<PAGE> 1
United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the quarterly period ended February 28, 1998.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ______to ______
Commission file number: 001-12867
NEVADA MANHATTAN MINING INCORPORATED
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 88-0219765
(State or Other Jurisdiction of (I.R.S.Employer
Incorporation or Organization) Identification No.)
5038 N. PARKWAY CALABASAS, SUITE #100, CALABASAS, CA 91302
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices
(818) 591-4400
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(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
3 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 16,099,562 of Common Stock and
207,608 of Series A Preferred Stock.
Traditional Small Business Disclosure Format (check one): Yes [X] No [ ]
<PAGE> 2
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1 Financial Statements for Nevada Manhattan Mining, Inc.
Consolidated Statements of Operations -
Three and Nine Months Ended February 28, 1998 and 1997 3
Consolidated Balance Sheets -
February 28, 1998 and May 31, 1997 5
Consolidated Statements of Cash Flow -
Nine Months Ended February 28, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operation 11
PART II OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
Signature 16
</TABLE>
<PAGE> 3
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>
(Unaudited)
<S> <C> <C>
1998 1997
---- ----
Revenues $ 174,175 $ --
Cost of Sales 147,278 --
----------- ---------
Gross profit 26,897 --
Expenses:
General and administrative (1,424,240) (662,270)
----------- ---------
Net loss (1,397,343) (662,270)
Cumulative preferred dividends (0) (97,223)
----------- ---------
Net loss attributable to common
shareholders $(1,397,343) $(759,493)
=========== =========
Net loss per common share $ (0.08) $ (0.08)
=========== =========
Weighted average shares outstanding 15,557,214 10,405,727
----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 4
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>
(Unaudited)
1998 1997
----- ----
<S> <C> <C>
Revenues $ 525,981 $ --
Cost of Sales 413,151 --
------------ ------------
Gross profit 112,830 --
Expenses:
General and administrative (4,363,954) (1,319,759)
------------ ------------
Net loss (4,251,124) (1,319,759)
Cumulative preferred dividends (58,356) (136,063)
------------ ------------
Net loss attributable to common
shareholders $ (4.309,480) $ (1,455,822)
============ ============
Net loss per common share $ (0.32) $ (0.13)
============ ============
Weighted average shares outstanding 13,436,463 10,405,727
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 5
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
MAY 31, 1997
Current assets: FEB. 28, 1998 (Restated)
-------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 9,354 $ 559,510
Accounts receivable 64,481 58,161
Inventory 45,000 --
Prepaid expenses 948,222 622,710
------------ ------------
Total current assets 1,067,057 1,240,381
------------ ------------
Property and equipment
Domestic 2,936,000 2,744,327
Indonesia 2,600,000 2,600,000
Brazilian timber concession 1,460,000 3,296,729
Furniture, fixtures, equipment 781,346 431,840
Less accumulated depreciation (140,185) (82,998)
------------ ------------
7,637,161 8,989,898
------------ ------------
8,704,218 10,230,279
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 415,464 544,738
Accrued liabilities 925,676 441,535
Notes payable to stockholders 2,058,497 712,321
Current portion of long-term debt 60,000 303,818
------------ ------------
Total current liabilities 3,459,637 2,002,412
------------ ------------
Convertible debentures 2,264,167 1,333,333
Long term debt 24,540 2,669,427
------------ ------------
Total liabilities 5,748,344 6,005,172
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock to be issued 760,000 108
Preferred stock, $1 par, 250,000 shares
Authorized, 207,608 and 228,319 207,608 228,319
outstanding At February 28, 1998
Common stock, $0.01 par, 49,750,000
Shares authorized, 16,099,562 and
12,273,565 shares issued 160,995 122,736
Additional paid-in capital 26,106,812 23,699,574
Accumulated deficit (24,279,541) (19,825,630)
------------ ------------
Total stockholders' equity 2,955,874 4,225,107
------------ ------------
$ 8,704,218 $ 10,230,279
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 6
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>
(Unaudited)
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities: $(4,251,124) $(1,319,759)
Net loss
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued for services 63,878 240,000
Depreciation and amortization 328,021 7,500
Minority interest expense -- 49,500
Accounts receivable (6,320) --
Inventory (45,000) --
Prepaid expenses 378,426 (164,500)
Accounts payable and accrued liabilities 819,511 (12,515)
----------- -----------
Net cash used in operating activities (2,712,608) (1,199,774)
----------- -----------
Cash flows from investing activities:
Purchase of inventory, property and equipment (529,381) (1,521,460)
----------- -----------
Cash flows from financing activities:
Additions to convertible debentures 1,500,000 14,556
Payments on debt (293,376) (6,251)
Proceeds from notes payable to stockholders 1,346,176 254,945
Proceeds from issuance of stock and stock
to be issued 139,033 2,359,537
----------- -----------
Net cash provided by financing activities 2,691,833 2,622,787
----------- -----------
Net increase (decrease) in cash and cash equivalents (550,156) (98,447)
Cash and cash equivalents at beginning of period 559,510 233,981
----------- -----------
Cash and cash equivalents at end of period $ 9,354 $ 135,534
=========== ===========
Supplemental cash flow information:
Cash paid during the year for interest $ 0 $ 0
----------- -----------
</TABLE>
Non-Cash Transactions:
During the nine months ended February 28, 1998, the Company issued:
o 100,000 shares of Common Stock valued at $441,000 for a consulting
contract.
o 224,109 shares of Common Stock valued at $262,938 for liquidated damages to
a debenture holder.
o 65,000 shares of Common Stock valued at $325,000 for mine contract services
to Harrison Western.
o 5,000 shares of Common Stock valued at $12,700 was issued to Vanderbilt for
option to acquire property.
o 1,000,000 shares of Common Stock valued at $760,000 to be issued to
Ignatius Theodorou over a three-year period for Company's acquisition of
certain interests in Brazil.
o 65,000 shares of Common Stock valued at $63,876 issued for services.
During the nine months ended February 28, 1998, $340,000 of debenture notes were
converted to 212,911 shares of Common Stock. During the nine months ended
February 28, 1998, shareholders converted 165,144 Preferred Shares to 1,651,440
Common Shares.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 7
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-QSB instructions and in the opinion of
management contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of February
28, 1998, the results of operations for the three months and nine months
ending February 28, 1998 and 1997, and the cash flows for the nine months
ended February 28, 1998 and 1997. These results have been determined on the
basis of generally accepted accounting principles and practices applied
consistently with those used in the preparation of the Company's audited
financial statements for its fiscal year ended May 31, 1997.
2. BUSINESS
The Company's business is the harvesting of timber and the production of
rough sawn lumber and other finished wood products in Brazil and the
exploration and mining of precious metals and coal in Nevada and Indonesia.
The Company holds various rights in and to the following properties: (i)
various timber properties aggregating up to approximately 750,000 hectares
(1,875,000 acres) and sawmill facilities located near the town of Sao
Miguel do Guama, Brazil all of which are located in the state of Para,
Brazil (the "Brazilian Timber Properties"); (ii) 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); (iii) 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"); and (iv) three (3)
coal properties located in Kalimantan, Indonesia, comprising 290,000
hectares (725,000 acres) (the "Indonesian Coal Concessions").
The Company is currently not operating the sawmill in Sao Miguel do Guama,
Brazil. On February 27, 1998, the Company announced that based on
recommendations from outside consultants related to timber production and
environmental management, the Company began transporting an initial 1,000
cubic meters of the Company's inventory of raw materials to Tome-Acu, in
the Amazon Basin within the same region as Sao Miguel operations. In
addition, the Company began experiencing problems in its relationship with
the former owner of the Sao Miguel sawmill. Timber production in Tome-Acu
commenced in March, 1998. These new timber milling operations commenced in
anticipation of acquiring a leasehold interest in an operating sawmill
located in the Tome-Acu area or another facility in the region, where
hardwood is readily available for harvesting in a sustainable method. The
Company expects to be able to substantially reduce its transportation
expenses and overhead expenses associated with the production of timber
products, thereby creating additional efficiencies.
<PAGE> 8
On December 19, 1997 the Company increased its equity ownership of its
Brazilian subsidiary, Equatorial Resources Ltda., from 80% to 100%. The
Company renegotiated its agreement with Ignatius Theodorou, formerly the
20% minority shareholder in Equatorial. The Company agreed to pay Mr.
Theodorou one million shares of its restricted common stock over a three
year period in consideration of acquiring certain interests in Brazil.
Under the new agreement, the Company will no longer be required to pay Mr.
Theodorou a total of $3,000,000.
On November 25, 1997 the Company entered into a non-binding letter of
intent with Royal Gold (the "Letter of Intent") relating to exploration and
development efforts on its Manhattan Property located in Nye County,
Nevada. Under the terms of the Letter of Intent, Royal Gold was granted an
exclusive option to explore, develop and purchase all of the interests
which are or may be controlled by the Company on the Manhattan Property.
The term of the agreement to be entered into (if at all), consistent with
the terms of the Letter of Intent, will be three years, renewable for
successive terms of three years, provided that Royal Gold continues to
perform exploration work. The Company will retain a 4% net smelter returns
royalty and also reserves the right to continue with the development of its
underground mining opportunity at the historic White Caps location. Royal
Gold has the option to acquire all of the Company's interest in the
property, at any time during the term of the agreement, upon the payment to
the Company of $5 million. The agreement would continue indefinitely to the
extent that Royal Gold is achieving production in commercial quantities or
is engaged in reclamation. Closing of the transaction will be subject to
title and environmental due diligence, and documentation in a form
satisfactory to both parties. The option was granted in part because Royal
Gold is the largest U.S.-based, publicly held gold royalty company. It
engages in the acquisition, exploration and development of gold properties
and the acquisition and management of royalty interests.
3. CONVERTIBLE DEBENTURES
On April 14, 1997 and July 7, 1997, the Company entered into Subscription
Agreements related to two negotiated private placements. These transactions
were 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
an aggregate of $3,500,000 of 8% Senior Secured Convertible Debentures (the
"Debentures") due March 31, 2000 (with respect to $2,000,000 of the
Debentures) and July 1, 2000 (with respect to $1,500,000 of the Debentures)
and granted to the purchasers warrants to purchase 62,500 shares and 75,250
shares of the Company's Common Stock (the "Warrants"), respectively.
The Debentures may be converted into shares of Common Stock at any time at
a price equal to the lesser of: seventy-five percent (75%) of the closing
bid price of the Common Stock on the closing date (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. With respect to the April 1997 funding, if
conversion is made after August 16, 1997 (as the case may be with respect
to $1,800,000 of the April 1997 Debentures), the discount will be
seventy-two and one-half percent (72.5%) of the above-referenced valuation
standards. The Company has recorded financing charges for the differences
between the conversion price and the fair market value of the stock at the
date of each funding ($500,000 for the nine month period ended February 28,
1998). The discount will be amortized over the life of the Debentures.
<PAGE> 9
The Company was required to use its "best efforts" to cause a registration
statement on Form SB-2 (the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") to become effective. If the
Registration Statement did not become effective within 120 days of each
respective funding, the Company was required to pay liquidated damages
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. The Company withdrew its Registration Statement pending
further discussion with the Commission. The Company has entered into
discussions with its Debenture holders in an effort to secure from the
Debenture holders "lockup" agreements allowing the Company to retire the
Debentures without market conversion to common stock pursuant to a
registration statement.
With regard to the April 1997 funding, until at least seventy-five percent
(75%) of the Debentures are converted, a deed of trust on the Nevada
Property and a pledge of 1,000,000 shares of Common Stock will secure the
Debentures. No such security is given on the Debentures issued in July
1997.
The Company has issued warrants to the subscribers of the April 14 and July
7 Debentures. The subscribers of the April 14 Debentures have been granted
warrants to purchase 62,500 shares of Common Stock at an exercise price of
$8 per share until April 16, 2002. The subscribers of the July 17, 1997
Debentures have been granted warrants to purchase 75,250 shares of Common
Stock at an exercise price of $6.75 per share until July 16, 2002. The
exercise price is subject to adjustment to account for payments of
dividends, stock splits, reverse stock splits, and similar events.
4. RESTATEMENT
As explained in the Company's Form 10-QSB for the period ending November
30, 1997, the Company has discussed with the Securities and Exchange
Commission possible adjustments to the carrying value of its Nevada and
Indonesia mineral proprties in accordance with the SEC Industry Guide 7 and
Statement of Financial Accounting Standards No. 121. As of February 28,
1998, the Company has provided an impairment against those properties as
follows:
Exploration costs related to the Nevada properties $3,036,000
Exploration costs related to the Indonesian properties 227,000
------------
Total adjustment $3,263,000
The remaining capitalized costs in Nevada at February 28, 1998 ($2,936,000)
represent acquisition costs of $2,525,000 and capitalized development costs
of $411,000. The capitalized development costs are limited to the
proven/probable reserves contained in the Nevada properties. The remaining
capitalized costs related to the Indonesia properties are the acquisition
costs of $2,600,000. The Company has restated its May 31, 1997 financial
statements as a result of this impairment, reducing the Domestic property
and equipment value from $5,830,091 to $2,744,327 and Indonesia property
and equipment value from $2,826,782 to $2,600,000.
<PAGE> 10
5. SUBSEQUENT EVENTS:
(a) On March 3, 1998, the Company executed an agreement (the " Metsa
Agreement") with Oy Metsa Timber Ltd. of Helsinki, Finland for timber
distribution and management services. The Metsa Agreement grants Metsa
distribution and sales rights for the output of timber and timber-
related products of its subsidiary, Equatorial Resources. Metsa
Timber's extensive marketing areas include the United Kingdom, France,
Italy, Germany, Denmark, The Netherlands, Japan, Greece, Northern
Africa and Arab countries. The Metsa Agreement also provides the
Company with management and development assistance which will be
provided through one of Metsa's sister subsidiaries, FWI Wood
International.
Metsa Timber group is one of Europe's leading sawmilling groups with a
1997 production of 2 million cubic meters of sawn timber in its 13
European units. Metsa Timber group reported net sales of $525 million
USD in 1997. The Metsa Timber Group is a division of the Metsaliitto
Group which is one of Europe's largest forest industry enterprises
focusing on wood trading and forest products manufacturing. The
Metsaliitto Group reported net sales of $4.86 billion USD in 1997. It
has manufacturing operations in Europe and its products are marketed
worldwide.
The Metsa Agreement also expresses compliance with international
guidelines for sustainable forestry. In order to achieve this goal,
the Company has commenced a development project for an Eco-Efficiency
Model through Eco-Rating International, Zurich, Switzerland
("Eco-Rating"), to help insure that its timber harvesting and milling
operations in Brazil adhere to ecologically sound practices.
Eco-Rating is one of the private sector's environmental rating
agencies specializing in evaluating the environmental performance of a
project, firm or product through an in-depth analysis yielding a
numerical score. Eco-Rating has completed more than 50 evaluations in
a variety of industries, ranging from forestry to waste management.
(b) On March 27, 1998, the Company executed an agreement securing $14
million in equity financing, primarily to fund its timber operations
in South America. The financing, through Bristol Asset Management
Company II LLC, enables Nevada Manhattan to draw up to $14 million
over a three-year period. The initial use of funds will be used to
complete the relocation of the Company's Brazilian timber-sawmill
operations as announced on February 27, 1998 (see "Business").
(c) From July 1997 through April 10, 1998, Jeffrey S. Kramer, Chief
Operating Officer, provided loans to the Company, aggregating
$603,017.
(d) From the period November 11, 1997 to March 30, 1998, 2,746,709 shares
of common stock were reserved to collateralize loans of the Company.
The Board of Directors has authorized an aggregate 3,000,000 shares of
common stock to either collateralize or retire outstanding loans.
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATION
Comparison of Results of Operations - Nine months Ended February 28,
1998 and February 28, 1997.
------------------------------
Revenues for nine months ended February 28, 1998 were $525,981 as
compared to no revenues for the same period in 1997. However, net loss
for the nine month period ended February 28, 1998 was approximately
$4,309,480 as compared to a net loss of $1,456,000 for the same period
in 1997. The net loss for the nine month period ended February 28,
1998 was attributable to Brazilian operations (approximately
$1,642,000); consulting expenses (approximately $251,211);
debt-related expense (approximately $353,000); interest expense
(approximately $268,000); legal fees (approximately $240,000);
printing (approximately $85,000); shareholder expense (approximately
$64,000), travel and lodging mostly related to Brazilian operations
(approximately $150,000 and $120,000 respectively); salaries for
Nevada and Calabasas operations (approximately $594,000); telephone
(approximately $72,000); office expense (approximately $95,000);
accounting and auditing (approximately $47,000); Depreciation
(approximately $56,000); and accrued Preferred dividends expense
(approximately $58,356).
Quarter Ended February 28, 1998 to Quarter Ended February 28, 1997
------------------------------------------------------------------
Revenues for the quarter ended February 28, 1998 were approximately
$174,175 as compared to no revenues for the same period in 1997.
However, net loss for the quarter ended February 28, 1998 was
approximately $1,397,343 as compared to net loss of approximately
$856,700 for the same period in 1997. The net loss for the quarter
ended February 28, 1998 was attributable to Brazilian operations
(approximately $504,000); consulting expense (approximately $64,000);
legal fees (approximately $70,000); interest (approximately $113,000);
debt related expense (approximately $127,000); shareholder expense
(approximately $45,000); salaries for administration staff
(approximately $200,000); and travel and lodging ($55,000 and $28,000
respectively).
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position as of February 28, 1998 was a
deficit of approximately $2,392,590. 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 Brazilian
Properties, the Silobat Property and the remainder of the Indonesian
Concessions.
<PAGE> 12
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 $5,525,000 (including $525,700 in
quarter ending February 28, 1998) pursuant to such private placements
and notes payable to stockholders. The Company in 1997 concluded
privately-negotiated placements of approximately Three Million Five
Hundred Thousand Dollars ($3,500,000) of 8% Senior Convertible
Debentures with certain investors. The Company has entered into
discussions with its Debenture holders in an effort to secure from the
Debenture holders "lockup" agreements allowing the Company to retire
the Debentures without market conversion to common stock pursuant to a
registration statement.
On March 27, 1998, the Company executed an agreement securing $14
million in equity financing, primarily to fund its timber operations in
South America. The financing, through Bristol Asset Management Company
II LLC, enables Nevada Manhattan to draw up to $14 million over a
three-year period. The initial use of funds will be used to complete
the relocation of the Company's Brazilian timber-sawmill operations as
announced on February 27, 1998 (see "Business").
The Brazilian operations represent an opportunity for the Company to
generate significant cash flows for the first time, particularly due to
the Company's agreement with Metsa Timber (see "Subsequent Events") and
the Bristol Asset Management financing agreement. The Company believes
that with the anticipated increase in daily production at its Brazilian
operations to 125 cubic meters per day, much of its continued
operations in Brazil, Indonesia, the Nevada Property, and its operating
expenses and overhead at its corporate offices will be funded by the
cash flow generated from its operations in Brazil.
The Company anticipates that it will require additional capital and
intends to secure it through its agreement with Bristol Assets
Management Company II LLC, by utilizing a publicly registered offering
of its securities, a "Private Placement" and/or funds generated from
its Brazilian operations.
<PAGE> 13
NEVADA MANHATTAN MINING, INCORPORATED AND SUBSIDIARIES
PART II - OTHER INFORMATION
1. LEGAL PROCEEDINGS
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. The Action, as amended is seeking a
judicial declaration that Marlowe Harvey does not have any joint venture or real
property interest in the mining claims included within the Nevada property. The
Action also seeks compensatory damages and other financial relief based on the
Harvey Entities' breach of contract and other causes of action.
During April 1997, the Company through its counsel filed a first amendment to
its Complaint in the Action. Counsel for the Harvey Entities filed an answer and
a counterclaims in the action during July 1997. In their answer, the Harvey
Entities have generally denied the allegations of the first amended complaint
and have raised various affirmative defenses. In their counterclaims, the Harvey
Entities are seeking an injunction preventing the Company from conducting
activities related to the Manhattan Project pending resolution of the issues in
the action and compensatory and punitive damages and other financial relief
based on breach of contract and other causes of action.
In July 1997, the Harvey Entities moved for a preliminary injunction against the
Company preventing it from conducting further activities at the Manhattan
Project without their consent, from issuing press releases describing certain
real property as being wholly owned by the Company, and from using the same as
security for loans. After a two-hour hearing on September 4, 1997, the court
refused to issue an injunction against the Company. Instead, the Harvey Entities
were ordered not to interfere with the Company's operations on the Nevada
Property. Additionally, the Company agreed not to further encumber the Nevada
Property pending trial. A trial date for some issues has been set for April 30,
1998.
2. CHANGES IN SECURITIES
The Series A Preferred Stock, convertible into ten shares of common stock on or
before December 31, 1997, has been retired as of December 31, 1997. All accrued
dividends have been paid (in Common Stock of the Company) and all Preferred
shares converted into Common Stock (upon presentation of stock certificate to
transfer agent).
3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
<PAGE> 14
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
5. OTHER INFORMATION
Dividend
- --------
The Board of Directors declared a dividend to all shareholders of record as of
December 31, 1997 consisting of one share of a new series of Convertible
Preferred Stock (the "1998 Preferred Stock"), $1 par value, for every 100 shares
of Common Stock owned. As authorized in the Company's Amended Certificate of
Determination of Preferences of Series A Preferred Stock filed with the Nevada
Secretary of State on January 14, 1998, the 1998 Preferred Stock is convertible
to one share of Common Stock for a period of one year and carries a dividend
equal to eight percent (8%) of par value payable in cash or stock at the
Company's election. Such dividends are cumulative so that if full dividends in
respect of any previous dividend period are not paid, holders of the 1998
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. Each share of 1998 Preferred
Stock will have attached a warrant to purchase two additional shares of Common
Stock at $3.00 per share for a period of two years (the "Dividend Warrants").
The Dividend Warrants are callable by the Company, at its option, at $3.50 per
share.
6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The Company hereby incorporates by reference the exhibits filed in connection
with its Registration Statement filed on Form SB-2 under the Securities Act of
1933, as amended (Registration Nos. 333-17423 and 333-27923) and its
Registration Statement filed on Form 10, as amended (Registration No.
001-12867).
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- ----------------------
3.(ix) Amended Certificate of Determination of Preferences of Series A
Preferred Stock of Nevada Manhattan Mining Incoporated Filed
January 14, 1998.
<PAGE> 15
Reports On Form 8-K
8-K Report dated February 27, 1998 to report (i) the press release issued on
February 27, 1998 announcing that the Company commenced timber operations in
Tome-Acu, in the Amazon Basin, based on recommendations from outside consultants
related to timber production and environmental management; and (ii) the press
release issued on March 11, 1998 announcing the Company executed an agreement
with Metsa Timber Ltd., granting Metsa distribution and sales rights for the
timber and timber-related products produced in the Company's Brazilian timber
operations.
8-K Report dated December 9, 1997 to report (i) the press release issued on
December 9, 1997 announcing second quarter revenues and a Preferred Stock
Dividend to shareholders; (ii) the press release issued on December 17, 1997
announcing the signing of a Letter of Intent with Royal Gold Corporation for an
exploration and development effort in Nye County, Nevada; (iii) the press
release issued on January 12, 1998 announcing the Company increased its equity
ownership of Equatorial Resources from 80% to 100%.
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Nevada Manhattan Mining, Incorporated
/s/ Jeffrey S. Kramer
April 14, 1998 ------------------------------------------
Jeffrey S. Kramer, Chief Financial Officer
<PAGE> 1 EXHIBIT 3.(ix)
AMENDED CERTIFICATE OF DETERMINATION
OF
PREFERENCES OF SERIES A PREFERRED STOCK
OF
NEVADA MANHATTAN MINING INCORPORATED
A Nevada Corporation
Christopher D. Michaels and Jeffrey Kramer hereby certify that:
A. They are the duly elected and acting President and Secretary,
respectively, of Nevada Manhattan Mining Incorporated, a Nevada corporation (the
"Corporation").
B. Pursuant to authority given by the Corporation's Articles of
Incorporation, the Board of Directors of the Corporation has duly adopted the
following recitals and resolutions:
WHEREAS the Articles of Incorporation of the Corporation
provide for a class of shares known as Preferred Stock, issuable from
time to time in one or more series; and
WHEREAS the Board of Directors of the Corporation is
authorized to determine or alter the rights, preferences, privileges
and restrictions granted to or imposed upon any wholly unissued shares
of Preferred Stock, to fix the number of shares constituting any such
series, and to determine the designation thereof, or any of them; and
WHEREAS the Corporation has previously issued Series "A"
Preferred Stock which has or will be redeemed pursuant to the
Certificate of Determination duly filed with the Nevada Secretary of
State on October 25, 1995, and the Board of Directors of the
Corporation desires, pursuant to its authority as aforesaid, to
reestablish and redetermine the rights, preferences, privileges and
restrictions relating to a series of said Preferred Stock and the
number of shares constituting the designation of said series;
NOW, THEREFORE, BE IT RESOLVED that the Board of Directors
hereby fixes and determines the designation of, the number of shares
constituting, and the rights, preferences, privileges and restrictions
relating to, said series of Preferred Stock as follows:
(1) Designation of Preferred Shares. The Corporation shall have a
series of Preferred Stock which shall be designated "Series A
Preferred Stock" (the "Series A Preferred Stock"). The Series A
Preferred Stock is hereinafter sometimes referred to as the "Preferred
Stock." The Preferred Stock shall have a par value of $1.00 per share.
(2) Number of Preferred Shares. The number of shares constituting
the Series A Preferred Stock shall be 250,000. Initially, each
shareholder of record holding at least 100 shares of the Corporation's
Common Stock shall be entitled to receive Preferred Stock at the rate
of one share of Preferred Stock for every 100 shares of common stock
so owned by him, her or it (as the case may be) as of such record
date. No fractional shares of Preferred Stock shall be issued.
Thereafter, the Board of Directors may issue all or a portion of the
remaining shares of Preferred Stock on such terms and conditions as
the Board of Directors shall determine.
<PAGE> 2
(3) Dividends. The Holders of the Series A Preferred Stock shall
be entitled to receive dividends at the rate of eight percent (8%) per
annum of the par value per share of Series A Preferred Stock, out of
any funds legally available therefor, payable on or before December
31, 1998. Such dividends shall be cumulative, so that if the full
dividends in respect of any previous dividend period shall not have
been paid on the Series A Preferred Stock at the time outstanding,
whether or not earned, whether or not funds of the Corporation are
legally available therefor and whether or not declared by the Board,
the deficiency shall be fully paid or declared and set apart for such
shares (without interest) before any dividend or other distribution
shall be paid on or declared or set apart for any other class or
series of Common Stock or Preferred Stock of the Corporation, whether
now or hereafter authorized, and before any redemption, retirement,
purchase or other acquisition of any other class or series of Common
Stock or Preferred Stock of the Corporation, whether now or hereafter
authorized. The Company may pay the dividend on the Series A Preferred
Stock in cash, or through the issuance of additional shares of Series
A Preferred Stock or Common Stock having an issue price equal to the
amount of the dividend, or through a combination of the foregoing.
(4) Liquidation Preference.
a. Preference on Series A Preferred Stock. In the event of any
liquidation, dissolution or winding up of the Corporation, either
voluntarily or involuntarily, the holders of shares of Series A
Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets or surplus funds of the
Corporation to the holders of shares of any other class or series of
Common Stock or Preferred Stock of the Corporation, an amount equal to
Three Dollars Fifty Cents ($3.50) per share plus a further amount
equal to any dividends declared but unpaid on such shares, as either
such amount may be adjusted from time to time to give effect to stock
splits, stock dividends and similar transactions affecting the Series
A Preferred Stock.
All of the preferential amounts to be paid to the holders of
shares of Series A Preferred Stock under this Section shall be paid or
set apart for payment before the payment or setting apart for payment
of any amount for, or the distribution of any assets of the
Corporation to, the holders of shares of Common Stock in connection
with such liquidation, dissolution or winding up. After the payment or
the setting apart for payment to the holders of the Series A Preferred
Stock of the preferential amount so payable to them, the holders of
shares of Common Stock shall be entitled to receive all remaining
assets of the Corporation.
If, upon such liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution
are insufficient to provide for the payment of the full preferential
amount for each share of Series A Preferred Stock outstanding, such
assets as are available shall be distributed ratably among the holders
of shares of Series A Preferred Stock.
b. Consolidation or Merger. A consolidation or merger of the
Corporation with or into any other corporation or corporations, or a
sale of all or substantially all of the assets of the Corporation, or
a series of related transactions in which more than fifty percent
(50%) of the voting power of the Corporation is disposed of, shall not
be deemed to be a liquidation, dissolution or winding up within the
meaning of this Section (4).
<PAGE> 3
c. Noncash Distributions. If any of the assets of the Corporation
are to be distributed other than in cash under this Section (4), then
the Board of Directors of the Corporation shall promptly engage
independent competent appraisers to determine the value of the assets
to be distributed to the holders of shares of Series A Preferred Stock
or Common Stock. The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of
shares of Series A Preferred Stock and Common Stock of the appraiser's
valuation.
d. Consent for Certain Repurchase. Each holder of an outstanding
share of Series A Preferred Stock shall be deemed to have consented to
distributions made by the Corporation in connection with the
repurchase of shares of Common Stock issued to or held by employees or
consultants upon termination of their employment or services pursuant
to agreements providing for the right of said repurchase between the
Corporation and such persons.
(5) Warrants to Purchase Additional Common Stock. Each share of
Preferred Stock shall include the right to purchase two (2) shares of
Common Stock through December 31, 1999 at a price of Three Dollars
($3.00) per share, as may be adjusted from time to time pursuant to
Section (6) b. Exercise of the warrants may be made in whole or in
part through December 31, 1999, provided, however, that no fractional
shares of Common Stock shall be issued in connection with such
exercise.
(6) Conversion. The holders of the shares of Series A Preferred
Stock hall have the following conversion rights (the "Conversion
Rights").
a. Automatic Conversion. Each share of Series A Preferred Stock
initially shall be converted on or before 5:00 p.m. (PST) on December
31, 1998, at the office of the Corporation or any transfer agent for
the Series A Preferred Stock into one (1) fully paid and nonassessable
share of Common Stock of the Corporation (the "Conversion Ratio").
b. Adjustments to Conversion Ratio.
(i) Stock Dividends and Subdivisions. If, after the date of
the first issuance of shares of Series A Preferred Stock, the
Corporation shall declare and issue additional shares of Common
Stock, by reason of the declaration or payment of any dividend on
the Common Stock payable in Common Stock or by reason of a
subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) without
a corresponding subdivision or dividend with respect to the
Series A Preferred Stock, the Conversion Ratio of the Series A
Preferred Stock in effect immediately prior to such declaration
or subdivision shall, concurrently with the effectiveness of such
declaration or subdivision, be propotionately increased.
(ii) Adjustments for Combinations or Con-solidation of
Common Stock. In the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock without
a corresponding combination or consolidation with respect to the
Series A Preferred Stock, the Conversion Ratio of the Series A
Preferred Stock in effect immediately prior to such combination
or consolidation shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately decreased.
<PAGE> 4
(iii) Adjustment for Merger, Reorganization, etc. In the
case of any merger of the Corporation with or into another
corporation or the transfer of all or substantially all of the
assets of the Corporation to another corporation in which the
shareholders of the Corporation are to receive cash, securities
or other consideration for their shares, each share of Series A
Preferred Stock shall thereafter be convertible into the number
of shares of stock or other securities or property to which a
holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of the shares of Series A Preferred
Stock would have been entitled upon such merger or conveyance;
and, in any such case, appropriate adjustment (as determined 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 holders of shares of Series A
Preferred Stock, to the end that the provisions set forth herein
(including all provisions with respect to changes in and other
adjustments of the Conversion Ratio) shall thereafter be
applicable as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the
conversion of Series A Preferred Stock.
c. Mechanics of Conversion. Any conversion of shares of Series A
Preferred Stock pursuant to this Section (6) by any holder shall be
done on an aggregate basis taking into account all shares of Series A
Preferred Stock held by such holder (i.e., such holder shall have no
more than one fractional share of Series A Preferred Stock upon such
conversion). Before any holder of shares of Series A Preferred Stock
shall be entitled to convert the same into full shares of Common Stock
such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer
agent for Series A Preferred Stock, and shall give written notice to
the Corporation at such office that the holder elects to convert the
same, and shall state herein the holder" name or the name or names of
the nominees in which the holder wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of shares of Series A Preferred Stock, or to his
nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled as aforesaid.
Except as set forth in this Section (6) such conversion shall be
deemed to have been made immediately prior to the close of business on
the day of such surrender of the shares of Series A Preferred Stock to
be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common
Stock on such date. Upon conversion of only a portion of the number of
shares of Series A Preferred Stock represented by a certificate so
surrendered for conversion, the Corporation shall issue and deliver
to, or upon the written order of, the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Series A Preferred Stock
representing the unconverted portion of the certificate so
surrendered.
d. Transfer Costs. The Corporation shall pay any and all
documentary stamp and other transactional taxes attributable to the
issuance or delivery of shares of Common Stock of the Corporation upon
conversion of any shares of Series A Preferred Stock.
e. No Impairment. The Corporation will not, without the approval
of the requisite number of shares of Series A Preferred Stock by
amendment of its Articles of Incorporation or this Certificate of
Determination or through any reorganization transfer of assets,
merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in the carrying
out of all the provisions of this Section (6) and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of shares of Series A Preferred Stock
against impairment.
<PAGE> 5
f. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Ratio for any shares of
Series A Preferred Stock pursuant to this Section (6) the Corporation
at its expense shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and shall furnish to each holder
of shares of Series A Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any holder of shares of Series A
Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Ratio at the time in effect, and (iii) the number
of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of the shares
of Series A Preferred Stock held by such holder.
g. Common Reserved. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number
of shares of Common Stock as shall from time to time be sufficient to
effect conversion of all of the outstanding shares of the Series A
Preferred Stock as well as the number of shares equal to the total
number of shares of Common Stock which would be issued upon the
exercise of the Warrants identified elsewhere in this Certificate of
Determination.
h. Registration. If any shares of Common Stock to be reserved for
the purpose of conversion of shares of Series A Preferred Stock
require registration or listing with, or approval of, any governmental
authority, stock exchange or other regulatory body under the federal
or state law or regulation or otherwise, before such shares may be
validly issued or delivered upon conversion, the Corporation will, in
good faith and as expeditiously as possible, at its expense, endeavor
to secure such registration, listing or approval, as the case may be.
i. Status of Shares. All shares of Common Stock which may be
issued upon conversion of the shares of Series A Preferred Stock will
upon issuance by the Corporation be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect
to the issuance thereof.
j. Cancellation of the Shares. Upon conversion of any shares of
Series A Preferred Stock into common Stock, said converted shares of
Series A Preferred Stock shall resume the status of authorized and
unissued shares of Series A Preferred Stock.
k. Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall mail to
each holder of shares of Series A Preferred Stock, at least twenty
(20) days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
l. Notices. Any notice required by the provisions of this Section
(6) to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address
appearing on the books of the Corporation.
<PAGE> 6
(7) Voting Rights. Except as otherwise required by law or by the
Articles of Incorporation of the Corporation, the shares of Series A
Preferred Stock and Common Stock shall be voted together as a single
class at any annual or special meeting of shareholders of the
Corporation, or may act by written consent in the same manner as the
Corporation's Common Stock, upon the following basis: each share of
Series A Preferred Stock issued and outstanding shall have that number
of votes equal to the number of shares of Common Stock into which each
share of Series A Preferred Stock is then convertible, except that
fractional shares shall not be permitted, and any fractional voting
rights resulting from this formula (after aggregating all shares of
Common Stock into which shares of Series A Preferred Stock held by
each holder could be converted) shall be rounded to the nearest whole
number (with one-half being rounded upward).
(8) Protective Provisions. So long as any shares of Series A
Preferred Stock shall be outstanding the Corporation shall not without
first obtaining the approval (by vote or written consent, as provided
by law) of the holders of at least fifty percent (50%) of the
outstanding shares of Series A Preferred Stock:
a. Change of Rights. Alter or change the rights, preferences, or
privileges of the Series A Preferred Stock so as materially and
adversely to affect the Series A Preferred Stock; or
b. Authorized Number. Increase the authorized number of shares of
Series A Preferred Stock; or
c. Create New Class. Create any new class or series of shares
having preferences over, or being on a parity with, Series A Preferred
Stock then outstanding.
RESOLVED FURTHER that the Chairman of the Board, the President or
any Vice President, and the Secretary, Chief Financial Officer, the
Treasurer, or any Assistant Secretary or Assistant Treasurer of the
Corporation are each authorized to execute, verify and file a
certificate of determination of preferences in accordance with Nevada
law.
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
January 7, 1998.
/s/ Christopher D. Michaels
---------------------------
Christopher D. Michaels,
President
/s/ Jeffrey S. Kramer
---------------------------
Jeffrey S. Kramer
Secretary
The undersigned, Christopher D. Michaels and Jeffrey Kramer, the President
and Secretary, respectively, of Nevada Manhattan Mining Incorporated, a Nevada
corporation, declare under penalty of perjury that the matters set out in the
foregoing Certificate of Determination of Preferences of Series A Preferred
Stock are true of their own knowledge.
EXECUTED at Los Angeles, California, on January 7, 1998.
/s/ Christopher D. Michaels
----------------------------
Christopher D. Michaels
/s/ Jeffrey S. Kramer
--------------------------
Jeffrey S. Kramer
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<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 9,354
<SECURITIES> 0
<RECEIVABLES> 64,481
<ALLOWANCES> 0
<INVENTORY> 45,000
<CURRENT-ASSETS> 1,067,057
<PP&E> 781,346
<DEPRECIATION> 140,185
<TOTAL-ASSETS> 8,704,218
<CURRENT-LIABILITIES> 3,459,637
<BONDS> 0
0
207,608
<COMMON> 160,995
<OTHER-SE> 2,587,271
<TOTAL-LIABILITY-AND-EQUITY> 8,704,218
<SALES> 525,981
<TOTAL-REVENUES> 525,981
<CGS> 413,151
<TOTAL-COSTS> 413,151
<OTHER-EXPENSES> 4,363,954
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,309,480)
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