its Common Stock to Singkamas as of the date of this
Prospectus. Of this amount, Two Hundred Thousand (200,000) shares are to be
reissued to Maxwells.
To date, no funds have been transferred by Kalimantan to PT Kajiwahida or
any other party. However, Kalimantan Resources has been given authority to
conduct trenching and pitting and has conducted preliminary mapping, sampling
and trench hole pitting under the supervision of Behre Dolbear & Co. for the
purpose of evaluating the Silobat Property. Results of these tests have not yet
been made public pending verification. The Company (through its association with
Singkamas) is currently in negotiations with PT Kajiwahida to amend the terms of
the Acquisition Agreement to reflect the accord reached by the parties to enable
Kalimantan to conduct further exploration activities on the Silobat Property and
to forego any payments due under the Acquisition Agreement until such time as
all governmental approvals associated with annexing the 2,000-hectare tract have
been secured.
The Silobat Property forms part of what was known as the Chinese district
of Western Borneo and has been the location of substantial exploitation by the
Chinese since the 1880s. In the 1960s, a Dutch company was granted a concession
to conduct mining operations on the Silobat Property, but such property was
abandoned shortly thereafter because of political unrest, sabotage and lack of
funding.
The property is located 1 degree 1 minute north longitude and 109 degrees
12 minutes east latitude in the subdistrict of Sambas, Kalimantan Barat. The
topography of the property is characterized by swampy lowlands with isolated
hilly outcrops covered mainly with revegetation and local rubber plantations.
The geology is characterized by green-black mudstone, fine silt stone,
quartz-feldspar porphyry and quartz diorite rock types.
In 1977, 21 rock chip and 7 stream sediment samples were submitted for
analysis to the Superintendent Laboratories in Jakarta. Only small traces of
gold were detected in all rock samples submitted while stream sediment samples
yielded values of .5 to 1.05 ppm in four of the seven samples.
In 1982, R.A. Watters conducted an evaluation of the Silobat Property. A
synthesis of the work performed on previous investigations was attempted.
Geological traverses were carried out and samples of rock types were taken. A
portion of the rock type samples was dollied in a pot and washed to a
concentrate representing approximately one kilogram of original material. The
concentrates were then submitted to Rio
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Tinto Laboratories in Jakarta for analysis. Six (6) large samples were taken
sluiced with existing equipment. The concentrate obtained was cleaned with
gravity traps and the gold separated and weighed on a balance. Four (4) heavy
mineral concentrates were collected from small creeks located on the most
southwestern hill on the property.
Visible gold occurred in all samples of alluvial material. The rock and
stream concentrates were not measurable but gold was detected in four of the
stream concentrates. The R.A. Watters report suggests that it might be possible
to extract up to one gram of gold per cubic meter and that the previous
evaluation estimating 0.33 grams per tonne for hard rock mining activities was
"remarkably realistic."
Munung (Monroe) Property. The Company's wholly-owned subsidiary, Kalimantan
Resources, entered into an Acquisition Agreement for Gold and Coal Concessions
February 18, 1997, with Kalimas Jaya Ltd., a Bahamian corporation ("Kalimas"),
relating to five (5) gold mining concessions and one (1) coal mining concession
(the "Kalimas Acquisition Agreement"). Kalimas is also an affiliate of Maxwells
and is owned and controlled by the same persons who own and control Maxwells.
Kalimas acquired its rights to the concession relating to the Monroe Property
pursuant to a Development Agreement dated February 14, 1997, by and between PT
Muara Mayang Coal Utama ("PT Muara") and Kalimas. Under the Development
Agreement, Kalimas obtained the right to acquire an 80% interest in a Kuasa
Pertambangan Penyelidikan ("KP") issued to PT Muara for the sum of $1,000,000
payable as follows: $150,000 upon execution of the Development Agreement and
verification by Kalimas that PT Muara possesses marketable title to the
concession without encumbrances and $850,000 upon commencement of production and
generation of net profits.
The Monroe Property comprises 6,096 hectares and is located in Central
Kalimantan, Indonesia. It is located in the same general area of the Kelian gold
mining concession which has produced over 450,000 per annum ounces of gold since
1992.
The existing KP issued on the Monroe Property allows PT Muara to conduct a
general survey and perform exploration activities for gold and other precious
metals. The Development Agreement requires PT Muara to use its "expert abilities
and efforts" to obtain additional licenses for the exploitation, production and
refining, and transportation and sale of all minerals obtained from the Monroe
Property.
The Kalimas Acquisition Agreement requires Kalimas to convey a 51% interest
in all current and future licenses which it acquires with respect to the Monroe
Property.
To date, no sums have been paid by Kalimas or Kalimantan Resources to PT
Muara nor has any exploration work been performed on the Monroe Property.
Kalimantan Resources currently intends to complete title work prior to engaging
in any exploration activities.
Telen (Tomak) Property. The second gold concession in which Kalimantan
Resources received rights under the Kalimas Acquisition Agreement is known as
the Telen or Tomak Property. This property comprises 687 hectares and is located
in East Kalimantan, Indonesia. Kalimas acquired its rights to the property
pursuant to a Development Agreement dated February 14, 1997, which it entered
into with PT Walea Bahimas, an Indonesian limited liability company. PT Walea
Bahimas currently holds a KP for general survey and exploration on the property.
Kalimas is required to pay a purchase price of $1,000,000 to acquire an 80%
interest in the current KP. The Development Agreement contains provisions
similar to those contained within the Development Agreement relating to the
Monroe Property with respect to payment terms. Moreover, PT Walea Bahimas will
only be entitled to receive the final $850,000 payment upon commencement of
commercial production and obtaining licenses for exploration and exploitation,
production and refining, and transportation and sale.
Kalimas is obligated to commence exploration in or before April 1997 or at
such other time as agreed upon by the parties. In addition to being required to
dig test pits as part of the exploration program, Kalimas has agreed to: conduct
shallow drilling to a depth of approximately 60 meters during the first 90-day
period, conduct deep drilling to a depth of at least 200 meters during the
second 90-day period, and securing a commitment of at least $300,000 during the
first three (3) years of exploration activities.
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The Kalimas Acquisition Agreement requires Kalimas to convey a 51% interest
in all current and future licenses which it acquires with respect to the Tomak
Property. In addition, Kalimas and the Company have agreed that Kalimas will be
entitled to receive a number of shares of Common Stock the amount of which is to
be determined no later than July 1997. The Kalimas Acquisition Agreement further
provides that the value of the Common Stock is to be determined at $10 per
share, which was the approximate value as of January 26, 1997.
To date, no sums have been paid by Kalimas or Kalimantan Resources to PT
Walea Balimas nor has any exploration work been performed on the Tomak Property.
Kalimantan Resources currently intends to complete title work prior to engaging
in any exploration activities.
Long Beleh (La Bella) Property. The La Bella Property represents the third
gold concession in which Kalimantan Resources acquired rights pursuant to the
Kalimas Acquisition Agreement. This property currently comprises 4,637 hectares
and is located in East Kalimantan, Indonesia. Kalimas acquired its rights in and
to a KP for general survey and exploration pursuant to a Development Agreement
dated February 14, 1997, with PT Muara Koman Mas ("PT Muara Koman"). The terms
and conditions for the acquisition of an eighty percent (80%) interest in the
current license and all future licenses held or to be held by PT Muara Koman are
identical to the terms and conditions described above and relating to the Tomak
Property. The obligations of Kalimas under the Kalimas Acquisition Agreement are
identical to the obligations which it possesses with respect to the Tomak
Property.
To date, no sums have been paid by either Kalimas or Kalimantan Resources
to PT Muara Koman nor has any exploration been performed on the La Bella
Property. Kalimantan Resources currently intends to complete title work prior to
engaging in any exploration activities.
Sengingi Property. The Sengingi Property is the fourth gold concession in
which Kalimantan Resources acquired rights pursuant to the Kalimas Acquisition
Agreement. Unlike the previous gold concessions mentioned in this Section of the
Prospectus, the Sengingi Property is a 4,000-hectare (10,000-acre) tract which
is located on the island of Sumatra in the province of Riau, Indonesia. Kalimas
acquired the right to obtain an eighty percent (80%) interest in a KP for
exploration and a KPE for exploitation with respect to 3,000 hectares of this
property from PT Aksara Mina Artha ("PT Aksara") pursuant to a Development
Agreement dated February 14, 1997. Under the terms of its agreement with PT
Aksara, Kalimas is obligated to pay PT Aksara $1,000,000 to be paid from
production derived from the property. In all other material respects, the terms
and conditions of the Development Agreement between Kalimas and PT Aksara and
the terms and conditions of the Kalimas Acquisition Agreement between Kalimas
and Kalimantan Resources are identical to the terms and conditions described
above with respect to the other gold concessions subject to the Kalimas
Acquisition Agreement.
Kuantan Property. The last gold concession subject to the Kalimas
Acquisition Agreement is known as the Kuantan Property. The Kuantan Property is
also located in Riau Province, Sumatra, Indonesia, and comprises 8,000 hectares.
Kalimas derives its rights pursuant to a Development Agreement dated February
14, 1997, between it and PT Aksara Tama Pramita ("PT Aksara Tama"). PT Aksara
Tama currently holds a KP for general survey and exploration. The general terms
and conditions upon which Kalimas is to acquire an eighty percent (80%) interest
in all current and future licenses on the Kuantan Property are similar to the
terms and conditions upon which all other licenses subject to the Kalimas
Acquisition Agreement have been acquired. The purchase price which Kalimas will
be required to pay for the Kuantan Property is $1,000,000 payable as follows:
$250,000 upon execution of the Development Agreement and verification by Kalimas
that PT Aksara Tama possesses marketable title to the concession without
encumbrances, and $750,000 to be paid upon commencement of production and
generation of net profits.
Indonesian Coal Concessions. As previously mentioned, Kalimantan Resources
and Singkamas entered into an Acquisition Agreement on January 26, 1997. In
addition to acquiring rights to the Silobat Property, Kalimantan Resources
obtained rights to three coal mining concessions aggregating over 286,000
hectares. Singkamas acquired its rights to these three coal mining concessions
pursuant to Development agreements entered into with the PT Andhika Group of
Companies, three Indonesian limited liability brother-sister companies
(collectively referred to as "PT Andhika"). Under the terms of these Development
Agreements,
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Singkamas received the right to acquire seventy-seven and one-half percent
(77.5%) interest in the three contracts of work ("COWs") currently held by PT
Andhika.
Under the terms of the Acquisition Agreement between Singkamas and
Kalimantan Resources, Singkamas has agreed to assign a fifty-one percent (51%)
in and to the COWs (as well as a fifty-one percent [51%] interest in the Silobat
Property) in consideration of the issuance of 4,000,000 shares of the Company's
Common Stock described elsewhere in this Prospectus in greater detail.
In March 1997, Kalimantan Resources, engaged an Indonesian exploration crew
to travel to the properties and to perform preliminary evaluations of possible
coal reserves in place on the three (3) coal concessions located in Indonesia
where the Company and Kalimantan Resources have entered into contracts to
acquire certain exploration and exploitation rights. Behre Dolbear & Co. will
review the results of these activities and present recommendations based upon
such review.
The Company has been contacted by several large coal mining companies for
the purpose of entering into proposed joint ventures to conduct further
exploration and subsequent development of such properties. At present, no joint
venture agreements have been entered into by the Company.
The Company has entered into an agreement with Behre Dolbear & Company,
Inc. ("Behre Dolbear"), an internationally recognized mining consulting firm
which was established in 1988. Behre Dolbear will be responsible for providing
independent technical advisory third-party validation services to the Company as
more particularly outlined in the agreement. A more thorough description of this
agreement is described in the Section of this Prospectus entitled "MANAGEMENT."
THE BRAZILIAN TIMBER PROPERTIES
The Company has acquired various rights to 693,000 hectares of timber
properties located in the state of Para, Brazil. In evaluating these properties,
the Company has considered only the Jonasa Concessions (comprising 276,000
hectares) in developing its economic forecasts. The property areas contain a
variety of timber species of which initially only seventeen (17) of the most
commercial of the one hundred twenty-five (125) available species have been
selected and factored into the Company's economic forecasts. The other species
will be harvested at the appropriate time.
Of the four existing saw mills located on the Jonasa Concessions, two are
currently operational, while two mills are currently being placed into
production. Immediate expansion plans call for the construction of up to eight
additional mills. The purpose of several small mills as opposed to one large
facility, is to accommodate different varieties of timber and minimize downtime
in the event of mechanical failure or schedule maintenance of any of the mills.
All appropriate infrastructure including power, housing, roads and auxiliary
equipment as well as trained labor and strong management are in place and are
believed to be adequate to accommodate the phased increase in mill capacity.
All shipping and associated transportation services will be provided by the
Jonasa Group, one of the largest private shipping companies in the Amazon Basin.
Their expertise and political position are anticipated to provide invaluable
support to the operation, and as a participant in the joint venture, allow for
operating efficiencies that greatly enhance profitability. The joint venture
also holds the lands in fee title and the existing operations have virtually no
debt.
Equatorial Resources has standing orders for all of its initial start-up
production at 200 cubic meters per day capacity. Additional orders for up to
1,000 cubic meters per day have been submitted to Equatorial Resources and
appear to demonstrate the viability of the immediate expansion noted above.
Five Hundred Thousand Dollars ($500,000) has been provided by the Company
for initial start-up. The Company will also provide $1,500,000 for the
additional expansion noted above.
The United Nations Food and Agricultural Organization (F.A.O.), Simons
Corporation (Canada) and Reid, Collins & Associates, Ltd. (Canada), highly
respected forestry experts, have evaluated 24,000 hectares of the total holdings
and have posited that each hectare will yield approximately 200 cubic meters of
raw
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<PAGE> 34
timber. If these evaluations are accurate with respect to the entire Concession,
the total potential asset value of all 276,000 hectares would be approximately
55.2 million cubic meters of raw, hard wood timber.
The description of the Company's proposed activities relating to the
Brazilian Timber Properties which follows summarizes the activities more
particularly described in the 1997 Business Plan which is appended to the
Registration Statement of which this Prospectus is a part.
The Jonasa Concessions. On November 11, 1996, the Company, through
Equatorial Resources Ltd. ("Equatorial Resources"), entered into a letter
agreement with Madeira Intex, S.A., International Exports, a company formed
under the laws of the Greek Democratic Republic ("Madeira"), whereby Madeira
agreed to assign its rights in and to a Joint Venture Agreement which Madeira
had entered into on June 29, 1984, with Companhia Agropecuaria do Rio Jabuti
("Jonasa").
The Joint Venture Agreement required Jonasa to assign to Madeira the
exclusive rights to extract and market all lumber licensed by the appropriate
Brazilian authorities for export. In turn, Madeira was required to provide the
financing for the management of cutting, preserving, protecting, inspecting and
shipping of the lumber species permitted and located on the timber property
owned by Jonasa. All such activities are required to be conducted in accordance
with the Association Technique International des Bois Tropicaux. The original
term of the agreement was for the period needed to extract 13,000,000 cubic
meters from an area of 100,000 hectares. At such time as this quantity was
extracted from the property, Madeira was required to provide the expertise and
financing necessary to reclaim the areas harvested under the Joint Venture
Agreement. Among the other obligations required to be performed by Madeira were
the obligations to provide all labor associated with the transportation and
harvesting of the timber; purchase all lumber cut up to 13,000,000 cubic meters;
issue a letter of credit allowing Jonasa to present sight drafts representing
the purchase price of the lumber to be harvested from the property and
stevedoring costs for the shipment of such lumber; comply with the rules and
regulations of the Association Technique International des Bois Tropicaux; and
supervise all shipping activities. The Joint Venture Agreement required Madeira
to purchase a minimum of 60,000 cubic meters per year. The purchase price of the
lumber to be sold by Jonasa and purchased by Madeira was as follows: for all
"merchantable quality" lumber, $90 per cubic meter; for "fair/average" quality,
$80 per cubic meter; and for "second quality", $67 per cubic meter. The above
purchase prices were to be revised annually commencing in 1986 based upon a
formula involving the average price increase or decrease of the usual
international price variations for same or similar tropical lumber from West
Africa, Central America and the Far East.
Through various addenda, the rights and responsibilities of Madeira have
been modified so as to allow the original joint venture to remain in effect and
to allow Madeira to assign its rights and delegate its responsibilities to
Equatorial Resources.
On July 12, 1984, Madeira entered into an agreement with Thyssen Sudamerica
N. V., a Netherlands Antilles company. Under the terms of this agreement,
Madeira agreed to sell through Thyssen all wood logs, sawed lumber and
byproducts purchased and sold exclusively to the Far East, including Japan,
South Korea, Taiwan, Singapore and the Philippines. Similarly, Thyssen agreed to
exclusively purchase all such products for shipment to such regions of the Far
East. The price which the parties agreed to sell such products was to be
determined on a quarterly basis. Additional provisions of the contract
identified the standards to be met by Madeira as to quality, species types,
quantity and measurements. The Company has received confirmation that Thyssen is
ready, willing and able to abide by the terms of the contract.
In July, 1985, United Amazon Resources Limited, a company owned and
controlled by Madeira ("U.A.R."), and Jonasa entered into a Managing and
Marketing Agreement which effectively gives U.A.R. control over management and
supervision of operations conducted on the Jonasa Concessions. Among other
things, U.A.R. has been granted the authority to manage all of Jonasa's timber
operations, including the Jonasa Concessions.
The Company has also agreed to issue two million (2,000,000) shares of its
Common Stock to Ignatius Z. Theodorou, the sole shareholder and executive
officer of Madeira pursuant to a tax-free stock for assets transaction. To date,
the Company has neither completed its agreement with Mr. Theodorou to effect
such transaction nor issued said shares to him.
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<PAGE> 35
The Company has recently commenced timber operations on the Jonasa
Concessions and has recently obtained a preliminary evaluation of a sample of
the Jonasa Concessions, suggesting a possible yield of 200 cubic meters of
hardwood timber per hectare. The Company through its subsidiary, Equatorial
Resources, Ltd., has begun to harvest and cut only a few of the species of trees
located on the Jonasa Concessions, and commenced milling operations at three of
the mills located in the vicinity of the concessions. At present, production at
the mill has aggregated approximately 670 cubic meters since late December 1996.
In mid-March 1997, daily production was increased to 80 cubic meters. The
Company has received approximately $200,000 for the sawed lumber produced to
date. All of this revenue has been reinvested in improvements to the mills and
infrastructure on the property. The Company's subsidiary, Equatorial Resources,
Ltd., currently employs 62 persons to operate the mills and conduct the
activities contemplated under the agreements pertaining to these concessions.
Potential markets for the lumber include the Far East, Brazil, Europe and the
United States. The Company now projects daily production of sawed timber to
increase to 140 cubic meters by April 1997.
Salim Concession. On February 28, 1997, Equatorial Resources accepted a
sales proposal from Joao Salim, et al., to purchase the rights to cut and
harvest up to 300,000 hectares of land located near Portel, Brazil. The property
on which these rights are located is adjacent to one of the properties relating
to the Jonasa Concessions. Under the terms of this proposal, the owner has
agreed to license to Equatorial Resources the right to cut up to 500,000 cubic
meters of timber on the property and to pay to the owners approximately $7.50
per cubic meter. In addition, Equatorial Resources has been granted the right to
purchase the 300,000 hectares for $3,500,000 on terms and conditions to be
agreed upon by the parties. The proposed purchase price for the acquisition of
this license calls for Equatorial Resources to pay seven and one-half Reals
(approximately $7.50) per cubic meter of logs of any and all species cut
pursuant to the concession upon payment of approximately One Million Dollars
($1,000,000). Once this amount is paid, Salim, et al., have agreed to issue the
concession to all 300,000 hectares. Equatorial Resources will also be
responsible for all extraction and transportation expenses. The parties have
further agreed to employ counsel to reach a definitive agreement on or before
March 30, 1997.
Equatorial Resources is currently evaluating the viability of commercial
production on the Salim Concession and continuing its title investigation.
Bernardes Concessions. On March 2, 1997, Equatorial Resources received and
accepted a proposal to participate in a joint venture pertaining to a timber
property aggregating 117,000 hectares. Under the terms of the proposal,
Equatorial Resources has been granted the right to cut timber and to pay the sum
of $5.00 per cubic meter upon payment of approximately $50,000 as an advance
towards the purchase of the timber. Equatorial Resources has conditionally
accepted this proposal subject to the execution of definitive agreements and
completion of all title work necessary to confirm the merchantability of these
concessions.
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<PAGE> 36
USE OF PROCEEDS
The gross proceeds from the sale of the Common Stock by the Company will
range from a minimum of $1,500,000 to a maximum of $9,000,000. The Company
expects the proceeds derived from the sale of the Common Stock to be expended as
follows:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
SUBSCRIPTIONS SUBSCRIPTIONS
------------- -------------
<S> <C> <C>
Subscriptions(1)................................. $ 2,000,000 $ 9,000,000
Sales and Underwriting Commissions(2)............ 240,000 1,080,000
Legal and Accounting Fees........................ 80,000 120,000
NET PROCEEDS TO COMPANY.......................... 1,680,000 7,800,000
========== ==========
Expansion of Mine, Exploration and Development of
Nevada Property, and Mill Expansion(3)......... $ 500,000 $ 1,500,000
Exploration Activities on Indonesian
Concessions(4)................................. 440,000 1,500,000
Acquisition and Development of Additional
Brazilian Timber Properties(5)................. 500,000 3,415,200
General and Administrative Expenses(6)........... 240,000 1,000,000
========== ==========
</TABLE>
- ---------------
(1) A minimum of 250,000 shares and a maximum of 1,500,000 shares of Common
Stock will be sold at a price of $ per share.
(2) The Company has allocated up to $1,080,000 from the sale of the Common Stock
for sales and underwriting commissions. The Company may enter into
Underwriting Agreements with broker-dealers who are members in good standing
with the National Association of Securities Dealers, Inc. Under the terms of
these agreements, the Company will pay up to ten percent in sales
commissions and an additional two percent for "due diligence" fees and
expenses.
(3) The Company anticipates expending up to $1,500,000 to expand mining
operations on the Nevada Property consistent with the Business Plan as more
fully described in the Section of the Prospectus entitled "DESCRIPTION OF
COMPANY'S BUSINESS AND PROPERTY." Such expansions would include extending
the existing decline to the White Caps Mine at the 565-foot level,
rehabilitation and mining old workings in the White Caps Mine, drifting and
mining a new area near a drill hole which was intercepted by the decline
formed during the 1993 drilling program, rehabilitation of the White Caps
Shaft, and mining the 565-foot level, 670-foot level, 800-foot level,
910-foot level, 1120-foot level, 1200-foot level, and 1300-foot level of the
White Caps Mine. If only the minimum number of Subscriptions are raised
pursuant to this Offering, the Company will continue with its present course
of business and use revenues derived from ongoing operations to finance and
execute the above-described expansion. The Company has also been engaged in
discussions with the owner of the mill, New Concept Mining, Inc., concerning
the acquisition of up to a fifty percent interest in the mill currently
adjacent to the Nevada Property. To date, no definitive agreement has been
reached. The Company anticipates that if such an agreement is reached, the
Company intends to expend up to $250,000 in consideration of acquiring up to
a fifty percent interest in the mill. In the alternative, the Company will
utilize such amount to help finance the construction of its own mill on the
Nevada Property.
(4) The Company anticipates that up to $4,915,200 will be expended on data
collection, reconnaissance surveying, reporting, field work, sampling, data
processing, laboratory analyses, prospect evaluation, mineralization
mapping, additional acquisitions, and exploration drilling activities. All
of these activities will be undertaken subject to the advice and independent
consulting services provided to the Company by Behre Dolbear & Company, Inc.
("Behre Dolbear"), pursuant to a Consulting Services Agreement dated October
7, 1996, and more particularly described elsewhere in this Prospectus. The
actual work on the Indonesian Property will be performed by Five Engineering
Consultants, Bandung, Indonesia, under the supervision of Behre Dolbear.
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<PAGE> 37
(5) To date, three (3) separate timber properties are under the control and/or
management of the Company's subsidiary, Equatorial Resources, Ltd. The
Company has targeted an additional five (5) properties and/or concessions
for acquisition. The funds allocated in the above-referenced chart
represents the amounts currently projected by the Company to acquire the
rights to own and/or control and develop such properties.
(6) The Company currently expends approximately $60,000 per month in general and
administrative expenses. These expenses include salaries of all employees
(including its executive officers and directors), rent, health insurance,
travel and entertainment expenses, postage and courier and stock transfer
expenses. It is anticipated that once exploration and development occurs on
the Properties, general and administrative expenses may be paid from such
operations. To the extent that the Company does not utilize all funds
allocated for general and administrative expenses, such excess will be
retained by the Company as additional working capital.
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<PAGE> 38
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's Bylaws authorize the creation of the offices of President,
Treasurer (Chief Financial Officer), one or more Vice Presidents, Secretary, and
one or more Assistant Secretaries and Assistant Treasurers as the Board of
Directors deems proper. The Bylaws also provide for not less than three
directors and not more than seven directors who shall hold office until the
following annual meeting of the shareholders. The Bylaws further provide that
the number of directors may be increased by the affirmative vote of the Board of
Directors or a majority in interest of the shareholders at an annual or special
meeting.
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- -----------------------------------------------
<S> <C> <C>
Christopher D. Michaels 53 President and Chairman of the Board
Jeffrey S. Kramer 42 Senior Vice President, Chief Financial Officer
and Director
Stanley J. Mohr 61 Vice President of Shareholder Relations and
Director
Edna Pollock 60 Director
Joseph Rude III, M.D. 52 Director
William Michaels 79 Vice President of Client Relations
Ignatius Z. Theodorou 55 President and Director of Equatorial Resources,
Ltd.
</TABLE>
CHRISTOPHER D. MICHAELS cofounded the Company in June 1986. Since then he
has served as President, Chief Executive Officer, and Chairman of the Board and
is entitled to retain his positions with the Company until the next annual
meeting of the Company's shareholders. Mr. Michaels is also a director, vice
president and chairman of the Board of Equatorial Resources, Ltd. and the
chairman and a director of Kalimantan Resources, Ltd., subsidiaries of the
Company. Mr. Michaels received a bachelor of arts degree from Alfred University
located in New York. After graduation, he accepted a post with the United States
government overseas in the Peace Corps. Since 1980, Mr. Michaels has acted in
sales and management positions in corporations whose primary business consists
of mining and minerals. Mr. Michaels has extensive background and experience in
international relations and has spent considerable time at the Company's
Bolivian mine site (closed in 1992) as well as on the Nevada Property. Mr.
Michaels is a party and is subject to the permanent injunction more particularly
described in the Section of the Prospectus entitled "LEGAL MATTERS, AUDITORS,
AND PENDING LEGAL PROCEEDINGS." Mr. Michaels has also been and is subject to a
cease and desist order issued by the Pennsylvania Securities Commission issued
February 27, 1989 prohibiting the Company, Mr. Michaels and other executive
officers from violating Section 201 of the Pennsylvania Securities Act of 1972
relating to the sale of unregistered "penny stocks."
JEFFREY S. KRAMER, Senior Vice President, Chief Financial Officer,
Secretary-Treasurer and Director, has held these positions since 1989 and is
entitled to retain these positions with the Company until the next annual
meeting of the Company's shareholders. Mr. Kramer is also a director, vice
president and the secretary-treasurer of Equatorial Resources, Ltd. and a
director and the secretary-treasurer of Kalimantan Resources, Ltd. He has held
management positions with Continental Cafes. As Chief Financial Officer, Mr.
Kramer's responsibilities include business affairs, contract administration,
public relations and broker and shareholder relations. Mr. Kramer was also
responsible for management oversight of the Nevada Property operations since
1995 and was management's liason in negotiating the Company's settlement with
the Securities and Exchange Commission more particularly described in the
Section of this Prospectus entitled "LEGAL MATTERS, AUDITORS AND LEGAL
PROCEEDINGS." Mr. Kramer is a party and is subject to the regulatory proceedings
described in the Section of this Prospectus entitled "LEGAL MATTERS, AUDITORS
AND LEGAL PROCEEDINGS" and the action taken by the Pennsylvania Securities
Commission detailed above with respect to Mr. Michaels.
STANLEY J. MOHR, has been Vice President Client Relations with Nevada
Manhattan since 1986. Mr. Mohr became a Director in 1992 and is entitled to
retain his current positions with the Company until the next annual meeting of
the Company's shareholders. He is also a director of Kalimantan Resources, Ltd.
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<PAGE> 39
Mr. Mohr has been employed as a marketing executive with several mining and
mineral related companies and has gained extensive experience in many phases of
operations in the mining industry. Mr. Mohr held a real estate license issued by
the state of California from 1976 to 1984. Mr. Mohr was a party and is subject
to the regulatory proceedings more particularly described in the Section of the
Prospectus entitled "LEGAL MATTERS, AUDITORS, AND LEGAL PROCEEDINGS."
EDNA POLLOCK was elected to the Board of Directors on April 3, 1995 and is
entitled to retain her position as director until the next annual meeting of the
Company's shareholders. Ms. Pollock is a court reporter in North Carolina and
has been a shareholder of record since 1989. She has been an active member of
the Shareholders' Advisory Committee for several years representing shareholders
at Director's meetings. Ms. Pollock is a graduate of Columbia University, New
York, New York, having received her bachelor of arts degree in Journalism. She
spent twenty-eight years as a freelance reporter for both the federal and state
courts in North Carolina and acted in her official capacity as a court reporter
at numerous depositions, arbitrations, hearings, and conventions.
DR. JOE RUDE' III was elected to the Board of Directors on April 3, 1995
and is entitled to retain his position as a director until the next annual
meeting of the Company's shareholders. Dr. Rude' is a radiologist and has been
practicing his medical specialty since 1977 Georgia. Dr. Rude' has been a
shareholder of record since 1989 and has been an active member of the
Shareholders' Advisory Committee for several years representing shareholders at
Director's meetings. Since 1995, Dr. Rude' has been a diagnostic radiologist at
Quantum Radiology, Atlanta, Georgia. From 1977 to 1995, he was associated with
Cobb Radiology Associates, Austell, Georgia, which merged with Quantum Radiology
in 1995. Dr. Rude' is a graduate of the University of Texas, Austin, Texas,
where he received his bachelor of arts degree in 1966. In 1970, he was awarded a
medical degree from the University of Texas Southwestern Medical School, Dallas,
Texas. Dr. Rude' is board certified in radiology and served in the United States
Air Force as a flight medical officer from 1971 to 1973.
WILLIAM MICHAELS, Vice President of Client Relations, has served in such
capacity or in other capacities since the Company's inception. Mr. Michaels is
the father of Christopher D. Michaels, the Company's President and Chairman of
the Board. Mr. Michaels is a party and is subject to the regulatory proceedings
more particularly described in the Section of the Prospectus entitled "LEGAL
MATTERS, AUDITORS AND PENDING LEGAL PROCEEDINGS."
IGNATIUS Z. THEODOROU, President and Director of Equatorial Resources, Ltd.
has served in such capacities since the formation of the Company's
Brazilian-based subsidiary. Mr. Theodorou is the remaining shareholder of
Equatorial Resources, owning twenty percent (20%) of such company. Mr. Theodorou
was born in Greece but has spent a substantial portion of the last thirty-seven
(37) years in the United States. Mr. Theodorou holds dual citizenship (Greek and
U.S.) and is currently managing the Company's operations at the Jonasa
Concessions. His employment experience has included consulting arrangements with
Dames & Moore Consulting Company, employment as Managing Director of the
Liberian-owned shipping company Crest Lines Inc., and founder and chief
executive officers of the timber companies known as Madira Intex, S.A.
International Imports and United Amazonian Resources, Limited.
SIGNIFICANT EMPLOYEES AND CONSULTANTS
The Company has entered into employment agreements dated January 1, 1995,
with Christopher D. Michaels and Jeffery S. Kramer relating to their respective
positions as executive officers and directors of the Company. Under the terms
and conditions of these employment agreements, both Mr. Michaels and Mr. Kramer
are required to devote substantially all of their business time and effort
during normal business hours to the Company through December 31, 1997. As
compensation for the services rendered and to be rendered to the Company, Mr.
Michaels is entitled to receive annual salaries equal to One Hundred Forty-Eight
Thousand Seven Hundred Twenty-Seven Dollars ($148,727) per annum which Mr.
Kramer is entitled to a salary of One Hundred Thirty-Seven Thousand Two Hundred
Twelve Dollars ($137,212) per annum. Both the salaries of Mr. Michaels and Mr.
Kramer are to be reviewed on each anniversary date of the Agreement by the board
of directors for the purposes of either increasing or decreasing such base
salary. The Board, however, may not reduce the base salary of either Mr.
Michaels or Mr. Kramer by more than twenty percent (20%) of the base salary for
the immediately preceding year. In addition, both Mr. Michaels and
34
<PAGE> 40
Mr. Kramer have each received 900,000 shares of the Company's Common Stock as
part of their compensation under the terms of their employment agreements.
In addition to the base salaries and stock options, both Mr. Michaels and
Mr. Kramer are entitled to receive reimbursement on a monthly basis for all
reasonable expenses incurred in connection with the performance of their duties
under the employment agreement. Mr. Michaels and Mr. Kramer are also entitled to
certain fringe benefits (including but not limited to paid vacation and
participation in medical insurance plans and employee benefit plans) which now
are or may thereafter become available to all executive officers of the Company
and such other benefits (if any) as may be authorized from time to time by the
board of directors of the Company. The employment agreements also authorize
these officers to receive a "merit bonus" ranging between twenty-five percent
(25%) and seventy-five percent (75%) of such officer's base salary in the event
the Company experiences operating cash flow for a fiscal year equal to not less
than One Million Dollars ($1,000,000). Specifically, if the Company's operating
cash flow for any fiscal year ranges between One Million Dollars ($1,000,000)
and Two Million Dollars ($2,000,000), both Mr. Michaels and Mr. Kramer will be
entitled to a "merit bonus" equal to twenty-five percent(25%) of his base
salary; if the operating cash flow is between Two Million Dollars ($2,000,000)
and Three Million Dollars ($3,000,000) for any fiscal year, the "merit bonus"
will be equal to fifty percent (50%) of such officer's base pay; and if the
Company's operating cash flow is over Three Million Dollars ($3,000,000) or more
during any fiscal year, during the term of the Agreement, such officer's "merit
bonus" will be equal to seventy-five percent (75%) of such officer's base
salary. In the event of termination of the employment agreement by the Company
for cause or by such officer without cause, the "merit bonus" is not required to
be paid. In the event of termination for any other reason, the "merit bonus"
will be prorated for the fiscal year in which termination occurs.
The employment agreements with Messrs. Michaels and Kramer contain a
covenant prohibiting such officer from engaging directly or indirectly as a
principal partner or director or officer of any business competitive with the
Company. However, such officer may hold up to a five percent (5%) equity
interest in any entity engaged in a business competitive with the Company
without violating such covenant.
The agreements contain provisions for termination in the event of such
officer's permanent disability, death, or for cause. In addition, the agreements
provide for severance compensation equal to such officer's highest monthly base
salary times thirty-six. Both Mr. Michaels and Mr. Kramer also possess an option
to acquire up to twenty-five percent (25%) of the number of then outstanding
shares of the Company's capital stock at a price of five cents per share in the
event of an occurrence of a "Change in Control." For the purposes of such
employment agreements, the term "Change in Control" shall be deemed to have
occurred if the Company sells substantially all of its assets to a single
purchaser or to a group of associated purchasers in a single transaction or
series of related transactions; shares of the Company's outstanding capital
stock constituting more than twenty percent (20%) of the voting power of the
Company's outstanding capital stock are sold, exchanged, or otherwise disposed
of in one transaction or in a series of related transactions; or the Company is
a party to a merger or consolidation in which the Company is not the surviving
entity or the Company's shareholders receive shares of capital stock of the new
or continuing corporation constituting less than eighty percent (80%) of the
voting power of the new or continuing corporation.
The Company has engaged the services of Arthur J. Mendenhall to act as
project geologist for the Nevada Property. His duties include acting as the
on-site representative of the Company and to provide geological exploration and
mining grade control of the Nevada Property on a daily basis.
Mr. Mendenhall is an experienced mining geologist. He received his bachelor
of science degree in 1971 and his master of science degree in geology from Utah
State University, Logan, Utah. Mr. Mendenhall's work experience includes roles
supervising and monitoring the work of senior geologists in the coring and
sampling of ore; working as senior geologist in the sampling and mapping of
tertiary volcanic rock formations in gold exploration projects; collecting
cuttings and core samples for geochemical analyses; drafting drill hole cross
sections; and supervised drilling operations for bentonite and iron ore. Mr.
Mendenhall has completed the Occupational & Safety Hazard Agency ("OSHA")
forty-hour hazardous waste site training course and OSHA'S refresher course, and
has attended other geological seminars and courses relevant mining. Mr.
Mendenhall is a registered geologist in the Commonwealth of Pennsylvania and a
member of the Geological Society of America.
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<PAGE> 41
AGREEMENT WITH GOLD KING MINES CORPORATION
On April 1, 1995, the Company entered into an Agreement with Gold King
Mines Corporation ("Gold King"), Denver, Colorado. Under the terms of this
Agreement, Gold King has agreed to provide the services of William R. Wilson on
a consulting basis at the rate of $400 per day. The initial term of the
consulting agreement was through December 31, 1995, and extended for one-year
periods upon mutual agreement between Gold King and the Company. Gold King and
the Company have extended this consulting agreement for two years.
Mr. Wilson has provided various services to the Company including the
preparation of the Business Plan. Mr. Wilson possesses a professional degree in
metallurgical engineering from the Colorado School of Mines, Golden, Colorado,
and has been awarded a Master's in Business Administration from the University
of Southern California, Los Angeles, California. In his more than thirty years
of experience, Mr. Wilson has, for the past fifteen years served in various
seniority executive capacities with engineering, construction, and consulting
firms, many of such capacities as president or the chief executive officer of
mining companies operating in the United States and internationally. Mr. Wilson
is the past chairman of the Colorado Mining Association. Gold King is a
subsidiary of Sheridan Reserve Corporation, a publicly-traded resource company
based in Toronto, Canada.
Mr. Wilson's primary responsibility to the Company has been and will be to
act as project manager for the Nevada Property and to act as the Company's
representative to Harrison Western Mining & Construction Company, the mining
contractor for the Nevada Property. Mr. Wilson will also provide technical and
managerial consulting to the Company on the Indonesian Property.
AGREEMENT WITH BEHRE DOLBEAR & COMPANY, INC.
The Company entered into a Consulting Services Agreement (the "Consulting
Agreement") with Behre Dolbear & Company, Inc. ("Behre Dolbear"), an
internationally recognized mining consulting firm. Under the terms of the
Consulting Agreement, Behre Dolbear will be responsible for providing
independent technical advisory services relating to the Indonesian Property.
Such services initially require Behre Dolbear to advise and validate the
exploration program contemplated by the Company, and would include related
technical input for other aspects of project development. The term of the
Consulting Agreement is for six months or upon satisfactory completion of the
consulting services contemplated prior to such expiration date. The Company has
agreed to pay Behre Dolbear the hourly rate of $137.50 up to a maximum of $1,100
per diem for the services contemplated under the Consulting Agreement and has
committed to utilize Behre Dolbear a minimum of two days per month. Unused days
will accrue under the Consulting Agreement but will be forfeited if not utilized
prior to the expiration of the term of the agreement. The Company must also
reimburse Behre Dolbear for any travel; reasonable and necessary lodging
expenses (including meals); telegram, cable, telex charges; a 2.5% "flat" labor
charge in lieu of actual telephone charges; printing, copies, reproduction, and
fax charges; postage, courier, express, and freight charges; use of personal
automobiles; royalties on computer software; professional liability insurance
(assessed on a 1.5% flat fee basis); clerical fees at the rate of $35 per hour;
and other costs and expenses incurred by Behre Dolbear and/or its personnel in
performing the services contemplated by the Consulting Agreement.
AGREEMENT WITH BRITISH FAR EAST HOLDINGS LTD.
On April 30, 1997, the Company entered into a financial and management
services agreement with British Far East Holdings Ltd. ("BFE"). Under this
agreement, BFE has agreed to provide the personal services of Arthur Lipper III
to the Company for a period of thirty-six months to assist the Company with
respect to financial and business matters. The Company has agreed to pay BFE
$5,000 per month for the first three days of service and $1,000 per diem for
each additional day of service rendered by Mr. Lipper under the contract. The
agreement also grants to BFE warrants to purchase up to 100,000 shares of the
Company's Common Stock at one hundred twenty percent (120%) of the April 30,
1997 market price of $5.75 per share (subject to adjustment for certain events)
vesting at the rate of thirty-three and one-third percent (33 1/3%) per year
after the first twelve months of service.
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<PAGE> 42
AGREEMENT WITH ECO-RATING INTERNATIONAL
In order to better assure compliance with applicable Brazilian
environmental laws and regulations, the Company has entered into an agreement
with Eco-Rating International, Zurich, Switzerland ("Eco-Rating"). Under the
terms of the agreement, Eco-Rating has agreed to develop an "eco-efficiency
model" designed to establish environmental management guidelines for the
Company's operations in Brazil. It is the objective of the Company to establish
a reputation as a leader in the timber industry in environmentally-related
issues and to develop its properties in a manner best designed to properly
reclaim any areas harvested pursuant to its concessions.
SHAREHOLDERS' ADVISORY COMMITTEE
In 1989, the Company formed a Shareholder Advisory Committee (the "Advisory
Committee") comprised of up to 12 outside shareholders. The purpose of the
Advisory Committee is to participate in directors' meetings and compensation
meetings, as well as planning meetings related to all aspects of corporate
development. Members are selected annually from a group of shareholders who
respond to Company inquiries regarding interest in participating on the Advisory
Committee. Membership is rotated annually. One of the primary purposes of this
Committee is to provide independent, shareholder participation in critical
decisions relating to overall corporate strategy.
EXECUTIVE COMPENSATION
The table set forth below identifies the compensation paid to the Company's
executive officers for the last three completed fiscal years (i.e. fiscal years
ending May 31, 1994; May 31, 1995; and May 31, 1996):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ------------------------- -----------------------
------------------------------------------------ RESTRICTED SECURITIES ALL
NAME AND OTHER STOCK UNDERLYING LTIP OTHER
PRINCIPAL ANNUAL AWARD(S) OPTIONAL/ PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) ($) SARS(#) ($) ($)
- ----------------------- ---- --------- -------- ------------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Christopher Michaels,
President and Chairman
of the Board........... 1996 $100,449 -- $6,316.00 $225,000(2) 10,000(3) -- --
1995 $148,727 -- $5,712.00 -- 10,000 -- --
1994 $137,222 -- $5,712.00 -- 10,000 -- --
Jeffrey Kramer, Senior
Vice 1996 $117,791 -- $7,658.00 $225,000(4) 10,000(5) -- --
President and
Director............. 1995 $137,212 -- $6,564.00 -- 10,000 -- --
1994 $135,117 -- $6,564.00 -- 10,000 -- --
</TABLE>
- ---------------
(1) The Company incurs the annual cost of health insurance for Messrs. Michaels
and Kramer and their respective dependents.
(2) The Company granted Messrs. Michaels and Kramer the option to purchase
900,000 shares of Common Stock each at an average price of $1.50 per share.
These options were exercised during the year ended May 31, 1996, at which
time the Company's board of directors agreed to issue these shares for
services rendered. The Company has valued these restricted securities to be
worth twenty-five cents ($.25) per share.
(3) The Company has granted stock options to all members of its board of
directors in the amount of 10,000 shares per full year of service as an
active member of the board. These options may be exercised at $1.00 per
share of Common Stock. Options may not be exercised after the expiration of
10 years from the date of the grant and are nontransferable other than by
inheritance. As of the date of this Prospectus, the Company has granted
options aggregating 100,000 shares to Mr. Michaels and 70,000 shares to Mr.
Kramer.
(4) See Footnote 2.
(5) See Footnote 3.
37
<PAGE> 43
OPTIONS AND STOCK APPRECIATION RIGHTS
The table set forth below provides certain information concerning
individual grants of stock options and stock appreciation rights (whether
granted in connection with stock options or as "freestanding" rights made during
the last fiscal year of the Company ending May 31, 1996) to each of the named
executive officers noted below:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE EXPIRATION
NAME GRANTED(4) IN FISCAL YEAR PRICE($/SH) DATE
(A) (B) (C) (D) (E)
- ---------------------------------------------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Christopher D. Michaels....................... 100,000 10% $ 1.00 May 31, '06
Jeffrey S. Kramer............................. 70,000 14% $ 1.00 May 31, '06
Stanley Mohr.................................. 40,000 25% $ 1.00 May 31, '06
Edna Pollock.................................. 10,000 100% $ 1.00 May 31, '06
Joe Rude' III................................. 10,000 100% $ 1.00 May 31, '06
Lloyd S. Pantell, Esq.(4)..................... 100,000 100% $ 4.00 May 31, '06
</TABLE>
- ---------------
(1) The Company has granted stock options to all members of its board of
directors pursuant to Stock Option Agreements executed at various times.
Under the terms of these agreements, each director has been granted options
to purchase 10,000 shares of Common Stock per full year of service. The
exercise price for such options is $1.00 per share. The years in which stock
options were initially granted to each respective board member are as
follows: Christopher Michaels, 1986; Jeffrey Kramer, 1989; Stanley Mohr,
1993; Edna Pollock, 1996; and Joe Rude' III, 1996. In 1996, the Stock Option
Agreements relating to Messrs. Michaels, Kramer and Mohr were extended so
that they may be exercised through May 31, 2006. The remaining may not be
exercised after the expiration of ten (10) years from the date of grant and
are nontransferable other than by inheritance.
(2) See Footnote 1.
(3) See Footnote 1.
(4) Mr. Pantell is an attorney who is a principal in Lloyd S. Pantell, APLC who
has performed substantial legal services to the Company in connection with
this Offering.
LIMITATIONS ON DIRECTOR AND OFFICER LIABILITY
The Company's Bylaws do not contain a provision entitling any director or
executive officer to indemnification against liability under the Securities Act
of 1933 (the " '33 Act"). Sections 78.751 et seq. of the Nevada Revised Statutes
allow a company to indemnify its officers, directors, employees, and agents from
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, except under certain
circumstances. Indemnification may only occur if a determination has been made
that the officer, director, employee, or agent acted in good faith and in a
manner which such person believed to be in the best interests of the company. A
determination made be made by the shareholders; by a majority of the directors
who were not parties to the action, suit, or proceeding confirmed by opinion of
independent legal counsel; or by opinion of independent legal counsel in the
event a quorum of directors who were not a party to such action, suit, or
proceeding does not exist. Provided the terms and conditions of these provisions
under Nevada law are met, officers, directors, employees, and agents of the
Company may be indemnified against any cost, loss, or expense arising out of any
liability under the '33 Act. Insofar as indemnification for liabilities arising
under the '33 Act may be permitted to directors, officers and controlling
persons of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy and is, therefore, unenforceable.
38
<PAGE> 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company is a development-stage company, with corporate offices in
Calabasas, California, and with interest(s) in certain mining properties located
in the (1) Manhattan Mining District, Nye County, Nevada, (the "Nevada
Property"); (2) in the Indonesian Gold Belt, Kalimantan, Indonesia (the
"Indonesian Gold Concessions"); (3) in the Kutai District of East Kalimantan,
Indonesia (the "Indonesian Coal Concessions"); (4) on the island of Sumatra,
Indonesia; and (5) in the state of Para, Brazil (the "Brazilian Timber
Properties").
COMPARISON OF RESULTS OF OPERATIONS -- NINE MONTHS ENDED FEBRUARY 28, 1997
COMPARED TO NINE MONTHS ENDED FEBRUARY 29, 1996
Net loss for the first three fiscal quarters of 1996-97 was $1,319,759 as
compared to $468,453 for the same period ended February 29, 1996. The principal
increases in expenses during the nine months ended February 28, 1997 were
attributed to expenses in Brazil (approximately $124,000), office salaries
(approximately $50,000), travel (approximately $125,000), stock for services to
employees ($240,000), minority interest expense ($49,500) and a general increase
in other expenses attributable to the Company's increased development activities
from the previous year. During the period from July 1996 to February 28, 1997,
the Company invested $4,000,000 in Common Stock towards the purchase of certain
contractual rights to the seven (7) gold mining concessions comprising the
Indonesian Gold Concessions; $123,147 towards certain exploration activities
relating to the Silobat Property (one of the Indonesian Gold Concessions): and
$1,055,000 ($700,000 in Common Stock) towards the acquisition of and
improvements to the infrastructure relating to the Brazilian Timber Properties;
and $1,565,313 ($250,000 in Common Stock) in development activities on the
Nevada Property.
YEAR ENDED MAY 31, 1996 COMPARED TO YEAR ENDED MAY 31, 1995
During the year ended May 31, 1996, the Company reported an operating loss
of $1,198,506 as compared to an operating loss of $611,073 for the year ended
May 31, 1995. The difference between these two periods was principally due to
the issuance of stock to officers for services rendered of $485,000. There was
an increase of $233,981 in cash and cash equivalents for the year ended May 31,
1996 as compared to a decrease in cash and cash equivalents of $78,613 for the
previous fiscal year. The improvement in the availability of cash and cash
equivalents to the Company was the result of the sale of $1,255,325 in stock
offered and sold through private placements. By contrast, the Company sold
$726,013 in stock through private placements for the year ended May 31, 1995.
YEAR ENDED MAY 31, 1995 COMPARED TO YEAR ENDED MAY 31, 1994
The Company incurred a net loss of $611,073 in fiscal 1995 compared to a
net loss of $480,473 during fiscal 1994. The principal reason for the increased
loss was due to an increase in salaries of approximately $150,000. The Company
used $616,013 cash in developmental activities in 1995 compared to $749,057 in
1994. Investment in property and equipment was similar each year: $146,496 in
1995 compared to $116,777 in 1994. Proceeds from issuance of stock amounted to
$726,013 in 1995 compared to $975,469 in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position as of February 28, 1997 was a
deficit of approximately $553,000. Almost since inception, the Company has
experienced pressure on its working capital position due to operating losses,
and the need to continually invest in exploration activities on the Nevada
Property and, more recently, the Silobat Property, the remainder of the
Indonesian Concessions, and the Brazilian Concessions.
To raise funds in the past, the Company has relied upon private placements
of its equity securities. Over the past three years, the Company has raised
approximately $4,340,000 pursuant to three such private
39
<PAGE> 45
placements. The Brazilian operations represent an immediate opportunity for the
Company to generate significant cash flows for the first time. The Company
believes that with the anticipated increase in daily production at its Brazilian
operations to 140 cubic meters per day, much of its continued operations in
Brazil, Indonesia, and on the Nevada Property will be funded by the cash flow
generated on the Jonasa Concessions. The Company has also recently concluded a
privately-negotiated placement of Two Million Dollars ($2,000,000) of 8% Senior
Convertible Debentures with Silenus Limited. This private placement, together
with the cash flow anticipated from the Company's operations in Brazil, should
satisfy the Company's immediate need for the significant amounts of capital for
its overseas acquisitions and operations in both Indonesia and Brazil.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information as of February 28, 1997,
regarding the record and beneficial ownership of the Common Stock and Preferred
Stock with respect to: (i) any individual or group of affiliated individuals or
persons owning, of record or beneficially, five percent (5%) or more of the
outstanding shares of the Common Stock or the Preferred Stock; (ii) the amount
of shares of Common Stock or Preferred Stock owned by each executive officer and
director of the Company; and (iii) the number of shares of Common Stock and/or
Preferred Stock owned, of record or beneficially, by the directors of the
Company as a group. Except as otherwise indicated, the Company believes that the
beneficial owners listed below, based upon information provided by such owners,
have sole voting and investment power with respect to such shares.
PRINCIPAL SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENT OF CLASS
- -------------- ------------------------------- ------------------- ----------------
<S> <C> <C> <C>
Common Christopher D. Michaels 1,294,510(2) 10.31%
876 Ballina Court
Newbury Park, California 91320
Common Jeffrey S. Kramer 1,180,000(3) 9.40%
6053 Paseo Canyon Drive
Malibu, California 90265
Common Joseph C. Rude' III, M.D. 1,274,150(4) 10.15%
3065 River N. Pkwy.
Atlanta, Georgia 30328
Common David Weissberg, M.D. 1,109,900 8.84%
29 Blair Drive
Huntington, New York 11743
Common All Officers and 3,992,160(5) 31.79%
Directors as a Group
6 persons)
</TABLE>
- ---------------
(1) In addition to the 12,208,412 shares of Common Stock outstanding as of
February 28, 1997, the percentages noted in this column assume the issuance
of 340,000 shares of Common Stock pursuant to various options primarily to
existing management which may be issued in whole or in part within 60 days
of the date of this Prospectus and the issuance of an additional 10,800
shares of Common Stock required to be issued to Maxwells Energy & Metals
Technology Ltd. pursuant to the August 26, 1996 Principles of Agreement.
(2) Includes options to purchase up to 100,000 shares of Common Stock which may
be exercised in whole or in part within 60 days of the date of this
Registration Statement.
(3) Includes options to purchase up to 70,000 shares of Common Stock which may
be exercised in whole or in part within 60 days of the date of this
Registration Statement.
40
<PAGE> 46
(4) Includes shares owned by Carolyn Rude and Quantum Radiology (an affiliate of
Dr. Rude) as well options to purchase up to 10,000 shares of Common Stock
which may be exercised in whole or in part within 60 days of the date of
this Registration Statement.
(5) Includes options to purchase up to 230,000 shares of Common Stock by all
Directors or Officers as a group which may be exercised in whole or in part
within 60 days of the date of this Prospectus.
In addition, Ignatius Z. Theodorou, the President and a director of the
Company's eighty percent (80%) controlled subsidiary, Equatorial Resources,
Ltd., will be entitled to receive Two Million (2,000,000) shares of the
Company's Common Stock at such time as the Company and he complete the
preparation of a tax-free stock for assets agreement consistent with the
November 11, 1996 letter agreement pertaining to the Jonasa Concessions.
SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OF SHARES BENEFICIALLY
OFFERING SHARES OWNED AFTER OFFERING
------------------------ BEING ---------------------
NAME NUMBER PERCENT(1) OFFERED NUMBER PERCENT
- ------------------------------- --------- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Maxwells Energy & Metals
Technology
1901 Avenue of the Stars
Suite 1925
Los Angeles, CA 90067 400,000(2) % 200,000 200,000(3) %
Singkamas Aging Ltd.
c/o Maxwells Energy & Metals
Technology
1901 Avenue of the Stars
Suite 1925
Los Angeles, CA 90067 200,000 % 200,000 (4) %
Silenus Limited
c/o Betuvo AG,
Baoerostrase 73
Postfach 6302
Zug, Switzerland 395,834(5) % 1,500,000(6) %
</TABLE>
- ---------------
(1) Except where otherwise described in these footnotes, the percentages noted
in this column represent the ratio that a shareholder's beneficial
ownership bears to the total number of shares outstanding and issued as of
February 28, 1997 (12,208,412), plus the issuance of an additional
shares of Common Stock for the period February 28, 1997 through
April , 1997, the conversion of all Preferred Stock issued and
outstanding as of February 28, 1997, into the Common Stock on a ten-to-one
basis (2,289,190 shares of Common Stock) plus the number of stock options
issued and outstanding as of February 28, 1997 (340,000 shares).
(2) Does not include the right to receive an additional 4,000,000 shares of
Common Stock pursuant to the Principles of Agreement dated August 19, 1996.
Such right is contingent upon events which have not presently occurred.
(3) See Footnote 10.
(4) Does not include the issuance of an additional 4,000,000 shares of Common
Stock which only may be issued, if at all, upon the fulfillment of
conditions identified in the Acquisition Agreement dated January 26, 1997 by
and between Singkamas Aging Ltd. and the Company's subsidiary, Kalimantan
Resources, Ltd. As of the date of this Prospectus, such conditions have not
been met.
(5) Assumes the conversion of all of the 8% Senior Secured Convertible
Debentures at $6.00 per share (based upon seventy-five percent (75%) of the
closing "bid" price of the Common Stock as of April 16, 1997), plus the
exercise of the warrant to purchase up to 62,500 shares of Common Stock
pursuant to the
41
<PAGE> 47
terms and conditions of the April 14, 1997 Subscription Agreement and
related documents as described in further detail below.
(6) The Subscription Agreement requires the Company to register 1,500,000 shares
of Common Stock in the event all five tranches aggregating Ten Million
Dollars ($10,000,000) in 8% Senior Secured Convertible Debenture are issued
warrants to purchase all 312,500 shares of Common Stock are granted and
exercised.
AGREEMENT WITH SILENUS LIMITED
On April 14, 1997, the Company entered into a Subscription Agreement with
Silenus Limited ("Silenus") in a negotiated private placement. This transaction
was made in reliance upon the exemption from registration afforded by Section
4(2) of the Securities Act of 1933. As a result, the Company issued $2,000,000
of 8% Senior Secured Convertible Debentures due March 31, 2000 (the
"Debentures") and granted to Silenus a warrant to purchase 62,500 shares of the
Company's Common Stock (the "Warrant").
The Debentures may be converted into shares of Common Stock at any time
commencing June 2, 1997 through August 16, 1997 at a price equal to the lesser
of: seventy-five percent (75%) of the closing bid price of the Common Stock on
April 16, 1997 (i.e. 75% X $8.00, or $6.00 per share); seventy-five percent
(75%) of the closing bid price of the Common Stock on the day prior to the
funding of any subsequent funding ("tranche"); or seventy-five percent (75%) of
the average closing bid price for the five trading days immediately preceding
the actual date of conversion of the Debentures. If conversion is made after
August 16, 1997, the conversion price will be seventy-two and one-half percent
(72.5%) of the above-referenced valuation standards.
The Company is required to use its "best efforts" to cause the Registration
Statement of which this Prospectus is a part to become effective prior to August
16, 1997. If the Registration Statement does not become effective by July 17,
1997, the Company is required to pay liquidated damages to Silenus equal to two
percent (2%) of the Debentures for the first thirty days and three percent (3%)
per month thereafter until the Registration Statement becomes effective.
Subject to the existence of certain conditions subsequent and the
continuing accuracy of the warranties and covenants within the Subscription
Agreement, Silenus has the right to fund the issuance of additional Debentures
in up to four additional tranches aggregating $8,000,000. The second tranche
will close, if at all, commencing the later of: five business days after the
effective date of the Company's Registration Statement filed April 3, 1997, on
Form 10 pursuant to Section 12(b) of the Securities Exchange Act of 1934; or the
conversion of the Debentures. Subsequent tranches may fund, if at all, on the
later of: ninety days after the funding of the previous tranche: or the
conversion of the Debentures issued in the immediately preceding tranche.
Provided Silenus and the Company fund at least two tranches of $2,000,000
each, Silenus will be entitled to a right of first refusal for one year to
participate in all or any part of any equity securities (i.e., stock or
securities convertible into equity) subsequently issued or proposed to be issued
by the Company. In addition, the Company will be prohibited from issuing any of
its securities at a discount (other than in connection with any merger,
acquisition, or certain benefit plans) for a period of ninety days following the
funding of the last tranche. The Company may notify Silenus that a funding is
requested at any time after the effective date of the Registration Statement of
which this Prospectus is a part until the funding of the last tranche. In such
event, should Silenus elect not to fund the tranche so requested, the Company
may issue its securities at a discount to a third party, provided a public
distribution of the securities sold to such third party is not made until at the
earlier of: ninety days following the effective date of the Company's
Registration Statement on Form 10; or the date on which at least seventy-five
percent (75%) of the Debentures are converted.
Until Silenus has not converted at least seventy-five percent (75%) of the
Debentures, a deed of trust on the Nevada Property and the pledge of 1,000,000
shares of Common Stock will secure the Debentures.
42
<PAGE> 48
The Company has also issued to Silenus a Warrant to purchase 62,500 shares
of Common Stock. The Warrant may be exercised at any time up to and through
April 16, 2002 at the price of $8.00 per share, the closing bid price as of
April 15, 1997. The exercise price is subject to adjustment to account for
payments of dividends, stock splits, reverse stock splits, and similar events.
Funding of each subsequent tranche will likewise entitle Silenus to purchase an
additional 62,500 shares of Common Stock at $8.00 per share (subject to
adjustments noted above).
In order to provide for the issuance of all shares of Common Stock, which
may be issued pursuant to the Subscription Agreement and the Warrants, the
Company agreed to register 1,500,000 shares of Common Stock pursuant to this
Prospectus.
DESCRIPTION OF SECURITIES BEING OFFERED
The following description of the capital stock of the Company and certain
provisions of the Company's Amended Articles of Incorporation and Certificate of
Determination of Preferences of Series A Preferred Stock is a summary and is
qualified in its entirety by the provisions of those documents which have been
filed as exhibits to the Company's Registration Statement of which this
Prospectus is a part.
COMMON STOCK
The issued and outstanding shares of Common Stock, including the shares
being offered hereby, are validly issued, fully paid and nonassessable. Subject
to the rights of holders of Preferred Stock, the holders of outstanding shares
of the Common Stock are entitled to receive dividends out of assets legally
available therefor at such time and at such amounts as the board of directors
may, from time to time, determine. See "Dividend Policy." The shares of Common
Stock are neither redeemable nor convertible and the holders thereof have no
preemptive or subscription rights to purchase any securities of the Company.
Upon liquidation, dissolution, or winding up of the Company, the holders of the
Common Stock are entitled to receive, pro rata, the assets of the Company which
are legally available for distribution after payment of all debts and other
liabilities and subject to the rights of any holders of the Preferred Stock then
outstanding. Before declaring any dividends, the board of directors may set
apart out of any funds of the Company available for dividends such sum or sums
as they may, from time to time, deem in their discretion to be proper working
capital or as a reserve fund to meet contingencies or for equalizing dividends
or for such other purposes as the directors shall deem conducive to the
interests of the Company. Each outstanding share of the Common Stock is entitled
to one vote on all matters submitted to a vote of stockholders if there is no
cumulative voting in the election of directors.
PREFERRED STOCK
The Company's Amended Articles of Incorporation and its Certificate of
Determination of Preferences of Series A Preferred Stock authorized the Company
to issue up to 250,000 shares of the Preferred Stock. The holders of the
Preferred Stock are entitled to receive dividends at the rate of eight percent
per annum of the original issue price per share out of any funds legally viable
therefor payable on each January 1, April 1, July 1, and October 1 after the
issuance of the Preferred Stock. Dividends on the Preferred Stock are cumulative
so that if the full dividends in respect of any preference dividend is not paid,
the deficiency will be fully paid or declared and set apart for such shares
(without interest) before any dividend or other distribution is paid on or
declared or set apart for any other class or series of the Common Stock or
preferred shares of the Company. The Company enjoys the right to pay any
dividend on the Preferred Stock in cash or through the issuance of additional
shares of Preferred Stock or Common Stock having an issue price equal to the
amount of the dividend or through a combination of cash and stock. In the event
of any liquidation, dissolution, or winding up of the Company, either
voluntarily or involuntarily, the holders of the Preferred Stock will be
entitled to receive prior and in preference to any distribution of any of the
assets or surplus funds of the Company to the holders of the Common Stock or any
other class of preferred shares of the Company an amount equal to $10 per share
plus a further amount equal to any dividends declared but unpaid on such shares.
In the event of any consolidation or merger of the Company, or a sale of all or
substantially all of the assets of the Company, or a
43
<PAGE> 49
series of related instructions in which more than fifty percent of the voting
power of the Company is disposed of, holders of the Preferred Stock will not be
entitled to treat such event as a liquidation, dissolution, or winding up of the
Company The Company has and intends to implement the right granted to each
holder of the Preferred Stock to convert each such share into 10 shares of fully
priced and nonaccessable shares of the Common Stock as of the date of this
Prospectus.
DIVIDEND POLICY
The Company has established a policy of not paying dividends on the Common
Stock and anticipates that this policy shall remain in effect until further
notice. To date, the Company has not paid any dividends in cash or in stock on
the Preferred Stock. Management of the Company is currently planning and
arranging for payment of all cumulative dividends on the Preferred Stock through
the issuance of shares of Common Stock after giving effect to the conversion of
Preferred stock to Common Stock on a ten-for-one basis.
DILUTION
The net tangible book value of the Company at February 28, 1997, was
approximately cents ($. ) per share. After taking into consideration the
conversion rights of the shareholders holding Preferred Stock as of February 28,
1997 (but exclusive of any dividends paid in stock), the total number of shares
of Common Stock outstanding as of February 28, 1997, the conversion by Silenus
Limited of all Debentures at an effective conversion price of $ per share
and assuming all shares of the Company's Common stock are sold pursuant to this
Offering, the net tangible book value of the Common Stock immediately after the
Offering (after deducting $ for Organization and Offering Expenses)
will be approximately per share of Common Stock. Investors who
subscribe to shares of the Common Stock under circumstances whereby all shares
of Common Stock are sold pursuant to this Offering will therefore realize an
immediate dilution of Dollars Cents ($ ) per share of Common Stock.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Offering price per share........................................ $
Net tangible book value before Offering(1)...................... $
Increase attributable to new Investors.......................... $
Pro forma net tangible book value after Offering................ $
-----
Dilution to new Investors(2).................................... $
-----
</TABLE>
- ---------------
(1) Determined by dividing the tangible net worth of the Company at February 28,
1997 by the number of shares outstanding as of that date (after taking into
consideration the conversion rights of Preferred Shareholders).
(2) The difference between the Subscription price of the Common Stock and the
net tangible book value per share of Common Stock after the Offering,
assuming all shares are sold pursuant to the Offering.
By contrast, the net tangible book value of the Common Stock immediately
after the Offering (after deducting $ in Organization and Offering
Expenses) will be approximately ($ ) per share of Common Stock.
Investors who subscribe to Common Stock under these circumstances will therefore
realize an immediate dilution of ($ ) per share of Common Stock.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Offering price per share........................................ $
Net tangible book value before Offering(3)...................... $
Increase attributable to new Investors.......................... $
Pro forma net tangible book value after Offering................ $
-----
Dilution to new Investors(4).................................... $
-----
</TABLE>
- ---------------
(3) See Footnote 2 above.
44
<PAGE> 50
(4) The difference between the Subscription price of the Common Stock and the
net tangible book value per share of Common Stock after the Offering,
assuming only shares are sold pursuant to the Offering.
The Offering price for the Common Stock offered pursuant to this Offering
must be compared to the prices paid by and options granted to certain of the
Company's executive officers and the Selling Shareholders. In the case of all
options to purchase Common Stock, each recipient has the right to purchase
shares for a period of ten (10) years from the date of the grant as described in
further detail in the section of this Prospectus entitled
"MANAGEMENT -- Executive Compensation" and "MANAGEMENT -- Options and Stock
Appreciation Rights." In the case of the sale of Common Stock, Messrs. Michaels
and Kramer have paid, on the average, $2.53 and $2.03 per share, respectively,
while the Selling Shareholders have paid between $ and $ per share for the
Common Stock.
REGISTRATION RIGHTS
The Company has entered into agreements with various shareholders (the
"Selling Shareholders") to attempt to effect registration of their shares of
Common Stock. The Company has obtained registration of all persons who are
Selling Shareholders pursuant to Form BD filed in connection with this Offering.
The Selling Shareholders and their relation to the Company are more particularly
described in Form BD and in the section of the Prospectus entitled "PRINCIPAL
AND SELLING SHAREHOLDERS".
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and the Preferred
Stock is US Stock Transfer Corporation, Glendale, California.
LEGAL MATTERS, AUDITORS, AND LEGAL PROCEEDINGS
COUNSEL
Lloyd S. Pantell, APLC has acted as Special Counsel. As such Special
Counsel has assisted the Company in the preparation of this Prospectus and the
registration statement. As required by applicable federal and state securities
laws, Special Counsel has rendered an opinion to the effect that, when issued,
the Common Stock shall be duly and validly issued in accordance with applicable
law.
AUDITORS
The Company has retained Jackson and Rhodes, P.C., Dallas, Texas, to serve
at Company's accountants for fiscal year 1997. The financial statements
accompanying this Prospectus have been audited by such firm.
LEGAL PROCEEDINGS
In May 1989, the Company received notice that the Securities and Exchange
Commission (the "Commission") had commenced an informal investigation into the
Company's compliance with the registration and disclosure requirements of the
Securities Act of 1933 (the "'33 Act") and the Securities Exchange Act of 1934
(the "'34 Act"). Thereafter the Commission commenced an extensive review of the
Company's books and records relating to the Company's business and mining
operations, its capital raising activities, and its financial condition and
history. Through all stages of the investigation, the Company cooperated with
the Commission.
The Commission and the Company agreed to terminate the Commission's
investigation by the entry of a consent judgment against the Company and certain
of the Company's past and present key employees. These
45
<PAGE> 51
key employees include Christopher D. Michaels, Jeffrey Kramer and Stanley Mohr.
The term and conditions of the consent judgment can be summarized as follows:
1. The Company neither admitted nor denied any of the allegations
alleged by the Commission;
2. The Company and its officers, agents, servants, employees, and
others receiving actual notice of the consent judgment are permanently
restrained and enjoined from selling securities in interstate commerce
unless and until a registration statement is in effect or the security or
transaction is exempt from the registration provisions of the '33 Act
and/or '34 Act;
3. The Company and its officers, agents, servants, employees, and
others receiving actual notice of the consent judgment are permanently
restrained from engaging in any transaction, practice, or course of
conduct, employing any course of conduct, or obtaining any money or
property by means of an untrue statement of a material fact, or any
omission to state a material fact, necessary to make the statements made in
light of the circumstances under which they were made not misleading.
On April 7, 1994, the Company and the Commission entered into a stipulation
regarding the resolution of all outstanding issues which then existed, which
stipulation was entered as an order by the United States District Court for the
Central District of California. Such stipulation contained an acknowledgement
that the Company and its executive officers had received no ill-gotten gains as
a result of prior activities by the Company in offering and selling its
securities, and that the consent judgment resolved once and for all, all issues
raised by the Commission as a result of the Company's prior activities. The
Company was not required to pay any fines or required to disgorge any monies
previously received by it in connection with its securities.
On November 4, 1996, the Company filed a complaint (the "Action") in Nye
County, Nevada against Marlowe Harvey, Maran Holdings Inc., Calais Resources
Inc., and Argus Resources, Inc. (the "Harvey Entities"). The complaint in the
Action alleges, amongst other things, that the Harvey Entities breached their
obligations under various agreements (including the October 20, 1995 amendment
to the Joint Venture Agreement discussed in further detail in the Section of
this Prospectus entitled "DESCRIPTION OF COMPANY'S BUSINESS AND PROPERTY -- The
Nevada Property"). The Action originally sought to require the Harvey Entities
to specifically perform their obligations to convey a 1% interest in the joint
venture Nevada Property to the officers of the Company (namely Messrs. Michaels
and Kramer) and a 52% interest in the outstanding and issued stock in Argus
Resources, Inc. The Action also seeks damages of approximately $4,000,000
resulting from the actions or inactions of the defendants. It is unknown at the
present time whether the Harvey Entities have the ability to transfer the
required 52% interest in Argus Resources, Inc. as required under the Amended
Joint Venture Agreement, whether the Harvey Entities have substantive defenses
which would prevent the Company from obtaining specific performance, or whether
the remaining shareholders of Argus Resources, Inc. have approved and/or
ratified the Amended Joint Venture Agreement at any time. If the Company is
successful in obtaining specific performance of the agreements alleged in the
Action, it will effectively continue to own or control an undivided 50% interest
in the Nevada Property.
To date the complaint has been served on all defendants. In January 1997,
the parties held an initial joint case management conference. The parties have
voluntarily exchanged documents pursuant to local court rules. The Company has
recently amended its complaint to eliminate its request for specific performance
of the various agreements and to seek from the Court a judicial determination
that the Harvey Entities have breached such agreements and that the Harvey
Entities have failed to earn any interest in the Nevada Property. The Company
currently intends to commence formal discovery within the next several days. The
Company anticipates that the Harvey Entities will vigorously defend the Action.
46
<PAGE> 52
DEFINITIONS
The terms noted below shall, when used in this Prospectus, have the
following meanings ascribed to them:
"Accredited Investor" shall mean any Investor who meets one or more of the
categories defined by Rule 501(a) of Regulation D and who also is excluded from
the number of purchasers for the purposes of California Corporations Code
Section 25102(f)(1).
"Affiliate" shall mean (i) any person who directly or indirectly controls
or is controlled by or under a common control with, a person or entity; (ii) a
person owning or controlling ten percent (10%) or more of the outstanding voting
securities of the entity to which said definition relates; and (iii) any officer
or director of such entity. "Brazilian Timber Properties" shall mean the three
(3) timber properties on which the Company's subsidiary, Equatorial Resources,
Ltd. holds certain licensing and/or ownership rights more particularly described
in this Prospectus.
"Company" shall mean Nevada Manhattan Mining, Inc., a Nevada corporation.
"Debentures" shall mean the 8% Senior Secured Convertible Debentures
pursuant to the terms and conditions, the Subscription Agreement dated April 14,
1997 with Silenus Limited.
"Deed of Trust" shall mean the encumbrance currently affecting the Nevada
Property and created in favor of Anthony C. Selig & Associates, Dixie
Exploration, and Anthony C. Selig by virtue of the Nevada Property Agreement.
"Indonesian Concessions" shall mean the exploration prospects located on
the Indonesian portion of the island of Borneo known as Kalimantan and on the
island of Sumatra, Indonesia and more particularly described in this Prospectus.
"Investors" shall mean such persons and/or any authorized and qualified
successors who consider an investment in the Company as described in the
Prospectus and who submit completed and executed subscription documents to the
Company.
"Net Proceeds" shall mean those proceeds after deduction of Organization
and Offering Expenses which shall be applied in furtherance of the Company's
business plan in accordance with this Offering.
"Nevada Business Plan" shall mean the report prepared by William R. Wilson
dated as of July 1995 and entitled "Nevada Manhattan Mining, Inc., Manhattan
Mine Project Review and Business Plan."
"Nevada Property" shall mean the 28 patented and 65 unpatented mining
claims comprising approximately 1,800 acres and located in Nye County, Nevada
near the town of Manhattan as more particularly described in this Prospectus.
"Nevada Property Agreement" shall mean the Mining Agreement dated April 4,
1987 by and among the Company and Anthony C. Selig, Anthony C. Selig &
Associates, and Dixie Exploration as amended by subsequent agreements.
"Offering" shall mean the offer of the Common Stock pursuant to the terms
and conditions specified in the Prospectus.
"Offering Commitment Date" shall mean the date on which Subscription
ownership to at least One Million Five Hundred Thousand Dollars ($1,500,000) are
accepted by the Company. The Offering Commitment Date is presently scheduled for
October 31, 1997
"Offering Termination Date" shall mean the date on which the Company shall
issue, it at all, at least 250,000 shares of Common Stock pursuant to the
Offering. At present, such Date is set for December 31, 1997. In no event shall
the Offering Termination Date extend beyond March 31, 1998.
"Organization and Offering Expenses" shall mean all costs and expenses
incurred on behalf of the Company for professional fees (legal and accounting),
printing expenses, regulatory compliance, and all other costs associated with
the offer and sale of Common Stock. The amount of One Hundred Twenty Thousand
Dollars ($120,000) has been allocated for such expenses.
47
<PAGE> 53
"Properties" shall mean the Nevada Property and the Indonesian Property.
"Prospectus" shall mean the offering materials dated , 1997
describing the terms and conditions of the Offering.
"Registration Statement" shall mean Form BD and all amendments thereto
filed with the Securities and Exchange Commission and relating to the offer and
sale of Common Stock pursuant to this Offering.
"Special Counsel" shall mean Lloyd S. Pantell, APLC, a professional law
corporation.
"Subscription" shall mean the number of shares of Common Stock which a
prospective Investor agrees to purchase in the Company or the purchase price for
such purchase of shares as the context requires.
"Transfer Agent" shall mean U.S. Stock Transfer Corporation which shall be
authorized to accept Subscriptions, deposit Subscription funds into the Bank,
instruct the Bank to invest Subscriptions prior to the Offering Termination
Date, and to issue the Common Stock, all in accordance with this Offering.
"Underwriting Agreement" shall mean the agreement entered into between the
Company and broker-dealers who are members in good standing with the National
Association of Securities Dealers, Inc. and who agree to use their "best
efforts" to effect sales of the Common Stock pursuant to this Offering.
FURTHER INFORMATION
The Company is not currently a reporting company within the meaning of
Section 12(g) of the Securities Exchange Act of 1934, but anticipates that it
will become a reporting company on or before the Offering Commitment Date.
The Company has applied for listing on the American Stock Exchange. If
approved for listing, certain reports and information not necessarily contained
in this Prospectus will be available for inspection through the American Stock
Exchange, 86 Trinity Place, New York, New York 10006-1881.
The Company has and intends to continue to furnish its shareholders annual
reports containing financial statements examined by an independent accounting
firm and quarterly reports for the first three fiscal quarters of each fiscal
year containing interim unaudited financial information.
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form SB-2
under the Securities Act of 1933, as amended, with respect to the Common Stock
offered pursuant to this Offering. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules accompanying the Registration Statement. For further information with
respect to the Company and such the common Stock offered hereby, reference is
made to the Registration Statement and the exhibits and schedules accompanying
the Registration Statement. Copies of the Registration Statement and such
exhibits and schedules may be inspected, without charge, at the public reference
facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such material can also be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N. W.,
Washington, D. C. 20549.
Until , 1997, all dealers effecting transactions in the Common
Stock registered pursuant to the Registration Statement, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
Subscriptions.
48
<PAGE> 54
NEVADA MANHATTAN MINING INCORPORATED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report........................................................ F-2
Consolidated Balance Sheet at February 28, 1997 (Unaudited) and May 31, 1996 and
1995.............................................................................. F-3
Consolidated Statements of Operations for the Nine Months Ended February 28, 1997
and 1996 (Unaudited) and the Years Ended May 31, 1996, 1995 and 1994.............. F-4 - 5
Consolidated Statements of Changes in Stockholders' Equity for the Nine Months Ended
February 28, 1997 and 1996 (Unaudited) and the Years Ended May 31, 1996, 1995 and
1994.............................................................................. F-6
Consolidated Statements of Cash Flows for the Nine Months Ended February 28, 1997
and 1996 (Unaudited) and the Years Ended May 31, 1996, 1995 and 1994.............. F-7 - 8
Notes to Consolidated Financial Statements.......................................... F-9
</TABLE>
F-1
<PAGE> 55
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Nevada Manhattan Mining Incorporated
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Nevada
Manhattan Mining Incorporated (a development stage company) as of May 31, 1996
and 1995, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended May 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Nevada
Manhattan Mining Incorporated as of May 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the years in the three-year period
ended May 31, 1996, in conformity with generally accepted accounting principles.
/s/ JACKSON & RHODES P.C.
--------------------------------------
Jackson & Rhodes P.C.
Dallas, Texas
March 21, 1997 (except as to Note 7,
which is as of April 16, 1997)
F-2
<PAGE> 56
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MAY 31,
-----------------------------
1996 1995
FEBRUARY 28, ------------ ------------
1997
------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash........................................... $ 135,534 $ 233,981 $ --
Accounts receivable............................ -- -- 1,846
Prepaid expenses............................... 164,500 -- 2,545
----------- ---------- ----------
Total current assets........................ 300,034 233,981 4,391
----------- ---------- ----------
Property and equipment (Note 2):
Domestic mining properties and equipment....... 5,510,369 3,961,047 3,696,295
Indonesian mining property (Note 7)............ 4,123,147 -- --
Brazilian timber concession (Note 7)........... 700,000 -- --
Furniture and fixtures......................... 162,833 63,842 64,046
Less accumulated depreciation............... (66,567) (59,067) (52,867)
----------- ---------- ----------
10,429,782 3,965,822 3,707,474
----------- ---------- ----------
$ 10,729,816 $ 4,199,803 $ 3,711,865
=========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $ 86,761 $ 88,226 $ 124,983
Accrued liabilities............................ 306,175 181,162 283,169
Notes payable to stockholders.................. 256,196 136,751 93,182
Current portion of long-term debt (Note 3)..... 68,150 44,388 23,278
----------- ---------- ----------
Total current liabilities................... 717,282 450,527 524,612
Long-term debt (Note 3).......................... 100,266 115,723 105,919
----------- ---------- ----------
Total liabilities........................... 817,548 566,250 630,531
----------- ---------- ----------
Minority interest in subsidiary.................. 49,500 -- --
----------- ---------- ----------
Commitments and contingencies (Note 4)........... -- -- --
Stockholders' equity (Note 5):
Common stock to be issued, 10,800 shares (Notes
5 and 7).................................... 108 -- 495,000
Preferred stock to be issued, $1 par value,
250,000 shares authorized................... -- -- 737,327
Stock subscriptions receivable................. -- -- (50,500)
Preferred stock, $1 par, 250,000 shares
authorized, 228,919 and 132,510 shares
issued...................................... 228,919 132,510 --
Common stock, $.01 par; 49,750,000 shares
authorized; 12,208,412, 8,353,881 and
4,658,481 shares issued each period......... 122,084 83,539 46,585
Additional paid-in capital..................... 22,629,435 15,079,460 12,305,772
Deficit accumulated during the development
state....................................... (13,117,778) (11,661,956) (10,452,850)
----------- ---------- ----------
Total stockholders' equity............. 9,862,768 3,633,553 3,081,334
=========== ========== ==========
$ 10,729,816 $ 4,199,803 $ 3,711,865
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 57
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED FEBRUARY 28, YEARS ENDED MAY 31,
------------------------ -------------------------------------
1997 1996 1996 1995 1994
----------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Expenses:
Costs and expenses of development
stage activities.............. $ 1,319,759 $ 468,453 $ 1,198,506 $ 611,073 $ 480,473
---------- --------- ----------- --------- ---------
Net loss........................... (1,319,759) (468,453) (1,198,506) (611,073) (480,473)
Cumulative preferred dividends..... (136,063) -- (10,600) -- --
---------- --------- ----------- --------- ---------
Net loss attributable to common
shareholders..................... $(1,455,822) $ (468,453) $(1,209,106) $ (611,073) $ (480,473)
========== ========= =========== ========= =========
Net loss per common share.......... $ (0.14) $ (0.07) $ (0.16) $ (0.12) $ (0.15)
========== ========= =========== ========= =========
Weighted average shares
outstanding...................... 10,405,727 6,414,837 7,428,081 5,021,801 3,146,727
========== ========= =========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 58
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 10, 1985)
TO FEBRUARY 28, 1997 (UNAUDITED)
<TABLE>
<S> <C>
Expenses:
Costs and expenses of development stage activities........................... $ 12,809,932
Loss on disposition of mining properties..................................... 161,183
-----------
12,971,115
-----------
Net loss....................................................................... (12,971,115)
Cumulative preferred dividends................................................. (146,663)
-----------
Net loss attributable to common shareholders................................... $(13,117,778)
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 59
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STATE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
STOCK SUBSCRIPTIONS -------------------- --------------------- PAID-IN
TO BE ISSUED RECEIVABLE SHARES AMOUNT SHARES AMOUNT CAPITAL
------------ ------------- --------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Stock issued from inception (June 10,
1985) to May 31, 1993 (unaudited):
For cash........................... $ -- $ -- $ -- 2,450,460 $ 24,505 $11,019,902
For services....................... 219,016 2,190 113,545
For property....................... 140,000 1,400
Shares borrowed from officers (Note
8)................................. (495,000)
Losses from inception to May 31, 1993
(unaudited)........................
--------- -------- --------- -------- --------- ------- -----------
Balance, May 31, 1993................ -- -- -- -- 2,809,476 28,095 10,638,447
Stock issued for cash................ -- -- -- -- 1,155,225 11,552 963,917
Net loss............................. -- -- -- -- -- -- --
--------- -------- --------- -------- --------- ------- -----------
Balance, May 31, 1994................ -- -- -- -- 3,964,701 39,647 11,602,364
Shares to be issued to officers (Note
5)................................. 495,000 -- -- -- -- -- --
Shares issued for cash (Note 5)...... 131,500 (50,000) -- -- 647,213 6,472 638,541
Shares issued in settlement of claims
(Note 5)........................... -- -- -- -- 32,500 325 32,175
Shares issued as conversion of debt
(Note 5)........................... 605,827 -- 14,067 141 32,692
Net loss............................. -- -- -- -- --
--------- -------- --------- -------- --------- ------- -----------
Balance, May 31, 1995................ 1,232,327 (50,000) -- -- 4,658,481 46,585 12,305,772
Issuance of stock previously
purchased.......................... (1,232,327) -- 13,150 13,150 554,400 5,544 1,213,633
Cash received from stock
subscriptions...................... -- 50,500 -- -- -- -- --
Shares issued for cash............... -- -- 119,360 119,360 1,001,000 10,010 1,075,455
Shares issued for services (Note
5)................................. -- -- -- -- 1,940,000 19,400 465,600
Shares issued in connection with
shareholder loan................... -- -- -- -- 200,000 2,000 19,000
Preferred dividend................... -- -- -- -- -- -- --
Net Loss............................. -- -- -- -- -- -- --
--------- -------- --------- -------- --------- ------- -----------
Balance, May 31, 1996................ -- -- 132,510 132,510 8,353,881 83,539 15,079,460
Shares issued for property (Note
7)................................. 108 -- -- -- 789,200 7,892 4,942,000
Shares issued for cash............... -- -- 226,926 226,926 989,762 9,897 2,122,714
Shares issued for services........... -- -- -- -- 120,000 1,200 238,800
Shares issued for conversion of
debt............................... -- -- -- -- 650,400 6,504 128,996
Conversion of preferred.............. -- -- (130,517) (130,517) 1,305,169 13,052 117,465
Preferred dividend................... -- -- -- -- -- -- --
Net Loss............................. -- -- -- -- -- -- --
--------- -------- --------- -------- --------- ------- -----------
Balance, February 28, 1997
(unaudited)........................ $ 108 $ -- 228,919 $228,919 12,208,412 $122,084 $22,629,435
========= ======== ========= ======== ========= ======= ===========
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
DEVELOPMENTAL
STAGE TOTAL
------------ -----------
<S> <<C> <C>
Stock issued from inception (June 10,
1985) to May 31, 1993 (unaudited):
For cash........................... $ -- $11,044,407
For services....................... 115,735
For property....................... 1,400
Shares borrowed from officers (Note
8)................................. (495,000)
Losses from inception to May 31, 1993
(unaudited)........................ (9,361,304) (9,361,304)
------------ -----------
Balance, May 31, 1993................ (9,361,304) 1,305,238
Stock issued for cash................ -- 975,469
Net loss............................. (480,473) (480,473)
------------ -----------
Balance, May 31, 1994................ (9,841,777) 1,800,234
Shares to be issued to officers (Note
5)................................. -- 495,000
Shares issued for cash (Note 5)...... -- 726,013
Shares issued in settlement of claims
(Note 5)........................... -- 32,500
Shares issued as conversion of debt
(Note 5)........................... -- 638,660
Net loss............................. (611,073) (611,073)
------------ -----------
Balance, May 31, 1995................ (10,452,850) 3,081,334
Issuance of stock previously
purchased.......................... -- --
Cash received from stock
subscriptions...................... -- 50,500
Shares issued for cash............... -- 1,204,825
Shares issued for services (Note
5)................................. -- 485,000
Shares issued in connection with
shareholder loan................... -- 21,000
Preferred dividend................... (10,600) (10,600)
Net Loss............................. (1,198,506) (1,198,506)
------------ -----------
Balance, May 31, 1996................ (11,661,956) 3,633,553
Shares issued for property (Note
7)................................. -- 4,950,000
Shares issued for cash............... -- 2,359,537
Shares issued for services........... -- 240,000
Shares issued for conversion of
debt............................... -- 135,500
Conversion of preferred.............. -- --
Preferred dividend................... (136,063) (136,063)
Net Loss............................. (1,319,759) (1,319,759)
------------ -----------
Balance, February 28, 1997
(unaudited)........................ $(13,117,778) $ 9,862,768
============ ===========
</TABLE>
See accompanying notes to consolidated financial Statements
F-6
<PAGE> 60
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED FEBRUARY 28, YEARS ENDED MAY 31,
----------------------- -----------------------------------
1997 1996 1996 1995 1994
----------- --------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from developmental activities:
Net loss.................................... $(1,319,759) $(468,453) $(1,198,506) $(611,073) $(480,473)
Adjustments to reconcile net loss to net
cash used in developmental activities:
Common stock issued for services......... 240,000 -- 485,000 -- --
Loss on disposition of property.......... -- -- -- -- --
Settlement of claim with debt............ -- -- -- 32,500 --
Depreciation............................. 7,500 4,650 6,200 9,150 6,708
Minority interest expense................ 49,500 -- -- -- --
Changes in assets and liabilities:
Accounts receivable.................... -- -- 1,846 (1,846) --
Prepaid expenses....................... (164,500) 2,545 2,545 -- --
Accounts payable and accrued
liabilities......................... (12,515) (51,773) (149,364) (44,744) (275,292)
----------- --------- ----------- --------- ---------
Net cash used in developmental
activities............................. (1,199,774) (513,031) (852,279) (616,013) (749,057)
----------- --------- ----------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment.......... (1,521,460) (109,512) (187,481) (146,496) (116,777)
----------- --------- ----------- --------- ---------
Cash flows from financing activities:
Additions to long-term debt................. 14,556 -- -- -- --
Change in bank overdraft.................... -- 55,569 -- -- --
Payments on long-term debt.................. (6,251) (54,000) (46,153) (42,117) (31,133)
Net change in notes payable to
stockholders............................. 254,945 30,000 64,569 -- --
Proceeds from issuance of stock and stock to
be issued................................ 2,359,537 601,200 1,255,325 726,013 975,469
----------- --------- ----------- --------- ---------
Net cash provided by financing
activities............................. 2,622,787 632,769 1,273,741 683,896 944,336
----------- --------- ----------- --------- ---------
Net increase (decrease) in cash and
cash equivalents............................ (98,447) 10,226 233,981 (78,613) 78,502
Cash and cash equivalents:
Beginning of period......................... 233,981 -- -- 78,613 111
----------- --------- ----------- --------- ---------
End of period............................... $ 135,534 $ 10,226 $ 233,981 $ -- $ 78,613
=========== ========= =========== ========= =========
Supplemental cash flow information:
Cash paid during the period for interest.... $ -- $ -- $ 9,647 $ 12,701 $ 12,701
=========== ========= =========== ========= =========
</TABLE>
Non-cash transactions:
During the year ended May 31, 1995, the Company issued stock for
conversion of notes payable (see Note 5).
During the year ended May 31, 1996, the Company issued 200,000 shares
of common stock, valued at $21,000 in connection with a loan from a
shareholder. Also during the year ended May 31, 1996, the Company assumed
$77,067 in debt in connection with acquiring an additional interest in the
mine (Note 2).
During the period ended February 28, 1997, the Company issued 789,200
shares of common stock in connection with the Indonesian mining property
acquisitions, 100,000 shares for domestic mining services and 100,000
shares for a Brazilian timber concession (Note 7).
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 61
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 10, 1985)
TO FEBRUARY 28, 1997 (UNAUDITED)
<TABLE>
<S> <C>
Cash flows from developmental activities:
Net loss................................................................... $(12,971,115)
Adjustments to reconcile net loss to net cash used in developmental
activities:
Common stock issued for services........................................ 725,000
Loss on disposition of property......................................... 156,183
Settlement of claim with debt........................................... 97,265
Depreciation............................................................ 66,567
Minority interest expense............................................... 49,500
Changes in assets and liabilities:
Prepaid expenses...................................................... (164,500)
Accounts payable and accrued liabilities.............................. 246,273
------------
Net cash used in developmental activities.................................. (11,794,827)
------------
Cash flows from investing activities:
Purchase of property and equipment......................................... (5,625,466)
------------
Cash flows from financing activities:
Additions to long-term debt................................................ 330,011
Payments on long-term debt................................................. (165,291)
Net change in notes payable to stockholders................................ 256,196
Proceeds from issuance of stock and stock to be issued..................... 17,134,911
------------
Net cash provided by financing activities.................................. 17,555,827
------------
Net increase in cash and cash equivalents.................................... 135,534
Cash and cash equivalents:
Beginning of period........................................................ --
------------
End of period.............................................................. $ 135,534
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 62
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1996 AND 1995 AND FEBRUARY 28, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Nevada Manhattan Mining Incorporated was organized under the Laws of the
State of Nevada on June 10, 1985, to acquire, explore, develop, finance and sell
mining rights and properties. As of May 31, 1996 the Company is in the
development stage, in that planned principal operations have not commenced. The
Company has to date acquired properties and begun exploration and development.
Preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Basis of Presentation
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company is
reporting a net loss of $1,198,506 and $611,073 for the years ended May 31, 1996
and 1995 and $1,319,759 for the period ended February 28, 1997 and net cash
resources were used in developmental activities for each year and for the period
then ended.
The following is a summary of managements' plan to raise capital and
generate additional operating funds. Management has reached an agreement to have
gold ore milled adjacent to its Nevada property by a third party, reducing
capital requirements of the Company. The Company and its joint venture partners
in the Nevada property have constructed a 1,200 foot decline underground access
to enhance exploration and facilitate the extraction of gold ore. The Company
has negotiated an agreement with Harrison Western Mining and Construction
Company to begin production in July 1996. The Company has acquired and commenced
the exploration and development of its mineral holdings in Indonesia and its
Brazilian timber operations. Management will attempt to raise additional capital
through a private or public sale of common stock or by loans. Though the Company
has been able to raise funds from private placement of its equity securities in
recent years, there is no assurance of future availability of funds from these
sources.
Statement of Cash Flows
For statement of cash flow purposes, the Company considers short-term
investments with original maturities of three months or less to be cash
equivalents.
Property and Equipment
Mining properties acquisition, exploration and development costs are
capitalized as incurred and will be amortized on the units-of-production method
based on economically recoverable mineral reserves. The Company assesses
impairment of mineral properties on an area-by-area basis which aggregates
contiguous areas. Estimated site restoration and closure costs in which the
Company has reclamation responsibilities are charged against operating earnings
on the units-of-production method over the expected economic life of the mines.
Other property and equipment are carried at cost. Depreciation of other
property and equipment is provided using the straight-line method over the seven
year estimated useful lives of the related assets. Maintenance and repairs are
charged to operations as incurred and expenditures for major improvements are
capitalized. Gains and losses from retirement or replacement of property and
equipment are included in operations.
F-9
<PAGE> 63
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1996 AND 1995 AND FEBRUARY 28, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) which
requires the use of the asset and liability method of computing deferred income
taxes. The objective of the asset and liability method is to establish deferred
tax assets and liabilities for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled.
Net Loss Per Common Share
Per share amounts have been computed on the weighted average number of
common shares outstanding for each period. All share and per share amounts have
been restated to retroactively reflect the reverse stock split explained in Note
5. Convertible preferred shares are considered antidilutive since conversion
would decrease loss per share.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation.
2. MINING PROPERTIES AND EQUIPMENT
The Company previously owned a 24.5 percent undivided interest in a mining
property in the Manhattan Mining District, Nye County, Nevada. The property
consists of 28 patented (fee) and 65 unpatented mine claims which include the
Whitecaps Mine, Union Mine, Consolidated Mine, Earl Mine, Bath Mine and other
assorted mines and claims which cover approximately 1,200 acres. Under
contractual understandings reached during October 1995, which are in the final
stages of confirmation, the Company has increased its interest to 50 percent and
has assumed an additional $77,067 in debt (Note 3) in connection therewith.
In March 1997, the Company entered into an agreement to purchase the note
and deed of trust in its entirety which is secured by the property (see Note 7).
Management of the Company is active in the supervision of work taking place,
plus future planning of all aspects of operations. The operating permits for the
Manhattan Gold Mine were issued to the Company by the State of Nevada during
April 1996. The Company has negotiated an agreement with Harrison Western Mining
and Construction Company for the beginning of production in July 1996. The work
was begun in July 1996 and included placement of mine shops and support
facilities; mining in the existing workings of the mine and extension of the
existing decline from its end location of 1,200 linear feet from the surface to
the White Caps Level. Underground flooding and caving of the existing decline
required an alternate access way and a new decline was driven from approximately
800 feet on the existing decline. As of the end of December 1996, the new
decline has been driven starting from approximately 350 feet with an additional
450 feet expected to be completed by the end of March 1997. Ore is expected to
begin to be milled in May 1997.
Previously, the Company had an interest in a gold producing property in
Bolivia, South America and mining claims in British Columbia, Canada. The
management, directors and stockholders voted to release these properties as they
felt they were not economical to the Company and the future exploration and
development of the Nevada, Indonesian and Brazil properties would offer the
greatest return to the Company (see Note 7).
F-10
<PAGE> 64
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1996 AND 1995 AND FEBRUARY 28, 1997 AND 1996
3. LONG-TERM DEBT AND NOTES PAYABLE
Notes payable to stockholders accrue interest at rates from 9 percent to 12
percent, are due on demand and are guaranteed by certain Company officers.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
FEBRUARY
28, MAY 31,
----------- ---------------------
1997 1996 1995
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Obligation to a stockholder as a result of a
lawsuit settlement, interest imputed at 9%,
payable $1,000 per month until April 2001....... $ 48,426 $ 50,770 $ 52,330
Note payable to an individual at $2,000 per month,
including interest at 9%........................ 35,649 -- --
10% note payable to an individual under terms of a
joint venture agreement, payable $50,000 per
year including interest......................... 84,341 109,341 76,867
-------- -------- --------
168,416 160,111 129,197
Current portion................................... 68,150 44,388 23,278
-------- -------- --------
Long-term debt.................................... $ 100,266 $115,723 $105,919
======== ======== ========
</TABLE>
Maturities of long-term debt are as follows for the years ending May 31:
<TABLE>
<S> <C>
1997....................................................... $44,388
1998....................................................... $48,925
1999....................................................... $40,978
2000....................................................... $10,267
2001....................................................... $15,553
</TABLE>
The Company has capitalized $26,693, $34,242, $82,906 and $74,543 of
interest into the mining properties during the years ended May 31, 1996, 1995
and 1994 and for the period ended February 28, 1997, respectively.
4. COMMITMENTS AND CONTINGENCIES
Lease
The Company leases office space under terms of an operating lease expiring
on February 28, 1997. Future minimum lease payments for the year ending May 31,
1997 are $20,394. Rent expense amounted to $20,726, $20,394, $21,922 and $18,621
for the years ended May 31, 1996, 1995 and 1994, and the period ended February
28, 1997, respectively.
Securities and Exchange Commission
During May 1989, the Company received notice that the Securities and
Exchange Commission ("Commission") had commenced an investigation into the
Company's business activities. In 1993, the Board of Directors of the Company
determined that the entry of a proposed consent judgment and the termination of
the investigation was in the best interest of the Company and received
confirmation that the investigation had been completed.
On March 19, 1994, the Company received the following "Stipulation
Regarding Resolution of Outstanding Issues" from the Commission closing out the
investigation and all related issues:
F-11
<PAGE> 65
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1996 AND 1995 AND FEBRUARY 28, 1997 AND 1996
4. COMMITMENTS AND CONTINGENCIES (CONTINUED)
"Whereas the disposition of funds analysis conducted pursuant to the
Judgment of Permanent Injunction and Other Relief against Defendant
Nevada Manhattan Mining Incorporated entered on August 3, 1993 has
revealed no ill-gotten gains received by any defendant, the
undersigned parties hereby stipulate that all outstanding issues in
this action have been resolved, including disgorgement, and that the
judgment entered against the defendants are final."
While the Company believes that it was in the best interests of the Company
and its stockholders to enter the consent judgment, the entry of the judgment
may impose certain burdens on the Company with respect to its future activities.
The more significant of such burdens are as follows:
(i) The Company may not be able to utilize the exemptions from
registration available under Regulation A and Rule 701 under the 1933 Act.
(ii) The Company may not be able to rely on the private placement
exemptions provided in various state securities laws in connection with the
offer and sale of securities in a transaction which qualifies as an exempt
sale of securities under the 1933 Securities Act.
In such case, the Company would be required to qualify the transaction
under the state securities laws which may not be available. This qualification
would increase the cost of, and extend the time for completing, such private
placement of securities.
Other Contingencies
In January 1995, a group of stockholders and creditors asserted a claim in
regards to a January 1988 settlement agreement. The Company has not been
formally served or any legal process initiated by the stockholders and creditors
in asserting this claim. Management does not believe the ultimate outcome of
this contingency will have a material effect on financial position or results of
operations.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair value
amounts have been determined by the Company, using available market information
and appropriate valuation methodologies.
The fair value of financial instruments classified as current assets or
liabilities including cash and cash equivalents and notes and accounts payable
approximate carrying value due to the short-term maturity of the instruments.
5. STOCKHOLDERS' EQUITY
Stock Options
The Company has granted stock options to all members of the Board of
Directors in the amount of 10,000 shares per full year of service as an active
member of the Board of Directors. The exercise price of options granted is $1.00
per share of common stock. Options may not be exercised after expiration of ten
(10) years from the date of grant and are non-transferable other than by will or
inheritance. These options are the only compensation received for service as
Director.
F-12
<PAGE> 66
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1996 AND 1995 AND FEBRUARY 28, 1997 AND 1996
5. STOCKHOLDERS' EQUITY (CONTINUED)
The following table sets forth information regarding options for the
periods ended:
<TABLE>
<CAPTION>
FEBRUARY 28, MAY 31,
------------ -----------------
1997 1996 1995
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Outstanding at beginning of period........... 240,000 190,000 160,000
Granted...................................... -- 50,000 30,000
------- ------- -------
Outstanding at end of period................. 240,000 240,000 190,000
======= ======= =======
</TABLE>
In connection with their employment contracts, the Company also granted two
officers the right to purchase 900,000 common shares each at an average price of
$1.50 per share. The officers exercised these options during the year ended May
31, 1996 and the Company's Board of Directors then agreed to give the officers
the shares for services rendered. These shares have been valued at $.25 per
share ($450,000) in the accompanying financial statements.
The Company has also granted its chief legal counsel an option to acquire
100,000 common shares at $4 per share.
Reverse Split
In February 1995, the Company's stockholders approved a one-for-ten reverse
split of the Company's common stock. The stated par value per share was not
changed. All share and per share amounts herein have been retroactively restated
to reflect the reverse split.
Stock to be Issued and Stock Subscriptions Receivable
The Company sold 647,213 shares of common stock and 13,150 shares of Series
A Preferred Stock in separate private placements during the year ended May 31,
1995. The preferred stock had not been formally issued as of May 31, 1995, but
was issued during the year ended May 31, 1996. The Company raised $776,513 in
the private placements of which $50,500 was still receivable at May 31, 1995 and
has been reflected as an offsetting amount in stockholders' equity at that date.
During the year ended May 31, 1995, the Company also agreed to issue 73,467
shares of common stock in exchange for conversion of $638,660 of notes payable
to certain individuals.
During the year ended May 31, 1995, the Company also agreed to issue 32,500
shares of common stock to certain individuals to settle certain claims made by
the individuals. The $32,500 value of the shares was charged to general and
administrative expense.
The preferred stock has a $1 par value, a $10 liquidation preference and an
8 percent cumulative dividend payable in cash or kind. Each share is convertible
to ten common shares for a period of thirty months.
During 1988, two Company officers loaned 495,000 (post-reverse split)
common shares to the Company as treasury stock in return for the Company's
promise to return the shares when common shares became available as a result of
a reverse split or an increase in authorized shares. The shares were reissued to
the officers in November 1995. The Company has accounted for the shares, valued
at the market price of the shares when they were loaned to the Company, as a
long-term obligation in the financial statements until the year ended May 31,
1995, when the reverse split occurred and the shares became available for
issuance. At that time, the obligation was considered as common stock to be
issued and included in stockholders' equity.
F-13
<PAGE> 67
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1996 AND 1995 AND FEBRUARY 28, 1997 AND 1996
5. STOCKHOLDERS' EQUITY (CONTINUED)
Warrants
In connection with the private placement of common stock, in October 1994,
the Company also issued warrants to purchase 50,300 shares of common stock at
$1.00 per share. None of these warrants, which expire in October 1996, have been
exercised as of May 31, 1996.
6. INCOME TAXES
The Company has recorded no income tax benefit, nor has deferred taxes in
any year due to a net operating loss carryforward amounting to approximately
$10,000,000 at May 31, 1996, which will expire, if not utilized, from 2002 to
2011.
7. SUBSEQUENT EVENTS
In March 1997, the Company entered into a Sale and Purchase Agreement with
the Selig Entities. Under the terms of this latest agreement, the Selig Entities
agreed to sell to the Company one hundred percent (100%) of their interests in
the Nevada Note, the Deed of Trust, and the Nevada Property for the sum of Three
Hundred Seventy Five Thousand Dollars ($375,000) payable as follows: One Hundred
Thousand Dollars ($100,000) in March 1997 and the balance plus all accrued and
unpaid interest (calculated at the rate of 5.25%) on or before February 6, 1999.
The Company in fact paid the first installment of One Hundred Thousand Dollars
($100,000) in March 1997. The agreement also acknowledges that the Company is
the only person or entity legally entitled to conduct mineral operations on the
Nevada Property. The Company is also required to pay all U.S. Bureau of Land
Management annual maintenance fees associated with the claims comprising the
Nevada Property.
Indonesia
The Company has made certain acquisitions in Indonesia subsequent to May
31, 1996:
On August 19, 1996, the Company entered into an agreement to acquire a 51%
interest in a metals/minerals mining property in Kalimantan, Indonesia (Sopang
Gold Concession). Consideration for the purchase consisted of 400,000 shares of
common stock due upon the signing of the agreement (of which 10,800 are unissued
as of February 28, 1997) and an additional 4,000,000 shares to be released
dependent upon the value of an independent valuation of the property. The
Company has valued the 400,000 shares at $1,200,000.
The Sopang Gold Concession ("Sopang") consists of 16,480 hectares and is
held under Indonesian title as a KP, a form of Indonesian citizen ownership with
a joint venture agreement. The concession is located in southeast Kalimantan.
Because of the lack of major infrastructure in the area, initial work will be
limited to surface trenching and geochemical sampling. Field work at Sopang will
be initiated in the first quarter of 1997 with more extensive exploration
including airborne geophysical surveys and drilling to be initiated later in
1997.
The West Kalimantan Gold Project ("West Kalimantan") is 75 kilometers south
of the Sarawak region of Malaysia and contains 62 hectares with the intent to
expand to at least 2,000 hectares. The Project is held under a KPPE title, a
form of Indonesian citizen ownership in joint venture with the Company. Access
to the property is by road and motorized canoe for initial field work and
helicopter support for advanced exploration activities. Infrastructure is
limited but the proximity to the west coast of Kalimantan and low relief terrain
indicates no unusual development problems will be encountered. Following a
survey and additional ground
F-14
<PAGE> 68
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1996 AND 1995 AND FEBRUARY 28, 1997 AND 1996
7. SUBSEQUENT EVENTS (CONTINUED)
sampling, key core drill targets will be identified and drilling will start as
early as the second quarter of 1997. Further property acquisition is an integral
part of the development program at West Kalimantan. Exploration has commenced in
the first quarter of 1997.
The Cepa Coal Project ("Cepa") in East Kalimantan covers an area of
approximately 286,000 hectares and is held in three concessions as Contracts of
Work ("COW's"). Initial work on the property will include reasonable expansion
of ownership to include promising additional property containing similar coal.
Surface sampling, shallow drilling for coal characterization and general market
surveys began in the first quarter of 1997. The Silobat and Cepa projects,
collectively, were acquired in January 1997 for 400,000 common shares issued
upon signing of the agreement (valued at $2,800,000) and an additional 4,000,000
shares to be released dependent upon an independent valuation of the property of
$40,000,000. The Company is also contingently liable to issue 1,000,000 common
shares regardless of the valuation.
The Company has contractually acquired the controlling interest in five
additional gold concessions in Indonesia. The Company is currently reviewing
these properties to determine an applicable acquisition structure.
The Company has retained the firm of Behre Dolbear & Co. to provide review
and third party validation with respect to its Indonesian operations.
Brazil
The Company, through its 80% owned subsidiary, Equatorial Resources ("ER"),
has entered into a joint venture agreement with a Brazilian company to develop
and operate 276,000 hectares of virgin timberland located in the state of Para,
Brazil. The Company has an option to buy an additional 420,000 hectares. Under
this joint venture arrangement, ER will manage the property and will earn a
fifty percent interest in all operations, including timber harvesting and
milling activities currently being conducted on the property. Of the four
existing saw mills acquired by ER, two are operational in Phase I and Phase II,
and the other two mills will be put into operation by the end of February 1997.
Immediate expansion plans call for the construction of up to eight additional
mills in Phase III.
The Company is providing $500,000 for Phase I and Phase II and will provide
$1,500,000 for Phase III. In addition to the cash capital requirements for the
property, the Company has issued 100,000 shares (valued at $700,000) and is
required to issue 2,000,000 shares of common stock to the seller in 1997 upon
closing of a stock-for-assets reorganization agreement.
Agreement with Silenus Limited
On April 14, 1997, the Company entered into a Subscription Agreement with
Silenus Limited ("Silenus") in a negotiated private placement. This transaction
was made in reliance upon the exemption from registration afforded by Section
4(2) of the Securities Act of 1933. As a result, the Company issued $2,000,000
of 8% Senior Secured Convertible Debentures due March 31, 2000 (the
"Debentures") and granted to Silenus a warrant to purchase 62,500 shares of the
Company's Common Stock (the "Warrant").
The Debentures may be converted into shares of Common Stock at any time
commencing June 2, 1997 through August 16, 1997 at a price equal to the lesser
of: seventy-five percent (75%) of the closing bid price of the Common Stock on
April 16, 1997 (i.e. 75% X $8.00, or $6.00 per share); seventy-five percent
(75%) of the closing bid price of the Common Stock on the day prior to the
funding of any subsequent funding ("tranche"); or seventy-five percent (75%) of
the average closing bid price for the five trading days
F-15
<PAGE> 69
NEVADA MANHATTAN MINING INCORPORATED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1996 AND 1995 AND FEBRUARY 28, 1997 AND 1996
7. SUBSEQUENT EVENTS (CONTINUED)
immediately preceding the actual date of conversion of the Debentures. If
conversion is made after August 16, 1997, the conversion price will be
seventy-two and one-half percent (72.5%) of the above-referenced valuation
standards.
The Company is required to use its "best efforts" to cause the Registration
Statement of which this Prospectus is a part to become effective prior to August
16, 1997. If the Registration Statement does not become effective by July 17,
1997, the Company is required to pay liquidated damages to Silenus equal to two
percent (2%) of the Debentures for the first thirty days and three percent (3%)
per month thereafter until the Registration Statement becomes effective.
Subject to the existence of certain conditions subsequent and the
continuing accuracy of the warranties and covenants within the Subscription
Agreement, Silenus has the right to fund the issuance of additional Debentures
in up to four additional tranches aggregating $8,000,000. The second tranche
will close, if at all, commencing the later of: five business days after the
effective date of the Company's Registration Statement filed April 3, 1997, on
Form 10 pursuant to Section 12(b) of the Securities Exchange Act of 1934; or the
conversion of the Debentures. Subsequent tranches may fund, if at all, on the
later of: ninety days after the funding of the previous tranche: or the
conversion of the Debentures issued in the immediately preceding tranche.
Until Silenus has not converted at least seventy-five percent (75%) of the
Debentures, a deed of trust on the Nevada Property and the pledge of 1,000,000
shares of Common Stock will secure the Debentures.
The Company has also issued to Silenus a Warrant to purchase 62,500 shares
of Common Stock. The Warrant may be exercised at any time up to and through
April 16, 2002 at the price of $8.00 per share, the closing bid price as of
April 15, 1997. The exercise price is subject to adjustment to account for
payments of dividends, stock splits, reverse stock splits, and similar events.
Funding of each subsequent tranche will likewise entitle Silenus to purchase an
additional 62,500 share of Common Stock at $8.00 per share (subject to
adjustments noted above).
8. GEOGRAPHIC AND SEGMENT INFORMATION
The Company's operations during the three years ended May 31, 1996 were
entirely gold mining operations in the United States. Beginning in the nine
months ended February 28, 1997, the Company began operating in Indonesia (gold
mining and coal) and Brazil (timber). Financial data by geographic area as of
and for the period ended February 28, 1997 were as follows:
<TABLE>
<CAPTION>
OPERATING IDENTIFIABLE
LOSS ASSETS
----------- -----------
(UNAUDITED)
<S> <C> <C>
United States..................................... $(1,105,472) $ 5,659,169
Indonesia......................................... (79,955) 4,123,147
Brazil............................................ (134,332) 947,500
----------- -----------
Total................................... $(1,319,759) $10,729,816
=========== ===========
</TABLE>
F-16
<PAGE> 70
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Summary of the Offering................ 1
Risk Factors and Special Material
Considerations....................... 4
Terms of the Offering.................. 14
Plan of Distribution................... 16
Description of Company's Business and
Property............................. 16
Use of Proceeds........................ 31
Management............................. 33
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 39
Principal and Selling Shareholders..... 40
Description of Securities Being
Offered.............................. 43
Legal Matters, Auditors, and Pending
Legal Proceedings.................... 45
Definitions............................ 47
Further Information.................... 48
Financial Statements of Company........ F-1
</TABLE>
======================================================
======================================================
LOGO
SHARES
NEVADA MANHATTAN MINING, INC.
MINING DEVELOPMENT EXPLORATION
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
, 1997
======================================================
<PAGE> 71
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws do not contain a provision entitling any director or
executive officer to indemnification against liability under the Securities Act
of 1933 (the " '33 Act"). Sections 78.751 et seq. of the Nevada Revised Statutes
allow a company to indemnify its officers, directors, employees, and agents from
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, except under certain
circumstances. Indemnification may only occur if a determination has been made
that the officer, director, employee, or agent acted in good faith and in a
manner which such person believed to be in the best interests of the company. A
determination made be made by the shareholders; by a majority of the directors
who were not parties to the action, suit, or proceeding confirmed by opinion of
independent legal counsel; or by opinion of independent legal counsel in the
event a quorum of directors who were not a party to such action, suit, or
proceeding does not exist. Provided the terms and conditions of these provisions
under Nevada law are met, officers, directors, employees, and agents of the
Company may be indemnified against any cost, loss, or expense arising out of any
liability under the '33 Act. Insofar as indemnification for liabilities arising
under the '33 Act may be permitted to directors, officers and controlling
persons of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification for violations of the
'33 Act is against public policy and is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Company in connection with the sale of Common Stock being registered. All
amounts are estimates except the registration fee and the Amex fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
Registration fee.................................................. $ 8,888
Amex fee.......................................................... $ 50,000
Printing and engraving............................................ $ 60,000
Translation Services.............................................. $ 3,000
Legal fees and expenses........................................... $ 70,000
Accounting fees and expenses...................................... $ 50,000
Blue sky fees and expenses........................................ $ 10,000
Transfer agent fees............................................... $ 2,500
Miscellaneous..................................................... $ 5,000
-------
Total................................................... $ 259,388
=======
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
From the period March 1, 1994, through February 28, 1997, the Company has
offered and sold 8,342,619 shares of its Common Stock and 228,919 shares of
Preferred Stock.
Sales of both the Common Stock and the Preferred Stock were effected
through the executive officers of the Company to existing shareholders.
No underwriters were employed in connection with the offer and sale of the
aforementioned securities. Thus no underwriting discounts or commissions were
paid.
All of the above-referenced sales were made by the Company in reliance upon
the exemptions from registration contained in Section 4(2) of the Securities Act
of 1933 and Regulation D promulgated pursuant to such exemption.
II-1
<PAGE> 72
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
---------- ------------------------------------------------------------------------
<S> <C>
3.(i) Articles of Incorporation of Epic Enterprises, Ltd., Filed June 10,
1985*
3.(ii) Certificate of Amendment to Articles of Incorporation of Epic
Enterprises, Ltd., Filed September 11, 1987*
3.(iii) Certificate of Amendment to Articles of Incorporation of Nevada
Manhattan Mining Incorporated Filed October 26, 1987*
3.(iv) Certificate of Amendment of Articles of Incorporation of Nevada
Manhattan Mining Incorporated Filed August 31, 1995*
3.(v) Certificate of Determination of Preferences of Series A Preferred Stock
of Nevada Manhattan Mining Incorporated Filed October 25, 1995*
3.(vi) Bylaws of Epic Enterprises, Ltd.*
3.(vii) Memorandum and Articles of Association of Equatorial Resources, Ltd.+
3.(viii) Memorandum and Articles of Association of Kalimantan Resources, Ltd.+
4.(i) Pages 1, 3, 4, and 5 of the Bylaws of Epic Enterprises, Ltd.*
4.(ii) Pages 1 through 9 of Certificate of Determination of Preferences of
Series A Preferred Stock of Nevada Manhattan Mining Incorporated Filed
October 25, 1995*
4.(iii) Stock Options Issued to Directors+
4.(iv) Subscription Agreement dated April 14, 1997 with Silenus Limited
4.(v) Warrant to Purchase Common Stock
4.(vi) Deed of Trust in favor of Silenus Limited
4.(vii) Form of Debenture
5 Opinion on Legality*
10.(i) Mining Agreement Dated April 4, 1987*
10.(ii) Amendment to Mining Agreement Dated December 9, 1987*
10.(iii) Manhattan Mining Property Agreement Dated March 2, 1989*
10.(iv) Corporation Quitclaim Deed Filed March 9, 1989*
10.(v) Deed of Trust and Assignment of Rents Recorded March 9, 1989*
10.(vi) Joint Venture Agreement Dated June 1993*
10.(vii) Letter Agreement Dated August 10, 1995*
10.(viii) Amendment to Joint Venture Agreement Dated October 20, 1995*
10.(ix) Contract Between Nevada Manhattan Mining, Inc, and Harrison Western
Construction Corp.*
10.(x) Principles of Agreement Dated August 19, 1996*
10.(xi) Employment Agreement Dated January 1, 1995 with Christopher D. Michaels*
10.(xii) Employment Agreement Dated January 1, 1995 with Jeffrey Kramer*
10.(xiii) Consulting Agreement with Gold King Mines Corporation Dated April 1,
1995*
10.(xiv) Consulting Services Agreement Dated October 7, 1996 with Behre Dolbear &
Company, Inc.*
10.(xv) Letter Agreement Dated March 25, 1996 with David Weissberg, M.D.*
10.(xvi) Letter Agreement Dated May 13, 1996 with David Weissberg, M.D.*
</TABLE>
II-2
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
---------- ------------------------------------------------------------------------
<S> <C>
10.(xvii) Letter Agreement Dated September 25, 1996 with Mr. John Holsten*
10.(xviii) Letter Agreement dated April 23, 1997 with British Far East Holdings
Ltd.
10.(xix) Addendum Agreement to Principles of Agreement+
10.(xx) Acquisition Agreement by and between Sinkamas Agunbg Ltd. and Kalimantan
Resources, Ltd. dated January 26, 1997+
10.(xxi) Acquisition Agreement for Gold and Coal Concessions by and between
Kalimas Jaya Ltd. and Kalimantan Resources, Ltd.+
10.(xxii) November 11, 1996 letter Agreement with Maderia Intex, S.A.
International Exports+
10.(xxiii) Proposal for Sale and Purchase and Authorization for Exploration of
Timber+
10.(xxiv) Eco-Rating Standard Agreement dated December 17, 1996+
10.(xxv) Sale and Purchase Agreement dated February 6, 1997+
21 Subsidiaries of Small Business Issuer+
23.(i) Consent of Jackson & Rhodes P.C.
23.(ii) Consent of William R. Wilson
23.(iii) Consent of Behre Dolbear & Company, Inc.
27 Financial Data Schedule
99(i) Business Plan Dated July 1995*
99(ii) Business Plan Dated January 1997+
</TABLE>
- ---------------
* Filed with Registration Statement on Form SB-2 on December 8, 1996
(Registration No. 333-17423).
+ Incorporated by reference to the Company's Registration Statement on Form 10
filed April 3, 1997 (Registration No. 001-12867).
(B) FINANCIAL STATEMENT SCHEDULES.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective Registration Statement.
II-3
<PAGE> 74
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the Company pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described in the Prospectus or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed a part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 75
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this amendment to
registration statement to be signed on its behalf by the undersigned, in the
City of Calabasas, State of California on April 30, 1997.
NEVADA MANHATTAN MINING
INCORPORATED
By /s/ CHRISTOPHER D. MICHAELS
------------------------------------
Christopher D. Michaels
President
In accordance with the requirements of the Securities Act of 1933, this
amendment to registration statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- ---------------
<S> <C> <C>
/s/ CHRISTOPHER D. MICHAELS President and Director April 30, 1997
- ---------------------------------------------
CHRISTOPHER D. MICHAELS
/s/ JEFFREY S. KRAMER Senior Vice President April 30, 1997
- --------------------------------------------- Chief Financial Officer
JEFFREY S. KRAMER
/s/ STANLEY J. MOHR Director April 30, 1997
- ---------------------------------------------
STANLEY J. MOHR
/s/ JOSEPH RUDE III, M.D. Director April 30, 1997
- ---------------------------------------------
JOSEPH RUDE III, M.D.
/s/ EDNA POLLOCK Director April 30, 1997
- ---------------------------------------------
EDNA POLLOCK
</TABLE>
II-5
<PAGE> 76
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------- ------------
<S> <C> <C>
3.(i) Articles of Incorporation of Epic Enterprises, Ltd., Filed June 10,
1985*..................................................................
3.(ii) Certificate of Amendment to Articles of Incorporation of Epic
Enterprises, Ltd., Filed September 11, 1987*...........................
3.(iii) Certificate of Amendment to Articles of Incorporation of Nevada
Manhattan Mining Incorporated Filed October 26, 1987*..................
3.(iv) Certificate of Amendment of Articles of Incorporation of Nevada
Manhattan Mining Incorporated Filed August 31, 1995*...................
3.(v) Certificate of Determination of Preferences of Series A Preferred Stock
of Nevada Manhattan Mining Incorporated Filed October 25, 1995*........
3.(vi) Bylaws of Epic Enterprises, Ltd.*......................................
3.(vii) Memorandum and Articles of Association of Equatorial Resources,
Ltd.+..................................................................
3.(viii) Memorandum and Articles of Association of Kalimantan Resources,
Ltd.+..................................................................
4.(i) Pages 1, 3, 4, and 5 of the Bylaws of Epic Enterprises, Ltd.*..........
4.(ii) Pages 1 through 9 of Certificate of Determination of Preferences of
Series A Preferred Stock of Nevada Manhattan Mining Incorporated Filed
October 25, 1995*......................................................
4.(iii) Stock Options Issued to Directors+.....................................
4.(iv) Subscription Agreement dated April 14, 1997 with Silenus Limited.......
4.(v) Warrant to Purchase Common Stock.......................................
4.(vi) Deed of Trust in favor of Silenus Limited..............................
4.(vii) Form of Debenture......................................................
5 Opinion on Legality*...................................................
10.(i) Mining Agreement Dated April 4, 1987*..................................
10.(ii) Amendment to Mining Agreement Dated December 9, 1987*..................
10.(iii) Manhattan Mining Property Agreement Dated March 2, 1989*...............
10.(iv) Corporation Quitclaim Deed Filed March 9, 1989*........................
10.(v) Deed of Trust and Assignment of Rents Recorded March 9, 1989*..........
10.(vi) Joint Venture Agreement Dated June 1993*...............................
10.(vii) Letter Agreement Dated August 10, 1995*................................
10.(viii) Amendment to Joint Venture Agreement Dated October 20, 1995*...........
10.(ix) Contract Between Nevada Manhattan Mining, Inc. and Harrison Western
Construction Corp.*....................................................
10.(x) Principles of Agreement Dated August 19, 1996*.........................
10.(xi) Employment Agreement Dated January 1, 1995 with Christopher D.
Michaels*..............................................................
10.(xii) Employment Agreement Dated January 1, 1995 with Jeffrey Kramer*........
10.(xiii) Consulting Agreement with Gold King Mines Corporation Dated April 1,
1995*..................................................................
10.(xiv) Consulting Services Agreement Dated October 7, 1996 with Behre Dolbear
& Company, Inc. *......................................................
10.(xv) Letter Agreement Dated March 25, 1996 with David Weissberg, M.D.*......
10.(xvi) Letter Agreement Dated May 13, 1996 with David Weissberg, M.D. *.......
10.(xvii) Letter Agreement Dated September 25, 1996 with Mr. John Holsten*.......
10.(xviii) Letter Agreement dated April 23, 1997 with British Far East Holding
Ltd....................................................................
10.(xix) Addendum Agreement to Principles of Agreement+.........................
10.(xx) Acquisition Agreement by and between Sinkamas Agunbg Ltd. and
Kalimantan Resources, Ltd. dated January 26, 1997+.....................
10.(xxi) Acquisition Agreement for Gold and Coal Concessions by and between
Kalimas Jaya Ltd. and Kalimantan Resources, Ltd.+......................
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------- ------------
<S> <C> <C>
10.(xxii) November 11, 1996 letter Agreement with Maderia Intex, S.A.
International Exports+.................................................
10.(xxiii) Proposal for Sale and Purchase and Authorization for Exploration of
Timber+................................................................
10.(xxiv) Eco-Rating Standard Agreement dated December 17, 1996+.................
10.(xxv) Sale and Purchase Agreement dated February 6, 1997+....................
21 Subsidiaries of Small Business Issuer+.................................
23.(i) Consent of Jackson & Rhodes P.C. ......................................
23.(ii) Consent of William R. Wilson...........................................
23.(iii) Consent of Behre Dolbear & Company, Inc................................
27 Financial Data Schedule................................................
99(i) Business Plan Dated July 1995*.........................................
99(ii) Business Plan Dated January 1997+......................................
</TABLE>
- ---------------
* Filed with Registration Statement on Form SB-2 on December 6, 1996
(Registration No. 333-17423).
+ Incorporated by reference to the Company's Registration Statement on Form 10
filed April 3, 1997 (Registration No. 001-12867)'
<PAGE> 1
EXHIBIT 4.(iv)
SUBSCRIPTION AGREEMENT
NEVADA MANHATTAN MINING INCORPORATED
8% SENIOR SECURED CONVERTIBLE DEBENTURES
THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND REGISTERED OR QUALIFIED UNDER SUCH LAWS, OR UNLESS
THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
THE ISSUER AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE
SECURITIES BEING OFFERED BY THE ISSUER ARE SECURITIES AS THAT TERM HAS BEEN
DEFINED IN THE ACT. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ACT IN
RELIANCE UPON THE EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 4(2) THEREOF,
AND ARE SUBJECT TO RESTRICTIONS ON TRANSFER. FURTHER, THESE SECURITIES MAY
ONLY BE SOLD PURSUANT TO EXEMPTIONS FROM REGISTRATION OR QUALIFICATION IN THE
VARIOUS STATES, AND MAY BE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER IN
SUCH JURISDICTIONS.
This Agreement has been executed by the undersigned in connection with the
private placement of Eight Percent (8%) Senior Secured Convertible Debentures
and Common Stock Purchase Warrants (hereinafter referred to as the
"Securities") of Nevada Manhattan Mining Incorporated, 5038 North Parkway
Calabasas, Suite 100, Calabasas, California 91302, a corporation organized
under the laws of Nevada (hereinafter referred to as the "Issuer").
The undersigned, a corporation organized under the laws of the Isle of Man,
(hereinafter referred to as the "Purchaser") hereby represents and warrants to,
and agrees with the Issuer as follows:
1. Agreement to Subscribe: Purchase Price.
a) The undersigned hereby subscribes for and agrees to purchase up to
$10,000,000 aggregate principal amount of the Issuer's 8% Senior
Secured Convertible Debentures convertible into shares of the Issuer's
common stock ("Common Stock") in the form attached as Schedule "A"
hereto (the "Debentures"), and Common Stock Purchase Warrants attached
as Schedule "B" hereto (the "Warrants") for a total consideration,
including all fees and commissions, if all Debentures are purchased,
of $10,000,000 (the "Purchase Price") under the terms and conditions
specified in Paragraph 10 hereof.
1
<PAGE> 2
b) Form of Payment. Purchaser shall pay such portion of the Purchase
Price as may be required to purchase the Debentures being purchased,
from time to time, by delivering good funds by wire transfer in United
States Dollars into an escrow account (the "Escrow Account") as
follows:
Preferred Bank
1801 Century Park East
Los Angeles, California 90067
ABA No. 1220 42205
Account Name: David L. Kagel Special Trust Account
Account No.: 004 603 451
2. General Understanding
Purchaser understands that the Securities have not been registered
under the Act, and, accordingly, that the Issuer must be satisfied
that the offer and sale of the Securities to the Purchaser will
satisfy the requirements of Section 4(2) under the Act. Purchaser and
Issuer intend that the representations, declarations, and warranties
set out in this Agreement will be relied upon in determining
Purchaser's suitability as a purchaser of the Securities.
3. Purchaser Representations and Covenants
Purchaser represents, warrants, and acknowledges to the Issuer as
follows:
a) The Securities are being acquired for the account of Purchaser and its
affiliates for investment, with no present intention of distributing
or selling any portion thereof, and will not be transferred by
Purchaser in violation of the Act. No one other than Purchaser has
any interest in or any right to acquire the Securities.
b) The Securities have not been registered under the Act or qualified
under any state securities law in reliance on an exemption from
registration and qualification for private offerings. Purchaser is
purchasing the Securities without being furnished any offering
literature or prospectus other than the SEC Filings (as defined in
Section 3(k) below).
C) Purchaser is an "accredited investor" under Rule 501(a)(3) of
Regulation D under the Act and will sign the Accredited Investor
Declaration, substantially in the form of Schedule "C", attached
hereto, contemporaneously with the execution of this Agreement.
d) No representations or warranties have been made to Purchaser by the
Issuer or any agent of the Issuer other
2
<PAGE> 3
than those set forth in this Agreement.
e) Purchaser has investigated the acquisition of the Securities to the
extent it deems necessary or desirable and the Issuer has provided it
with any assistance it has requested in connection therewith.
f) The address set forth below is the true and correct address of
Purchaser's principal business office.
g) Purchaser has full power and authority to make the representations
referred to herein, to purchase the Securities, and to execute and
deliver this Agreement.
h) If Purchaser is not located in the United States, Purchaser has
satisfied himself as to the full observance of the laws of the
Purchaser's jurisdiction in connection with the offer and sale of the
Securities or any use of this Agreement, including (i) the legal
requirements of the Purchaser's jurisdiction for the purchase of
Securities, (ii) any foreign exchange restrictions applicable to such
purchase, and (iii) any governmental or other consents that may need
to be obtained, and (iv) the income tax and other tax consequences, if
any, which may be material to the purchase, holding, redemption,
exchange, sale or transfer of the Securities. Purchaser's purchase
and payment for, and Purchaser's continued beneficial ownership of the
Securities will not violate any applicable securities or other laws of
Purchaser's jurisdiction.
i) Purchaser is aware that this is a private offering and that no United
States federal, state or other agency has made any finding or
determination as to the fairness of the investment nor made any
recommendation or endorsement of the Securities;
j) Purchaser acknowledges and represents that Purchaser has had access to
information concerning the Issuer and its subsidiaries, its
management, its current and proposed business and other details of the
investment believed by Purchaser to be sufficient to enable Purchaser
to make an informed investment decision regarding Purchaser's
acquisition of the Securities. Purchaser has had an opportunity to
ask questions of, and receive answers from, and obtain additional
information from representatives of the Issuer concerning (i) the
business and financial condition of the Issuer; (ii) the current and
proposed business of the Issuer; and (iii) the terms of this Agreement
and the purchase of the Securities, all to the extent such information
is available or could be
3
<PAGE> 4
acquired without unreasonable effort or expense.
k) Purchaser represents that Purchaser or its representative has received
copies of the Form 10 Registration Statement under the Securities
Exchange Act of 1934 filed by the Issuer on April 3, 1997 and will
receive all amendments thereto (collectively "SEC Filings").
l) Purchaser represents that all data or information requested by
Purchaser from the Issuer or any of its officers or affiliates
concerning the Issuer has been furnished to Purchaser.
m) Purchaser represents and warrants to the Issuer that (i) Purchaser is
able to bear the economic risk of an investment in the Securities;
(ii) Purchaser has adequate means of providing for Purchaser's current
needs and contingencies; (iii) Purchaser is purchasing the Securities
for investment with the intention of holding the Securities for an
indefinite period, and is able to afford to hold the Securities for an
indefinite period; (iv) Purchaser has such knowledge and experience in
financial and business matters that Purchaser is capable of evaluating
the merits and risks of the investment in the Securities; (v)
Purchaser can afford a complete loss of Purchaser's investment in the
Securities; and (vi) Purchaser is willing to accept the foregoing
investment risks.
n) Purchaser represents and warrants to the Issuer that Purchaser's
acquisition of the Securities is not a transaction (or any element of
a series of transactions) that is part of a plan or scheme to evade
the registration provisions of the Act.
o) Purchaser understands that there is currently no trading market for
the Securities and that none is expected to arise. Purchaser further
acknowledges that, although there currently exists a trading market
for the Issuer's Common Stock, such market may not exist or be
accessible in sufficient volume at such time as the Securities are
converted into Common Stock.
Purchaser covenants to the Issuer that:
excluding the SEC Filings, Purchaser has not distributed, and will not
distribute any materials and has not divulged, and will not divulge,
the contents thereof to anyone other than such legal or financial
advisors as Purchaser has deemed necessary for purposes of evaluating
an investment in the Securities and no one (except such
4
<PAGE> 5
advisors) has used such materials, and Purchaser has not made, and
will not make, any copies thereof.
4. Issuer Representations and Covenants.
In order to induce Purchaser to enter into this Agreement, the Issuer
represents and warrants to the Purchaser as follows:
This private placement of Securities in the aggregate principal amount
of up to $10,000,000.00 is being made on a "best efforts" basis
pursuant to Section 4(2) of the Act. Such Securities may be issued in
from one to five tranches of up to $2,000,000 per tranche, at one or
more closings (each a "Closing") with no aggregate minimum investment
amount, but all such Securities shall have identical rights, and
privileges in all respects.
a) The Securities, when issued and delivered pursuant hereto, and the
Common Stock issuable upon conversion and/or exercise thereof, when
issued and delivered upon such conversion and/or exercise thereof,
will be duly and validly authorized and under federal or state law
issued, fully paid and non-assessable and will not subject the
Purchaser thereof to any liability solely by reason of being such
Purchaser.
b) The Issuer has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and,
when accepted by the Issuer, this Agreement will have been duly
authorized by all necessary actions of the directors and (if
necessary) the shareholders of Issuer, validly executed and delivered
on behalf of the Issuer and be a legally binding obligation of the
Issuer, enforceable in accordance with its terms.
c) The execution and delivery of this Agreement and the sale of the
Securities pursuant hereto and the issuance of the Common Stock
issuable upon conversion and/or exercise thereof of such Securities,
and the transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by the Issuer of any of the
terms or provisions of, or constitute a default under, the Articles of
Incorporation or By-Laws of the Issuer or any indenture, mortgage,
deed of trust or other material agreement or instrument to which the
Issuer is a party or by which it or any of its property or assets are
bound or any existing applicable law, rule or regulation or any
applicable decree, judgment or order of any court, federal or state
regulatory body, administrative agency or other governmental body
having jurisdiction over the Issuer or any of its properties or
assets.
5
<PAGE> 6
d) There are no facts or circumstances existing, and there has been no
event, which has had or which reasonably could be expected to have in
the future a material adverse effect with respect to the financial
condition, business affairs or prospects of the Issuer other than as
disclosed in the SEC Filings provided to Purchaser.
e) Issuer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and is duly qualified
and in good standing as a foreign corporation in all jurisdictions
where the failure to so qualify would have a material adverse effect
on the Issuer. The Issuer has not registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") but filed a registration statement on
Form 10 under the Exchange Act on April 3, 1997, and the Common Stock
is traded on the Electronic Bulletin Board maintained by the National
Association of Securities Dealers, Inc. under the symbol NVMH.
f) The Purchaser shall, upon the purchase of the Securities and at each
Closing, receive an opinion letter from the Issuer's counsel to the
effect that (i) the Issuer is duly incorporated and validly existing;
(ii) this Agreement, the issuance of the Securities, the issuance of
Common Stock upon conversion and/or exercise thereof and the other
transactions contemplated by this Agreement have been approved and
duly authorized by all required corporate action; (iii) the
Securities, upon delivery, shall be validly issued and outstanding,
fully paid and nonassessable; and (iv) the Issuer has reserved from
its authorized but unissued shares of Common Stock a sufficient number
of shares to permit full conversion and/or exercise thereof at the
then applicable conversion and/or exercise rate for all outstanding
Securities.
(9) Contemporaneously with the Closing of the first tranche the Issuer
will pay all existing liens and encumbrances on the Issuer's Nevada
mining properties and deliver a first trust deed on such properties in
favor of Purchaser so that Purchaser shall have a senior security
interest in such properties.
Covenants of the Issuer.
For so long as any Securities held by Purchaser remain outstanding, the Issuer
covenants and agrees with the Purchaser that:
a) Issuer will undertake its best efforts to maintain the listing of its
Common Stock on the Electronic Bulletin
6
<PAGE> 7
Board, the NASDAQ SmallCap Stock Market or the American Stock
Exchange;
b) Except as expressly set forth in Section 7 below, and only until the
Registration Statement (as hereinafter defined) has been declared
effective, Issuer will not issue stop transfer instructions to its
transfer agent in regard to the Securities or the Common Stock
issuable upon conversion and/or exercise thereof of the Securities;
C) The SEC Filings and any amendments thereto (i) do and will conform in
all material respects to the rules and regulations of the Commission
with respect thereto; (ii) do not and will not contain an untrue
statement of a material fact or omit to state any material fact
required to make the statements contained therein not misleading;
d) Issuer will reserve from its authorized shares of Common Stock One
Million Five Hundred Thousand (1,500,000) shares to permit conversion
and/or exercise thereof in full of all outstanding Securities;
e) Notwithstanding the foregoing, the conversion and/or exercise right of
the Purchaser set forth herein shall be limited such that in no
instance shall the maximum number of shares of Common Stock into which
the Purchaser may convert these Securities exceed, at any one time, an
amount equal to the remainder of (i) 4.99% of the then issued and
outstanding shares of Common Stock of the Issuer following such
conversion and/or exercise thereof, minus (ii) the number of shares of
common Stock of the Issuer then held by the Purchaser;
f) Neither the SEC Filings nor the Registration Statement (as hereinafter
defined) or any amendments thereto, when declared effective will
contain a misstatement of material fact or will omit a material fact
necessary to make the statements contained therein not misleading; and
g) The President and the Senior Vice President of the Issuer will confirm
the warranties, representations and covenants contained in this
Agreement at each Closing.
5. Attorney's Fees: Due Diligence Fees.
The Issuer agrees to pay all costs and expenses, including reasonable
attorneys' fees, which may be incurred by the Purchaser in collecting
any amount due or exercising the conversion and/or exercise rights
under these Securities. Further, the Issuer agrees to pay from escrow
the Purchaser's legal fees and due diligence costs incurred in an
amount of
7
<PAGE> 8
Twenty Five Thousand Dollars ($25,000.00), payable on the first
tranche Closing and due diligence costs (estimated at $15,000) for
representatives of Purchaser to travel to Issuer's facilities in
Nevada, Brazil and Indonesia.
6. Registration Rights; Liquidated Damages.
The Purchaser will be entitled to registration rights in respect of
the shares of Common Stock issuable upon conversion of the Debentures
and exercise of the Warrants (the terms of which are set forth below)
as follows: (1) The Issuer shall prepare and file, within 30 days of
the initial Closing Date, and amendment to its registration statement
under the Act on Form SB-2 (the "Registration Statement"), filed with
the Securities and Exchange Commission (the "Commission") on December
6, 1996, covering the resale of the shares of Common Stock issuable
upon conversion of the Debentures and the shares of Common Stock
issuable upon exercise of the Warrants. The Issuer shall use its best
efforts to cause the Registration Statement to be declared effective
by the Commission no later than 120 days following the initial Closing
Date and shall promptly deliver to Purchaser copies of all amendments
to such Registration Statement and correspondence with the Commission
with respect thereto. The Issuer shall maintain the effectiveness of
the Registration Statement until all of the Common Stock issuable or
issued upon conversion or exercise of the Securities has been sold.
The Issuer shall pay all expenses of registration (other than
underwriting fees and discounts in respect of shares of Common Stock
offered and sold under such registration statement by the Purchaser,
if any). (2) If the Registration Statement is not declared effective
by the Commission during the 120-day period mentioned above, the
Company shall pay in cash (or common stock valued at Market Price, as
hereinafter defined) to the Purchaser, as liquidated damages and not
as a penalty, an amount equal to two percent (2%) per month
(commencing 90 and ending 120 days after the initial Closing) of the
outstanding principal amount of the Debentures, in the event that the
Registration Statement is not declared effective by the Commission
within 90 days of the initial Closing Date and three percent (3%) from
120 days after the Closing Date until the Registration Statement is
declared effective.
7. Transfer Agent Instructions, Book-Entry System, Liquidated Damages.
Each conversion of the Debentures and/or exercise of the Warrants will
be effected through a "book-entry" mechanism. Pursuant to this
book-entry mechanism, (1) immediately following each Closing, the
Escrow Agent will wire payment of the net offering proceeds to the
Issuer and the Issuer will instruct the Issuer's transfer agent to
register the Debentures in the name of the Purchaser on a Debenture
8
<PAGE> 9
Register to be maintained by such transfer agent for the benefit of
the Issuer and the Purchaser; (2) the transfer agent will establish a
set of book-entry procedures to record transfers and conversions of
the Debentures; and (3) the Issuer will irrevocably instruct the
transfer agent to issue shares of Common Stock, bearing such legend as
may be required by law, to the Purchaser upon the valid exercise of
the conversion privilege and the fulfillment of other requirements of
the transfer agent, including but not limited to the effectiveness of
the Registration Statement and the delivery of an opinion of the
Company's counsel (which the Company shall promptly supply) as to the
issuance of such shares of Common Stock. If the Company willfully
fails to deliver shares of Common Stock without restrictive legends or
stop-transfer orders within four (4) New York Stock Exchange Trading
Days of delivery of a notice of conversion following the effectiveness
of the Registration Statement, or fails to deliver legended
certificates if requested prior thereto, liquidated damages will
accrue in an amount equal to $1,000.00 for each $100,000.00 principal
amount of Debentures as to which conversion has been requested then
outstanding for each day that such shares of Common Stock are not
delivered up to 10 days, and $2,000.00 for each $100,000.00 principal
amount of Debentures as to which conversion has been requested then
outstanding for each day that such shares of Common Stock are not
delivered in excess of 10 days. Such amounts will accrue and be
payable to the Purchaser by the Issuer upon demand notices of
conversion shall be submitted by facsimile transmission and shall be
deemed to have been received on the date transmitted.
8. Indemnification.
Each of the Issuer and the Purchaser agrees to indemnify and to hold
the other harmless from and against any and all losses, damages,
liabilities, costs and expenses which the other may sustain or incur
in connection with the breach by the indemnifying party of any
representation, warranty or covenant made in this agreement. Each of
the Issuer and the Purchaser agrees that the Escrow Agent shall be
relieved of any liability arising out of acting as escrow agent and
each also hereby agrees to indemnify the Escrow Agent against expenses
including attorneys fees, judgements, fines and amounts paid in
settlement incurred by the Escrow Agent as a result of any threatened,
pending or completed action, suit or proceeding of every nature by
reason of the fact that it served as escrow agent.
9. Notices.
All notices, requests, demands and other communications provided for
herein (collectively "Notices") shall be in writing. All Notices
shall be sent by hand delivery, U.S.
9
<PAGE> 10
mail with return receipt requested, overnight courier, or facsimile
with all delivery charges prepaid. All notices will be effective when
received by the addressee as indicated by the return receipt, the
receipt of the courier service, or on the facsimile. All notices to
the Purchaser and/or the Issuer shall be delivered to the Escrow Agent
(who may also act as counsel to Purchaser) at the address indicated
below:
Escrow Agent:
David L. Kagel
1801 Century Park East, #2500
Los Angeles, California 90067
Telephone: (310) 553 - 9009
Facsimile: (310) 553 - 9693
The Escrow Agent shall be entitled to a fee of $3,000 for each of the
last four tranches which shall close.
10. Closing Date.
This agreement shall be effective from the date of execution by the
Purchaser. Each Closing shall be effected through delivery of funds
and certificates to the Escrow Agent. The Closing Date, which shall
be so designated by a "Closing Certificate" from the Escrow Agent,
shall be deemed to be that date upon which the Escrow Agent shall have
the Securities available for delivery to the Purchaser and the
Purchaser's funds in the Escrow Agent's account available for
delivery to the Issuer. The Debentures will be issuable in five
tranches of $2,000,000 each. The first tranche will close no later
than April 15, 1997. Subject to the provisions of Paragraph 11 the
second tranche will close within five business days after the later of
(a) the effective date of the SEC Filing, or (b) the conversion of the
entire principal amount of Debentures purchased in the first tranche.
Each of the next three tranches will close on the later of (a) ninety
days following the Closing of the previous tranche, or (b) the
conversion of the entire principal amount of Debentures purchased in
the previous tranche.
11. Right of First Refusal.
Provided the Purchaser funds at least two tranches the Issuer will not
sell any new equity securities (or securities convertible into equity
securities) at a discount to the then-current market price per share
of Common Stock, other than offerings in connection with mergers,
acquisitions and certain benefit plans of the Issuer (a "discounted
equity offering") for a period of ninety (90) Days from the funding of
the last tranche. At any time after the effective date of the
Registration Statement and prior to the funding of all tranches
contemplated hereunder Issuer may give written notice (a "Funding
Notice") to Purchaser that funding of a tranche is
10
<PAGE> 11
requested. Funding of any tranche after the first is at the sole
discretion of the Purchaser. If Purchaser shall elect not to fund
such tranche by written notice to Issuer or by failing to effect a
Closing within five days of receipt of a Funding Notice, and provided
that such failure to is not the result of Issuer's inability or
unwillingness to satisfy its obligations for such Closing, Issuer
shall be free to sell any of its securities to any third party. In
the event of such sale the Purchaser of such securities shall not
effect a public distribution of Common stock of Issuer until the
earlier of (a) 90 days following the effective date of the SEC Filing,
or (b) the conversion of 75 percent of the Common Stock issuable upon
exercise of the Debentures. Provided the Purchaser funds at least two
tranches, for a period of one year from the Closing of the last
tranche the Company will offer the Purchaser the opportunity to
participate in all or any portion of any such financings on a right of
first refusal basis. The Purchaser will have five (5) days from the
date of receipt of a notice of such offering to respond to any notice
by the Issuer of any right of first refusal.
12. Security.
In order to secure its obligations under this Subscription Agreement
and the Debentures Issuer will (a) grant Purchaser a first lien on the
Issuer's gold mining claims and properties in the state of Nevada,
which shall be released upon the conversion by Purchaser of 75% of the
Debentures, and (b) arrange for Issuer to pledge 1,000,000 shares of
common stock of Issuer in favor of Purchaser.
13. Origination Fee.
Issuer will pay from Escrow (and execute appropriate instructions with
respect thereto) an origination fee of ten percent (10%) of the gross
proceeds of the closing of the first two tranches and seven percent of
the gross proceeds of each tranche thereafter to such persons and in
such manner as Purchaser may advise.
14. Conditions to the Issuer's Obligation to Sell.
Issuer shall have the right to reject any given executed Agreement
which is tendered to the Issuer hereunder, but only for the reason
that the Issuer reasonably believes any representations and warranties
of such Purchaser contained therein to be untrue, and in such event
Issuer shall promptly provide Purchaser written notice of such
rejection and the reason therefor and shall provide reasonable
opportunity for a response to such stated reason. Purchaser
understands that Issuer's obligation to sell the Securities is
conditioned upon:
(i) The receipt and acceptance by Issuer of this
11
<PAGE> 12
Agreement for all of the Securities evidenced by execution of
this Agreement by the Issuer or Issuer's duly authorized
agent. In the absence of a written acknowledgement of this
Agreement by the Issuer, the delivery of Securities to the
designated Escrow Agent and/or the transfer of funds to the
Issuer shall be deemed to be constructive acceptance of this
Agreement.
(ii) Delivery to the Escrow Agent by Purchaser of good funds as
payment in full of the Purchase Price of the securities
subscribed for and all fees and commissions hereunder.
15. Conditions to Purchaser's Obligation to Purchase.
Issuer understands that Purchaser's obligation to purchase the
Securities is conditioned upon delivery of (i) the opinion of counsel
specified in Section 4(i)(f) herein, (ii) the Securities as described
herein, and (iii) such documents, certificates and other evidence of
the Issuer's compliance with necessary corporate and statutory
formalities as Purchaser shall reasonably require. Further, the
Purchaser anticipates being in a position to close and fund the
initial tranche no later than April 15, 1997. However, each Closing
is conditioned upon (a) the execution and delivery of, and performance
under, appropriate documentation (including but not limited to an
executed agreement, form of debenture, warrants, and book entry
transfer agreement), all in form and substance mutually acceptable to
the parties and containing representations, warranties and agreements
customary for transactions of this type; (b) the truth and accuracy of
each of the representations and warranties contained herein, both when
made and as of each Closing Date; (c) satisfactory completion of due
diligence by Purchaser (applies to the initial Closing only); (d) the
absence of any material adverse change in the business, condition
(financial or otherwise), earnings or prospects of the Issuer; and
(e) the availability of a valid exemption under the Act regarding the
offering and sale of the Securities and shares of Common Stock
issuable on the conversion or exercise thereof.
16. Governing Law.
This agreement shall be governed by and construed under the laws of
the State of California without regard to its choice of law
principles.
17. Entire Agreement.
This Agreement constitutes the entire agreement among the parties
hereof with respect to the subject matter hereof and supersedes any
and all prior or contemporaneous
12
<PAGE> 13
representations, warranties, agreements and understandings in
connection therewith. This Agreement may be amended only by a writing
executed by all parties hereto. This Agreement may be executed in
counterparts, and the facsimile transmission of an executed
counterpart to this Agreement shall be effective as an original.
18. Announcements
No public announcement concerning the events and transactions
contemplated by this Agreement shall be made by Issuer without the
prior approval of Purchaser, which approval shall not be unreasonably
withheld.
Full Name and Address of Purchaser for Registration Purposes:
NAME: Silenus Limited
ADDRESS: c/o Betuvo AG, Baarestrasse 73
Portfach 6302, Zug, Switzerland
Tel No. 011-4141-710-0823
Fax No. 011-4141-710-7583
Contact Name: Mr. Bernard Muller
19. Delivery Instructions: (If different from Registration Name)
NAME: Soreg Inc.
ADDRESS: 620 Wilson Avenue, Suite 501
Toronto, Ontario
Canada M5K 1Z3
Tel No. 416-630-9130
Fax No. 416-638-5023
Contact Name: Sheldon Salcman
13
<PAGE> 14
Special
Instructions: In each tranche closing, Purchaser will receive Debentures
representing One Hundred Percent (100%) of its subscription
for that tranche in denominations of $100,000 each. Each
Debenture will specify a First Conversion Date of the earlier
of the date of effective registration, or forty-five (45) Days
from the First Closing Date.
The Purchase Warrants being purchased will have a five (5)
year term and will have an Exercise Price set at the lesser of
the Conversion Price applicable to the Debenture being
purchased at (a) the first Closing, or (b) the subsequent
Closing. The value of the Warrants will equal 25% of the
principal amount of the Debenture (valued based on a
Black-Scholes or similar model).
IN WITNESS WHEREOF, this Agreement was duly executed on the date first written
below. This Agreement must be accepted by the Issuer no later than 5:00 pm
Eastern Time, on the third United States business day after the date of
execution by the Purchaser or it shall be deemed to be null and void.
Dated this 14th day of April, 1997.
Purchaser Name:
SILENUS LIMITED [SEAL]
By:
------------------------------------------
Bernard Muller
Official signatory of Purchaser
Name (Printed) :
Bernard Muller
------------------------------------------
Title:
President
------------------------------------------
Country of Execution:
Switzerland
------------------------------------------
Accepted this 14th day of April, 1997.
14
<PAGE> 15
A MANHATTAN MINING INCORPORATED
By: /s/ JEFFREY KRAMER
-----------------------------
Official Signatory of Issuer
I have full authority to bind Nevada Manhattan Mining Incorporated
JSK (initial)
Name (Printed): /s/ JEFFREY KRAMER
----------------------------------
Jeffrey Kramer
Title:
C.O.O.
- ---------------------------------------------------
15
<PAGE> 16
SCHEDULE "A"
FORM OF DEBENTURE
No.________ $100,000
NEVADA MANHATTAN MINING INCORPORATED
8% SENIOR SECURED CONVERTIBLE DEBENTURE DUE MARCH 31, 2000
The securities represented hereby have not been registered under the Securities
Act of 1933, as amended (the "Act") and may not be sold, transferred or
hypothecated, except pursuant to registration under the Act or an exemption
from the registration requirements of the Act.
This Debenture is one of a duly authorized issue of Debentures of Nevada
Manhattan Mining Incorporated, a corporation duly organized and existing under
the laws of the state of Nevada (the "Issuer") designated as Eight Percent (8%)
Convertible Debentures Due March 31, 2000, in an aggregate principal amount not
exceeding Ten Million Dollars ($10,000,000.00).
FOR VALUE RECEIVED, the Issuer promises to pay to Silenus Limited, the
registered holder hereof and its successors and assigns (the "Holder"), the
principal sum of One Hundred Thousand Dollars ($100,000), on March 31, 2000
("Maturity Date"), and to pay interest on the principal sum outstanding at the
rate of 8% per annum. Interest shall be due and payable quarterly on the last
day of June, September, December and March in each year. Accrual of interest
shall commence on the first business day to occur after the date hereof and
shall continue until payment in full of the principal amount has been made or
duly provided for. At the option of Issuer interest may be paid in common
stock of the Issuer ("Common Stock") at the average of the closing "bid" prices
for the common stock for the five trading days immediately prior to the date on
which such interest payment is due. The interest so payable will be paid to
the person in whose name this Debenture (or one or more predecessor Debentures)
is registered on the records of the Issuer regarding registration and transfers
of the Debentures (the "Debenture Register"); provided, however, that the
Issuer's obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Subscription Agreement dated as of April 14, 1997 between the
Issuer and Holder (the "Subscription Agreement"). Except as set forth above,
the principal of, and interest on, this Debenture are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing
on the Debenture Register of the Issuer as designated in writing by the Holder
hereof from time to time. The Issuer will pay the principal of and all accrued
and unpaid interest due upon
16
<PAGE> 17
this Debenture on the Maturity Date, less any amounts required by law to be
deducted or withheld, to the Holder at the last address as set forth on the
Debenture Register.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of One Hundred Thousand
Dollars ($100,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders
surrendering the same. No service charge will be made for
registration, transfer or exchange.
2. The Issuer shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to
be withheld under the applicable provisions of the United States
income tax or other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment representations
of the original Holder hereof and may be transferred or exchanged in
compliance with the Act and applicable state securities laws. Prior
to the due presentment for transfer of this Debenture, the Issuer and
any agent of the Issuer may treat the person in whose name this
Debenture is duly registered on the Issuer's Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided
and all other purposes, whether or not this Debenture be overdue, and
neither the Issuer nor any such agent shall be affected by notice to
the contrary.
4. The Holder of this Debenture is entitled, at its option, at any time
commencing forty-five days from the date hereof, to convert the
principal amount of this Debenture into shares of Common Stock of the
Issuer (the "Common Stock") at a conversion price for each share of
Common Stock equal to Seventy-Five percent (75%) of the Market Price
(as defined below) of the Common Stock for all conversions for which
notice is received after the date hereof and a conversion price of
Seventy-two and one-half percent (72 1/2%) of the Market Price
thereafter. For purposes of this Section 4, the "Market Price" shall
be the lesser of (a) the closing bid price of the Common Stock on the
day prior to the Closing of the first tranche; (b) the closing bid
price of the Common Stock on the day prior to the Closing of any
subsequent tranche; or (c) the average closing bid price of the Common
Stock for the five (5) New York Stock Exchange Trading days
immediately preceding each conversion date, in each case as reported
by the National Association of Securities Dealers Automated Quoting
System, or as reported by the American Stock Exchange of the Common
Stock
17
<PAGE> 18
shall then be listed in trading upon such exchange. Such conversion
shall be effected by surrendering the Debentures to be converted (with
a copy by facsimile or courier, to the Issuer) to the Issuer, with the
form of conversion notice attached hereto as Exhibit 1, executed by
the Holder of this Debenture or a specified portion (as provided)
hereof, and accompanied, if required by the Issuer, by proper
assignment hereof in blank. No fractional shares or scrip
representing fractions of shares will be issued on conversion or
payment in lieu of interest, but the number of shares issuable shall
be rounded to the nearest whole share, with the fraction paid in cash
at the discretion of the Issuer. For purposes of this Debenture, the
"Conversion Date" on which notice of conversion is given shall be
deemed to be the date on which the Holder has delivered by facsimile
transmission a duly executed notice of conversion followed by delivery
by mail or courier of this Debenture, with the conversion notice duly
executed, to the Issuer, if such notice of conversion and this
Debenture are received by mail or courier by the Issuer within three
(3) business days.
5. No provision of this Debenture shall alter or impair the obligation of
the Issuer which is absolute and unconditional, to pay the principal
of, and interest on, this Debenture at the place, time, and rate, and
in the coin or currency, herein prescribed.
6. The Issuer hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, bringing of suit and
diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of any without any
notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder.
7. The Issuer agrees to pay all costs and expenses, including reasonable
attorneys' fees which may be incurred by the Holder in collecting any
amount due or exercising the conversion rights under this Debenture.
8. If one or more of the following described "Events of Default" shall
occur:
(a) The Issuer shall default in the payment of principal or
interest on this Debenture; or
(b) Any of the representations or warranties made by the Issuer
herein, in the Subscription Agreement, or in any certificate
or financial or other statements heretofore
18
<PAGE> 19
or hereafter furnished by or on behalf of the Issuer in
connection with the execution and delivery of this Debenture
or the Subscription Agreement shall be false or misleading in
any material respect at the time made; or
(c) The Issuer shall fail to perform or observe any other
covenant, term, provision, condition, agreement or obligation
of the Issuer under this Debenture or the Subscription
Agreement, including but not limited to conversion of this
Debenture as provided herein and therein, and such failure
shall continue uncured for a period of seven (7) days after
notice from the Holder of such failure; or
(d) The Issuer shall (1) become insolvent; (2) admit in writing
its inability to pay its debts generally as they mature; (3)
make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (4) apply for or consent
to the appointment of a trustee, liquidator or receiver for it
or for a substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Issuer for a substantial part of its property or business
without its consent and shall not be discharged within thirty
(30) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume
custody or control of the whole or any substantial portion of
the properties or assets of the Issuer and shall not be
dismissed within thirty (30) calendar days thereafter; or
(g) Any money judgment, writ or warrant of attachment or similar
process in excess of Four Hundred Thousand Dollars
($400,000.00) in the aggregate shall be entered or filed
against the Issuer or any of its properties or other assets
and shall remain unvacated, unbonded or unstayed for a period
of fifteen (15) calendar days or in any event later than five
(5) calendar days prior to the date of any proposed sale
thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Issuer, and if instituted against
the Issuer, shall not be dismissed within thirty (30) calendar
days after such institution or the Issuer shall by any action
or answer approve of, consent to, or acquiesce in any such
proceedings or admit the material
19
<PAGE> 20
allegations of, or default in answering a petition filed in
any such proceedings or admit the material allegations of, or
default in answering a petition filed in any such proceeding;
or
(i) The Issuer shall have its Common Stock delisted from an
exchange or an over-the-counter market;
then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder's
sole discretion, the Holder may consider this Debenture immediately
due and payable, without presentment, demand protest or notice of any
kind, all of which are hereby expressly waived, anything herein or in
any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without
expiration of any period of grace, enforce any and all of the Holder's
rights and remedies provided herein or any other rights or remedies
afforded by law.
9. This Debenture is subject in all respects to the provisions, terms and
conditions of the Subscription Agreement which is, in its entirety,
incorporated herein by this reference.
10. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or
otherwise in respect hereof, against any incorporator, shareholder,
officer or director, as such, past, present or future, of the Issuer
or any successor corporation, whether by virtue of any constitution,
statute, or rule of law, or by enforcement by any assessment or
penalty or otherwise, all such liability being, by acceptance hereof
and as part of the consideration for the issue hereof, expressly
waived and released.
11. The Holder of this Debenture, by execution of the Subscription
Agreement and acceptance hereof, agrees that this Debenture is being
acquired for investment purposes and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon exercise thereof except under circumstances which
shall not result in a violation of the Act or any applicable state
Blue Sky law or similar laws relating to the sale of securities.
12. The Issuer undertakes to file and amendment to Registration Statement
on Form SB-2 to register the Common Stock to be issued upon conversion
of this Debenture with the Securities and Exchange Commission on or
before May 15, 1997.
20
<PAGE> 21
13. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible,
and the validity and enforceability of the remaining provisions of
this Debenture will not in any way be affected or impaired thereby.
14. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the
Issuer and the Holder with respect hereto. Neither this Debenture nor
any terms hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Issuer and the
Holder. This Debenture is in all respects subject to the terms and
conditions contained in the Subscription Agreement.
15. Payment of the liabilities and obligations of the Issuer under this
Debenture and the other Debentures authorized pursuant to the
Subscription Agreement, and the Subscription Agreement, are secured by
a Trust Deed on certain patented and unpatented mining claims held by
the issuer near Manhattan, Nevada. The Issuer agrees to execute such
documents and take such action as may be necessary to perfect the
security interest of the Issuer in such claims.
16. This Debenture shall be governed by and construed in accordance with
the laws of the state of California.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by an officer thereunto duly authorized.
NEVADA MANHATTAN MINING INCORPORATED
By:
------------------------------------------
Official Signatory of Issuer
- ---------------------------------------------------
Name (Printed)
- ---------------------------------------------------
Title
- ---------------------------------------------------
Date
21
<PAGE> 22
EXHIBIT 1
NEVADA MANHATTAN MINING INCORPORATED
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned (the "Holder") hereby irrevocably elects to
convert____________($____________) principal amount of the above Debenture No.
___________ into ___________ (_____________) shares of Common Stock of Nevada
Manhattan mining Incorporated (the "Issuer") and to receive a Debenture in the
principal, amount of ____________. ($___________) representing the unconverted
principal amount of Debenture in accordance with the conditions set forth in
such Debenture, as of the date written below. The shares are to be issued in
the "Street Name" written below.
The undersigned represents and warrants as follows:
(1) The undersigned is the Holder of the Debenture referred to
above, is duly authorized to execute this Notice of Conversion
and has not sold, transferred, hypothecated or encumbered the
Debenture.
(2) The undersigned will not sell, transfer or hypothecate the
shares of common stock of the Issuer issued pursuant to this
Notice except in full compliance with federal and state
securities laws, rules and regulations applicable thereto.
Holder:
- --------------------------------------------------
By:
----------------------------------------------
Official Signatory of Holder
- --------------------------------------------------
Title
- --------------------------------------------------
Date of Conversion *
- --------------------------------------------------
Applicable Conversion Price
- --------------------------------------------------
Name of Holder for Registration
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- --------------------------------------------------
Address for Registration
- --------------------------------------------------
"Street Name" for Certificates
* The original Debenture and this Notice of Conversion must be received by the
Issuer within five (5) New York Stock Exchange Trading Days following the Date
of Conversion.
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<PAGE> 1
EXHIBIT 4.(v)
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") AND THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL (i) THEY ARE SO REGISTERED OR, (ii) RULE 144,
RULE 144A OR ANY SUCCESSOR RULE UNDER THE ACT PERMITS SUCH SALE OR TRANSFER, OR
(iii) UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF
SUCH EXERCISE, SALE OR TRANSFER UNDER ANY OTHER EXEMPTION UNDER THE ACT,
PROVIDED THAT THE HOLDER OF THIS WARRANT OR SHARES OF COMMON STOCK ISSUABLE
HEREUNDER DELIVERS TO THE COMPANY AN OPINION OF HOLDER'S COUNSEL THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
WARRANT TO PURCHASE COMMON STOCK OF
NEVADA MANHATTAN MINING INCORPORATED
THIS CERTIFIES that, for value received, Silenus Limited, (herein
called "Holder") is entitled to subscribe for and purchase from Nevada Manhattan
Mining Incorporated (herein called the "Company") a corporation organized and
existing under the laws of the State of Nevada, at the price of $8.00 per share,
(the "Warrant Exercise Price") (subject to adjustment as set forth in paragraph
3 below) at any time up to and including April 16, 2002 62,500 fully paid and
nonassessable shares of the Company's Common Stock, no par value. This warrant
is issued in accordance with the Subscription Agreement dated as of April 14,
1997 (the "Agreement") between the Company and Silenus Limited and is subject in
all respects to the relevant provisions of the Agreement.
This Warrant is subject to the following provisions,
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<PAGE> 2
terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to a fractional share) at the
principal office of the Company at 5038 Parkway Calabasas, Suite 100,
Calabasas, California 91302 (or such office or agency of the Company as it may
from time to time reasonably designate) at any time within the aforementioned
period, and by payment to the Company by certified check or bank draft of the
Warrant Exercise Price for such shares. The Holder may also exercise this
Warrant in whole or in part in a "cashless" or "net-issue", exercise. In the
latter event, the Holder will deliver this Warrant to the Company with a notice
stating the number of shares to be delivered to the Holder and the number of
shares with respect to which the Warrant is being surrendered in payment of the
aggregate Warrant Exercise Price for the shares to be delivered to the Holder.
For purposes of this provision, all shares as to which the Warrant is
surrendered will be valued at the Current Market Price (as defined below). The
notice accompanying the Warrant shall also set forth the number of shares
remaining subject to the Warrant. As an example of the foregoing, if the
Warrant Exercise Price is $5.00 per share, the Current Market Price is $10.00
per share, and the Warrant were exercised for 1,000 shares, the Company would
deliver 500 shares of the Company's Common Stock to the
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<PAGE> 3
Holder and the Warrant would be surrendered for exercise with respect to the
remaining 500 shares in payment of the $5,000 Aggregate Warrant Exercise Price.
The Company shall not be obligated to issue fractional shares of Common Stock
upon exercise of this Warrant but shall pay to the Holder an amount in cash
equal to the Current Market Price per share multiplied by such fraction
(rounded to the nearest cent). The Company agrees that the shares so purchased
shall be deemed to be issued to the Holder as the record owner of such shares
as of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. Subject to the
provisions of the next succeeding paragraph and this paragraph 1, certificates
for the shares of stock so purchased shall be delivered to the Holder within
four business days after the rights represented by this Warrant shall have been
so exercised, and, unless this Warrant has expired, a new Warrant representing
the number of shares, if any, with respect to which this Warrant shall not then
have been exercised or surrendered shall also be delivered to the Holder hereof
within two business days.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES.
The Company covenants and agrees:
(i) That all Common Stock which may be issued upon the
exercise of the rights represented by this Warrant, will, upon issuance, be
fully paid and nonassessable and free from all preemptive rights, and taxes,
liens and charges with respect to
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<PAGE> 4
the issuance thereof;
(ii) That during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times
have authorized and reserved for the purpose of the issuance upon exercise of
the rights evidenced by this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant;
(iii) That the Company will take all such action as may be
necessary to assure that the Common Stock issuable upon the exercise hereof may
be so issued without violation of any applicable law or regulation or of any
requirements of any domestic securities exchange or market upon which any
capital stock of the Company may be listed or traded;
(iv) That the Company will not take any action if the
total number of shares of Common Stock issuable after such action and upon
exercise of all warrants and other rights to purchase or acquire Common Stock,
together with all shares of Common Stock then outstanding, would exceed the
total number of shares of Common Stock then authorized by the Company's
Articles of Incorporation. In the event any stock or securities of the Company
other than Common Stock are issuable upon the exercise hereof, the company will
take or refrain from taking any action referred to in clauses (i) through (iv)
of this paragraph 2 as though such clauses applied to such other shares or
securities then issuable upon the exercise hereof;
(v) The Company has all requisite corporate power
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<PAGE> 5
and authority to execute and deliver this Warrant; the execution and delivery
of this Warrant have been duly and validly authorized by the Company's Board of
Directors and no other corporate proceedings on the part of the Company are
necessary to authorize this Warrant; this Warrant has been duly and validly
executed and delivered by the Company and constitutes a legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms;
(vi) No order, permit, consent, approval, license,
authorization or validation of, and no registration or filing of notice with,
any governmental entity is necessary to authorize or permit, or is required in
connection with, the execution, delivery or performance of this Warrant or the
consummation by the Company of the transactions contemplated hereby and;
(vii) Neither the execution, delivery nor compliance by the
Company with any of the provisions hereof will (a) violate, conflict with or
result in any breach of any provision of the Company's charter documents, (b)
result in a violation or breach or termination of, or constitute a default
under or conflict with any provision of, any note, bond, mortgage, indenture,
license, lease, agreement or other instrument or obligation to which the
Company is subject, or (c) violate any judgment, order, writ, injunction,
decree, award, statute, rule or regulation to which the company is subject.
3. ADJUSTMENT OF SHARES ISSUABLE OR WARRANT EXERCISE
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<PAGE> 6
PRICE.
The above provisions are subject to the following:
If the Company shall pay a dividend or make a distribution in
shares of its Common Stock, subdivide (split) its outstanding shares of Common
Stock, combine (reverse split) its outstanding shares of Common Stock, issue by
reclassification of its shares of Common Stock any shares or other securities of
the company, or distribute to holders of its Common Stock any securities or any
assets of the Company or of another entity, the number of shares of Common Stock
or other securities the Holder hereof is entitled to purchase pursuant to this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive upon exercise the number of shares of Common Stock or other
securities or assets which such Holder would have owned or would have been
entitled to receive after the happening of any of the events described above had
this Warrant been exercised in full immediately prior to the happening of such
event, and the Warrant Exercise Price per share shall be correspondingly
adjusted. The Warrant Exercise Price shall also be adjusted in accordance with
the Special Instructions continued with the Subscription Agreements. An
adjustment made pursuant to this Section 3 shall become effective immediately
after the record date in the case of a stock dividend or other distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. The Holder of this Warrant shall
be entitled to participate in any subscription or other rights offering made to
holders of shares of Common Stock as if such Holder had purchased the full
number of shares as to which this
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<PAGE> 7
Warrant remains unexercised immediately prior to the record date for such
subscription rights offering. If the Company is consolidated or merged with or
into another corporation or entity or if all or substantially all of its assets
are conveyed to another corporation or entity this Warrant shall thereafter be
exercisable for the purchase of the kind and number of shares of stock or other
securities or property, if any, receivable upon such consolidation, merger or
conveyance by a Holder of the number of shares of Common Stock of the Company
which could have been purchased on the exercise of this Warrant in full
immediately prior to such consolidation, merger or conveyance; and, in any such
case, appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth herein (including provisions
with respect to changes in and other adjustments of the number of shares of
Common Stock the Holder of this Warrant is entitled to purchase) shall
thereafter be applicable, as nearly as possible, in relation to any shares of
Common Stock or other securities or other property thereafter deliverable upon
the exercise of this Warrant.
The Company shall not effect any such consolidation, merger or
conveyance, unless upon or prior to the consummation thereof the successor
corporation, or if the Company shall be the surviving corporation in any such
transaction and is not the issuer of the shares of stock or other securities or
property to be
7
<PAGE> 8
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer shall assume by written instrument the
obligation to deliver to the Holder such shares of stock, securities, cash or
other property as the Holder shall be entitled to purchase in accordance with
the foregoing provisions.
4. NOTICE OF ADJUSTMENT.
Upon any adjustment of the number of shares of Common Stock
issuable upon exercise of this Warrant or the Warrant Exercise Price, then and
in each such case, the Company shall give written notice thereof by first class
mail, postage prepaid, addressed to the Holder at the address of such Holder as
shown on the books of the Company and pursuant to Paragraph 17, which notice
shall state the Warrant Exercise Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares purchasable at such price
upon the exercise of this Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
5. OTHER NOTICES.
In case at any time:
1. The Company shall declare any cash dividend upon its
Common Stock payable in stock or make any special dividend or other
distribution (other than regular cash dividends) to the Holders of its Common
Stock;
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<PAGE> 9
2. The Company shall offer for subscription to the
Holders of any of its Common Stock any additional shares of Common Stock of any
class or other rights;
3. There shall be any capital reorganization or
reclassification of the capital stock of the Company or consolidation or merger
of the Company with or sale of all or substantially all of its assets to another
corporation or entity; or
4. There shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
Then in any one or more of said cases the Company shall give
by first class mail postage prepaid, addressed to the Holder of this Warrant at
the address of such Holder as shown on the books of the Company and pursuant to
Paragraph 17 (i) at least 20 days prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation, merger or
sale, dissolution, liquidation or winding and (ii) in the case of such
reorganization or reclassification, consolidation, merger or sale, dissolution,
liquidation or winding up, at least 20 days prior written notice of the date
when the same shall take place. Any notice required by clause (i) shall also
specify in the case of any such dividend, distribution or subscription rights
the date on which the holders of Common Stock shall be entitled thereto and a
notice required by (ii) shall also specify the date on which the holders of the
Common Stock shall be entitled
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<PAGE> 10
to exchange their Common Stock for securities or other property deliverable
upon such reorganization, reclassification, merger or sale, dissolution,
liquidation or winding up as the case may be.
6. ISSUE TAX.
The issuance of certificates for shares of Common Stock upon
the exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof, provided that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other that
of the Holder of the Warrant exercised.
7. CLOSING OF BOOKS.
The Company will at no time close its transfer books against
the transfer of this Warrant or of any shares of Common Stock issued or
issuable upon the exercise of this Warrant in any matter which interferes with
a timely exercise of this Warrant. The Company will not, by any action, seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith seek to carry out all such terms and take all
such action as may be necessary or appropriate in order to protect the rights
of the Holder against impairment.
8. NO VOTING RIGHTS.
This warrant shall not entitle the Holder hereof to
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<PAGE> 11
any voting rights or other rights as a stockholder of the Company.
9. REGISTRATION AND TRANSFER OF SECURITIES; DEFINITIONS.
"Holder" means Silenus Limited and its successors,
representatives and assigns. If there is more than one Holder at any time,
each such Holder shall be entitled to the rights and privileges granted
hereunder.
"Company" means Nevada Manhattan Mining Incorporated and its
successors and assigns.
"Registration", "register" and like words mean compliance with
all of the Federal and state laws, rules, regulations and provisions of
agreements and corporate documents pertaining to lawful and unconditional
transfer of the securities by way of a public offering or distribution.
"Security", or "securities" means the shares of stock of all
classes, type and series, and all rights however evidenced or contained, to
which the Holder shall be entitled upon the exercise of this Warrant.
10. TRANSFERS.
Prior to any transfer or attempted transfer of any securities
(except a transfer by a Holder to an affiliate, subsidiary, employee or
shareholder of the Holder), the Holder shall give written notice to the Company
of such Holder's intention to effect such transfer. Holder will not transfer
or dispose of
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this Warrant and will not sell or transfer any securities except pursuant to
(i) an effective registration statement under the Act, (ii) Rule 144, Rule 144A
or any successor rule under the Act permitting such sale or transfer or (iii)
any other exemption under the Act provided that the Holder delivers an opinion
of Holder's counsel reasonably satisfactory to counsel to the Company that an
exemption from registration under the Act is available. Each certificate
evidencing the securities issued upon such transfer shall bear the restrictive
legend set forth on the first page of this Warrant modified to delete
references to the Warrant, if appropriate, unless in the reasonable opinion of
Holder's counsel such legend is not required in order to insure compliance with
the Act.
11. REGISTRATION.
(a) The Company shall comply with its obligation to
register this Warrant and the Common Stock issuable upon exercise thereof as
set forth in paragraph 1 of this Agreement.
(b) Each time the Company shall propose the registration
under the Act of any securities of the Company, the Company shall give written
notice (the "Company Notice") of such proposed registration to the Holder. The
Company will include in any such Registration Statement any securities (or
portion thereof) of any Holder who 15 days after the mailing of a Company
Notice shall request inclusion. Upon receipt of such notice (a "Holder
Notice") from a Holder, the Company will (i) as expeditiously as possible but
in any event within 60 days of any request hereunder file a
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<PAGE> 13
Registration Statement on such form as the Company shall deem appropriate; (ii)
cause such Registration Statement to be declared effective and keep it
effective as long as required to allow the Holder to effect the disposition of
the securities registered and thereafter as long as required by the Act; (iii)
notify the Holder immediately after it shall receive notice thereof, of the
time when such Registration Statement has become effective or any supplement to
any prospectus forming a part of such Registration Statement has been filed;
(iv) notify the Holder immediately of any request by the Securities and
Exchange Commission (hereinafter referred to as the "Commission") for the
amending or supplementing of such Registration Statement or prospectus; (v)
prepare and immediately file with the Commission and immediately notify the
Holder of the filing of such amendment or supplement to such Registration
statement or prospectus as may be necessary to correct any statement or
omission, if at any time when a prospectus relating to the security is required
to be delivered under the Act, any event shall have occurred as a result of
which any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading; (vi) in case the
Holder or any underwriter for the Holder is required to deliver a prospectus,
at a time when the prospectus then in effect may no longer comply with the
requirements of the Act, prepare promptly upon request of the Holder such
amendment or amendments to such Registration Statement and such prospectus or
prospectuses as
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<PAGE> 14
may be necessary to permit compliance with the requirements of Section 10 of
the Act; (vii) not file any amendment or supplement to the Registration
Statement or prospectus to which the Holder shall reasonably object after
having been furnished a copy at a reasonable time prior to the filing thereof;
(viii) advise the Holder immediately after it shall receive notice or obtain
knowledge thereof of the issuance of any stop order by the Commission
suspending the effectiveness of any such Registration Statement or of the
initiation or threatening of any proceeding for that purpose and use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal
if such stop order should be issued; (ix) qualify the security for transfer
under the securities laws of such states as may be designated by the Company;
(x) furnish to the Holder as soon as available copies of any such Registration
Statement and each preliminary or final prospectus, or supplement required to
be prepared pursuant to this Paragraph 11, all in such quantities as the Holder
may from time to time reasonably request and (xi) make generally available to
its securityholders earnings statements satisfying the provisions of Section
11(a) of the Act, no later than 30 days after the end of any 12 month period
commencing at the end of any fiscal quarter in which securities are sold to
underwriters in an underwritten offering or if not sold to underwriters in an
underwritten offering beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
statement. The Company shall have no obligation to register
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<PAGE> 15
securities of a Holder if, at the time of such request the securities may be
sold pursuant to Rule 144 under the Act.
The Company will pay the costs and expenses incident to the
performance of its obligations under this Paragraph 11, including the fees and
expenses of its counsel, the fees and expenses of its accountants and all other
costs and expenses incident to the preparation, printing and filing under the
Act of any such Registration Statement, each prospectus and all amendments and
supplements thereof, the costs incurred in connection with the qualification of
the securities under the laws of various jurisdictions (including fees and
disbursements of counsel to the Company), the cost of furnishing to the Holder
copies of any such Registration Statement, each preliminary prospectus, the
final prospectus and each amendment and supplement thereto, all expenses
incident to delivery of the security to any underwriter or underwriters, but
not any underwriting commissions or discounts charged to the Holder. Holder
will pay all fees and expenses of one counsel for the Holder in connection with
the registration of securities.
12. INDEMNIFICATION.
The company will indemnify and hold harmless each Holder and
any underwriter (as defined in the Act) for such Holder and each person, if
any, who controls the Holder or underwriter within the meaning of the Act
against any losses, claims, damages or
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<PAGE> 16
liabilities (or actions in respect thereof), joint or several, to which the
Holder or underwriter or such controlling person may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) are caused by any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which the securities were registered under the Act, any preliminary
prospectus or prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and will reimburse the Holder,
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by the Holder, underwriter or such controlling person in
connection with investigating or defending any such loss, claim, damage,
expense or liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage,
expense or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with written information furnished by the Holder or underwriter in writing
specifically for use in the preparation thereof.
Each Holder will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed said Registration
Statement, and each person, if any, who controls the company within the meaning
of the Act, against any losses, claims,
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<PAGE> 17
damages or liabilities to which the Company, or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof) are
caused by any untrue or alleged untrue statement of any material fact contained
in said Registration Statement, said preliminary prospectus or prospectus, or
amendment or amendments or supplements thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was so made in reliance upon and in conformity with written information
furnished by the Holder for use in the preparation thereof; and will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. It shall be a
condition of the Company under paragraphs 11 and 12 hereof that the Holder
confirm to the Company in writing, prior to the effective date of any
Registration Statement in which are included securities of such Holder, the
agreement of such Holder as set forth in the previous sentence.
Promptly after receipt by an indemnified party pursuant hereto
of notice of any claim or the commencement of any action to which indemnity
would apply, such indemnified party will, if a
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<PAGE> 18
claim thereof is to be made against the indemnifying party pursuant hereto,
notify the indemnifying party of such claim or action; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than hereunder. In case such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, provided, however, that
any person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person and not of
the indemnifying party unless (a) the indemnifying party has agreed to pay such
fees or expenses, or (b) the indemnifying party shall have failed to assure the
defense of such claim and employ counsel reasonably satisfactory to such
indemnified party, or (c) in the reasonable judgment of such indemnified party
a conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claims (in which case, if the
indemnified party notifies the indemnifying part in writing that such
indemnified party elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such claim on behalf of such indemnified party.)
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<PAGE> 19
13. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT.
The rights and obligations of the Company, of the Holder of
this Warrant and of the Holder of the shares of Common Stock issuable upon
exercise of this warrant contained herein shall survive the exercise of this
Warrant.
14. DESCRIPTIVE HEADINGS AND GOVERNING LAW.
The descriptive headings of the several paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant. This Warrant is being delivered and is intended to be performed in
the State of California and shall be construed and enforced in accordance with
such law and the rights of the Holder shall be governed by the law of such
state.
15. RULE 144.
The Company covenants that it will file, on a timely basis,
the reports required to be filed by it under the Act and the Securities
Exchange Act of 1934, as amended, and the rules and regulations adopted by the
Commission thereunder, and it will take such further action as the Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell securities without registration under the Act within the
limitation of the conditions provided by (a) Rule 144 and Rule 144A under the
Act, as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. upon the request of the Holder
the Company will deliver to such
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<PAGE> 20
Holder a written statement verifying that it has complied with such information
and requirements.
16. ARBITRATION.
Any controversies, claims or disputes arising out of or under
this Warrant or the obligations of the parties hereunder shall be resolved by
binding arbitration to be held in Los Angeles, California under the auspices
and subject to the rules than pertaining of the American Arbitration
Association. The provisions of Section 1283.05 of the California Code of Civil
Procedure shall be applicable to any arbitration proceeding conducted in
accordance with the terms hereof. The arbitrators shall apply California and
Federal law in such arbitration and shall have the power to grant injunctive
relief. Any decision of the arbitrators shall be enforceable in any court of
competent jurisdiction.
17. NOTICES.
All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class mail, postage
prepaid, or delivered either by hand or by messenger, addressed (a) if to the
Company, to the principal offices of the Company in California to the attention
of its president, (b) if to the Holder, to Soreq, Inc. 620 Wilson Avenue, Suite
501, Toronto, Ontario, Canada M3K 1Z3, or such other address as the Holder
shall have furnished to the Company. All such notices or communications shall
be deemed given when actually
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delivered by hand or messenger or, if mailed, three days after deposit in the
U.S. Mail.
18. SUCCESSORS AND ASSIGNS.
All covenants, agreements, representations and warranties
contained in this Warrant shall bind the parties hereto and their respective
successors and assigns.
19. DAMAGES.
Without limiting in any way any of the rights the Holder may
otherwise have at law or in equity, for damages or otherwise, the Company
hereby agrees to indemnify and hold harmless the Holder from and against any
loss or expense that may be incurred or suffered by the Holder which arises
from any of the following: (i) any registration statement under paragraph 11(a)
is not filed with the Commission on or before the time required in the
Agreement and paragraph 11(a), or (ii) the Company is not able for any reason
within its control (A) to cause a registration statement under the Agreement
and paragraph 11(a) to be declared effective by the Commission within the time
required by the Agreement and to remain effective until completion of the
offering, or (B) to cause the securities to be qualified or registered for sale
in all appropriate jurisdictions as provided in paragraph 11(a) and to remain
so qualified or registered thereafter during the applicable period under
applicable law.
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20. NO INCONSISTENT AGREEMENTS.
The Company has not previously entered into, and will not on
or after the date of this Warrant enter into, any agreement with respect to its
securities which is inconsistent with the terms of this Warrant, including any
agreement which impairs or limits the rights granted to the Holder in this
Warrant, or which otherwise conflicts with the provisions hereof or would
preclude the Company from discharging its obligations hereunder.
21. SEVERABILITY.
In the event than any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
22. ENTIRE AGREEMENT.
This Warrant constitutes the entire agreement of the parties
with respect to the subject matter hereof.
23. AMENDMENT.
Any provision of this Warrant may be amended, waived or
modified by a writing signed by the Company and the Holder.
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24. CONFIDENTIALITY.
The parties hereto agree that the existence of this Warrant,
and the terms hereof, shall be held in the strictest confidence and shall not
be disclosed to any third party unless (a) such disclosure is required by law,
or (b) such disclosure is agreed upon in writing by the Holder and the Company.
NEVADA MANHATTAN MINING INCORPORATED
By: ________________________________________
JEFFREY S. KRAMER, SENIOR VICE PRESIDENT
23
<PAGE> 1
EXHIBIT 4.(vi)
Recorded at the request of
and when recorded return to:
Silenus Limited
c/o David Kagel
1801 Century Park East
Suite 2500
Los Angeles, California 90067
DEED OF TRUST
This Deed of Trust is made by Nevada Manhattan Mining, Inc., a Nevada
corporation ("Trustor"), whose address is 5038 North Parkway Calabasas, Suite
100, Calabasas, California 91302, as Trustor, and Stewart Title of Northern
Nevada, a Nevada corporation ("Trustee), whose address is 401 Ryland Street.
Reno, Nevada 89502, as Trustee, and Silenus Limited, a company organized under
the laws of the Isle of Man ("Beneficiary"), whose address is c/o Betuvo A.G.,
Baarestrasse 73, Potfach 6302, Zug, Switzerland, as Beneficiary.
RECITALS
A. Effective April 14,1997, Trustor and Beneficiary, entered into a
Subscription Agreement (the "Subscription Agreement"), in accordance with which
Beneficiary agreed to purchase certain 8% Senior Secured Convertible Debentures
issuable by Trustor (each a "Debenture" and collectively the "Debentures") are
convertible into the shares of Trustor's common stock ("Common Stock") and
Common Stock Purchase Warrants (the "Warrants").
B. In accordance with the terms of the Subscription Agreement and the
Debentures, Trustor has agreed and covenanted to grant to Beneficiary a
security interest in certain property held or owned by Trustor to secure
Trustor's obligations under the Subscription Agreement and the Debentures
(collectively the "Obligations").
Now, therefore, for the purpose of securing, in such order of priority
as Beneficiary may determine, Trustor's payment of the Debentures and Trustor's
performance of its obligations under the Subscription Agreement and the
Debentures, Trustor agrees with the Trustee and Beneficiary as follows:
1. GRANT. To secure payment and performance of the Obligations,
Trustor grants, bargains, sells, conveys, transfers and assigns to Trustee in
trust, with power of sale, and grants a security interest to the Beneficiary
in, all of the following collateral:
a. All of Trustor's present or after acquired right,
title or interest in and to the mining claims, unpatented mining claims,
millsite claims and mining or other leases, and other real property interests
(collectively the "Lands") situated in Nye County, Nevada, more Particularly
1
<PAGE> 2
described in Schedules I through III, inclusive, attached to and by this
reference incorporated in this Deed of Trust.
b. All of Trustor's present or after acquired right,
title and interest in and to buildings, fixtures, improvements and structures
now or subsequently located in, on or under, affixed to or erected on the Lands
(collectively the "Improvements"), and all easements, licenses, privileges,
rights-of-way and uses now or subsequently appurtenant to the Lands or the
Improvements, including all water and water rights. The Land and Improvements
are sometimes referred to in this Deed of Trust as the "Property".
c. All awards made to Trustor for the taking by eminent
domain or by zoning of all or any part of the Lands or the Improvements.
d. To have and to hold the Property, together with all
of the benefits, privileges and rights belonging, incidental or appertaining to
the Lands and the Improvements, to the Trustee, in trust for the security and
benefit of the Beneficiary, to secure and enforce the payment and satisfaction
of Trustor's Obligations.
2. MAINTENANCE OF COLLATERAL. Trustor agrees to pay when due all
claims for labor performed and materials furnished for any alteration,
construction or repair on the Lands or to the Improvements, to comply with all
laws and regulations affecting the Lands and the Improvements and to maintain
Trustor's title to the Land and Improvements.
3. ADOPTION OF STATUTORY COVENANTS. Covenants 1, 2 (in an amount
deemed reasonable by Trustor), 3, 4 (interest at the rate provided in the
Subscription Agreement and the Debentures), 6, 8 and 9 of Nevada Revised
Statutes 107.030 are adopted and made part of this Deed of Trust.
4. DEFAULT. The term "Event of Default" means any one or more of
the following events:
4.1 Failure by Trustor to pay (a) any payment of interest
or principal which shall become due and payable under the Debentures; (b) the
outstanding principal balance on the Debentures, together with interest
accrued, at maturity or upon acceleration; (c) any assessments or taxes against
The Lands or the Improvements when due; or (d) any other sums when due to be
paid by Trustor under this Deed of Trust or under the Subscription Agreement or
the Debentures.
4.2 Failure by Trustor to keep, perform, and observe any
other covenant, condition or agreement in the Subscription Agreement, the
Debentures or this Deed of Trust.
4.3 If (a) a petition is filed by or against Trustor
seeking or acquiescing any arrangement, composition, dissolution, liquidation,
readjustment or reorganization or similar relief under any law relating to
bankruptcy or insolvency; (b) Trustor acquiesces in, consents to or seeks or is
subject to the appointment of any liquidator, receiver or trustee; (c) Trustor
makes any general assignment for the benefit of its creditors; (d) Trustor
becomes insolvent.
2
<PAGE> 3
5. REMEDIES. In addition to the remedies afforded to Beneficiary
under the laws of the State of Nevada, Beneficiary shall have the following
powers concerning enforcement of this Deed of Trust:
5.1 In the Event of Default by Trustor, Beneficiary may,
at its option and in its sole and absolute discretion, deliver to the Trustee
written declaration of default and demand for sale and of written Notice of
Breach and Election to Sell to cause the Property to be sold to satisfy
Trustor's obligations, which Notice the Trustee shall cause to be filed for
record. Beneficiary also may deposit with the Trustee the Debentures and all
documents evidencing the secured expenditures.
5.2 After the lapse of such time as may then be required
by law following the recordation of the Notice of Breach and Election to Sell,
the notice of sale having been given as then required by law, the Trustee
without demand on Trustor, shall sell the Property at the time and place fixed
by it in the notice, either as a whole or in separate parcels, and in such
order as it may determine, at public auction to the highest bidder, for cash in
lawful money of the United States payable at the time of sale. The Trustee
may, for any cause it deems expedient, postpone the sale of all or any portion
of the Property until it shall be completed and, in every case, notice of
postponement shall be given by public announcement at the time and place last
appointed for the sale and from time to time the Trustee nay postpone such sale
by public announcement at the time fixed by the preceding postponement. The
Trustee shall execute and deliver to the purchaser its deed conveying said
property so sold, but without any covenant or warranty, express or implied.
The recitals in the Trustee's deed of any matters or facts shall be conclusive
proof of their truthfulness. Any person, including Beneficiary, may bid at the
sale.
After deducting all costs, fees and expenses of the Trustee
and of this Trust, including the cost of any evidence of title procured in
connection with such sale, the Trustee shall apply the proceeds of sale to the
payment of all sums expended under the terms of this Deed of Trust, not then
repaid, with accrued interest at the Default Rate, all other secured sums, and
the remainder, if any, to the persons legally entitled to the remainder.
5.3 If an Event of Default occurs, Beneficiary may, either
with or without entry or taking possession or otherwise, and without regard to
whether or not the indebtedness and other secured sums shall be due and without
prejudice to the right of Beneficiary later to bring an action or proceeding to
foreclose or any other action for any default existing at the time such earlier
action was commenced, proceed by any appropriate action or proceeding to enforce
payment of the Debentures or the performance of its terms or any other right; to
foreclose this Deed of Trust in the manner provided by law for the foreclosure
of mortgages on real property and to sell, as an entirety or in separate lots or
parcels, the Property pursuant to the laws of the State of Nevada or under the
judgment or decree of a court or courts of competent jurisdiction and
Beneficiary shall be entitled to recover in any such proceeding all incidental
costs and expenses, including reasonable attorneys' fees and costs (including,
expressly, costs incurred for services of paralegals and for computer-assisted
legal research) in such amount as shall be awarded by the court; and to
3
<PAGE> 4
pursue any other remedy available to it at law or in equity.
6. FURTHER ASSURANCES. At any time and from time to time, upon
Beneficiary's request, Trustor shall make, execute and deliver or cause to be
made, executed and delivered to Beneficiary, and, where appropriate, shall cause
to be recorded or filed, and from time to time to be re-recorded and refiled at
such time and in such offices and places as shall be deemed desirable by
Beneficiary, any and all such further deeds of trust, instruments of further
assurance, certificates and other documents as Beneficiary may consider
necessary or desirable in order to effectuate, complete or perfect, or to
continue and preserve the obligations of Trustor under the Debentures and this
Deed of Trust, and the lien of this Deed of Trust as a lien upon all of the
Property, whether now owned or later acquired by Trustor, and unto all and
every person or persons deriving any estate, right, title or interest under
this Deed of Trust or the power of sale granted under this Deed of Trust. Upon
any failure by Trustor to do so, Beneficiary may make, execute, record, file,
re-record and refile any and all such deeds of trust, instruments, certificates
and documents for and in the name of Trustor, and Trustor irrevocably appoints
Beneficiary the agent and attorney-in-fact of Trustor to do so.
7. DELAY OR OMISSION NO WAIVER. No delay or omission of Trustee
or Beneficiary or any holder of the Debentures to exercise any right, power or
remedy upon any Event of Default shall exhaust or impair any such right, power
or remedy or shall be construed to waive any such Event of Default or to
constitute acquiescence. Every right, power and remedy given to Trustee or
Beneficiary may be exercised from time to time and as often as may be deemed
expedient by Trustee or Beneficiary.
8. NO WAIVER OF ONE DEFAULT TO AFFECT ANOTHER. No waiver of any
Event of Default under this Deed of Trust shall extend to or affect any
subsequent or any other Event of Default. If Beneficiary grants forbearance or
any extension of time for the payment of any secured sums, takes other or
additional security for the payments, waives or does not exercise any right
granted in the Debentures, this Deed of Trust or any other Loan Document,
releases any part of the Property from the lien of this Deed of Trust or any
other instrument securing the Debentures, consents to the filing of any map,
plat or replat of the land, consents to the granting of any easement on the
land, or makes or consents to any agreement changing the terms of this Deed of
Trust or subordinating the lien or any change of this Deed of Trust, no such
act or omission shall release, discharge, modify, change or affect the original
liability under the Debentures, this Deed of Trust or otherwise of Trustor, or
any subsequent purchaser of the Property or any maker, obligor, co-signor,
surety or guarantor. No such act or omission shall preclude Beneficiary from
exercising any right, power or privilege granted to Beneficiary or intended to
be granted in case of any Event of Default then existing or of any subsequent
Event of Default, nor, except as otherwise expressly provided in an instrument
or instruments executed by Beneficiary, shall the lien of this Deed of Trust be
altered except to the extent of any release. In the event of the sale or
transfer by operation of law or otherwise of all or any part of the Property,
Beneficiary without notice to any person, firm or corporation, is authorized
and empowered to deal with any vendee or transferee with reference to the
Property or the secured indebtedness, or with reference to any
4
<PAGE> 5
of the terms or conditions of this Dead of Trust, as fully and to the same
extent as it might deal with the original parties and without in any way
releasing or discharging any of the Trustor's liabilities or undertakings.
9. DISCONTINUANCE OF PROCEEDINGS; POSITION OF PARTIES RESTORED.
If Beneficiary proceeds to enforce any right or remedy under this Deed of Trust
by foreclosure, entry or otherwise and such proceedings are discontinued or
abandoned for any reason, or such proceedings result in a final determination
adverse to Beneficiary, then and in every such case, Trustor and Beneficiary
shall be restored to their former positions and rights, and all rights, powers
and remedies of Beneficiary shall continue as if no such proceedings had been
taken.
10. REMEDIES CUMULATIVE. No right, power or remedy conferred upon
or reserved to Trustee or Beneficiary by the Debentures, this Deed of Trust or
any other instrument or document securing the Debentures or otherwise executed
in connection with the secured indebtedness is exclusive of any other right,
power or remedy, but each and every such right, power and remedy shall be
cumulative and concurrent to any other right, power and remedy now or later
existing at law or in equity or given under this Deed of Trust or under the
Debentures or the Subscription Agreement.
11. HEIRS, LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS. Except
as otherwise prohibited by the terms of this Deed of Trust, whenever one of the
parties is named in this Deed of Trust, the heirs, successors and assigns of
such party shall be included and all covenants, agreements. terms, provisions
and conditions contained in this Deed of Trust, by or on behalf of Trustor,
Trustee or Beneficiary shall bind and inure to the benefit of their respective
heirs, legal representatives, successors and assigns, whether so expressed or
not. In the event Trustor is composed of more than one party, the obligations
arising under this Deed of Trust, are the joint and several obligations of each
such party.
12. ADDRESSES FOR NOTICES. Wherever provision is made in this
Deed of Trust for the giving, service, or delivery of any notice, statement,
or other instrument, the same shall be deemed to have been duly given, served,
and delivered: (a) on the date personally delivered; (b) on the date of receipt
by the addressee of any item transmitted by United States registered or
certified mail (return receipt requested), postage prepaid; (c) on the date of
receipt by the addressee of any item transmitted by facsimile, telegraph, telex
or other electronically transmitted means, or (d) on the first (1st) business
day following the date on which delivered to a commercially-responsible
overnight courier which provides service between the point of origin and the
point of destination, addressed to the party which is to receive such notice at
the address stated above or to such other address(es) as may be designated in
writing by the other parties.
13. HEADINGS; CONSTRUCTION. The headings of the articles,
sections, paragraphs and subdivisions of this Deed of Trust are for convenience
of reference only, are not to be considered a part of this Deed of Trust, and
shall not limit or expand or otherwise affect any of the terms. Wherever the
context so requires, words used in the singular may be read in the plural,
words
5
<PAGE> 6
used in the plural may be read in the singular, words importing the neuter
shall include the masculine and feminine genders, words importing the feminine
sender shall include the masculine and the neuter, and words importing the
masculine gender shall include the feminine and the neuter.
14. SEVERABILITY. In the event that any of the covenants,
agreements, terms or provisions contained in the Debentures, in this Deed of
Trust or in any other Loan Document shall be invalid, illegal or unenforceable
in any respect, the validity of the remaining covenants, terms or provisions
contained in the Debentures, in this Deed of Trust or in any other Loan
Document shall in no way be prejudiced or disturbed.
15. MODIFICATION. Neither this Deed of Trust nor any of its terms,
may be changed, waived, discharged or terminated orally, or by any action or
inaction, but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. Any
agreement later made by Trustor and Beneficiary relating to this Deed of Trust
shall be superior to the rights of the holder of any intervening lien or
encumbrance. Whenever a power of attorney is conferred upon Beneficiary, it is
understood and agreed that such power is conferred with full power of
substitution and Beneficiary may elect in its sole discretion to exercise such
power itself or to delegate all or any part of such power to one or more
subagents.
16. GOVERNING LAW; JURISDICTION; VENUE. This Deed of Trust is
made by Trustor and accepted by Beneficiary to be governed by and under the
laws of the State of Nevada and shall be construed, interpreted, enforced and
governed by and in accordance with the laws of the State of Nevada. Trustor
and Beneficiary agree to the exclusive jurisdiction of the Fifth Judicial
District Court located in Tonopah, Nevada, and waives any objection based on
venue or forum non conveniens with respect to any action instituted and agrees
that any dispute concerning the relationship among Trustor, Trustee and
Beneficiary or the conduct of any party in connection with this Deed of Trust
or any Loan Document shall be heard only in the courts described in this
paragraph. Despite the foregoing, Beneficiary shall have the right to bring
any action or proceeding against Trustor or its property in the courts of any
other jurisdiction Beneficiary deems necessary or appropriate in order to
enforce the security interest and lien granted to Beneficiary or to realize on
the Property or other security for Trustor's obligations.
17. SUBSTITUTION OF TRUSTEE. Beneficiary, or any successor in
ownership of any secured indebtedness may from time to time, by instrument in
writing, substitute a successor to any Trustee named or acting trustee, which
instrument, executed by Beneficiary and duly acknowledged and recorded in the
Office of the Recorder of Nye County, Nevada, shall be conclusive proof of
proper substitution of such successor trustee or trustees, who shall succeed to
all title, estate, rights, powers and duties of the Trustee. The instrument
must contain the name of the original Trustor, Trustee and Beneficiary the
book and page where this Deed of Trust is recorded and the name and address of
the new trustee.
6
<PAGE> 7
18. RECONVEYANCE. Upon written request of Beneficiary stating
that all secured sums have been paid or that Debentures representing
seventy-five percent (75 %) of the principal balance of all of the issued
Debentures shall have been converted to Common Shares in accordance with the
terms of the Subscription Agreement and the Debentures, and upon surrender of
this Deed of Trust and the Debentures to the Trustee for cancellation and
retention and upon payment of its fees, the Trustee shall reconvey, without
warranty, the Property then held by Trustee. The recitals in such reconveyance
of any matters or facts shall be conclusive proof of their truthfulness. The
grantee in such reconveyance may be described as "the person or persons legally
entitled thereto." Five years after issuance of such full reconveyance, the
Trustee may destroy the Debentures and this Deed of Trust (unless directed in
such request to retain them).
19. ATTORNEYS' FEES. Without limiting any other provision in this
Deed of Trust, Trustor agrees to pay all costs of Beneficiary or Trustee
incurred in connection with the enforcement of this Deed of Trust or the taking
of this Deed of Trust as security for the repayment of the Debentures,
including, without limitation, all attorneys' fees (including, expressly, costs
of services of paralegals and computer-assisted legal research) whether or not
suit is commenced, and including specifically fees incurred in connection with
any appellate, bankruptcy, deficiency, or any other litigation proceedings, all
of which sums shall be secured by this Deed of Trust.
Dated effective April 14, 1997.
Nevada Manhattan Mining, Inc.
By: Jeffrey Kramer
----------------------------------------
Title: Sr. V.P., COO
-------------------------------------
STATE OF )
ss.
COUNTY OF )
This Deed of Trust was acknowledged before me on April 17, 1997,
by Jeffrey Steven Kramer as Sr. V.P., COO of Nevada At Manhattan Mining, Inc.
Anita Bedrosian
--------------------------------
Notary Public
My commission expires January 3, 2001
[SEAL]
7
<PAGE> 8
SCHEDULE 1: THE ANGUS CLAIMS(1)
<TABLE>
<CAPTION>
MINERAL SURVEY
PATENTED CLAIM NAME NUMBER PATENT NUMBER
- ------------------- --------------- -------------
<S> <C> <C>
Annie Lauris 2874 441202
Dexter #7 2502 48212
Earl 2544 375993
Eva 3667 537035
Flying Cloud 3667 537035
lvanhoe 2773 46617
Katie #1 2651 46321
Keystone 2692 555879
Morning Glory 4073 552989
Muleskinner 2882 123980
Pine Nut #2 4073 552989
Red Boy or Red Roy 2693 676958
Silver Pick #1 2528 Am. 674983
Snow Drift 2764 469515
Snowman 3667 537035
Union 2625 46616
Union #1 2625 46616
Union #2 2552 114749
Union #3 2553 32959
Union #4 2554 46332
Union #5 2555 94281
Uno 2695 98424
White Cap 2579 46176
White Cap No. 1 2579 46176
White Cap Extension or Extension No. 1 4335 734331
White Cap Extension No. 1 or No. 2 4335 734331
Whoopee Fraction 2694 46320
Dexter #8 2602 46212
</TABLE>
SUBTOTAL; 28 PATENTED ARGUS CLAIMS
____________
(1) The "Argus" patented and unpatented claims are in the Manhattan Mining
District, Sections 20, 21, 22, 27, 28 and 29, Township 8 North, Range 44 East,
Mt. Diablo Meridian, Nye County, Nevada.
SCHEDULE I: THE ARGUS CLAIMS
PAGE 1
<PAGE> 9
<TABLE>
<CAPTION>
Unpatented Claim Name NMC. No,
- ---------------------- --------
<S> <C>
Combination 93112
Lillie Fraction 93108
Little Joe #1 93115
Little Joe #2 93116
Little Joe #3 93117
Little Joe #4 93118
Little Joe #5 93119
Little Joe #6 93120
Little Joe #7 93121
Little Joe #8 93122
Little Joe #9 93123
Little Joe #10 93124
Little Joe #11 93125
Little Joe #12 93126
Little Joe #13 93127
Little Joe #14 93128
Little Joe #15 93129
Little Joe #16 93130
Little Joe #17 93131
Little Joe #18 93132
Little Joe Fraction #19 93133
Little Joe Fraction #20 93134
Little Joe Fraction #21 93135
Little Johnnie Fraction 93109
Mable A 93107
Pandora Fraction 93110
Turtle Dove Fraction 93111
Granny Fraction 93113
Yellow Horse Fraction 93114
</TABLE>
SUBTOTAL: 29 UNPATENTED ARGUS CLAIMS
TOTAL: 57 ARGUS CLAIMS
SCHEDULE I: THE ARGUS CLAIMS
PAGE 2
<PAGE> 10
SCHEDULE II: THE SOUTH MAIN CLAIMS(1)
<TABLE>
<S> <C> <C>
Unpatented Claim Name Year Located/NMC Year Relocated/NMC
---------------------- ---------------- ------------------
South Main 1982/241433
1 1982/241434
2 1982/241435
3 1982/241436
4 1982/241437
5 1982/241438
6 1982/241439
7 1982/241440
8 1982/241441
9 1982/241442
10 1996/735896
12 1982/241445
14 1982/241447
15 1982/241448
16 1982/241449
17 1982/241450
18 1996/735897
19 1996/735898
20 1996/735899
21 1982/241454
22 1982/241455
23 1982/241456
24 1982/241457
25 1982/241458
26 1982/241459 1987/443759
</TABLE>
TOTAL: 25 UNPATENTED SOUTH MAIN CLAIMS
_____________
(1) The "South Main" unpatented claims are in the Manhattan Mining District,
Sections 20-21 and 28-29, Township 8 North, Range 44 East, Mt. Diablo Meridian,
Nye County, Nevada.
SCHEDULE II: THE SOUTH MAIN CLAIMS
PAGE 1
<PAGE> 11
SCHEDULE III: THE WC CLAIMS(1)
<TABLE>
<CAPTION>
Unpatented Claim Name NMC No.
- --------------------- -------
<S> <C>
#2 280866
#4 260868
#6 736900
#8 735901
#10 443686
#12 443688
#13 443689
#14 443690
#15 260879
#16 443691
#17 260881
#18 443692
#19 260883
#20 443693
#21 735902
#22 443694
#23 735903
#24 443695
#25 735904
#26 735905
#27 443696
#28 443697
#29 443598
#30 443699
#31 443700
#32 443701
#33 443702
#34 443703
#35 735906
#36 260900
#37 260901
#38 260902
#39 260903
#40 260904
#41 260905
#42 260906
#43 260907
#44 260908
#46 260910
#46 735907
</TABLE>
_______________
(1) The "WC" unpatented claims are in the Manhattan Mining District, Sections
20-22 and 27-34 in Township 8 North and Sections 4-6 in Township 7 North, Range
44 East, Mt. Diablo Meridian, Nye Count, Nevada.
SCHEDULE III: THE WC CLAIMS
Page 1
<PAGE> 12
<TABLE>
<CAPTION>
Unpatented Claim Name NMC No.
--------------------- -------
<S> <C>
#50 735908
#52 735909
#54 735910
#56 735911
#57 443708
#58 735912
#59 443709
#60 735913
#61 443710
#62 443711
#69 443718
#70 443719
#71 443720
#72 443721
#73 443722
#74 443723
#75 443724
#76 443725
#77 443726
#78 443727
#79 443728
#80 443729
#81 443730
#82 443731
#83 443732
#84 443733
#85 443734
#86 443735
#87 443736
#88 443737
#89 443738
#90 443739
#91 443740
#92 443741
#93 443742
#94 443743
#95 443744
#96 443745
#97 260981
#98 735914
#99 735915
#100 443747
#101 260965
#102 735916
#103 260967
#104 443749
</TABLE>
SCHEDULE III: THE WC CLAIMS
Page 2
<PAGE> 13
<TABLE>
<CAPTION>
Unpatented Claim Name NMC No.
- --------------------- -------
<S> <C>
#105 260969
#106 443750
#107 260971
#108 443751
#109 260973
#110 443752
#111 260975
#112 443753
#113 260977
#114 260978
#115 260979
#116 260980
#117 260981
#118 260982
#119 260983
#120 280984
#121 260985
#122 260986
#123 260987
#124 260988
#125 735884
#126 260990
#127 735885
#128 260992
#129 735886
#130 260994
#131 735887
#132 260996
#133 735888
#134 260998
#135 735889
#136 261000
#137 735890
#138 735891
#139 735892
#140 261004
#141 261005
#142 261006
#143 261007
#144 735893
#146 735894
#147 735895
Grannie Lode 594683
Boogie Lode 569966
</TABLE>
TOTAL: 130 UNPATENTED WC CLAIMS
SCHEDULE III: THE WC CLAIMS
Page 3
<PAGE> 1
EXHIBIT 4.(vii)
SCHEDULE "A"
FORM OF DEBENTURE
No. A-1
NEVADA MANHATTAN MINING INCORPORATED
8% SENIOR SECURED CONVERTIBLE DEBENTURE DUE MARCH 31, 2000
The securities represented hereby have not been registered under the Securities
Act of 1933, as amended (the "Act") and may not be sold, transferred or
hypothecated, except pursuant to registration under the Act or an exemption
from the registration requirements of the Act.
This Debenture is one of a duly authorized issue of Debentures of Nevada
Manhattan Mining Incorporated, a corporation duly organized and existing under
the laws of the state of Nevada (the "Issuer") designated as Eight Percent (8%)
Convertible Debentures Due March 31, 2000, in an aggregate principal amount not
exceeding Ten Million Dollars ($10,000,000.00).
FOR VALUE RECEIVED, the Issuer promises to pay to Silenus Limited, the
registered holder hereof and its successors and assigns (the "Holder"), the
principal sum of One Hundred Thousand Dollars ($100,000), on March 31, 2000
("Maturity Date"), and to pay interest on the principal sum outstanding at the
rate of 8% per annum. Interest shall be due and payable quarterly on the last
day of June, September, December and March in each year. Accrual of interest
shall commence on the first business day to occur after the date hereof and
shall continue until payment in full of the principal amount has been made or
duly provided for. At the option of Issuer interest may be paid in common stock
of the Issuer ("Common Stock") at the average of the closing "bid" prices for
the common stock for the five trading days immediately prior to the date on
which such interest payment is due. The interest so payable will be paid to the
person in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Issuer regarding registration and transfers of
the Debentures (the "Debenture Register"); provided, however, that the Issuer's
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and conditions of the
Subscription Agreement dated as of April 14, 1997 between the Issuer and Holder
(the "Subscription Agreement"). Except as set forth above, the principal of,
and interest on, this Debenture are payable in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts, at the address last appearing on the Debenture
Register of the Issuer as designated in writing by the Holder hereof from time
to time. The Issuer will pay the principal of and all accrued and unpaid
interest due upon this Debenture on the Maturity Date, less any amounts
required by law to be deducted or withheld, to the Holder at the last address
as set forth on the Debenture Register.
<PAGE> 2
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of One Hundred Thousand
Dollars ($100,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders
surrendering the same. No service charge will be made for registration,
transfer or exchange.
2. The Issuer shall be entitled to withhold from all payments of principal
of, and interest on, this Debenture any amounts required to be withheld
under the applicable provisions of the United States income tax or other
applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment representations of
the original Holder hereof and may be transferred or exchanged in
compliance with the Act and applicable state securities laws. Prior to
the due presentment for transfer of this Debenture, the Issuer and any
agent of the Issuer may treat the person in whose name this Debenture is
duly registered on the Issuer's Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and all other
purposes, whether or not this Debenture be overdue, and neither the
Issuer nor any such agent shall be affected by notice to the contrary.
4. The Holder of this Debenture is entitled, at its option, at any time
commencing forty-five days from the date hereof, to convert the
principal amount of this Debenture into shares of Common Stock of the
Issuer (the "Common Stock") at a conversion price for each share of
Common Stock equal to Seventy-Five percent (75%) of the Market Price (as
defined below) of the Common Stock for all conversions for which notice
is received after the date hereof and a conversion price of Seventy-two
and one-half percent (72-1/2%) of the Market Price thereafter. For
purposes of this Section 4, the "Market Price" shall be the lesser of
(a) the closing bid price of the Common Stock on the day prior to the
Closing of the first tranche; (b) the closing bid price of the Common
Stock on the day prior to the Closing of any subsequent tranche; or (c)
the average closing bid price of the Common Stock for the five (5) New
York Stock Exchange Trading days immediately preceding each conversion
date, in each case as reported by the National Association of Securities
Dealers Automated Quoting System, or as reported by the American Stock
Exchange of the Common Stock shall then be listed in trading upon such
exchange. Such conversion shall be effected by surrendering the
Debentures to be converted (with a copy by facsimile or courier, to the
Issuer) to the Issuer, with the form of conversion notice
2
<PAGE> 3
attached hereto as Exhibit 1, executed by the Holder of this Debenture
or a specified portion (as provided) hereof, and accompanied, if
required by the Issuer, by proper assignment hereof in blank. No
fractional shares or scrip representing fractions of shares will be
issued on conversion or payment in lieu of interest, but the number of
shares issuable shall be rounded to the nearest whole share, with the
fraction paid in cash at the discretion of the Issuer. For purposes of
this Debenture, the "Conversion Date" on which notice of conversion is
given shall be deemed to be the date on which the Holder has delivered
by facsimile transmission a duly executed notice of conversion followed
by delivery by mail or courier of this Debenture, with the conversion
notice duly executed, to the Issuer, if such notice of conversion and
this Debenture are received by mail or courier by the Issuer within
three (3) business days.
5. No provision of this Debenture shall alter or impair the obligation of
the Issuer, which is absolute and unconditional, to pay the principal
of, and interest on, this Debenture at the place, time, and rate, and in
the coin or currency, herein prescribed.
6. The Issuer hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, bringing of suit and
diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums
owing and to be owing hereon, regardless of any without any notice,
diligence, act or omission as or with respect to the collection of any
amount called for hereunder.
7. The Issuer agrees to pay all costs and expenses, including reasonable
attorneys' fees which may be incurred by the Holder in collecting any
amount due or exercising the conversion rights under this Debenture.
8. If one or more of the following described "Events of Default" shall
occur:
(a) The Issuer shall default in the payment of principal or interest
on this Debenture; or
(b) Any of the representations or warranties made by the Issuer
herein, in the Subscription Agreement, or in any certificate or
financial or other statements heretofore or hereafter furnished
by or on behalf of the Issuer in connection with the execution
and delivery of this Debenture or the Subscription Agreement
shall be false or misleading in any material respect at the time
made; or
3
<PAGE> 4
(c) The Issuer shall fail to perform or observe any other covenant,
term, provision, condition, agreement or obligation of the
Issuer under this Debenture or the Subscription Agreement,
including but not limited to conversion of this Debenture as
provided herein and therein, and such failure shall continue
uncured for a period of seven (7) days after notice from the
Holder of such failure; or
(d) The Issuer shall (1) become insolvent; (2) admit in writing its
inability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings
for its dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for it or for a
substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Issuer for a substantial part of its property or business
without its consent and shall not be discharged within thirty
(30) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the
properties or assets of the Issuer and shall not be dismissed
within thirty (30) calendar days thereafter; or
(g) Any money judgment, writ or warrant of attachment or similar
process in excess of Four Hundred Thousand Dollars ($400,000.00)
in the aggregate shall be entered or filed against the Issuer or
any of its properties or other assets and shall remain
unvacated, unbonded or unstayed for a period of fifteen (15)
calendar days or in any event later than five (5) calendar days
prior to the date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by
or against the Issuer, and if instituted against the Issuer,
shall not be dismissed within thirty (30) calendar days after
such institution or the Issuer shall by any action or answer
approve of, consent to, or acquiesce in any such proceedings or
admit the material allegations of, or default in answering a
petition filed in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any
such proceeding; or
4
<PAGE> 5
(i) The Issuer shall have its Common Stock delisted from an
exchange or an over-the-counter market;
then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent
default) at the option of the Holder and in the Holder's sole
discretion, the Holder may consider this Debenture immediately due and
payable, without presentment, demand protest or notice of any kind, all
of which are hereby expressly waived, anything herein or in any note or
other instruments contained to the contrary notwithstanding, and the
Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein
or any other rights or remedies afforded by law.
9. This Debenture is subject in all respects to the provisions, terms and
conditions of the Subscription Agreement which is, in its entirety,
incorporated herein by this reference.
10. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Issuer or any
successor corporation, whether by virtue of any constitution, statute,
or rule of law, or by enforcement by any assessment or penalty or
otherwise, all such liability being, by acceptance hereof and as part of
the consideration for the issue hereof, expressly waived and released.
11. The Holder of this Debenture, by execution of the Subscription Agreement
and acceptance hereof, agrees that this Debenture is being acquired for
investment purposes and that such Holder will not offer, sell or
otherwise dispose of this Debenture or the shares of Common Stock
issuable upon exercise thereof except under circumstances which shall
not result in a violation of the Act or any applicable state Blue Sky
law or similar laws relating to the sale of securities.
12. The Issuer undertakes to file and amendment to Registration Statement on
Form SB-2 to register the Common Stock to be issued upon conversion of
this Debenture with the Securities and Exchange Commission on or before
May 15, 1997.
13. In case any provision of this Debenture is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and
the validity and
5
<PAGE> 6
enforceability of the remaining provisions of this Debenture will not in
any way be affected or impaired thereby.
14. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the
Issuer and the Holder with respect hereto. Neither this Debenture nor
any terms hereof may be amended, waived, discharged or terminated other
than by a written instrument signed by the Issuer and the Holder. This
Debenture is in all respects subject to the terms and conditions
contained in the Subscription Agreement.
15. Payment of the liabilities and obligations of the Issuer under this
Debenture and the other Debentures authorized pursuant to the
Subscription Agreement, and the Subscription Agreement, are secured by a
Trust Deed on certain patented and unpatented mining claims held by the
issuer near Manhattan, Nevada. The Issuer agrees to execute such
documents and take such action as may be necessary to perfect the
security interest of the Issuer in such claims.
16. This Debenture shall be governed by and construed in accordance with the
laws of the state of California.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by an officer thereunto duly authorized.
NEVADA MANHATTAN MINING INCORPORATED
By: [sig]
----------------------------------------------
Official Signatory of Issuer
/s/ JEFFREY KRAMER
- -------------------------------------------------
Name (Printed)
Senior Vice President and Chief Operating Officer
- -------------------------------------------------
Title
April 17, 1997
- -------------------------------------------------
Date
6
<PAGE> 1
EXHIBIT 10. (xviii)
[NEVADA MANHATTAN MINING, INC. LETTERHEAD]
April 30, 1997
Mr. Arthur Lipper III
British Far East Holdings Ltd.
14911 Caminito Ladera
Del Mar, CA 92014-3929
RE: Financial and Management Services
Dear Arthur:
This letter is intended to memorialize the agreement between Nevada
Manhattan Mining Incorporated (the "Company") and British Far East Holdings
Ltd. ("BFE").
On the terms and conditions which follow, BFE has agreed to provide the
personal services of Arthur Lipper III to the Company for a period of thirty-six
months commencing May 1, 1997. During this period, you will provide your
personal services requested from time to time by the Company and relating to
financial and management matters, including but not limited to decisions
relating to the Company's market makers, financial arrangements to be entered
into by the Company, proposed acquisitions of properties, selection of an Audit
Committee, and other matters generally affecting the financial affairs of the
Company. The Company also anticipates that you will participate as a
non-voting invitee at all meetings of the Board of Directors and shareholders'
meetings.
For the services to be rendered by you, the Company has agreed to pay
BFE $5,000 for the first three days of service per month and $1,000 for each
additional day of service. Payment will be made by the tenth day of the month
following the month during which services are rendered. The Company will also
reimburse BFE within five days of presentation of invoice any expenses incurred
by BFE in connection with the personal services
<PAGE> 2
rendered by you under this agreement. Any expenses in excess of $500 shall be
pre-authorized and approved by the Company. You will be entitled to travel first
class or business class on any international travel and business class on any
domestic travel requested by the Company.
The Company hereby grants BFE or its designee the right to purchase up
to 100,000 shares of its Common Stock. Commencing on the first day of the month
following the first twelve months of service, BFE shall be entitled to exercise
this warrant to the extent of thirty-three and one-third percent (33 1/3%) of
the shares which BFE is hereby entitled to purchase. Each successive
twelve-month period will vest an additional thirty-three and one-third percent
(33 1/3%) of such rights so that upon completion of the thirty-six month term,
BFE shall be entitled to purchase all shares granted pursuant to this warrant.
The purchase price per share for each share to be purchased under this warrant
shall be one hundred twenty percent (120%) of the current market price of $5.75
per share, subject to adjustment to account for any stock split, reverse stock
split, corporate reorganization, or similar events.
This agreement shall be for a term of thirty-six months and shall not be
terminated except "for cause." For the purposes of this agreement, the term "for
cause" shall mean any act or omission by you which would constitute misfeasance,
malfeasance, an illegal act, an act or acts considered ultra vires, acts which
are detrimental to the Company or which constitute a breach of a fiduciary
duty. Provided an event does not occur creating a right to terminate this
agreement for cause, you and BFE shall be entitled to indemnification to the
same extent all directors and executive officers are entitled under the
Company's Bylaws.
In the event of any dispute or question of interpretation under this
agreement, the parties agree to submit the matter to arbitration before the
American Arbitration Association in Los Angeles County. Arbitration shall be
conducted in accordance with the Commercial Arbitration Rules then in effect.
Any determination by the arbitrator may be confirmed by the Los Angeles Superior
Court and enforced as a judgment upon confirmation. The arbitrator shall have
the discretion to award the prevailing party its costs and attorneys' fees
incurred in connection with such arbitration and confirmation proceedings.
<PAGE> 3
If the foregoing is consistent with your understanding of the agreement
which we have reached, please signify BFE's acceptance on the space provided for
below for signature.
Very truly yours,
NEVADA MANHATTAN MINING
By /s/ JEFFREY S. KRAMER
---------------------------
Jeffrey S. Kramer
Chief Financial Officer
Agreed and Accepted
BRITISH FAR EAST HOLDING LTD
By /s/ ARTHUR LIPPER III
-------------------------
Arthur Lipper III
<PAGE> 1
EXHIBIT 23.(i)
The Board of Directors
Nevada Manhattan Mining, Incorporated
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the Prospectus and the Registration
Statement on Form SB-2.
/s/ JACKSON & RHODES P.C.
Jackson & Rhodes P.C.
Dallas, Texas
April 28, 1997
<PAGE> 1
EXHIBIT 23. (ii)
[GOLD KING MINES CORPORATION LETTERHEAD]
A SUBSIDIARY OF SHERIDAN RESERVE CORPORATION
April 30, 1997
Nevada Manhattan Mining, Inc.
Lloyd S. Pantell APLC
10940 Wilshire Boulevard
Suite 1550
Los Angeles, California 90024-3942
Re: Nevada Manhattan Mining, Inc. Registration Amendment #1
Dear Mr. Pantell:
This letter confirms the undersigned has reviewed the draft prospectus to be
filed in connection with the Company's Form SB-2 registration and hereby
consents to the use of this organization's name as disclosed in the April 30,
1997 Prospectus, which we presume is part of Amendment 1 to the Registration
Statement.
This letter shall also serve to confirm that the undersigned has received
appropriate authorization from his organization to execute this letter, to
provide representation herein contained, and to authorize you to provide this
letter to the Securities and Exchange Commission as evidence of same.
Sincerely,
Gold King Mines Corporation
/s/ WILLIAM R. WILSON
- ---------------------------
William R. Wilson
President
<PAGE> 1
EXHIBIT 23.(iii)
BEHRE DOLBEAR & COMPANY, INC.
Minerals Industry Consultants
______________________________________________________________________________
1801 Blake Street Tel: (302) 620-0020
Suite 301 Fax: (302) 620-0024
Denver, Colorado 80202
March 25, 1997
Mr. William R. Wilson
Vice President Operations
Nevada Manhattan Mining, Inc.
410 17th Street, Suite 1375
Denver, Colorado 80202
Re: Nevada Manhattan Mining, Inc. Registration Statement #333-17423
Amendment #1.
Dear Mr. Wilson:
This letter confirms that the undersigned has reviewed the draft prospectus
to be filed in connection with the Company's Form SB-2 registration statement
and hereby consents to the use of this organization's name as disclosed in
the facsimile draft of March 25, 1997, which we presume is part of Amendment
No. 1 to the registration statement.
This letter shall also serve to confirm that the undersigned has received
appropriate authorization from his organization to execute this letter, to
provide the representation herein contained, and to authorize you to provide
this letter to the Securities and Exchange Commission as evidence of same.
Sincerely,
BEHRE DOLBEAR & COMPANY, INC.
/s/ GARY G. VAN RIPER
- ---------------------------------------
Gary G. Van Riper
Vice President, Environmental Services
wfc
_____________________________________________________________________________
Denver New York Toronto Guadalajara Santiago Sydney
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