U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under section 13 or 15(d) of the Securities Act of 1934
for the fiscal year ended December 31, 1996.
[ ] Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission File Number 0-20193
AMERICOMM RESOURCES CORPORATION
(Name of small business issuer in its charter)
DELAWARE 73-1238709
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9 E. 4th Street, Suite 305, Tulsa, OK 74103-5109
(Address of principal executive offices) (Zip Code)
(Issuer's Telephone Number) (918) 587-0096
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
NONE
Securities registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year $10,784.
The aggregate market value of the voting stock held by non-affiliates on
March 3, 1997 was approximately $3,671,865. On such date, the closing price
for the Registrant's Common Stock was $0.42 per share.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of March 3, 1997. 11,204,592
Documents incorporated by reference: NONE
Transitional Small Business Disclosure Format:
YES [ ] NO [X]
<PAGE>
PART I
ITEM 1. BUSINESS
Background
Americomm Resources Corporation, a Delaware corporation (the "Registrant"),
was incorporated in the state of Utah in August 1983 under the name
Chambers Energy Corporation and reincorporated in Delaware in March 1985
under the name Americomm Corporation. The corporate name was changed to
Americomm Resources Corporation in July 1995 and a one-for-three reverse
stock split of the Company's Common Stock was effected in June 1996. All per
share numbers set forth in this Form 10-KSB have been adjusted to reflect
such reverse stock split. The Registrant has no subsidiaries. The
Registrant operates from leased office space at 9 East 4th Street, Suite 305,
Tulsa, Oklahoma 74103-5109 with the telephone number shown on the front of
this report.
From the time of its incorporation, the Registrant remained essentially
inactive with the exception of a two year period from January 1985 to
January 1987 when it engaged in a business brokerage and apartment rental
brokerage business. In December 1991, the Registrant completed a $60,000
private placement of its common stock which was used to pay the costs of (i)
obtaining an audit of the Registrant's financial statements, (ii) registering
its common stock pursuant to the Securities Exchange Act of 1934, as
amended, and (iii) partially funding the Registrant's business activities
to date. In August 1995, the Registrant completed a private placement of
1,674,724 shares at $0.375 per share. To facilitate the offering, certain
shareholders of the Company sold an aggregate of 666,666 shares at a
purchase price of $0.15 per share to investors who purchased shares from
the Company in the offering. In connection with the offering, the Company
realized gross cash proceeds of approximately $600,000 and was relieved
of an obligation to repay a $28,000 advance from a shareholder who purchased
shares in the offering. See "Plan of Operation".
Forward-Looking Information. All statements, other than statements of
historical fact contained in this Form 10-KSB, including statements in
"Plan of Operation", "Business", and "Properties" are forward-looking
statements. Forward-looking statements generally are accompanied by words
such as "anticipate", "believe", "estimate", "expect", "potential",
"project" or similar statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable,
no assurance can be given that such expectations will prove correct. Factors
that could cause the Company's results to differ materially from the results
discussed in such forward-looking statements include the uncertainty of
exploration results, operating hazards, need for additional capital,
competition from other mining and natural resource companies, the
fluctuations of gold prices and the effects of governmental and environmental
regulation. All forward-looking statements in this Form 10-KSB are expressly
qualified in their entirety by the cautionary statements in this paragraph.
<PAGE>
Business Developments over the past five years.
Over the past five years, the Registrant has acquired interests in, and
conducted surface geology, mapping, sampling and staking of claims on, the
following seven gold mining prospects, six of which are in various stages
of exploration and are without known reserves and one of which has been
dropped. In 1995, the Registrant acquired a copper exploration prospect
which was dropped in December 1996. The following is a brief description
of the Registrant's interests:
On May 19, 1995 the Registrant acquired all of the interests of Southwestern
Gold U.S.A., Inc. ("Southwestern Gold") in four gold mining prospects
located in the State of Nevada in exchange for the issuance of 1,333,333
shares of the Registrant's restricted common stock to such company. The
properties are located in Churchill, Nye, White Pine and Humboldt counties
in Nevada and originally consisted of 148 unpatented and non-producing gold
mining claims. In January 1996 the Registrant located 36 additional lode
mining claims adjoining its Churchill County project, bringing the total in
this group to 184 claims covering 3,680 acres. In December 1996 the
Registrant executed a Heads of Agreement with Echo Bay Exploration Inc., a
subsidiary of Echo Bay Mines Ltd., Denver, Colorado for exploration of the
Churchill County property.
During 1994, the Registrant acquired a one-third (33 1/3%) interest in the
North Goldfield Prospect in Esmeralda County, Nevada which consisted of
170 claims. The Registrant incurred $65,000 in exploration expense on this
prospect in 1995 and dropped its 1/3 interest partnership after an
unsuccessful test drilling program.
During 1992, the Registrant acquired 100% of the Indian Springs gold mining
prospect which currently consists of 64 claims covering 1,280 acres in
Esmeralda County, Nevada. During 1995 the Registrant incurred approximately
$63,000 in expenses in an eight hole drill test program on four of the
claims in this block. Six of the holes hit anomalous gold mineralization
in narrow low grade intervals which were not of economic value. Additional
anomalous gold values have been found at the surface within the claim block
and the Registrant expects to conduct further mapping and sampling over the
entire claim block to identify targets for a drilling program.
During 1992, the Registrant acquired the rights to a 3% net smelter run (NSR)
nonparticipating royalty interest in the gold mining prospect known as the
Gold Creek Prospect (formerly known as the Pioneer Project) which currently
consists of 20 mining claims in Powell County, Montana. A geochemical soil
survey was conducted on the prospect in 1993 to identify drill targets. No
additional exploration activities have been conducted on this prospect since
that time. In 1996, the holder of these claims reduced the number of mining
claims from 60 to 20 as it had not located an industry partner to explore
this prospect. The Registrant is attempting to negotiate a new agreement
with the holder of these claims, whereby the Registrant would become the
operator of the project.
In December 1995 the Registrant acquired a copper exploration prospect in
the Big Indian mining district of the Lisbon Valley in San Juan County,
Utah. The property had 107 located lode mining claims in two state leases
contiguous to the claim blocks, totaling 2,380 acres. The Registrant
engaged in surface exploration of the property in 1996 and dropped the
property in December 1996 as, in the Registrant's opinion, the property had
only marginal potential for discovery of economic copper production.
For a more particular description of the properties held by the Registrant,
see "Item 2. PROPERTIES".
<PAGE>
Competition
Precious metals exploration, is extremely competitive. The Registrant must
compete with many long-established companies with greater financial resources
and technical capabilities. There can be no assurance that the Registrant
will be able to successfully compete for the properties or for the services
and supplies necessary to conduct its business. The Registrant is not a
significant participant in the precious metals industry.
Markets; Price Volatility
The market price of gold and other precious metals is volatile, subject
to speculative movement and depends upon numerous factors beyond the control
of the Registrant, including expectations regarding inflation, global and
regional demand, political and economic conditions and production costs in
major gold producing regions. There can be no assurance that the production
and sale of gold and other precious metals, if any, from the Registrant's
properties will be commercially feasible under market conditions prevailing
in the future.
Regulation
The mining industry in the United States is subject to extensive federal,
state and local laws and regulations governing exploration, development, and
production, export, tax, labor standards, occupational health, waste
disposal, protection and remediation of the environment, reclamation, mine
safety, toxic substances and other matters. Compliance with such laws and
regulations has increased the cost of planning, designing, drilling,
developing, constructing, operating and closing mines and mining facilities.
In addition, during the past decade, legislation has been proposed that
sought to reform the General Mining Law of 1872, which governs exploration
and mining activities on unpatented mining claims and related activities
on federal lands. The proposed legislation contained strict new
environmental protection standards and conditions, additional reclamation
requirements and extensive new procedural steps which would likely result
in delays in permitting and could adversely effect the development of
minerals on federal lands. The proposed legislation also provided for the
imposition of royalties on gold production from currently unpatented mining
claims, which could adversely affect the economics of mining projects. The
imposition of stricter regulations governing mining operations and the
protection of the environment could have a significant impact on the
operations of all mining companies and substantially increase the costs of
those operations.
Although the Registrant is not aware of any circumstances which would cause
the Registrant to be in violation of any regulation, substantial costs are
expected to be required to comply with applicable regulations and costs and
delays associated with such compliance could materially affect the economics
of a given project, cause material changes or delays in the Registrant's
intended activities or inhibit the development of a mining property. The
effect of any future regulation on the Registrant's operations cannot be
determined at this time, although any increase in the cost of the Registrant's
operations as a result of future regulations could have a material adverse
impact on the Registrant.
<PAGE>
Title to Properties
The Registrant's mineral rights consist of unpatented mining claims which
are unique property interests and are generally considered to be subject to
greater title risk than other real property interests. The greater title
risk results from unpatented mining claims being dependent on strict
compliance with a complex body of federal and state statutory and decisional
law, much of which compliance involves physical activities on the land, and
from the lack of public records which definitively control the issues of
validity and ownership. In conformity with normal industry operating
procedures, title reports or opinions are not obtained as a matter of course
until a determination has been made to commence drilling operations.
Accordingly, the Registrant bears the risk of loss resulting from any title
defects.
Employees
The Registrant presently has two officers, (1) Mr. Thomas R. Bradley, its
president, who devotes all of his working time to the affairs of the
Registrant, and (2) Mrs. Jane Bradley, Mr. Bradley's wife, who serves as
corporate Secretary and Treasurer of the Registrant, is not compensated for
so serving has no active role and devotes a de minimis amount of time to the
Registrant's affairs. The Registrant has no employees.
ITEM 2. PROPERTIES
Jessup Property
Churchill County, Nevada
The Jessup Property consists of 130 unpatented mining claims (94 acquired
from Southwestern Gold U.S.A., Inc. in 1995 and 36 located by the Registrant
in 1996) covering approximately 2,600 acres in Churchill County, Jessup
Mining District, Nevada (collectively the "Jessup Property") which is
located approximately 60 miles northeast of Reno, Nevada. Access to the
property is by way of interstate highway from Reno, Nevada and then by dirt
road. The Registrant has received and evaluated data with respect to
mapping, trenching, rock chip sampling, geophysical surveying and exploratory
drilling which was conducted by Southwestern Gold and prior owners on the
property. The Registrant, through its consulting geologist, conducted further
exploration in 1995 and 1996 and assembled a data package on the prospect
for presentation to potential joint venture partners.
In December 1996 the Registrant executed a Heads of Agreement (the
"Agreement") with Echo Bay Exploration Inc. of Denver, Colorado, providing
for a five year exploration program on the Jessup Property to be conducted
by Echo Bay, as operator. The Agreement grants to Echo Bay the right to
earn an undivided fifty-one percent (51%) interest at any time during the
five (5) year period, in the Jessup Property by (i) expending Two Million
Dollars ($2,000,000) on or for the direct benefit of the Jessup Property
("Work Expenditures"); and (ii) making cash payments to the Registrant
totaling Seven Hundred Fifty Thousand Dollars ($750,000) (the "Cash
Payment"). Under the terms of the Agreement, $250,000 in Work Expenditures
shall be made in the first year and specified minimum amounts are to be
expended in each year thereafter until the full $2,000,000 has been expended,
although Echo Bay may accelerate the payment of such Work Expenditures or
may elect to pay up to 20% of the minimum annual Work Expenditures in cash
to the Registrant if such minimum annual Work Expenditures are not made. In
addition, the Cash Payment is to be paid in minimum annual increments over
the five year period commencing with the first cash payment of $50,000 which
was received by the Registrant in January 1997. Additional cash payments
of $100,000, $150,000, $200,000 and $250,000 are payable on or before
December 1 of each year commencing with December 1, 1997. Upon completion
of the Work Expenditures and payment of the Cash Payment, Echo Bay shall
have earned an undivided fifty-one (51%) interest in and to the Jessup
Property. Within one (1) year after Echo Bay has earned its undivided
fifty-one (51%) interest, Echo Bay has an option to acquire an additional
nineteen percent (19%) undivided interest in the Jessup Property by making
a cash payment to the Registrant of Two Million Dollars ($2,000,000). Prior
to earning its interest in the Jessup Property, Echo Bay may terminate the
Agreement at any time and shall be relieved of any further obligation to the
Registrant except for any obligation which accrued prior to such termination.
<PAGE>
The Agreement will continue for a term of twenty (20) years, and so long
thereafter as operations or activities under the Agreement continue, or until
the Agreement is terminated, whichever occurs first. The Agreement also
provides that, Echo Bay will maintain liability insurance with respect to its
operations on the Jessup Property during the five-year exploration period,
indemify the Registrant against certain liabilities caused by its exploration
activities during such period and pay all federal claim rental fees, payments
and obligations required by the von Hafften and Lawrence Leases and perform
assessment work and make necessary filings required to maintain the unpatented
claims comprising the Jessup Property while Agreement is in full force and
effect. If Echo Bay terminates the Agreement prior to acquiring an interest
in the Jessup Property, Echo Bay will perform any reclamation work required
as a direct result of its activities on the Jessup Property and shall hold
the Registrant harmless from any such reclamation obligation. Liability for
reclamation of any distrubance on the Jessup Property prior to the effective
date of the Agreement is the exclusive responsibility of the Registrant and
the Registrant has indemnified Echo Bay for any such liability. Echo Bay and
the Registrant have each granted the other a right of first refusal with
respect to their interest in the Jessup Property. Echo Bay's exploration
program commenced in the first quarter of 1997.
The leased mining claims are governed by the Mining Lease Agreement dated
June 15, 1991 between Southwestern Gold U.S.A., Inc., and Alexander von
Hafften which covers 91 mining claims (the "Hafften Lease"), and the Mining
Lease Agreement dated July 15, 1992 between Southwestern Gold U.S.A., Inc.,
and Edmond F. Lawrence which covers 3 mining claims (the "Lawrence Lease").
Each lease has a ten year term with one ten year renewal option. If any
portion of the claims under the lease are placed into commercial production
of minerals within the first renewal term, that lease may be renewed for
additional renewal terms for so long as commercial production of minerals
continues from that lease. The leases are terminable by the Lessee on 30
days notice to the Lessor. To maintain each lease, the following minimum
advance royalty payments must be made:
<TABLE>
AMOUNT OF PAYMENT
<CAPTION>
YEAR HAFFTEN LEASE LAWRENCE LEASE
<S> <C> <C> <C>
1996 $20,000 $3,000
1997 $30,000 $4,000
1998 $40,000 $6,000
1999 $50,000 $6,000
2000 $50,000 $8,000
2001 $50,000 $8,000
</TABLE>
The minimum advance royalty payments of $50,000 due with respect to the first
renewal term of the Hafften Lease will be increased for inflation. The
minimum advance royalty payments with respect to the Lawrence Lease will be
$10,000 for 2002 and for each year thereafter. In addition to minimum
advance royalty payments, the Lessee must pay the Lessor a royalty equal to
5% of net smelter returns less all advance royalty payments and must pay all
taxes assessed against the property during the term of the lease. The Lessee
must also pay applicable county, state and BLM annual fees to keep the
property in good standing unless the Lessee terminates the lease before May
1st of any year.
<PAGE>
Indian Springs Prospect
Esmeralda County, Nevada
The Registrant owns 100% of the Indian Springs Prospect with covers 64
recorded claims on 1,280 acres. This prospect is located approximately six
miles west northwest of Goldfield, Nevada and is accessible by dirt road.
Nevada is one of the worlds largest gold producing regions and the Goldfield
District has produced gold, silver and copper since 1900. The Goldfield
District, though an old, mature, mining area, has become active again with
companies using modern exploration techniques. Kennecott is probably the
most active company in the area. Within a 100 mile radius of the Registrant's
prospect in this area, there are numerous mines producing gold, silver, lead
and copper.
During 1995 the Registrant incurred approximately $63,000 in expenses in an
eight hole drill test program on four of the claims in this block. Six of
the holes hit anomalous gold mineralization in narrow low grade intervals
which were not of economic value. Additional anomalous gold values have been
found at the surface within the claim block and the Registrant expects to
conduct further mapping and sampling over the entire claim block to identify
targets for a drilling program. This prospect is without known reserves.
Gold Creek Prospect (a.k.a. Pioneer Project)
Powell County, Montana
The Gold Creek Prospect is in the historic Pioneer Gold Mining District of
Powell County, Montana and currently consists of 20 mining claims covering
400 acres held by the other party to the Exploration Agreement described
below. Surface geology and geochemical surveys have been completed on this
prospect and three target areas for exploratory drilling have been identified.
Placer gold was produced in the valleys immediately downstream from this
prospect in the past and the proposed drilling and development work is
intended to locate the source for this gold, which the Registrant believes
may be within its claim block. No potential resource value has been
assigned to this prospect. The prospect is accessible by dirt road.
The Registrant currently holds a 3% net smelter run (NSR) nonparticipating
royalty interest in this prospect pursuant to an Exploration Agreement which
it acquired effective December 30, 1992 for $12,000. Under the Exploration
Agreement, the Registrant may, but is not required to, convert its NSR
interest to a 30% participating interest at any time until the other party
to the Agreement has expended $250,000 in Qualified Expenditures (as
defined). If the Registrant elects to convert its interest, it will be
required to reimburse the other party for 30% of all Qualified Expenditures
incurred by the other party. If the prospect is developed and the
Registrant does not elect to convert its NSR interest, the NSR interest and
any other interest of the Registrant in the prospect will terminate when an
aggregate of $2 million in royalties have been received by the Registrant.
The other party may abandon all or any portion of the prospect or terminate
the Exploration Agreement at any time, in which case it is obligated to
assign all of its rights and title in the affected property to the Registrant
at no cost. In 1996, the other party to the Exploration Agreement reduced
the number of claims from 60 to 20 as such party had not located an industry
partner to explore this prospect. The Registrant is attempting to negotiate
a new agreement with the other party holding these claims, whereby the
Registrant would become the operator of the project, for a drilling program
in 1997.
<PAGE>
Ikes Canyon Property
Nye County, Nevada
The Ikes Canyon Property consists of 31 unpatented mining claims covering
approximately 620 acres in Nye County, Northumberland Mining District,
Nevada. The Registrant has received and evaluated data with respect to
preliminary rock chip sampling and reconnaissance mapping of the property
conducted during 1995 to locate targets for a reverse circulation drilling
program. The prospect is accessible by dirt road.
Pancake Summit Property
White Pine County, Nevada
The Pancake Summit Property consists of 10 unpatented mining claims located
in White Pine County, Pancake Mining District, Nevada. An initial program
of geological mapping and sampling on the property was conducted by
Southwestern Gold.
Verlee Property
Humboldt County, Nevada
The Verlee Property consists of 13 unpatented mining claims located in
Humboldt County, Red Butte Mining District, Nevada. An initial program of
preliminary geological mapping and sampling was conducted by Southwestern
Gold. An additional program of mapping and sampling was conducted by the
Registrant during 1995 and targets for reverse circulation drilling have
been identified. The Prospect is accessible by dirt road.
Lisbon Valley Copper Prospect
San Juan County, Utah
In December 1995 the Registrant leased a copper exploration prospect in the
Big Indian mining district, in the Lisbon Valley, San Juan County, Utah. The
property had 107 located lode mining claims in two blocks and two state
leases contiguous to the claim blocks, totaling 2,380 acres. The Registrant
completed geological mapping and sampling on the prospect in October 1996,
and its consulting geologist prepared a complete data package on the property.
After a thorough review of the data resulting from surface exploration work
conducted on the property by the Registrant through its consulting geologist
during 1996, in the opinion of the Company the property had marginal potential
for economic copper production. As the Mining Lease Agreement required
annual minimum advance royalty payments and the payment of certain other
annual fees and expenses by the Registrant, and as the leaseholder was
unwilling to modify such terms, both parties agreed to terminate the Mining
Lease Agreement effective December 1, 1996, with a final payment of $10,000
by the Registrant and a reassignment of the State of Utah leases to the
leaseholder.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not a party to any pending or threatened legal actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders of the Registrant
during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The Registrant's Common Stock was listed for trading effective December 21,
1992 by the National Association of Securities Dealer's (NASD) OTC Bulletin
Board and the National Quotation Bureau "Pink Sheets". The Registrant's
trading symbol for the OTC Bulletin Board is "AREC". At the close of business
on December 31, 1996, the holders of record of the Registrant's Common Stock
numbered 167. High and low bid prices for the Registrant's Common Stock for
each quarter within the fiscal years ending December 31, 1996 and 1995 as
reported by the OTC Bulletin Board and as adjusted to reflect a one-for-three
reverse split of the Registrant's Common Stock which was effective June 27,
1996 were as follows:
<TABLE>
<CAPTION>
LOW BID HIGH BID
<S> <C> <C>
Quarter Ended March 31, 1995 0.1875 0.3900
Quarter Ended June 30, 1995 0.3750 1.0311
Quarter Ended September 30, 1995 0.3750 0.8436
Quarter Ended December 31, 1995 0.1875 0.4800
Quarter Ended March 31, 1996 0.1500 0.3000
Quarter Ended June 30, 1996 0.2400 0.4687
Quarter Ended September 30, 1996 0.2812 0.6875
Quarter Ended December 31, 1996 0.3125 0.6875
</TABLE>
Such quotations reflect inter-dealer prices, without retail mark-up, mark-
down or commission and may not represent actual transactions.
The Registrant has never paid any dividends and, due to the present nature
of its business activity, payment of dividends is not presently anticipated.
<PAGE>
ITEM 6. PLAN OF OPERATION
In August 1995, the Registrant completed a private placement of 5,024,172
shares at $0.125 per share, which resulted in gross cash proceeds of
approximately $600,000 and relieved the Registrant of an obligation to repay
a $28,000 advance from a shareholder who purchased shares in the offering.
After utilizing approximately $85,200 of the offering proceeds to repay
amounts due to the Registrant's officers, directors and stockholders as a
result of advances made to the Registrant, $485,000 of the remaining cash
proceeds of this offering have been used to fund the Registrant's operations
including exploration of its existing prospects. The remaining cash proceeds,
together with the $50,000 cash payment received from Echo Bay in January 1997,
are expected to be used to fund the exploration of the Registrant's prospects
and to fund the Registrant's working capital requirements. Although the cost
of the exploration and development of the Registrant's properties is
dependent on numerous facts, some of which are beyond the Registrant's control,
the Registrant believes these funds will be sufficient to meet its operating
expenses and commitments over the next six months. Thereafter the Registrant
will be required to raise additional capital through debt or equity offerings,
encumbering properties or entering into arrangements whereby certain costs
of exploration will be paid by others to earn an interest in the properties.
There can be no assurance that the additional capital expected to be
necessary to fund the Registrant's operations will be available on economically
acceptable terms, if at all.
Exploration for mineral resources, such as gold, is highly speculative and
involves greater risks than many other businessess. Mineral exploration is
frequently marked by unprofitable efforts, not only from unproductive
prospects,but also from producing prospects which do not produce sufficient
amounts to return a profit on the amount expended. Accordingly, there can be
no assurance that the Registrant will be able to discover, develop or produce
sufficient reserves to recover the expenses incurred in connection with the
exploration of its properties, to fund additional exploration or to achieve
profitability.
The Registrant does not expect any significant change in the number of its
employees during 1997. It will employ part-time or temporary persons and
consultants in situations where special expertise is required.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
<TABLE>
AMERICOMM RESOURCES CORPORATION
BALANCE SHEET
DECEMBER 31, 1996
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents $ 29,311
Prepaid expenses 350
Accounts Receivable 50,000
________
Total Current Assets 79,661
________
Investments in prospects 805,161
________
Total Assets $884,822
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<S> <C>
Current Liabilities:
Accounts payable $ 11,574
Deferred payment proceeds 50,000
__________
Total current liabilities $ 61,574
Stockholder's equity:
Common stock, $.001 par value;
authorized 50,000,000 shares, 11,204,724
shares issued, of which 132 shares are
held in treasury 11,204
Capital in excess of par value 1,260,538
Retained earnings (448,494)
__________
Total stockholders' equity $ 823,248
__________
$ 884,822
<FN>
See accountant's report and accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERICOMM RESOURCES CORPORATION
INCOME STATEMENT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
For the Years Ended December 31,
_______________________________
1996 1995
______________ ______________
<S> <C> <C>
Revenues:
Miscellaneous Income $ 5,831 $ 331
Interest Income 4,953 1,262
______________ ______________
Total income 10,784 1,593
Costs and expenses:
General and administrative expenses 80,249 50,767
Abandoned prospects 102,928 65,666
Interest expense -0- 2,586
______________ ______________
Total costs and expenses 183,177 119,019
______________ ______________
Net income (loss) $ (173,393) $ (117,426)
______________ ______________
Net income (loss) per common share $ (.02) $ (.01)
______________ ______________
Weighted average number of common
shares outstanding 11,204,684 11,204,724
______________ ______________
<FN>
See accountants' report and accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERICOMM RESOURCES CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
COMMON STOCK
_________________
Capital in
Par Excess of Retained
Shares Value Amount Par Value Earnings Total
____________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
BALANCES,
Jan. 1, 1995 24,590,000 .001 $24,590 $ 119,139 $(158,675) $ (14,946)
Net loss (117,426) (117,426)
Issuance of
common stock 9,024,172 .001 9,024 1,118,997 1,128,021
__________ ____ _______ __________ _________ __________
BALANCES,
Dec. 31, 1995 33,614,172 .001 33,614 1,238,136 (276,101) 995,649
Net loss (172,393) (172,393)
Effect of Reverse
stock split (22,409,448) .001 (22,410) 22,402 (8)
__________ ____ _______ __________ _________ __________
BALANCES
Dec. 31, 1996 11,204,724 .001 $11,204 $1,260,538 $(448,494) $ 823,248
__________ ____ _______ __________ _________ __________
<FN>
See accountants' report and accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERICOMM RESOURCES CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
For the Years Ended December 31,
____________________________________
1996 1995
_________________ ________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Operations
Net loss $ (172,393) $ (117,426)
Adjustments to reconcile net income
to net cash flows from operating
activities:
Abandoned prospects 102,894 65,666
Changes in operating assets and
liabilities:
Accounts payable 10,907 (20,313)
Prepaid expenses 154 (504)
Accruals (53) (5,032)
_________________ ________________
Net cash provided(used) by operating
activities $ (58,491) $ (77,609)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash payments for investments in
prospects (172,905) (222,631)
________________ _________________
Net cash provided(used) by investing
activities (172,905) (222,631)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -0- 628,021
Repayment of note payable-related party -0- (71,000)
________________ _________________
Net cash provided(used) by financing
activities -0- 557,021
________________ _________________
Net increase(decrease) in cash and cash
equivalents (231,396) 256,781
Cash and cash equivalents, beginning
of year 206,707 3,926
________________ _________________
Cash and cash equivalents, end of year $ 29,311 $ 260,707
Supplemental Disclosures
Interest expense paid $ -0- $ 2,586
________________ _________________
Income taxes paid $ -0- $ -0-
________________ _________________
Issuance of 1,333,333 shares of common
stock in exchange for ownership interest
in various mineral prospects $ -0- $ 500,000
________________ _________________
<FN>
See accountants' report and accompanying notes to financial statements.
</TABLE>
<PAGE>
AMERICOMM RESOURCES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - The Company was originally incorporated in the State of Utah on the
22nd day of August 1983, as Chambers Energy Corporation. On the 7th day of
March 1985, the state of incorporation was changed to Delaware by means of a
merger with Americomm Corporation, a Delaware Corporation formed for the
purpose of effecting the said change.
In July 1995, the Company changed its name to Americomm Resources Corporation.
During 1996, the Company continued to explore its gold mine prospects and Utah
copper mine prospect. During 1996, the Company determined that the Utah
copper mine prospect did not contain commercially producible reserves.
Therefore, this prospect was abandoned and the amount expended on this
prospect has been charged against income. A Heads of Agreement was entered
into during December 31, 1996 as outlined below. Based on these activities
Americomm is no longer reporting their financial statements as a development
stage enterprise.
Method of Accounting - Assets, liabilities, revenues and expenses are
recognized on the accrual method of accounting for financial statement
presentation.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
Income Taxes - Temporary differences exist between the financial and tax
basis of assets relating to the revenue recognition on certain contracts.
Cash and Cash equivalents - The Company defines cash and cash equivalents to
be cash on hand, cash in checking accounts, certificates of deposit, cash
in money market accounts and certain investments with maturities of three
months or less from the date of purchase.
<PAGE>
2. HEADS OF AGREEMENT
On December 1, 1996, Americomm entered into an agreement with Echo Bay Mines
of Denver, Colorado (Echo Bay) for the exploration of the Jessup gold mine
prospect. According to the terms of the agreement Echo Bay can acquire a
51% joint venture interest in such property by paying Americomm $750,000 and
completing $2,000,000 in exploration expenditures over the five year period
ending December 1, 2001. As of December 31, 1996, no exploration expenditures
had occurred. The agreement stipulates Americomm is to receive a non-
refundable $50,000 payment that has been recorded as an account receivable in
the financial statements. This payment was received in January of 1997.
Income was not recognized on the transaction in 1996 as under the terms of
the agreement title does not transfer to the developer until all terms and
conditions are met.
3. INCOME TAXES
The Company also has net operating loss carryovers of approximately
$422,000 that expires from the year 2000 to 2009.
The deferred tax assets related to these items are as follows:
<TABLE>
<S> <C>
Reporting difference on Heads of Agreement $ 7,000
Net operating loss carryover 175,000
________
182,000
Valuation allowance 182,000
________
Net deferred tax asset $ -0-
</TABLE>
________
4. CAPITAL STOCK
On June 13, 1995, the board of directors approved a one-for-three reverse
stock split effective June 27, 1996. The Board of Directors elected not to
change the par value of the stock. The effects of this reverse split are
shown on the statement of stockholder's equity.
The weighted average shares outstanding have been adjusted to reflect this
reverse split as if it had occured on January 1, 1995.
As outlined in these footnotes, the Company has outstanding options with
various parties to purchase its common stock. Due to the stock's market
price, these shares have not been included in the weighted average shares
computation.
5. OFFICE RENT
The Company leases office space from another corporation under an informal
lease agreement. The lease is on a month-to-month basis with monthly rent
expense of $350.
6. STOCK OPTION PLAN
During 1995 Americomm adopted a Stock Option Plan. The compensation committee
of the Board of Directors has sole discretion for the granting of these
options. Options for a total of 1,000,000 shares (after the reverse split)
can be granted under the plan. The exercise price of these options is the
Fair Market Value on the date of grant.
The following stock options are outstanding at December 31, 1996
<TABLE>
<CAPTION>
Year Shares Under
Granted Options Expiration
_______________________________________
<S> <C> <C> <C>
Officer/Employee/Director 1995 66,666 6/14/05
Officer/Employee 1996 200,000 10/11/06
Directors 1995 200,000 6/14/05
Directors 1996 400,000 10/11/06
Others 1996 10,000 11/28/06
The effect of the exercising of these options has not been included in the
calculation of earnings per share.
</TABLE>
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
Not applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table gives certain information concerning the directors and
executive officers of the Registrant. Each person shown as a director serves
for a one-year term and until his successor is elected and qualified and
each person shown as an officer serves at the discretion of the board of
directors.
<TABLE>
<CAPTION>
Name Age Position Officer Since Director Since
___ _____________ _____________ ______________
<S> <C> <C> <C> <C>
Thomas R. Bradley (1) 73 President and
Director March, 1985 March, 1985
Jane Bradley (1) 73 Secretary/
Treasurer December, 1991 N/A
Albert Whitehead 67 Director N/A December, 1991
George H. Plewes 57 Director N/A May, 1995
________________________________________
(1) The Bradley's are husband and wife
</TABLE>
Mr. Bradley has served as President of the Registrant since December 1991 and
served as Executive Vice President of the Registrant from March 1985 to
December 1991. Mr. Bradley is also the owner of Bradley & Associates
Marketing, a sole proprietorship consulting firm providing domestic and
foreign sales and marketing management services to small manufacturers. From
January 1987 to March 1990, Mr. Bradley was also a partner in Capstone
Communications, an industrial advertising agency.
Mrs. Bradley has not been employed for the past five years.
Mr. Whitehead currently serves as the Chairman and Chief Executive Officer of
Seven Seas Petroleum Inc., A Yukon Territory corporation engaged in
international oil and gas exploration. From April 1987 through January 1995,
Mr. Whitehead served as Chairman and Chief Executive Officer of Garnet
Resources Corporation, a publicly held oil and gas exploration and development
company.
Mr. Plewes has served as Chairman of Southwestern Gold Corporation, Inc. since
1992 and as President of GHP Corporation, a private oil exploration and
production company in the United States, since 1990.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth for each of the three fiscal years information
concerning all compensation received by the Registrant's Chief Executive
Officer for all services rendered to the Registrant. No other compensation
was received by such person or by any other person for such services.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
____________________________________
Long Term
Other Annual Compensation
Name & Principal Position Year Salary Compensation(2) Optons/SARs
_________________________ ____ __________ _______________ ______________
<S> <C> <C> <C> <C>
Thomas R. Bradley 1996 $36,000 -0- 200,000
President (Chief Executive 1995 $18,000(1) $3,000 66,666
Officer) 1994 $6,000
_________________________________
(1) Represents salary paid to Mr. Bradley for services performed from July 1,
1995 through December 31, 1995.
(2) With respect to 1995, the amount indicated represents fees for consulting
service for the period from January 1, 1995 through June 30, 1995. With
respect to 1994, the amount indicated represents fees for consulting services
due to Mr. Bradley which were accrued in such year and paid in 1995. An
additional $2,000 in consulting fees which were accrued from service performed
in 1992 were also paid in 1995.
Option Grants in Last Fiscal Year
The following table sets forth information regarding the grant of an option
in the last fiscal year to the Company's only executive officer and employee.
</TABLE>
<TABLE>
Individual Grants
_____________________________________________________________________________
Number of
Securities % of Total
Underlying Options Granted Exercise or
Option to Employees in Base Price Expiration
Name Granted(1) Fiscal Year ($/Share) Date
_____________________________________________________________________________
<S> <C> <C> <C> <C>
Thomas R. Bradley 200,000 100% 0.6875 10/11/06
______________________________
(1) This option was granted pursuant to the Registrant's 1995 Stock Option
Plan. The exercise price of the option was equal to the fair market value of
a share of the Registrant's Common Stock on the date of grant and may be
paid in cash or by delivery of shares of Common Stock which have a fair
market value on the date of exercise equal to the exercise price. The option
is fully exercisable and will remain exercisable for a period of ten years
and thirty days from the date of grant unless the optionee resigns, retires or
dies, in which case the right to exercise the option is limited.
</TABLE>
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table sets forth option exercise activity in the last fiscal
year and fiscal year-end option values with respect to the Registrant's
only executive officer.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End(#) FY-End ($)(1)
___________________________________
Exer- Unexer- Exer- Unexer-
Name Exercise(1) Realized($) cisable cisable cisable cisable
<S> <C> <C> <C> <C> <C> <C>
Thomas R.
Bradley -- -- 266,666 -- N/A N/A
___________________________________
(1) No value is set forth herein as the fair market value of a share of
Registrant's Common Stock at December 31, 1996 was less than the exercise
price of the stock options.
</TABLE>
Director's Fees
During the fiscal year ended December 31, 1996, the Registrant granted each
director of the Corporation an option to purchase 200,000 shares of the
Registrant's Common Stock at an exercise price of $0.6875 per share. No
director's fees were paid during the fiscal year ended December 31, 1996.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows certain information, as of December 31, 1996,
concerning ownership of the Registrant's only class of outstanding securities,
common stock, by each of the Registrant's directors, by the Registrant's only
executive officer, by the Registrant's directors and only executive officer
as a group and by other persons known to the Registrant to beneficially own
more than five percent thereof:
<TABLE>
<CAPTION>
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership Percent of Class
___________________ _______________________ ________________
Directors:
<S> <C> <C>
Albert E. Whitehead 862,056 (2) 7.5%
2440 S. Terwilleger Blvd.
Tulsa, OK 74114
George H. Plewes 266,666 (3) 2.3%
The Regency
Margaret Suite
22 Cavendish Road
Pembroke HM19
Bermuda
Director and Only Executive Officer:
Thomas R. Bradley 800,000 (4) 6.9%
6617 South New Haven
Tulsa, OK 74136
Directors and Only Executive Officer as a Group:
(3 persons) 1,928,722 (5) 16.1%
Other Five Percent Owners:
Southwestern Gold
Corporation 1,333,333 (6) 11.9%
P. O. Box 10102
#1650-701 West Georgia Street
Vancouver, B.C. V7Y 1C6
Canada
______________________________
(1) Except as set forth below, to the best of the Registrant's knowledge,
each beneficial owner has sole voting power and sole investment power. For
each individual, the beneficial ownership information set forth above includes
shares currently issuable upon exercise of outstanding stock options granted
to such individuals.
(2) Includes 230,389 shares owned by Mr. Whitehead's spouse in which he
disclaims any interest and 266,666 shares issuable upon exercise of vested
stock options.
(3) Includes 266,666 shares issuable upon exercise of vested stock options.
Does not include shares beneficially owned by Southwestern Gold Corporation,
of which Mr. Plewes is the Chairman.
(4) Includes 266,666 shares issuable upon exercise of vested stock options.
(5) Includes 799,998 shares issuable upon exercise of vested stock options.
(6) Shares are held by Southwestern Gold U.S.A., Inc., a wholly-owned
subsidiary of Southwestern Gold Corporation.
</TABLE>
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
Exhibit Page(s) of this Form or
Number Exhibit Description Report Previously Filed*
______ ___________________ ________________________
<S> <C> <C>
3 Articles of Incorporation, as Form 10-QSB for quarter
amended, and Bylaws ended September 30, 1995
as filed November 6, 1995
4 Instruments defining the rights of Form 10-QSB for quarter
security holders including ended September 30, 1995
debentures as filed November 6, 1995
10 Material Contracts
(a) Letter Agreement, dated December Form 8-K
29, 1992 between American Gold filed January 21, 1993
Resources Corporation and the
Registrant
(b) Assignment of Exploration Form 8-K
Agreement dated effective filed January 21, 1993
December 30, 1992 (Executed
January 11, 1993) between the
Registrant and American Gold
Resources Corporation
(c) Exploration Agreement between Form 8-K
North Lily Mining Company and filed January 21, 1993
American Gold Resources
Corporation dated June 6, 1991
(d) Purchase Agreement by and among Form 10-QSB for the quarter
Southwestern Gold U.S.A., Inc., ended June 30, 1995 as filed
Southwestern Gold Corporation August 11, 1995
and the Registrant dated
May 19, 1995
(e) Mining Lease dated December 19, Form 10-KSB for the year
1995 between the Registrant and ended December 31, 1995
Robert A. Lufkin as filed March 29, 1996
(f) 1995 Stock Option Plan** Proxy Statement dated
June 13, 1995 as filed
June 14, 1995
(g) Form of Stock Option Agreement** Form 10-KSB for the year
ended December 31, 1995
as filed March 29, 1996
(h) Amendment to Letter Agreement Filed herewith
dated December 29, 1992 between
American Gold Resources
Corporation and the Registrant
(i) Heads of Agreement dated Filed herewith
November 22, 1996 by and between
Echo Bay Exploration Inc, and
the Registrant relating to the
Jessup Property
28 Common stock certificates Amendment No. 2 Form 10
Registration Statement filed
September 17, 1992
* Incorporated herein by reference
** Compensatory plan or arrangement
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
</TABLE>
<PAGE>
AMERICOMM RESOURCES CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereto duly authorized.
AMERICOMM RESOURCES CORPORATION
Registrant
March 27, 1997 Thomas R. Bradley
DATE THOMAS R. BRADLEY
President and Chief Executive Officer
(Principal Executive Officer) and
Chief Financial Officer (Principal
Financial and Accounting Officer)
In accordance with the Exchange Act this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
March 27, 1997 Thomas R. Bradley
DATE THOMAS R. BRADLEY, Director
March 27, 1997 George H. Plewes
DATE GEORGE H. PLEWES, Director
March 27, 1997 A. E. Whitehead
DATE A. E. WHITEHEAD, Director
Exhibit Page(s) of this Form or
Number Exhibit Description Report Previously Filed*
_______ ___________________ ________________________
3 Articles of Incorporation, as Form 10-QSB for quarter
amended, and Bylaws ended September 30, 1995
as filed November 6, 1995
4 Instruments defining the rights of Form 10-QSB for quarter
Security holders including ended September 30, 1995
debentures as filed November 6, 1995
10 Material Contracts
(a) Letter Agreement, dated Form 8-K
December 29, 1992 between filed January 21, 1993
American Gold Resources
Corporation and the Registrant
(b) Assignment of Exploration Form 8-K
Agreement dated effective filed January 21, 1993
December 30, 1992 (Executed
January 11, 1993) between the
Registrant and American Gold
Resources Corporation
(c) Exploration Agreement between Form 8-K
North Lily Mining Company and filed January 21, 1993
American Gold Resources
Corporation dated June 6, 1991
(d) Purchase Agreement by and among Form 10-QSB for the quarter
Southwestern Gold U.S.A., Inc., ended June 30, 1995
Southwestern Gold Corporation as filed August 11, 1995
and the Registrant dated
May 19, 1995
(e) Mining Lease dated December 19, Form 10-KSB for the year
1995 between the Registrant and ended December 31, 1995
Robert A. Lufkin as filed March 29, 1996
(f) 1995 Stock Option Plan** Proxy Statement dated
June 13, 1995
as filed June 14, 1995
(g) Form of Stock Option Agreement** Form 10-KSB for the year
ended December 31, 1995
as filed March 29, 1996
(h) Amendment to Letter Agreement Filed herewith
dated December 29, 1992 between
American Gold Resources
Corporation and the Registrant
(i) Heads of Agreement dated Filed herewith
November 22, 1996 by and between
Echo Bay Exploration Inc., and
the Registrant relating to the
Jessup Property
28 Common stock certificates Amendment No. 2 Form 10
Registration Statement filed
September 17, 1992
* Incorporated herein by reference
** Compensatory plan or arrangement
AMERICAN GOLD RESOURCES CORPORATION
333 Clay Street, Suite 4900
Houston, Texas 77002
(713) 654-3004
(713) 654-9228-Facsimile
January 2, 1995
Mr. Tom Bradley
President
Americomm Corporation
5147 S. Harvard, Suite 122
Tulsa, Oklahoma 74135
RE: Assignment of Exploration Agreement ("Agreement")
Between North Lily Mining Company ("NLMC") and
American Gold Resources Corporation ("AGR"), Dated
June 6, 1991 - Pioneer Project - Powell County,
Montana
______________________________________________________
Dear Tom:
Further to our letter agreement dated December 29, 1992, please be advised
that effective today, item 2 as outlined in the letter agreement will no
longer be valid. As you will recall, this provision provided for a 3%
NSR to be retained by AGR on all properties which were dropped by North Lily
and subsequently picked-up by Americomm.
Should you have any questions, please do not hesitate to contact me.
Yours very truly,
AMERICAN GOLD RESOURCES CORPORATION
Daniel C. Idzal
DANIEL C. IDZAL
President & CEO
ECHO BAY MINES
6400 South Fiddlers Green Circle
Suite 1000 W. Tom Rice
Englewood, Colorado 80111-4957 Manager Land U.S.
Telephone (303) 714-8600 Telephone (303) 714-8628
Telecopier (303) 714-8999 Telecopier (303) 714-8987
November 22, 1996
Mr. Tom Bradley
President
AMERICOMM RESOURCES CORPORATION
9 East 4th Street, Suite 305
Tulsa, Oklahoma 74103
RE: HEADS OF AGREEMENT - JESSUP PROPERTY
CHURCHILL COUNTY, NEVADA
Dear Mr. Bradley:
This letter confirms the common intent of AMERICOMM RESOURCES CORPORATION
("Americomm") and ECHO BAY EXPLORATION ("Echo Bay") to enter into a mining
venture agreement by which Echo Bay may acquire from Americomm an undivided
Fifty-One Percent (51%) interest in: (i) that certain Mining Lease Agreement
between Alexander von Hafften and Southwestern Gold U.S.A., Inc., dated
June 15, 1991, which Mining Lease Agreement was assigned to Americomm pursuant
to that certain Assignment and Assumption between Southwestern Gold U.S.A.,
Inc. and Americomm, dated May 19, 1995 (the "von Hafften Lease"), concerning
ninety-one (91) unpatented lode mining claims located in Churchill County,
Nevada (the "von Hafften Claims"), which von Hafften Lease is attached hereto
as Exhibit "A", (ii) that certain Mining Lease Agreement between Edmond F.
Lawrence and Southwestern Gold. U.S.A., Inc., dated July 15, 1992, which
Mining Lease Agreement was assigned to Americomm pursuant to that certain
Assignment and Assumption between Southwestern Gold U.S.A., Inc. and
Americomm, dated May 19,1995 (the "Lawrence Lease"), concerning three (3)
unpatented lode mining claims located in Churchill County, Nevada (the
"Lawrence Claims"), which Lawrence Lease is attached hereto as Exhibit "B";
and, (iii) thirty-six (36) unpatented lode mining claims located in Churchill
County, Nevada owned by Americomm (the "Americomm Claims"), a description of
which Americomm Claims is attached hereto as Exhibit "C".
The mining venture to be entered into by Echo Bay and Americomm shall be
named the Jessup Mining Venture (the "Venture"). Pursuant to mutual
agreement between Echo Bay and Americomm, the Venture will incorporate the
terms set forth in this Heads of Agreement into Form 5, Mining Venture
Agreement, published by the Rocky Mountain Mineral Law Foundation, including
its Exhibit B, Accounting Procedure, and Exhibit C, Tax Matters ("Form 5").
The Form 5 may be modified, as published, only by mutual agreement of Echo
Bay and Americomm and will most closely approximate the terms and conditions
set forth in this Heads of Agreement. Americomm and Echo Bay agree that the
following, although not inclusive, represents the salient provisions that set
forth the principal terms and conditions which will be incorporated into the
Jessup Mining Venture Agreement ("Venture Agreement").
<PAGE>
1. MINING VENTURE PROPERTY. The property subject to the Venture shall
include all unpatented claims described as the von Hafften Claims, the
Lawrence Claims, and the Americomm Claims ("Venture Property").
2. EFFECTIVE DATE. The Effective Date of this Heads of Agreement shall
be December 1, 1996 ("Effective Date").
3. TERM. The Term of this Heads of Agreement and the proposed Venture
Agreement shall be for twenty (20) years, and so long thereafter as operations
or activities under the Venture Agreement continue, or until the Venture
Agreement is terminated, which ever occurs first.
4. REPRESENTATIONS. To the best of its knowledge, Americomm represents as
follows:
4.1 Americomm holds certain rights, including, but not limited to, the
right to explore for, extract or produce minerals from the Venture
Property;
4.2 Americomm is the owner of the Americomm Claims, subject only to the
paramount title of the United States; the Americomm Claims'
location notices and certificates have been properly recorded and
filed; all assessment work required to hold the unpatented claims
comprising the Venture Property have been properly performed,
deferred or excused through the assessment year ending September 1,
1996; and, all filings required to maintain the unpatented claims
comprising the Venture Property in good standing through December
30, 1995, including evidence of assessment work, or the equivalent
thereof, have been made;
4.3 Americomm can freely assign the von Hafften Lease and the Lawrence
Lease to Echo Bay.
4.4 The Venture Property is free and clear of all liens and
encumbrance except those which are specifically set forth in the
von Hafften Lease and the Lawrence Lease, if any;
4.5 The von Hafften Lease and the Lawrence Lease are in good standing;
all of Americomm's obligations thereunder which have accrued have
been met or performed;
<PAGE>
4.6 Americomm has not received any notice regarding, and has no
knowledge of, any default or any violation of any term contained
in the von Hafften Lease or the Lawrence Lease;
4.7 Americomm has complied with all governmental regulations concerning
its activities on the Venture Property, including, but not limited
to, regulations enacted for the protection of the environment; and,
4.8 Americomm agrees that execution of this Heads of Agreement gives
Echo Bay sufficient authority to enter onto the Venture Property
to begin exploration activities.
5. RIGHT TO EARN INTEREST. Americomm hereby grants to Echo Bay the right
to earn and undivided Fifty-One Percent (51%) interest in the von Hafften
Lease, the Lawrence Lease, and the Americomm Claims by expending certain sums
money in the manner and within the time period described herein.
6. INITIAL EXPLORATION PHASE: WORK EXPENDITURES: CASH PAYMENTS. At
anytime during the first five (5) years of the Term (the "Initial Exploration
Phase"), Echo Bay shall be entitled to acquire an undivided Fifty-One Percent
(51%) interest in the von Hafften Lease, the Lawrence Lease, and the
Americomm Claims by (i) expending Two Million Dollars ($2,000,000.00) on or
for the direct benefit of the Venture Property ("Work Expenditures"); and,
(ii) making Cash Payments to Americomm totaling Seven Hundred Fifty Thousand
Dollars ($750,000.00).
6.1 Required Work Expenditures. The Work Expenditures shall be made
annually ("Work Year") and in accordance with the following schedule:
<TABLE>
<CAPTION>
WORK YEAR ANNUAL REQUIRED CUMULATIVE WORK
WORK EXPENDITURES EXPENDITURES
<S> <C> <C>
Year 1 $250,000.00 $250,000.00
Year 2 $300,000.00 $550,000.00
Year 3 $400,000.00 $950,000.00
Year 4 $500,000.00 $1,450,000.00
Year 5 $550,000.00 $2,000,000.00
Total Work Expenditures $2,000,000.00
</TABLE>
All Work Expenditures are cumulative. If Echo Bay expends more than the
required amount in any year, then all excess monies shall be credited towards
subsequent required Work Expenditures. Echo Bay may, at it sole option,
elect to accelerate the Work Expenditures and expend the total required
Work Expenditures in less than the five (5) year time period specified
herein. Echo Bay shall not be penalized in any way if it makes such election.
<PAGE>
Beginning with the first Work Year, which commences on the Effective Date,
and annually thereafter so long as Work Expenditures are required to be made,
the Work Expenditures will include a minimum of One Hundred Fifty Thousand
Dollars ($150,000.00) in drilling and assay expenses. Also included in the
annual Work Expenditures will be a minimum of Sixty Thousand Dollars
($60,000.00) in drilling and assay expenses to test the Shallow Resource.
The "Shallow Resource" is defined as the area of potential mineralization
that was delineated by previous drilling. The Shallow Resource will be
limited to an area that is within four hundred (400') feet of the surface. If,
in the determination of Americomm and Echo Bay, all reasonable efforts to
test the Shallow Resource have been made, then the requirement to make annual
expenditures to test the Shallow Resource shall be deleted from the annual
Work Requirement.
As part of the first years required Work Expenditure, Echo Bay agrees to
erect barriers that, in Echo Bay's sole determination, will reasonably prevent
entrance to existing mine shafts and adits on the Venture Property. The cost
of such preventative work shall be credited agains the required Work
Expenditures.
In the event that Echo Bay does not expend the total amount of an annual Work
Expenditure specified above, but it does expend at least eighty percent (80%)
of the annual Work Expenditure, then Echo Bay may, at its sole discretion,
elect to pay to Americomm a cash payment equaling the difference between the
annual required Work Expenditure and the amount actually expended by Echo Bay.
However, this cash payment shall not be more than twenty percent (20%) of the
required annual Work Expenditure. For example; Echo Bay expends Two Hundred
Forty Thousand Dollars ($240,000.00) by the end of the first Work Year. To
keep the Venture Agreement in effect, Echo Bay would then make a cash payment
to Americomm of Ten Thousand Dollars ($10,000.00). This amount represents the
difference between the required annual Work Expenditure and the amount actually
expended by Echo Bay.
Regardless of the execution date of the Venture Agreement, all exploration
expenditures, including any underlying obligation expenditures, made by Echo
Bay before and after the Effective Date of this Heads of Agreement, shall be
included in and are a credit upon the Work Expenditures. In order for
exploration expenditures to be included in the Work Expenditures, such
expenditures must come within the scope of "Charges to the Joint Account" as
set forth in Form 5, Exhibit B, Accounting Procedures, Article II. Echo Bay
shall provide Americomm with an annual accounting of Work Expenditures within
thirty (30) days of the close of each exploration work year.
If Echo Bay is precluded from timely completion of any, or all, of the Work
Expenditures set forth above due to the action or inaction of any governmental
agency to grant approval or permits to conduct exploration or development
activities, then the time period for all of the Work Expenditures shall be
extended for a period of time equal to that of the delay(s).
In the event that Echo Bay exercises its option to acquire an additional
interest in the Venture Property pursuant to Section 7 ("Option"), then Echo
Bay shall be allowed to credit expenditures made by Echo Bay in excess of the
Two Million Dollars ($2,000,000.00) Total Work Expenditures to adopted
Programs and Budgets, provided that such credited amount is limited to a
total of Fifty-Five Thousand Dollars ($55,000.00).
<PAGE>
6.2 Cash Payments. The Cash Payments shall be made in accordance with the
following schedule:
<TABLE>
<CAPTION>
Cash Payment Due Date
<S> <C>
$50,000.00 The Effective Date
$100,000.00 First Anniversary of the Effective Date
$150,000.00 Second Anniversary of the Effective Date
$200,000.00 Third Anniversary of the Effective Date
$250,000.00 Fourth Anniversary of the Effective Date
Total Cash Payments $750,000.00
</TABLE>
Echo Bay may, at its sole option, elect to accelerate the Cash Payments and
pay the Total Cash Payments to Americomm in less than the five (5) year time
period specified herein. Echo Bay shall not be penalized in any way if it
makes such election.
7. ACQUIRED INTEREST. Upon completion of the Work Expenditures and payment
of the Cash Payments, Echo Bay shall have earned an undivided Fifty-One (51%)
interest in and to the von Hafften Lease, the Lawrence Lease, and the
Americomm Claims. If Echo Bay fails to complete the Work Expenditures or fails
to make the Cash Payments within the time and manner prescribed above, it
shall have earned no interest in the Venture Property and the Venture Agreement
shall terminate automatically. Within one (1) year after Echo Bay has earned
its undivided Fifty-One Percent (51%) interest in the Venture Property, Echo
Bay shall have an Option to acquire an additional Nineteen Percent (19%)
undivided interest in the Venture Property by making a cash payment to
Americomm of Two Million Dollars ($2,000,000.00).
8. INITIAL PARTICIPATING INTERESTS AND DEEMED EXPENDITURES. Conditioned
upon completion of the Work Expenditures and making the Cash Payments by Echo
Bay, the Initial Participating interest of the parties and value associated
with said interests shall be:
Interest Value
Echo Bay: Fifty-One Percent (51%) US$2,750,000.00
Americomm: Forty-Nine Percent (49%) US$2,642,156.00
<PAGE>
9. OPERATOR; PROGRAMS AND BUDGETS.
9.1 Operator. Echo Bay is hereby appointed Operator of the Venture under
this Heads of Agreement and the Venture Agreement.
9.2 Programs and Budgets. During the Initial Exploration Phase, all work
programs and budgets shall be at the sole discretion of Echo Bay. Upon Echo
Bay earning its interest in the Venture Property, all further exploration,
development and operational activities shall be conducted, expenses shall be
incurred, and assets shall be acquired, only pursuant to adopted Programs and
Budgets. Proposed Programs and Budgets shall be prepared by the Operator for
one (1) month or any longer period of time. Each adopted Program and Budget,
regardless of length, shall be reviewed at least once a year by the
Management Committee. At least forty-five (45) days prior to the expiration
of each adopted Program and Budget, the Operator shall prepare and submit
to the Participants a proposed Program and Budget for the succeeding period.
Each such proposed Program and Budget shall be in a form and degree of detail
sufficient to allow the non-Operator to make a reasonably informed
determination concerning participation therein.
9.3 Review and Approval of Proposed Programs and Budgets. Within fifteen
(15) days after submission of an exploration Program and Budget, or within
forty-five (45) days after submission of a proposed Program and Budget
involving development or mining, each participant shall submit to the
Management Committee: (a) a notice that the participant approves the proposed
Program and Budget; or (b) proposed modifications of the proposed Program
and Budget. Failure by a participant to give either of the foregoing
responses within the allotted time shall be deemed to be an approval by the
participants of the Operator's proposed Program and Budget. If a participant
makes a timely submission to the Management Committee of item 9.3(b) above,
the Management Committee shall seek, for a period of fifteen (15) days in the
case of an exploration Program and Budget and for a period of thirty (30)
days in the case of a Program and Budget involving development or mining, to
develop a Program and Budget acceptable to the participants. At the end of
such period, the Management Committee shall vote on any revised Program and
Budget developed pursuant to the preceding sentence or, failing agreement by
the participants on a revised Program and Budget, shall vote on the original
Program and Budget submitted by the Operator.
9.4 Election to Participate. By notice to the Management Committee within
twenty (20) days after the final vote adopting a Program and Budget, a
participant may elect to contribute to such Program and Budget in some lesser
amount than its respective Participating Interest, or not at all, in which
case its Participating Interest shall be recalculated as provided. If a
participant fails to notify the Management Committee, the participant shall
be deemed to have elected to contribute to such Program and Budget in
proportion to its Participating Interest as of the beginning of the period
covered by the Program and Budget. Notwithstanding the elections provided,
the Operator may implement any program and Budget adopted by vote of the
Management Committee immediately upon its effective date.
<PAGE>
9.5 Budget Overruns; Program Changes. The Operator shall immediately
notify the Management Committee of any material departure from an adopted
Program and Budget. If the Operator exceeds an adopted Budget by more than
ten percent (10%), the excess over ten percent (10%) shall be for the sole
account of the Operator and such excess shall not be included in the
calculations of the Participating Interests, unless such excess is directly
caused by an emergency or unexpected expenditure or is authorized by the
participants. Budget overruns of ten percent (10%) or less shall be borne by
the participants in proportion to their respective Participating Interests as
of the time the overrun occurs.
10. DILUTION OF INTEREST.
10.1 If a participant elects to contribute funds to an adopted Program and
Budget in some lesser amount than its proportional Participating Interest,
or not at all, then the Participating Interest of the diluting participant
shall be recalculated at the time of the election by dividing: (i) the sum
of (a) the Initial Contribution of the diluting participant, (b) all
contributions of the diluting participant subsequent to its deemed Initial
Contribution, and (c) the amount, if any, the diluting participant elects
to contribute to the current adopted Program and Budget; by (ii) the sum of
(a),(b) and (c) above for all participants; and then multiplying the results
by one hundred. The Participating Interest of the other participant shall
thereupon become the difference between one hundred percent (100%) and the
recalculated Participating Interest of the diluting participant.
10.2 If a participant defaults in making a contribution or cash call
required by an approved Program and Budget, the non-defaulting participant
may advance the defaulted contribution on behalf of the defaulting participant
and treat the same, together with any accrued interest, as a demand loan
bearing interest from the date of the advance at LIBOR plus two percent (2%).
The failure to repay the loan upon demand shall be a default. Each
participant grants to the other a lien upon its interest in the Venture and
a security interest in its rights under the Venture Agreement.
10.3 At such time that a participant's Participating Interest dilutes to
fifteen percent (15%) or less, then the diluting participant's interest shall
be converted to a One Percent (1%) Net Returns Production Royalty from
production occuring from the von Hafften Claims and the Lawrence Claims, and
a Three Percent (3%) Net Returns Production Royalty from production occuring
from the Americomm Claims.
11. UNDERLYING OBLIGATIONS. Echo Bay agrees to pay, on or before August 31
each year that this Heads of Agreement or the Venture Agreement is in full
force and effect, the federal claim rental fees due for the unpatented claims
comprising the Venture Property. Echo Bay may, with the consent of Americomm,
abandon all or a portion of Americomm Claims. As of the Effective Date, and
during the Initial Exploration Phase, unless the Venture Agreement is
terminated on or before thirty (30) days prior to the due date of any
payment or obligation required pursuant to the von Hafften Lease and the
Lawrence Lease, or on or before thirty (30) days prior to the end of any
assessment work year, Echo Bay shall make all payments and complete all
obligations required by the von Hafften Lease and the Lawrence Lease, and
perform assessment work and make necessary filings required to maintain the
unpatented claims comprising the Venture Property. Echo Bay shall make the
required payments directly to Alexander von Hafften and Edmond F. Lawrence,
on or before fifteen (15) days prior to the due date with a copy of such
payment provided to Americomm. In addition, Echo Bay shall have the right,
subject to Americomm's approval, to renegotiate the von Hafften Lease and
the Lawrence Lease.
<PAGE>
12. AREA OF MUTUAL INTEREST. The Venture shall only apply to the Venture
Property specified herein and any property situated within the exterior
perimeter of the Venture Property hereinafter acquired by either Echo Bay or
Americomm. Neither Americomm or Echo Bay shall have any obligations to
contribute any additional properties to the Venture other than those
properties specified herein.
13. MANAGEMENT COMMITTEE. The Management Committee for the Venture shall
consist of four (4) members, two (2) which shall be appointed by each
participant. All significant decisions including, but not limited to those
affecting Programs and Budgets, shall be by the affirmative vote of a majority
(greater than 50%) of the Participating Interests. Management Committee
meetings shall be held at least two times per year at a mutually agreeable
location.
14. LIABILITY; RECLAMATION; INSURANCE. Echo Bay hereby indemnifies
Americomm against any liability arising from personal injury, death or
property damage when such is caused by Echo Bay's actions on the Venture
Property during the Initial Exploration Phase, provided that nothing herein
shall relieve Americomm from liability for its own negligence or for the
negligence of persons or instrumentalities acting on its behalf.
Should the Venture Agreement terminate prior to Echo Bay acquiring any
interest in the Venture Property, Echo Bay shall reclaim the Venture Property
in accordance with applicable law when such is required as a direct result
of Echo Bay's activities on the Venture Property and Echo Bay shall hold
Americomm harmless from any such reclamation obligations. By entering into
this Heads of Agreement, Echo Bay expressly disclaims any responsibility for
any historic or current environmental liabilities that may attach to the
Venture Property. Echo Bay's responsibility for reclamation or acceptance of
environmental/permitting liabilities on the Venture Property shall be limited
during the term of the Initial Exploration Phase specifically to any
disturbance that may be caused by Echo Bay's own activities on the Venture
Property and liability for reclamation of any disturbances existing on the
Venture Property prior to the Effective Date shall be the exclusive
responsibility of Americomm and Americomm hereby agrees to indemnify and hold
Echo Bay harmless from and against such liability. In the event that Echo
Bay earns an undivided interest in the Venture Property, then the reclamation
liability for all disturbances on the Venture Property shall be jointly as
between the parties.
Echo Bay shall not create or suffer any liens or encumbrances on the Venture
Property that may arrise out of work conducted by or on behalf of Echo Bay
during the Initial Exploration Phase.
During the Term hereof, Echo Bay agrees to comply with all applicable state
and federal laws and regulations regarding insurance for persons working in
or on the Venture Property under the direct supervision of Echo Bay. Echo
Bay agrees to carry liability insurance with respect to its operations on the
Venture Property in reasonable amounts in accordance with acceptable industry
practices in Churchill County, Nevada.
<PAGE>
15. RIGHT OF FIRST REFUSAL.
15.1 If either participant (then the "Offeror") elects to sell or otherwise
transfer all or any part of its interest in the Venture, the other participant
(then the "Offeree") will have the Right of First Refusal to acquire all or
part of the interest being transferred on the same terms and conditions as a
bonafide offer made by an arms length third party. Such right shall be
effective for a thirty (30) day period following notification by the
transferring participant. If any portion of the consideration to be received
is in the form of real property or other assets, an undertaking to act or
refrain from acting, or in some other nonmonetary form, the notice from the
Offeror to the Offeree will describe such consideration and its monetary
value, based on the fair market value of any such nonmonetary consideration.
15.2 If the Offeree does not accept the whole of the offer, the Offeror shall
be entitled, within thirty (30) days after such non-acceptance, to sell or
transfer that part which was not accepted to a bonafide third party, but at
not less than the equivalent price and on conditions which are not more
favorable to such third party than those at which the Offeree was entitled to
acquire the interest.
16. ASSIGNMENT OF INTERESTS. The interests of the participants in the
Venture may not be assigned without the prior written consent of the other
participant, which consent will not be unreasonalby withheld, excepting, the
participants may freely assign it rights in the Venture to an affiliate,
subsidiary or partner.
17. TERMINATION. Upon written notice to Americomm, prior to Echo Bay
acquiring an interest in the Venture Property, Echo Bay shall have the right
to terminate the Venture Agreement at any time. Upon such termination, Echo
Bay shall be relieved of any further rights or obligations, except for those
rights and obligations which accrued prior to Echo Bay's termination. Within
ninety (90) days after termination of the Venture Agreement, Echo Bay will
provide to Americomm copies of all non-interpretative data developed by or
for Echo Bay related to the Venture Property not previously provided to
Americomm. Such data shall include, but not necessary limited to, drill logs,
assay reports, geophysical, geochemical and geologic maps, metallurgical
reports and engineering reports and studies.
<PAGE>
18. CONFIDENTIALITY. Americomm and Echo Bay agree that the terms and
provisions of this Heads of Agreement and the Venture Agreement are highly
confidential and proprietary to each of them. Accordingly, and regardless
of whether Americomm and Echo Bay actually execute a Venture Agreement in
the manner contemplated by this correspondence, Americomm and Echo Bay agree
with each other they will not disclose, publish nor inform any third party of
the terms, conditions or monetary amounts stated herein unless the consent
of the other party is obtained in advance, which consent shall not be
unreasonably withheld or delayed. Each party shall consult with and obtain
the written consent of the other party prior to making or issuing any public
announcements, press release, or similar publicity or disclosure with respect
to this Heads of Agreement, the Venture Agreement, or any other agreement
between the parties. However, such consents shall not be required if any
disclosure is required by law, rule, regulation or ordinance as determined by
counsel for the disclosing party, but in all cases the disclosing party
shall give the other party a reasonable time within which to offer comments
on that which is disclosed or otherwise published.
19. REPORTS; ACCESS TO VENTURE PROPERTY. During the Initial Exploration
Phase, Echo Bay will provide to Americomm, on a quarterly basis, a narrative
report, together with copies of all factual data gathered by Echo Bay on the
Venture Property during the preceding calender quarter. Americomm will have
access to the Venture Property at all times.
20. NOTICES. All notices, payments, reports, consents and other
communications between the parties shall be in writing to the parties at their
respective addresses as follows:
Americomm: AMERICOMM RESOURCES CORPORATION
9 East 4th Street, Suite 305
Tulsa, Oklahoma 74103
Attn: Thomas R. Bradley
Echo Bay: ECHO BAY EXPLORATION INC.
6400 South Fiddlers Green Circle, Suite 1000
Englewood, Colorado 80111
Attn: Land Department
This Heads of Agreement is subject to final approval of Americomm and Echo
Bay's Board of Directors and is not binding until executed by an authorized
officer of Americomm and Echo Bay. This Heads of Agreement is further subject
to and is conditional upon on a review by Echo Bay of the title to the Venture
Property, and a determination of Echo Bay's potential liability on the Venture
Property with respect to the Comprehensive Environmental Response Compensation
Liability Act of 1980, as amended ("CERCLA") and the Resources Conservation
and Recovery Act of 1980, as amended ("RCRA").
<PAGE>
Upon execution, this Heads of Agreement consitutes a binding agreement
between the parties and a mutual commitment by both parties to negotiate
expeditiously and in good faith towards the execution of the Venture
Agreement. This Heads of Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute the same Heads of Agreement.
If this Heads of Agreement accurately reflects our understanding, please
signify your concurrence by fully executing both copies of this Heads of
Agreement and returning both copies to me for Echo Bay's execution. Please
contact me at the above address and telephone number at your earliest
convenience if you have comments or questions regarding this proposal. I
look forward to hearing from you in the near future.
Respectfully
ECHO BAY EXPLORATION INC.
W. Tom Rice
W. TOM RICE, Land Manager U.S.
This confirms that the foregoing accurately reflects our understanding and
intent.
AMERICOMM RESOURCES CORPORATION
BY: Thomas R. Bradley DATED: 12/5/96
THOMAS R. BRADLEY
President
ECHO BAY EXPLORATION INC.
BY: Donald E. Ranta DATED: 12/3/96
DONALD E. RANTA
Vice President, Exploration
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<PERIOD-START> OCT-01-1996
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0
0
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