FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ----- to -----.
Commission File Number 2-2274
ALTA GOLD CO.
------------
(Exact Name of Registrant as specified in its charter)
Nevada 87-0259249
------ ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
601 WHITNEY RANCH DRIVE, SUITE 10
HENDERSON, NEVADA 89014
----------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(702) 433-8525
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------ ------
The number of shares outstanding of the Registrant's
Common Stock as of June 30, 1996 was 28,903,603.
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<PAGE>
ALTA GOLD CO.
INDEX
Page
Number
PART I Financial Information
Item 1 Financial Statements
Condensed Balance Sheets as of
June 30, 1996 and December 31, 1995 . . 3
Condensed Statements of Operations
for the Three Months Ended
June 30, 1996 and 1995 . . . . . . . . 5
Six Months Ended June 30, 1996
and 1995 . . . . . . . . . . . . . . . 6
Condensed Statements of Cash Flows
for the Six Months Ended June 30,
1996 and 1995 . . . . . . . . . . . . . 7
Notes to Condensed Financial
Statements . . . . . . . . . . . . . . 9
Item 2 Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . 13
PART II Other Information
Item 4 Submission of Matters to a Vote
of Security Holders . . . . . . . . . 17
Item 6 Exhibits and Reports on Form 8-K . . . 17
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . 18
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ALTA GOLD CO.
-------------
CONDENSED BALANCE SHEETS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents $ 687,000 $ 369,000
Receivables 111,000 110,000
Inventories 3,577,000 4,251,000
Prepaid expenses and other 83,000 91,000
--------- ----------
Total current assets 4,458,000 4,821,000
PROPERTY, BUILDINGS AND
EQUIPMENT, net
Mining properties and claims 17,217,000 18,550,000
Buildings and equipment 15,952,000 15,063,000
---------- ----------
33,169,000 33,613,000
Less - accumulated depreciation (8,960,000) (8,049,000)
---------- ----------
Total property and
equipment, net 24,209,000 25,564,000
DEFERRED MINE DEVELOPMENT
COSTS, net 10,977,000 9,178,000
OTHER ASSETS 1,073,000 836,000
---------- ----------
Total assets $40,717,000 $40,399,000
=========== ===========
</TABLE>
The accompanying notes to condensed financial statements are
an integral part of these statements.
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ALTA GOLD CO.
-------------
CONDENSED BALANCE SHEETS (continued)
-----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 874,000 $ 1,064,000
Accrued liabilities 1,036,000 1,149,000
Current portion of
long-term debt 1,528,000 2,920,000
---------- -----------
Total current liabilities 3,438,000 5,133,000
LONG-TERM DEBT, net of current
portion 2,190,000 3,297,000
DEFERRED INCOME TAXES 686,000 755,000
OTHER LONG-TERM LIABILITIES 737,000 826,000
---------- -----------
Total liabilities 7,051,000 10,011,000
---------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value;
authorized 60,000,000
shares, issued 28,903,603
and 28,452,780 shares,
respectively 29,000 28,000
Additional capital 43,929,000 42,360,000
Accumulated deficit (10,292,000) (12,000,000)
----------- -----------
Total stockholders' equity 33,666,000 30,388,000
----------- -----------
Total liabilities and
stockholders' equity $40,717,000 $40,399,000
=========== ===========
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
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<PAGE>
ALTA GOLD CO.
-------------
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
REVENUE $5,186,000 $3,597,000
---------- ----------
OPERATING COSTS AND EXPENSES:
Direct mining, production
and holding costs 3,021,000 2,047,000
General and administrative 377,000 333,000
Exploration 14,000 8,000
Depreciation, depletion and
amortization 772,000 603,000
---------- ----------
4,184,000 2,991,000
---------- ----------
Income from operations 1,002,000 606,000
---------- ----------
OTHER INCOME (EXPENSE), net:
Interest income and other 30,000 51,000
Interest expense and other ( 57,000) ( 190,000)
---------- ----------
( 27,000) ( 139,000)
---------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 975,000 467,000
PROVISION FOR INCOME TAXES -- --
---------- ----------
NET INCOME $ 975,000 $ 467,000
========== ==========
NET INCOME PER SHARE $ 0.04 $ 0.02
========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 31,319,906 28,452,780
========== ==========
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
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<PAGE>
ALTA GOLD CO.
-------------
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
----------- ----------
<S> <C> <C>
REVENUE $10,371,000 $6,292,000
----------- ----------
OPERATING COSTS AND EXPENSES:
Direct mining, production
and holding costs 6,281,000 3,873,000
General and administrative 750,000 698,000
Exploration 16,000 17,000
Depreciation, depletion
and amortization 1,546,000 947,000
----------- ----------
8,593,000 5,535,000
----------- ----------
Income from operations 1,778,000 757,000
----------- ----------
OTHER INCOME (EXPENSE), net:
Gain on sale of assets -- 2,425,000
Interest income and other 58,000 97,000
Interest expense and other ( 128,000) ( 273,000)
----------- ---------
( 70,000) 2,249,000
----------- ---------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,708,000 3,006,000
PROVISION FOR INCOME TAXES -- --
----------- ---------
NET INCOME $ 1,708,000 $3,006,000
=========== ==========
NET INCOME PER SHARE $ 0.06 $ 0.11
=========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 30,240,811 28,222,233
========== ==========
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
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<PAGE>
ALTA GOLD CO.
------------
CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1996 1995
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,708,000 $3,006,000
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation, depletion
and amortization 1,546,000 947,000
Net gain on sale of assets -- (2,425,000)
Stock compensation 80,000 47,000
Decrease (increase) in:
Short-term
investments -- 262,000
Receivables (1,000) 325,000
Inventories 674,000 (1,675,000)
Prepaid expenses
and other (229,000) (139,000)
Increase (decrease) in:
Accounts payable (190,000) (862,000)
Accrued and other
liabilities (331,000) (99,000)
--------- ---------
Net cash provided
by (used in)
operating activities 3,257,000 (613,000)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property,
buildings and equipment (1,322,000) (1,322,000)
Additions to deferred mine
development costs (1,949,000) (1,309,000)
Proceeds from sale of property,
buildings and equipment -- 2,425,000
---------- ---------
Net cash used in
investing activities (3,271,000) (206,000)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 1,707,000 3,652,000
Payment on debt (1,265,000) (2,000,000)
Other (110,000) 15,000
---------- ---------
Net cash provided by
financing activities 332,000 1,667,000
---------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 318,000 848,000
CASH AND CASH EQUIVALENTS, beginning
of period 369,000 471,000
---------- ---------
CASH AND CASH EQUIVALENTS, end of
period $ 687,000 $1,319,000
========== ==========
</TABLE>
The accompanying notes to condensed financial
statements are an integral part of these
statements.
-7-
<PAGE>
ALTA GOLD CO.
------------
CONDENSED STATEMENTS OF CASH FLOWS (continued)
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1996 1995
---------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the period
for interest, net of amount
capitalized $ 125,000 $ 108,000
Cash paid during the period
for income taxes $ 18,000 $ 65,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
During the six months ended June 30, 1996,
the Company retired $3,000,000 in convertible
debentures - $1,600,000 through the issuance of
400,000 shares of common stock and 400,000
warrants and $1,400,000 through the exercise of
offset provisions as provided for in the Purchase
Agreement underlying the convertible debentures.
Concurrently with the exercise of the offset
provisions, the cost and book value of the assets
acquired under the Purchase Agreement was also
reduced by $1,400,000.
During the six months ended June 30, 1995,
the Company retired $500,000 in outstanding debt
through the issuance of common stock valued at
$500,000.
During the six months ended June 30, 1996 and
1995, the Company capitalized interest of $59,000
and $54,000, respectively, on zero coupon
debentures to deferred mine development costs.
</TABLE>
The accompanying notes to condensed financial
statements are an integral part of these
statements.
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<PAGE>
ALTA GOLD CO.
-------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------
(Unaudited)
Note 1. Interim Financial Statement Policies and
- -------------------------------------------------
Disclosures
- -----------
The unaudited, condensed financial statements
of Alta Gold Co. (the "Company") included herein
have been prepared pursuant to the rules and
regulations of the Securities and Exchange
Commission. Certain information and footnote
disclosures normally required in financial
statements prepared in accordance with generally
accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures
are adequate to make the information presented not
misleading.
These interim, unaudited, condensed financial
statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year
ended December 31, 1995, as filed with the
Securities and Exchange Commission. In the
opinion of Management, all adjustments (consisting
of normal recurring accruals) considered necessary
for a fair presentation have been included.
Operating results for the three and six months
ended June 30, 1996 are not necessarily indicative
of the results that may be expected for the year
ending December 31, 1996.
Cash and Cash Equivalents
- -------------------------
For purposes of the balance sheets and
statements of cash flows, the Company considers
all investments with an original maturity of three
months or less to be cash equivalents.
Reclamation Costs
- -----------------
Minimum standards for mine reclamation have
been established by various governmental agencies
which affect certain operations of the Company.
The Company's general policy is to accrue
estimated reclamation costs during each property's
productive life based on estimated reserves using
the units of production method. As of June 30,
1996 and December 31, 1995, the Company had
reserved approximately $1,103,000 and $1,596,000,
respectively, for reclamation activities of which
approximately $216,000 is expected to be expended
during the last six months of 1996.
Copper Flat
- -----------
Pursuant to an agreement dated June 14, 1994,
the Company reduced the net smelter return royalty
on Copper Flat from 5% to 2-1/2% in exchange for
375,000 restricted common shares of Alta Gold
stock. Under the terms of this agreement, the
Company is obligated to pay the owner the
difference between $4.00 per share and the average
trading price, if less than $4.00 per share, of
the Company's common stock as of the second
anniversary date of the common stock issuance as
multiplied by a maximum of 250,000 shares (the
"true-up provision"). The true-up provision has
been determined to be $110,000 and, as of June 30,
1996, the Company has recorded a liability and
reduced Stockholders' Equity - Additional Capital,
accordingly.
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<PAGE>
Income Taxes
- ------------
No provision for income taxes was required in
either 1996 or 1995 because of the utilization of
net operating loss carryforwards. As of June 30,
1996, the Company estimates that it has
approximately $18,247,000 in remaining net
operating loss carryforwards. These net operating
loss carryforwards are scheduled to expire during
the period 2005 to 2009.
Net Income per Share
- --------------------
Net income per share is computed based on the
weighted-average number of shares and common stock
equivalents, if dilutive, actually outstanding
during the period.
On a primary basis, net income per share is
based on common stock equivalents adjusted to
reflect additional shares that would be
outstanding using the treasury stock method
assuming exercise of dilutive stock warrants and
stock options having exercise prices less than the
average market price.
On a fully diluted basis, net income per
share is based on common stock equivalents
adjusted to reflect additional shares that would
be outstanding using the treasury stock method
assuming exercise of dilutive stock warrants and
stock options having exercise prices less than the
period end market price (when greater than the
average market price).
Note 2. Inventories
- --------------------
<TABLE>
<CAPTION>
Inventories consist of the following:
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Precious metals:
Refined products $ 230,000 $ 238,000
In process 3,188,000 3,765,000
Consumable supplies 159,000 248,000
---------- ----------
$3,577,000 $4,251,000
========== ==========
Inventories of in-process metals and
consumable supplies are valued at the lower of
cost (using the first-in, first-out method) or
market. Inventories of refined products are
valued at market.
</TABLE>
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<PAGE>
Note 3 - Long-Term Debt
- -------------------------
<TABLE>
<CAPTION>
Long-term debt is summarized as follows:
June 30, December 31,
1996 1995
-------- -----------
<S> <C> <C>
Amount due under a line of credit;
interest at LIBOR + 2%;due in
installments beginning
December 1996; secured by
property and equipment $ 500,000 $ -
Notes payable; interest at
16.1%; due in monthly
installments through June 1998;
secured by equipment 566,000 673,000
Note payable; interest at
11.8%; due in monthly
installments through April 1999;
secured by equipment 420,000 -
Note payable; interest at
8.5%; due in monthly
installments through June 1999;
secured by equipment 254,000 -
Note payable; interest at
10%; due September 1996;
unsecured 50,000 50,000
Note payable to a bank;
interest at 12%; due December 31,
1996; secured by property
and equipment 500,000 -
Amount due under a bank
credit facility; interest at prime
plus 2%; due September 1996;
secured by equipment - 1,125,000
6% Subordinated convertible
debenture; due June 1996 - 1,500,000
6% Subordinated convertible
debenture; due June 1998 - 1,500,000
Zero coupon $4,000,000
subordinated debenture;
discounted at an imputed
rate of 9%; due June 2008 1,428,000 1,369,000
--------- ---------
3,718,000 6,217,000
Less - current portion (1,528,000) (2,920,000)
--------- ---------
Total long-term debt $2,190,000 $3,297,000
========= =========
</TABLE>
On May 31, 1996, the Company obtained a line
of credit with Gerald Metals, Inc. pursuant to
which the Company is entitled to borrow up to
$5,000,000 through December 30, 1996 at an
interest rate based on the overnight London
Interbank Offered Rate ("LIBOR") plus 2%. Any
balances outstanding as of December 30, 1996,
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<PAGE>
are required to be paid down in installments of
$100,000 each on December 31, 1996, January 31,
1997 and February 28, 1997 and continuing on the
last business day of each month thereafter, nine
installments each in an amount equal to one-ninth
of the balance, if any, outstanding as of February
28, 1997. As of June 30, 1996, the Company has
borrowed $500,000 under this $5,000,000 line of
credit.
Effective June 28, 1996, $1,600,000 of the
$3,000,000 due under the two $1,500,000
subordinated convertible debentures due June 1996
and June 1998 were converted into 400,000 shares
of the Company's common stock and warrants to buy
400,000 shares of the Company's common stock. The
warrants are exercisable at a price of $4.00 per
share up through and including July 31, 2001. The
remaining $1,400,000 was credited against certain
Mining Properties and Claims which were subject to
a right of offset as provided for in the Purchase
Agreement in regard to which the subordinated
convertible debentures were originally issued.
-12-
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Private Securities Litigation Reform Act
of 1995 provides a "safe harbor" for forward-
looking statements. Certain information included
herein contains statements that are forward-
looking, such as statements relating to plans for
future production and development activities as
well as other capital spending, financing sources
and the effects of regulation. Such forward-
looking information involves important risks and
uncertainties that could significantly affect
anticipated results in the future and,
accordingly, such results may differ from those
expressed in any forward-looking statements made
herein. These risks and uncertainties include,
but are not limited to, those relating to the
market price of metals, production rates,
production costs, the availability of financing,
the ability to obtain and maintain all of the
permits necessary to put and keep properties in
production, development and construction
activities and dependence on existing management.
The Company cautions readers not to place undue
reliance on any such forward-looking statements,
and such statements speak only as of the date
made.
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THREE-MONTH PERIODS ENDED JUNE 30,
1996 AND JUNE 30, 1995.
In the second quarter of 1996, the Company
had $5,186,000 in revenue from the sale of 13,000
ounces of gold at an average price of $399/oz, as
compared to $3,597,000 in revenue in the second
quarter of 1995 from the sale of 9,100 ounces of
gold at an average price of $395/oz. In the
second quarter of 1996, the Company produced
13,374 ounces of gold, 11,575 ounces from Kinsley
at an average cash cost of $225/oz and 1,799
ounces from pad-rinsing at Easy Junior. In the
second quarter of 1995, the Company produced
10,732 ounces of gold, 7,548 ounces from Kinsley
at an average cash cost of $199/oz and 3,184
ounces from Easy Junior at an average cash cost of
$273/oz. The increase in cash production costs at
Kinsley from $199/oz to $225/oz between comparable
periods is principally due to mobilization, de-
mobilization and stripping costs incurred in the
first half of 1996 associated with shifting
production from the Main deposit, which has been
depleted, to the Upper and the Access deposits.
Gold production at Kinsley initially began in
late January 1995. Mining at Easy Junior was
completed in the third quarter of 1994; however,
gold production is expected to continue through
September 1996, as the remaining mined ore is
processed and the leach pad is rinsed. The
increase in revenue from $3,597,000 to $5,186,000
between comparable quarters is principally due to
having Kinsley in full production for the entire
second quarter of 1996, as partially offset by the
winding down of production at Easy Junior. The
increase in direct mining, production and holding
costs from $2,047,000 to $3,021,000 between
comparable periods is directly related to the
increase in production.
General and administrative expenses increased
from $333,000 in the second quarter of 1995 to
$377,000 in the second quarter of 1996. The
increase was principally due to legal and
accounting fees incurred in the second quarter of
1996 associated with various regulatory filings
with the Securities and Exchange Commission.
As the result of the Company's focus on
developing Olinghouse, Copper Flat and Griffon,
exploration expense was de minimis in the second
quarters of both 1996 and 1995.
The increase in depreciation, depletion and
amortization from $603,000 in the second quarter
of 1995 to $772,000 in the second quarter of 1996
is principally due to the depreciation, depletion
and amortization of various
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<PAGE>
costs associated with Kinsley, which was in full
production for the entire second quarter of 1996.
Interest income and other decreased from
$51,000 in the second quarter of 1995 to $30,000
in the second quarter of 1996 primarily as the
result of lower average balances available for
investment in 1996. Interest expense and other
decreased from $190,000 in the second quarter of
1995 to $57,000 in the second quarter of 1996
principally due to financing fees incurred in the
second quarter of 1995.
No provision for income taxes was required in
either the second quarters of 1996 or 1995 because
of the utilization of net operating loss
carryforwards. As of June 30, 1996, the Company
estimates that it has approximately $18,247,000 in
remaining net operating loss carryforwards. These
net operating loss carryforwards are scheduled to
expire during the period 2005 to 2009.
COMPARISON OF SIX-MONTH PERIODS ENDED JUNE 30,
1996 AND JUNE 30, 1995.
In the first half of 1996, the Company had
$10,371,000 in revenue from the sale of 25,900
ounces of gold at an average price of $400/oz, as
compared to $6,292,000 in revenue in the first
half of 1995 from the sale of 16,000 ounces of
gold at an average price of $393/oz. In the first
half of 1996, the Company produced 25,791 ounces
of gold, 22,667 ounces from Kinsley at an average
cash cost of $234/oz and 3,124 ounces from pad-
rinsing at Easy Junior. In the first half of
1995, the Company produced 17,643 ounces of gold,
10,407 ounces from Kinsley at an average cash cost
of $207/oz and 7,236 ounces from Easy Junior at an
average cash cost of $274/oz. The increase in
cash production costs at Kinsley from $207/oz to
$234/oz between comparable periods is principally
due to mobilization, de-mobilization and stripping
costs incurred in the first half of 1996
associated with shifting production from the Main
deposit, which has been depleted, to the Upper and
Access deposits.
Gold production at Kinsley initially began in
late January 1995. Mining at Easy Junior was
completed in the third quarter of 1994; however
gold production is expected to continue through
September 1996, as the remaining mined ore is
processed and the leach pad is rinsed. The
increase in revenue from $6,292,000 to $10,371,000
between comparable periods is principally due to
having Kinsley in full production for the entire
first half of 1996, as partially offset by the
winding down of production at Easy Junior. The
increase in direct mining, production and holding
costs from $3,873,000 to $6,281,000 between
comparable periods is directly related to the
increase in production.
General and administrative expenses increased
from $698,000 in 1995 to $750,000 in 1996. The
increase was principally due to legal and
accounting fees incurred in 1996 associated with
various regulatory filings with the Securities and
Exchange Commission.
As the result of the Company's focus on
developing Olinghouse, Copper Flat and Griffon,
exploration expense was de minimis in both the
first halves of 1996 and 1995.
The increase in depreciation, depletion and
amortization from $947,000 in 1995 to $1,546,000
in 1996 is principally due to the depreciation,
depletion and amortization of various costs
associated with Kinsley, which was in full
production for the entire first half of 1996.
In the first half of 1995, the Company sold
its remaining royalty interest in the Robinson
copper property for
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<PAGE>
a net gain of $2,425,000; there were no similar
transactions in the first half of 1996. Interest
income and other decreased from $97,000 in the
first half of 1995 to $58,000 in the first half of
1996 primarily as the result of lower average
balances available for investment in the first
half of 1996. Interest expense and other
decreased from $273,000 in the first half of 1995
to $128,000 in the first half of 1996 principally
due to financing fees incurred in the first half
of 1995.
No provision for income taxes was required in
either the first halves of 1996 or 1995 because of
the utilization of net operating loss
carryforwards. As of June 30, 1996, the Company
estimates that it has approximately $18,247,000 in
remaining net operating loss carryforwards. These
net operating loss carryforwards are scheduled to
expire during the period 2005 to 2009.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of June 30, 1996, the Company had
$1,020,000 in working capital, a $926,000
improvement from the $94,000 in working capital
as of March 31, 1996. This improvement was due to
internal funds generated from gold production at
Kinsley and the retirement of convertible
debentures via the issuance of common stock. The
Company believes that production from Kinsley and
a $5,000,000 line of credit which was obtained on
May 31, 1996 will provide adequate liquidity for
the Company's operational needs during the
remainder of 1996. Outside financing, whether
from debt or equity or through joint ventures or
similar arrangements, will be required to begin
site development and construction at Olinghouse
and Copper Flat. See "Outlook" below.
INVESTING AND FINANCING ACTIVITIES
- ----------------------------------
During the first half of 1996, the Company
expended $1,322,000, principally for equipment at
Kinsley, and $1,949,000 for the development of
Olinghouse, Copper Flat and Griffon. During the
same period, the Company obtained $1,707,000 in
debt financing and retired $1,265,000 of debt.
Effective June 28, 1996, $1,600,000 of the
$3,000,000 due under two $1,500,000 subordinated
convertible debentures due June 1996 and June 1998
were converted into 400,000 shares of the
Company's common stock and warrants to buy 400,000
shares of the Company's common stock. The
remaining $1,400,000 was credited against certain
Mining Properties and Claims which were subject to
a right of offset as provided for in the Purchase
Agreement in regard to which the subordinated
convertible debentures were originally issued.
OUTLOOK
- -------
During the remainder of 1996, the Company has
budgeted cash expenditures of $1,100,000 for mine
development, excluding site development and
construction, of Olinghouse, Copper Flat and
Griffon, $750,000 for debt repayments and $216,000
for reclamation. These expenditures are expected
to be funded from revenues generated from gold
production at Kinsley. An additional $10,000,000
in expenditures for site development and
construction at Olinghouse and Copper Flat has
been tentatively budgeted for the second half of
1996 - $5,000,000
-15-
<PAGE>
for Olinghouse and $5,000,000 for Copper Flat. At
Olinghouse, these expenditures would primarily be
for development drilling. At Copper Flat, these
expenditures would primarily be for site
preparation, equipment purchases and plant
construction. Outside financing, whether from
debt or equity or through joint ventures or
similar arrangements, will be required to begin
site development and construction at Olinghouse
and Copper Flat. The Company is currently in the
process of permitting both Olinghouse and Copper
Flat and investigating potential sources of
financing. Although the Company expects to be
able to obtain all of the necessary permits and
the necessary financing, there is no assurance
that the Company will be able to find external
sources of capital or that the necessary permits
will be obtained.
Budgeted cash expenditures are estimates,
subject to certain assumptions regarding future
events which cannot be predicted with total
accuracy and which may be beyond the control of
the Company. Nevertheless, the Company expects to
meet its obligations.
As of June 30, 1996, the Company had sold
forward 3,000 ounces of gold for delivery during
the remainder of 1996 at an average price of $397
per ounce.
The Company's business is subject to various
risk factors, some of which are discussed in the
Company's report on Form 10-K for the year ended
December 31, 1995, "Items 1 and 2. Business and
Properties - Risk Factors."
-16-
<PAGE>
PART II OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
(a) The 1996 Annual Meeting of Stockholders
("Annual Meeting") of the Company was held
on June 14, 1996.
(b) The Annual Meeting involved 1) the approval
of an amendment to the Company's Articles of
Incorporation increasing the Company's
authorized shares of common stock from
40,000,000 to 60,000,000 and 2) the election
of Directors of the Company. At the Annual
Meeting, the amendment to increase the number
of shares was approved and two directors were
elected - Messrs. John A. Keily and Toshiaki
Tanaka. Six other directors, each of whom
having terms of office extending through and
beyond the Annual Meeting, continued as
directors after the Annual Meeting - Messrs.
Robert N. Pratt, Ralph N. Gilges, Thomas A.
Henrie, Iwao Ino, Jack W. Kendrick and Thomas
D. Mueller.
(c) A tabulation of votes cast is as follows:
<TABLE>
<CAPTION>
Item For Against Abstain
---- --- ------- --------
<S> <C> <C> <C>
Increase shares 20,884,939 1,951,800 398,665
John A. Keily 22,907,421 - 352,483
Toshiaki Tanaka 22,880,537 - 379,367
</TABLE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Settlement Agreement dated June 28, 1996, by
and between Alta Gold Co. and Startronix
International, Inc., the successor in
interest to Gold Express Corporation.
Warrant to purchase 400,000 shares of Alta
Gold Co. common stock granted on June 28,
1996, to Startronix International, Inc.
(b) Form 8-K dated May 31, 1996, reporting a
$5,000,000 loan agreement with Gerald Metals,
Inc.
-17-
<PAGE>
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.
ALTA GOLD CO.
(Registrant)
August 9, 1996 BY: /s/ John A. Bielun
- -------------- -----------------------
(Date) John A. Bielun
Chief Financial Officer
and Principal Accounting
Officer
-18-
<PAGE>
ALTA GOLD CO.
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996
EXHIBIT #1
SETTLEMENT AGREEMENT DATED
JUNE 28, 1996, BY AND
BETWEEN ALTA GOLD CO. AND
STARTRONIX INTERNATIONAL, INC.,
THE SUCCESSOR IN INTEREST TO
GOLD EXPRESS CORPORATION
<PAGE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("Settlement
Agreement"), effective June 28, 1996, is made and
entered into by and between ALTA GOLD CO., a
Nevada corporation ("Alta Gold"), and STARTRONIX
INTERNATIONAL, INC., a Delaware corporation
("StarTronix"), the successor in interest to GOLD
EXPRESS CORPORATION, a Washington corporation
("Gold Express").
RECITALS:
--------
A. Alta Gold and Gold Express previously
entered into an Asset Purchase Agreement
("Purchase Agreement") dated effective June 14,
1994, wherein Alta Gold purchased from Gold
Express certain assets and property referred to in the
Purchase Agreement as the "Copper Flat Property."
B. The purchase price for the Copper Flat
Property consisted of (1) cash; (2) the issuance
by Alta Gold of a 6% convertible subordinated
debenture in the principal amount of $1,500,000
due June 14, 1996 (the "1996 Debenture"); (3) the
issuance by Alta Gold of a 6% convertible
subordinated debenture in the principal amount of
$1,500,000 due June 14,1998 (the "1998
Debenture"); (4) the issuance by Alta Gold of a
subordinated Zero Coupon Debenture with a
redemption price of $4,000,000 due fourteen
years from the date of closing ("Zero Coupon
Debenture"); and (5) the grant of a provisional
copper production royalty, payments pursuant to
which would constitute credits against the Zero
Coupon Debenture.
C. Disputes have arisen between StarTronix
and Alta Gold in various contexts, primarily
related to the Purchase Agreement, certain
representations and warranties by Gold Express
about the Copper Flat Property, and Alta Gold's
withholding of certain payments due under the 1996
and 1998 Debentures based on claimed rights of
offset against the Debentures.
D. In November, 1995, StarTronix, in the
name of Gold Express, initiated an arbitration
requesting an adjudication of Alta Gold's right to
an adjustment of the purchase price and
corresponding right of offset.
E. Alta Gold answered, denying Gold
Express' claim and counterclaimed, asserting a
breach of contract by Gold Express.
AGREEMENT:
---------
Based upon the foregoing, and in
consideration of the mutual covenants and
obligations herein, the parties agree to
compromise their claims as follows:
<PAGE>
I. 1996 and 1998 Debentures.
------------------------- StarTronix shall
surrender to Alta Gold the 1996 and 1998
Debentures contemporaneously with the execution of
this Settlement Agreement and shall exercise and
compromise its conversion rights under said
Debentures as follows:
(a) Stock.
------ Alta Gold shall issue to
StarTronix contemporaneously with the execution of
this Settlement Agreement 400,000 shares of Alta
Gold common stock par value $0.001 (the "Shares").
StarTronix specifically agrees that neither it nor
any assignee will sell any of the Shares to the
public (pursuant to Rule 144 or otherwise) prior
to January 1, 1997, and thereafter such sales
shall be limited, through and including the
month of October, 1997, to not more than 40,000
shares each month. All such permitted sales, and
any other assignments or dispositions of the
Shares, shall be subject to the provisions of
paragraph 6 hereof. The shares will contain a
legend to reflect this agreement.
(b) Warrants.
--------- Alta Gold shall issue to
StarTronix contemporaneously with the execution of
this Settlement Agreement warrants to purchase up
to 400,000 shares of Alta Gold's $0.001 par value
common stock ("Warrants"). The Warrants shall be
in the form of Exhibit "A" hereto and may be
converted into common stock of Alta Gold at a cash
purchase price of $4.00 per share at any time
prior to five years from the date of this
Settlement Agreement.
(c) The foregoing modification and
exercise of the conversion rights under the 1996
and 1998 Debentures, together with the
other terms contained in this Settlement
Agreement, constitute a full and final compromise
and release of Alta Gold's rights of offset and
the foregoing modification and exercise of the
conversion rights under the 1996 and 1998
Debentures are accepted by StarTronix in lieu of
payment and in full satisfaction and compromise of
the 1996 and 1998 Debentures, including any claim
for principal and interest under said Debentures.
1. Zero Coupon Debenture and Royalty
---------------------------------
Agreement
---------
(a) Amendment.
---------- The Zero Coupon
Debenture and the Provisional Copper Production
Royalty Agreement dated June 14, 1994 between
Alta Gold and Gold Express ("Royalty Agreement"),
which is currently held by Startronix, shall be
and remain fully binding, valid and payable
according to the terms thereof, except that the
Zero Coupon Debenture shall be amended in the form
of Exhibit "B" hereto ("Amended Zero Coupon
Debenture"). All provisions of the Zero Coupon
Debenture and the Royalty Agreement which link the
Zero Coupon Debenture and the Royalty Agreement
shall remain in full force and effect, including
all provisions which make payment under either one
of those instruments a discharge, to that extent,
of payment obligations under the other. As of the
effective date of this Settlement Agreement, Alta
Gold shall have no right of offset or defense of
any kind to the performance of the Zero Coupon
Debenture and the Royalty Agreement.
(b) Execution of Amended Zero Coupon
--------------------------------
Debenture.
- ---------- The Amended Zero Coupon Debenture, in
the form of Exhibit "B", will be executed by Alta
Gold contemporaneously with the execution of this
Settlement Agreement and upon surrender of the
Zero Coupon Debenture.
2
<PAGE>
(c) Assignment of Zero Coupon
-------------------------
Debenture.
- ---------- Alta Gold agrees that it will not
unreasonably withhold its consent to an assignment
of the Amended Zero Coupon Debenture by StarTronix
to a third party (the "Third Party"), subject to
the following: (1) Alta Gold receiving
notification of the intended assignment; (2) Alta
Gold, StarTronix and the Third Party agreeing as
to balance owing under the Amended Zero Coupon
Debenture, utilizing the procedure set forth in
paragraph 2(d) herein; (3) StarTronix assigning to
the Third Party all of its rights, obligations and
duties under said Amended Zero Coupon Debenture
and the Royalty Agreement; and (4) that no further
assignment or transfer of the Amended Zero Coupon
Debenture shall be permitted without the further
consent of Alta Gold. All subsequent assignments
shall be subject to the provisions of this Section
2(c).
(d) Accounting Procedure.
--------------------- Payments
made under the Royalty Agreement will be credited
as an offset against the Amended Zero Coupon
Debenture. The amounts due and owing under the
Amended Zero Coupon Debentures shall be determined
by utilizing the following procedure: Each time a
provisional copper royalty payment is made by Alta
Gold, said payment shall be accompanied by a
Statement of Account in the form attached hereto
as Exhibit "C", which shall set forth the amount
of said royalty payment as well as the Maturity
Amount owing under the Amended Zero Coupon
Debenture (after credit is given for the
accompanying payment)("Balance Owing"). The
Statement of Account shall be sent by certified
mail or similar delivery showing the date of
receipt. If Startronix (or its assignee)
does not give notice to Alta Gold that it disputes
the Balance Owing within 60 days of receipt of the
Statement of Account, said amount shall be deemed
to be the amount agreed to by the parties as due
and owing, and Startronix (or its assignee) will
be deemed to have waived any and all right to
dispute said Balance Owing. As of the date of
this Settlement Agreement, no payments have been
made under the Royalty Agreement and the Maturity
Amount which remains owing on the Zero Coupon
Debenture is $4,000,000.00.
2. Assumption Agreement.
--------------------- All of Alta
Gold's executory obligations under the terms of
the "Assumption Agreement" attached as Exhibit "D"
to the Purchase Agreement shall remain in full
effect.
3. Mutual Releases.
---------------
(a) Except as otherwise set forth in
this Settlement Agreement, StarTronix on behalf of
itself, its agents, successors, predecessors,
assigns and all affiliated or related persons or
entities, both past and present, hereby waive,
discharge and release Alta Gold, its agents,
successors, predecessors, assigns and all
affiliated or related persons or entities, both
past and present, from any and all liabilities,
debts, demands, contracts, promises, agreements,
claims, causes of action, injuries, costs,
attorneys' fees, or damages of any kind or
character, both known or unknown, which may now
exist or later be discovered, arising from,
related to, or connected with any and all disputes
and relationships between the parties including,
without limitation, all claims directly or
indirectly related to or arising out of the
Purchase Agreement, the 1996 Debenture, the 1998
Debenture, and all matters asserted in or relating
in anyway to that certain arbitration entitled
Gold Express Corporation v. Alta Gold Co.,
- -----------------------------------------
American Arbitration Association File No.
2650-9001-0001.
3
<PAGE>
(b) Except as otherwise set forth in
this Settlement Agreement, Alta Gold, on behalf of
itself, its agents, successors, predecessors,
assigns and all affiliated or related persons or
entities, both past and present, hereby waive,
discharge and release StarTronix, its agents,
successors, predecessors, assigns and all
affiliated or related persons or entities, both
past and present, from any and all liabilities,
debts, demands, contracts, promises, agreements,
claims, causes of action, injuries, costs,
attorneys' fees, or damages of any kind or
character, both known or unknown, which may now
exist or later be discovered, arising from,
related to, or connected with any and all disputes
and relationships between the parties including,
without limitation, all claims directly or
indirectly related to or arising out of the
Purchase Agreement, the 1996 Debenture, the 1998
Debenture, and all matters asserted in or relating
in any way to that certain arbitration entitled
Gold Express Corporation v. Alta Gold Co.,
- -----------------------------------------
American Arbitration Association File No.
2650-9001-0001. This release does not extend to:
a)counsel who have issued those opinion letters
attached as Exhibits 1(G), 15,16 and 17 to the
Purchase Agreement and Alta Gold and StarTronix
expressly agree that Alta Gold reserves any and
all rights related to or flowing from said
opinion letters or b) any Seller or assignor,
other than Gold Express or its successors in
interest, from whom Alta Gold acquired, directly
or indirectly, any right, title or interest in
assets of any nature whatsoever.
Alta Gold shall indemnify
StarTronix, and hold it harmless, against any and
all claims, defenses, liabilities, or expenses
resulting or arising from Alta Gold's reservations
of its claims as set forth in the preceding
sentence including, without limitation, any and
all claims, defenses, liabilities, or expenses
resulting or arising from any claim, cross
complaint, third party claim, or action, or
threats of same, asserted by any person against
whom Alta Gold asserts any claim within the scope
of those claims released by Alta Gold as to
StarTronix under this Section 4(b).
(c) Legal Representation.
--------------------- Each party
acknowledges the receipt of the advice of
independent legal counsel prior to the execution
of this Settlement Agreement; that the legal
nature and effect of this Settlement
Agreement has been fully explained to it by
counsel; and that each party fully understands the
terms and provisions of this Settlement Agreement
and its nature and effect. Each party further
represents that it is relying solely on the
advice of its own counsel in executing this
Settlement Agreement and has not relied on the
representation of any other party, except as
expressly set forth herein, or of the counsel for
any other party. Each party further represents
that this Settlement Agreement, and the terms
hereof, were arrived at after bargaining and
negotiation among the parties, and each provision
hereof shall be construed as having been drafted
by each and all of the parties hereto.
(d) Unknown Damages.
---------------- There is a risk
that subsequent to the execution of this
Settlement Agreement one party will incur damage
or loss which that party deems in some way
attributable to the prior actions of the other
party or parties, but which are unknown and
unanticipated at the time this Settlement
Agreement is signed. Except as may be otherwise
set forth in this Settlement Agreement, each party
acknowledges and assumes the risk that damages
presently known may become progressive, greater or
more serious than is now known, expected or
anticipated.
(e) Reliance on Known Facts.
------------------------ Each
party agrees that if the facts with respect to
this Settlement Agreement are found hereafter to
be different from the facts now believed by such
party to be true, that party nevertheless
expressly accepts and assumes the risk of such
possible
4
<PAGE>
difference in facts and agrees that this
Settlement Agreement is and will remain effective
notwithstanding such difference in facts.
4. Degerstrom Acknowledgment.
-------------------------- StarTronix
will provide to Alta Gold an acknowledgment in the
form of Exhibit "D" attached hereto,executed by
N.A. Degerstrom, Inc., acknowledging that the 1996
and 1998 Debentures and the Zero Coupon Debenture
may be surrendered by StarTronix to Alta Gold free
and clear of any and all interest, right or
entitlement N.A. Degerstrom, Inc. may have,
directly or indirectly, to said Debentures, the
interest in the proceeds to be received
thereunder, or any conversion rights or stock to
be issued pursuant to said conversion rights.
5. Restricted Securities.
---------------------- StarTronix
acknowledges and agrees that the Shares, the
Warrants, and any shares of Alta Gold common stock
that are issued upon the exercise of the Warrants
have not been and will not be registered under the
Securities Act of 1933, as amended ("Act") or the
securities laws of any state, and will constitute
"restricted securities" as that term is defined in
the rules and regulations promulgated under the
Act, and may not be sold or otherwise transferred
in the absence of (i) an effective registration
statement with respect thereto under the Act or
(ii) an opinion of counsel acceptable to Alta Gold
that such registration is not required in
connection with the sale or transfer in question.
6. No Assignment.
-------------- Each party represents
and warrants that there has been no assignment or
other transfer of any claim, said party has or may
have, one against the other.
7. Governing Law.
--------------
(a) This Settlemet Agreement shall be
governed by and interpreted in accordance with the
laws of the State of Nevada without giving
effect to any choice or conflict of law provision
or rule (whether of the State of Nevada or any
other jurisdiction) that would cause the
application of the laws of any other jurisdiction
other than the State of Nevada.
(b) Although the parties do not intend
this Settlement Agreement to be governed or
interpreted by the laws of the State of California
to the extent it is held applicable, each of the
parties to this Agreement waives the benefits of
California Civil Code Section 1542 which provides
as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
8. No Third Party Beneficiaries.
----------------------------- This
Settlement Agreement shall confer rights and
remedies only upon the parties hereto and their
respective successors and permitted assigns and
shall not confer any rights or remedies upon any
other person or entity.
5
<PAGE>
9. Corporate Authority.
--------------------
(a) Each party has full corporate power
and authority to execute and deliver this
Settlement Agreement and to perform its obligations
hereunder. Specifically, StarTronix represents
and warrants to Alta Gold that it is the sole and
complete successor in interest to Gold Express
and, in such capacity (i) owns and holds all of
the rights and has all of the obligations of
Gold Express under the Purchase Agreement, the
1996 Debenture, the 1998 Debenture, the Zero
Coupon Debenture and the Royalty Agreement and in
connection with the arbitration proceeding
referred to in paragraph 4 hereof, and (ii) has
the full legal right and authority to modify,
compromise and settle the foregoing, as
contemplated by this Settlement Agreement, in a
manner which is valid and binding as to StarTronix
in all respects and for all purposes.
(b) In connection with the execution
and delivery of this Settlement Agreement, each
party (the "Delivering Party") will provide the
other party (the "Receiving Party") with all
documents and certifications that the Receiving
Party shall reasonably request in regard to the
corporate existence of the Delivering Party and
power and authority of the Delivering Party to
execute and deliver this Settlement Agreement,
including without limitation (i) true and complete
copies of the Articles of Incorporation of the
Delivering Party, certified by an appropriate
governmental official within a reasonable number
of days of the effective date of this Settlement
Agreement, (ii) a certificate of corporate good
standing issued by the appropriate governmental
authority and dated within a reasonable number of
days of the effective date hereof; (iii) certified
copies of resolutions of the Board of Directors of
the Delivering Party authorizing the execution and
delivery of this Settlement Agreement and the
performance by the Delivering Party all of its
obligations hereunder, and (iv) a certificate of
the corporate secretary of the Delivering Party as
to the incumbency of the officer executing this
Settlement Agreement on behalf of the Delivering
Party.
10. Further Acts.
------------- The parties to this
Settlement Agreement shall promptly take such
further acts and execute such other documents as
shall be necessary to carry out the spirit and
letter of this Settlement Agreement. Without
limiting the generality of the foregoing, in the
event any court, county recorder, secretary of
state, or other governmental agency may require
any additional or different documents or actions
in order to effect the purposes contemplated by
this Settlement Agreement, the parties to this
Settlement Agreement shall execute the necessary
documents and take the necessary steps to comply
with those requirements.
11. Attorneys' Fees.
---------------- If any party breaches
any obligation under this Settlement Agreement,
the non-breaching party (or the prevailing party
in the event of any litigation or alternate
dispute resolution procedure) shall be entitled to
its reasonable expenses, attorneys' fees, and
costs incurred in any action taken, with or
without litigation, to enforce, work out, or
renegotiate the terms of this Settlement
Agreement, or to remedy or compensate for such
breach.
12. Severability.
------------- In the event that any one
or more of the provisions of this Settlement
Agreement shall be invalid, illegal, or
unenforceable in any respect, the validity,
legality and enforceability of the remaining
provisions contained herein shall not be in any
way affected or imposed thereby.
6
<PAGE>
13. Counterparts.
------------- This Settlement Agreement
may be executed in two or more counterparts, each
of which shall be deemed an original but all
of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed
this Settlement Agreement effective as set forth
above.
ALTA GOLD CO.
By:
------------------
Robert N. Pratt
Its: President
BY AFFIXING MY
SIGNATURE HERETO, I
HEREBY ACKNOWLEDGE
THAT THE SUBJECT OF
UNKNOWN CLAIMS WAS
DISCUSSED WITH
COUNSEL FOR ALTA
GOLD, AND THAT I
UNDERSTAND THAT
ALTA GOLD IS
RELEASING CLAIMS
THAT MAY BE
DISCOVERED IN
THE FUTURE WHICH
ARISE OUT OF FACTS
OR EVENTS WHICH NOW
EXIST OR HAVE
PREVIOUSLY OCCURRED.
STARTRONIX
INTERNATIONAL, INC.
By:
-----------------
Its:
-----------------
BY AFFIXING MY
SIGNATURE HERETO, I
HEREBY ACKNOWLEDGE
THAT THE SUBJECT OF
UNKNOWN CLAIMS WAS
DISCUSSED WITH
COUNSEL FOR
STARTRONIX, AND THAT
I UNDERSTAND THAT
STARTRONIX IS
RELEASING CLAIMS
THAT MAY BE
DISCOVERED IN
THE FUTURE WHICH
ARISE OUT OF FACTS
OR EVENTS WHICH NOW
EXIST OR HAVE
PREVIOUSLY OCCURRED.
7
<PAGE>
The undersigned counsel for the respective
parties have pointed out to and discussed with
their respective clients the fact that the
releases given by their clients under this
Settlement Agreement apply to unknown claims,
and the significance thereof.
RUTAN & TUCKER
By
-----------------
Edward D. Sybesma,
Jr.
(Counsel for
"StarTronix")
PARSONS BEHLE &
LATIMER
By
-----------------
Val R. Antczak
(Counsel for "Alta
Gold")
8
ALTA GOLD CO.
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996
EXHIBIT #2
WARRANT TO PURCHASE 400,000 SHARES OF
ALTA GOLD CO. COMMON STOCK
GRANTED JUNE 28, 1996 TO
STARTRONIX INTERNATIONAL, INC.
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A
NO-ACTION LETTER REASONABLY SATISFACTORY TO THE
COMPANY FROM THE SECURITIES AND EXCHANGE
COMMISSION OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
ALTA GOLD CO.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
THIS CERTIFIES THAT, for value received,
STARTRONIX INTERNATIONAL, INC. ("SII") or its
assigns is entitled to subscribe for and purchase
400,000 shares (as adjusted pursuant to Paragraph
4 hereof, the "Shares") of the fully paid and
nonassessable common stock, par value $0.001
("Common Stock"), of ALTA GOLD CO., a Nevada
corporation (together with its successors and
assigns, the "Company"), at the price of $4.00 per
Share (such price and such other price as shall
result, from time to time, from the adjustments
specified in Paragraph 4 hereof is herein referred
to as the "Warrant Price"), subject to the
provisions and upon the terms and conditions
hereinafter set forth.
1. Term.
----- The purchase right represented by this
Warrant is exercisable, in whole or in part, at
any time, and from time to time, from and after
July 31, 1996 and until 5 p.m. Pacific Time on
July 31, 2001. To the extent not exercised at 5
p.m. Pacific Time on July 31, 2001, this Warrant
shall completely and automatically terminate and
expire, and thereafter it shall be of no force or
effect whatsoever.
2. Method of Exercise; Payment; Issuance of New
--------------------------------------------
Warrant.
- -------
(a) The purchase right represented by this
Warrant may be exercised by the holder hereof, in
whole or in part and from time to time, by the
surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit "A" duly
executed) at the principal office of the Company
and by the payment to the Company of an amount, in
cash or other immediately available funds, equal
to the then applicable Warrant Price per share
multiplied by the number of Shares then being
purchased. Alternatively, the Warrant Price for
the Shares being purchased may be paid, in whole
or in part, by the delivery to the Company of
issued and outstanding shares of the common stock
of the Company which are owned by the holder of
this Warrant. For purposes of the exercise of
this Warrant, the value of such shares of common
stock shall be deemed to be the average closing
price (as quoted in The Wall Street Journal) of
the publicly traded common shares of the Company
for the 20 business days immediately preceding the
date upon which the exercise form is actually
received
<PAGE>
by the Company. Certificates representing the
common shares of the Company delivered in
payment of the Warrant Price must accompany
the exercise form, and must be duly endorsed
in blank or be accompanied by appropriate
stock powers. All such common shares must be free
and clear of all liens and encumbrances of every
type and description.
(b) The person or persons in whose name(s)
any certificate(s) representing shares of Common
Stock shall be issuable upon exercise of this
Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for
all purposes as the record holder(s) of, the
Shares represented thereby (and such Shares shall
be deemed to have been issued) immediately prior
to the close of business on the date or dates upon
which this Warrant is exercised. Upon any
exercise of the rights represented by this
Warrant, certificates for the Shares purchased
shall be delivered to the holder hereof as soon as
possible and in any event within thirty days of
receipt of such notice and payment, and, unless
this Warrant has been fully exercised or expired,
a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant
shall not then have been exercised, shall also be
issued to the holder hereof as soon as possible
and in any event within such thirty day period.
3. Stock Fully Paid; Reservation of Shares.
---------------------------------------- All
Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon
issuance, be fully paid and nonassessable, and
free from all taxes, liens and charges with
respect to the issue thereof. During the period
within which the rights represented by this
Warrant may be exercised, the Company will at all
times have authorized, and reserved for the
purpose of the issue upon exercise of the purchase
rights evidenced by this Warrant, a sufficient
number of shares of its Common Stock to provide
for the exercise of the rights represented by this
Warrant.
4. Adjustment of Warrant Price and Number of
-----------------------------------------
Shares.
- ------- The number and kind of securities
purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment
from time to time upon the occurrence of certain
events, as follows:
(a) Reclassification, Merger, Etc.
------------------------------ In case
of (i) any reclassification, reorganization,
change or conversion of securities of the class
issuable upon exercise of this Warrant (other than
a change in par value, or from par value to no par
value,or from no par value to par value, or as a
result of a subdivision or combination), (ii) any
merger or consolidation of the Company with or
into another corporation (other than a merger or
consolidation with another corporation in which
the Company is the acquiring and the surviving
corporation and which does not result in any
reclassification or change of outstanding
securities issuable upon exercise of this
Warrant), or (iii) any sale of all or
substantially all of the assets of the Company,
then the Company, or such successor or purchasing
corporation, as the case may be, shall duly
execute and deliver to the holder of this Warrant
a new Warrant or a supplement hereto (in form and
substance reasonably satisfactory to the holder of
this Warrant), so that the holder of this Warrant
shall have the right to receive, at a total
purchase price not to exceed that payable upon the
exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Common Stock
theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock,
other securities, money and property receivable
upon such reclassification, reorganization,
change, conversion, merger or consolidation by a
holder of the number of shares of Common Stock
then purchasable under this Warrant. Such new
Warrant
2
<PAGE>
shall provide for adjustments that shall
be as nearly equivalent as may be practicable to
the adjustments provided for in this Paragraph 4.
The provisions of this subparagraph 4(a) shall
similarly apply to successive reclassifications,
reorganizations, changes, mergers, consolidations
and transfers.
(b) Subdivision or Combination of Shares.
-------------------------------------
If the Company at any time while this Warrant
remains outstanding and unexpired shall subdivide
or combine its Common Stock, (i) in the case of a
subdivision, the Warrant Price shall be
proportionately decreased and the number of Shares
purchasable hereunder shall be proportionately
increased, and (ii) in the case of a combination,
the Warrant Price shall be proportionately
increased and the number of Shares purchasable
hereunder shall be proportionately decreased.
(c) Stock Dividends.
---------------- If the Company at any
time while this Warrant is outstanding and
unexpired shall(i) pay a dividend with respect to
Common Stock payable in Common Stock, or (ii) make
any other distribution with respect to Common
Stock (except any distribution specifically
provided for in the foregoing subparagraphs (a)
and (b)) of Common Stock, then the Warrant Price
shall be adjusted, from and after the date of
determination of shareholders entitled to receive
such dividend or distribution to a price
determined by multiplying the Warrant Price in
effect immediately prior to such date of
determination by a fraction (i) the
numerator of which shall be the total number of
shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number
of shares of Common Stock outstanding immediately
after such dividend or distribution. Upon each
adjustment in the Warrant Price pursuant to this
Paragraph 4(c), the number of Shares of Common
Stock purchasable hereunder shall be adjusted, to
the nearest whole share, to the product obtained
by multiplying the number of Shares purchasable
immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately prior
to such adjustment and the denominator of which
shall be the Warrant Price immediately thereafter.
(d) No Impairment.
-------------- The Company will not, by
amendment of its Articles of Incorporation or
through any reorganization, recapitalization,
transfer of assets, consolidation, 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 Company,
but will at all times in good faith assist in the
carrying out of all the provisions of this
Paragraph 4 and in the taking of all such action
as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant
against impairment.
5. Notice of Adjustments.
---------------------- Whenever the Warrant
Price or the number of Shares purchasable
hereunder shall be adjusted pursuant to Paragraph
4 hereof, the Company shall prepare a certificate
signed by its chief financial officer setting
forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated.
6. Fractional Shares.
------------------ No fractional shares of
Common Stock will be issued in connection with any
exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment
therefor based on the fair market value of the
Common Stock on the date of exercise as reasonably
determined in good faith by the Company's Board of
Directors.
3
<PAGE>
7. Compliance with Securities Act; Disposition
-------------------------------------------
of Warrant or Shares of Common Stock.
-------------------------------------
(a) Compliance with Securities Act.
------------------------------- The
holder of this Warrant, by acceptance hereof,
agrees that this Warrant and the shares of Common
Stock to be issued upon exercise hereof are being
acquired for investment and that such holder will
not offer, sell or otherwise dispose of this
Warrant or any shares of Common Stock to be issued
upon exercise hereof except under circumstances
which will not result in a violation of applicable
securities laws. Upon exercise of this Warrant,
unless the Shares being acquired are registered
under the Securities Act of 1933, as amended (the
"Act"), or an exemption from such registration is
available, the holder hereof shall confirm in
writing, by executing the form attached as
Schedule 1 to Exhibit "A" hereto, that the shares
of Common Stock so purchased are being acquired
for investment and not with a view toward
distribution or resale. This Warrant and all
Shares issued upon exercise of this Warrant
(unless registered under the Act) shall be stamped
or imprinted with a legend in substantially the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A
NO-ACTION LETTER REASONABLY SATISFACTORY TO THE
COMPANY FROM THE SECURITIES AND EXCHANGE
COMMISSION OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH
THIS SECURITY WAS ISSUED."
(b) Disposition of Warrant or Shares.
--------------------------------- With
respect to any offer, sale or other disposition of
this Warrant or any shares of Common Stock
acquired pursuant to the exercise of this Warrant
prior to registration of such shares, the holder
hereof and each subsequent holder of this Warrant
agrees to give written notice to the Company prior
thereto,describing briefly the manner thereof,
together with a written opinion of such holder's
counsel, if reasonably requested by the Company,
to the effect that such offer, sale or other
disposition may be effected without registration
or qualification (under the Act as then in effect
or any federal or state law then in effect) of
this Warrant or such shares of Common Stock and
indicating whether or not under the Act
certificates for this Warrant or such shares of
Common Stock to be sold or otherwise disposed of
require any restrictive legend as to applicable
restrictions on transferability in order to insure
compliance with the Act. Promptly upon receiving
such written notice and reasonably satisfactory
opinion, if so requested, the Company, as promptly
as practicable, shall notify such holder that such
holder may sell or otherwise dispose of this
Warrant or such shares of Common Stock, all in
accordance with the terms of the notice delivered
to the Company. If a determination has been made
pursuant to this subparagraph (b) that the opinion
of counsel for the holder is not reasonably
satisfactory to the Company, the Company shall so
notify the holder promptly after such
determination has been made. Notwithstanding the
foregoing, this Warrant or such shares of Common
Stock may be offered,sold or otherwise disposed of
in accordance with Rule 144 as promulgated under
the Act ("rule 144"), provided that the Company
shall have been furnished with such information as
the Company may reasonably request to provide a
reasonable assurance that the provisions of Rule
144 have been
4
<PAGE>
satisfied. Each certificate representing this
Warrant or the shares of Common Stock thus
transferred (except a transfer pursuant
to Rule 144) shall bear a legend as to the
applicable restrictions on transferability in
order to insure compliance with the Act, unless in
the aforesaid opinion of counsel for the holder,
such legend is not required in order to insure
compliance with the Act. The Company may issue
stop transfer instructions to its transfer agent
in connection with such restrictions.
8. Registration Rights.
--------------------
(a) Definitions.
------------ For purposes of this
paragraph 8:
(i) The terms "register," "registered,"
-------- ----------
and "registration" refers to a registration
------------
effected by preparing and filing with the
Securities and Exchange Commission (the "SEC") a
registration statement on Form S-3, or on other
appropriate form selected by the Company in its
sole and absolute discretion, in compliance with
the Act, and the declaration or ordering of
effectiveness of such registration statement or
document;
(ii) The term "Registrable Securities"
----------------------
means the Common Stock actually issued upon the
exercise of this Warrant, or such other security
as is issued in exchange for or in replacement of,
the Shares, excluding in all cases, however, any
Registrable Securities acquired in a transaction
or series of transactions in which the rights
under this paragraph 8 were not assigned or were
not assignable;
(iii) The term "Registrable Securities
----------------------
then outstanding"
- ---------------- means the shares of Common Stock
which are Registrable Securities and are then
issued and outstanding.
(iv) The term "Holder"
------ means any person
owning of record Registrable Securities that have
not been sold to the public pursuant to an
effective registration statement under the Act, or
pursuant to an exemption from the registration
requirements of the Act (including a sale pursuant
to Rule 144);
(v) The term "Form S-3"
-------- means such
form under the Act as in effect on the date
hereof, or any successor registration form under
the Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial
information by reference to other documents filed
by the Company with the SEC.
(b) Demand Registration.
--------------------
(i) Request for Registration.
------------------------- If
the Company shall receive, at any time after the
date upon which there are at least 100,000
Registrable Securities then outstanding, a written
request from the Holders of at least fifty percent
(50%) of the Registrable Securities then
outstanding that the Company file a registration
statement under the Act covering the registration
of all or a portion of the Registrable Securities
then outstanding held by such Holders, and the
aggregate gross sales price of all Registrable
Securities expected to be registered is reasonably
expected to be greater than $500,000, then the
Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to
all Holders and shall, subject to the limitations
of paragraph 8(b)(ii) file, as soon
5
<PAGE>
as practicable, the registration under the Act
covering all Registrable Securities which the
Holders request to be included in such
registration within thirty (30) days of the
mailing of such notice by the Company.
(ii) Underwriting Requirements.
-------------------------- If
the Holders initiating the registration (the
"Initiating Holders") intend to distribute the
Registrable Securities covered by the registration
by means of an underwriting, they shall so advise
the Company as a part of their request made
pursuant to paragraph 8(b)(i), and the Company
shall include such information in the written
notice to other Holders referred to in such
paragraph. In such event, the right of any Holder
to include such Holder's Registrable Securities in
the registration effected pursuant to this
paragraph 8 shall be conditioned upon such
Holder's participation in such underwriting and
the inclusion of such Holder's Registrable
Securities in the underwriting to the extent
provided herein. All Holders proposing to
distribute their securities through such
underwriting shall (together with the Company as
provided in paragraph 8(c)) enter into an
underwriting agreement in reasonable and customary
form with the underwriter or underwriters selected
for such underwriting by the Initiating Holders
and approved by the Company, which approval shall
not be unreasonably withheld. Notwithstanding any
other provision of this paragraph 8(b), if the
underwriter advises the Initiating Holders, in
writing, that marketing factors require a
limitation of the number of Registrable Securities
to be underwritten, then the Initiating Holders
shall so advise all Holders of Registrable
Securities which would otherwise be underwritten
pursuant to the provisions hereof, and the number
of shares of Registrable Securities that may be
included in the underwriting shall be allocated
among all Holders thereof in proportion (as nearly
as practicable) to the amount of Registrable
Securities then outstanding owned by each Holder.
(iii) Number of Demand
----------------
Registrations.
- -------------- The Company is obligated to effect
only one registration pursuant to this paragraph
8(b).
(iv) Expenses of Demand
------------------
Registration.
- ------------- All expenses, other than
underwriting discounts and commissions, incurred
in connection with the registration pursuant to
this paragraph 8(b), and related filings and
qualifications, including (without limitation) all
registration, filing and qualification fees,
printer's and accounting fees, and fees and
disbursements of counsel for the Company shall be
borne by the Company; provided, however, that the
Company shall not be required to pay for any
expenses of any registration proceeding begun
pursuant to this paragraph 8(b) if the
registration request is subsequently withdrawn at
the request of the Holders of at least 60% of the
Registrable Securities to be registered (in which
case the Holders requesting the withdrawal shall
bear such expenses, pro rata, based on the number
of Registrable Securities each was to include in
the registration). The Holders of the Registrable
Securities to be registered shall, in any event,
bear and pay all costs, fees and expenses of
counsel for the selling Holders in connection with
any registration requested under this paragraph
8(b).
(v) Additional Limitations.
----------------------
Notwithstanding any provision of this paragraph 8
to the contrary, the Company shall not be
obligated to effect any requested registration:
(1) if Form S-3 is not available for such offering
by the Holders; (2) if the Company would be
required to undertake an audit in addition to its
normal year-end audit, unless the Holders
requesting the registration agree to pay for such
audit, or unless the additional audit is
necessitated by the
6
<PAGE>
Company's decision to delay the registration as
permitted by the following sentence. The Company
may postpone the requested registration for a
period of time not to exceed four months if the
Board of Directors of the Company determines, in
good faith, and so notifies the Holders requesting
registration, that the registration at the
requested time would materially and adversely
affect the public market for the Company's
securities.
(c) Obligations of the Company.
--------------------------- When
required under this paragraph 8 to effect the
registration of Registrable Securities, the
Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC
a registration statement with respect to such
Registrable Securities on Form S-3 or such similar
form of registration statement then in effect
which permits the incorporation by reference of
information periodically filed by the Company
pursuant to the requirements of the Securities
Exchange Act of 1934, and use reasonable
commercial efforts to cause such registration
statement to become effective promptly thereafter,
and to keep such registration statement effective
for up to 365 consecutive days in order to permit
the selling Holders to offer and sell such
Registrable Securities on a delayed or continuous
basis pursuant to Rule 415 of the Act to the
extent such Rule is then available;
(ii) Prepare and file with the SEC
such amendments and supplements to such
registration statement and the prospectus used in
connection with such registration statement as may
be necessary to comply with the provisions of the
Act with respect to the disposition of all
securities covered by such registration statement;
(iii) Furnish to the selling
Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity
with the requirements of the Act, and such other
documents as they may reasonably request in order
to facilitate the disposition of Registrable
Securities owned by them and covered by the
registration statement filed pursuant to this
paragraph 8;
(iv) Use reasonable commercial
efforts to register and qualify the securities
covered by such registration statement under such
other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by
the Holders, provided that the Company shall not
be required, in connection therewith or as a
condition thereto, to qualify to do business or to
file a general consent to service of process in
any such states or jurisdictions and, provided
further, that the Company shall not be required to
qualify securities in more than 10 states unless
the selling Holders pay the costs directly
associated with such additional qualifications;
(v) In the event of any
underwritten public offering, enter into and
perform its obligations under an underwriting
agreement, in usual, customary and commercially
reasonable form, with the managing underwriter(s)
of such offering. Each selling Holder
participating in such underwriting shall also
enter into and perform its obligations under such
underwriting agreement;
(vi) Notify each Holder of
Registrable Securities covered by such
registration statement, as promptly as possible,
at any time when a prospectus relating thereto is
required to be delivered under the Act, of the
happening of any event as a result of which the
7
<PAGE>
prospectus included in such registration
statement, as then in effect, includes an untrue
statement of a material fact or omits to state a
material fact required to be stated therein or
necessary to make the statements herein not
misleading in the light of the circumstances then
existing;
(vii) Furnish, at the request of
any Holder requesting registration of Registrable
Securities pursuant to this paragraph 8, on the
date that such Registrable Securities are
delivered to the underwriters for sale in
connection with a registration pursuant to this
paragraph 8 (if such securities are being sold
through underwriters), or if such securities are
not being sold through underwriters, on the date
that the registration statement with respect to
such securities becomes effective, (i) an opinion,
dated as of such effective date, of the counsel
representing the Company for the purposes of such
registration, in form and substance as is
reasonably and customarily given to underwriters
in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders
requesting registration of Registrable Securities
and (ii) a letter dated as of such date, from the
independent certified public accountants of the
Company, in form and substance as is reasonably
and customarily given by independent certified
public accountants to underwriters in an
underwritten public offering, addressed to the
underwriters, if any, and to the Holders
requesting registration of Registrable Securities;
provided that the Company need only use its
commercially reasonable efforts to furnish the
letter from the Company's accountants described in
the immediately preceding clause (ii).
(d) Obligations of Holders.
----------------------- It shall be a
condition precedent to the obligations of the
Company to take any action pursuant to this
paragraph 8 that the selling Holders shall furnish
to the Company, at their sole expense, such
information regarding themselves, the Registrable
Securities held by them, and the intended method
of disposition of such securities as shall be
required to effect the registration of their
Registrable Securities.
(e) Delay of Registration.
---------------------- No Holder shall
have any right to obtain or seek an injunction
restraining or otherwise delaying any such
registration as the result of any controversy that
might arise with respect to the interpretation or
implementation or this paragraph 8.
(f) Indemnification.
---------------- In the event any
Registrable Securities are included in a
registration statement under this paragraph 8:
(i) To the full extent permitted
by law, the Company will indemnify and hold
harmless each selling Holder, the partners,
agents, officers and directors of each selling
Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who
controls such Holder or underwriter within the
meaning of the Act or the Securities Exchange Act
of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or
several) to which they may become subject under
the 1933 Act, the Act or other federal or state
law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise
out of or are based upon any of the following
statements, omissions or violations (collectively
a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact
contained in such registration statement,
including any preliminary prospectus or final
prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required
to be stated therein, or necessary to make the
statements therein not misleading, or (iii)
8
<PAGE>
any violation or alleged violation by the Company
of the Act, the 1934 Act, any state securities law
or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law in
connection with the offering covered by such
registration statement; and the Company will
reimburse each such Holder, partner, agent,
officer or director, underwriter or controlling
person for any legal or other expenses reasonably
incurred by them in connection with investigating
or defending any such loss, claim, damage,
liability, or action; provided however, that the
indemnity agreement contained in this paragraph
8(f)(i) shall not apply to amounts paid in
settlement of any such loss, claim, damage,
liability, or action if such settlement is
effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for
any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and
in conformity with written information furnished
expressly for use in connection with such
registration by such Holder, partner, officer,
director, underwriter or controlling person of
such Holder. Notwithstanding anything to the
contrary contained in this paragraph 8(b), this
indemnity shall not apply to a person indemnified
in this paragraph 8(f)(i) insofar as it relates
to any untrue statement, alleged untrue statement,
omission or alleged omission made in a prospectus
used by such person after the Company has advised
such person in writing that the prospectus is out
of date or no longer accurate and the Company has
stated that the use of the prospectus should be
discontinued.
(ii) To the extent permitted by
law, each selling Holder will indemnify and hold
harmless the Company, each of its directors, each
of its officers who have signed the registration
statement, each of the Company's agents, each
person, if any, who controls the Company within
the meaning of the Act, any underwriter and any
other Holder selling securities under such
registration statement or any of such other
Holder's partners, directors or officers or any
person who controls such Holder, against any
losses, claims, damages, or liabilities (joint or
several) to which the Company or any such
director, officer, agent, controlling person,
underwriter, or other such Holder, partner or
director, officer or controlling person of such
other Holder may become subject under the Act, the
1934 Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are
based upon any Violation, in each case to the
extent (and only to the extent) that such
Violation occurs in reliance upon and in
conformity with written information furnished by
such Holder expressly for use in connection with
such registration; and each such Holder will
reimburse any legal or other expenses reasonably
incurred by the Company or any such director,
officer, controlling person, underwriter or other
Holder, partner, officer, agent, director, or
controlling person of such other Holder in
connection with investigating or defending any
such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement
contained in this paragraph 8(f)(ii) shall not
apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such
settlement is effected without the consent of the
Holder (which consent shall not be unreasonably
withheld).
(iii) Promptly after receipt by
an indemnified party under this paragraph 8(f) of
notice of the commencement of any action
(including any governmental action), such
indemnified party will, if a claim in respect
thereof is to be made against any indemnifying
party under this paragraph 8(f), deliver to the
indemnifying party a written notice of the
commencement thereof and the indemnifying party
shall have the right to participate in, and, to
the extent the indemnifying party so desires,
jointly with any other indemnifying party
similarly noticed, to assume the defense thereof
9
<PAGE>
with counsel mutually satisfactory to the parties
provided, however, that an indemnified party shall
have the right to retain its own counsel, with the
reasonable fees and expenses to be paid by the
indemnifying party, if representation of such
indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to
actual or potential differing interests between
such indemnified party and any other party
represented by such counsel in such proceeding.
The failure to deliver written notice to the
indemnifying party within a reasonable time of the
commencement of any such action, shall not relieve
such indemnifying party of any liability to the
indemnified party under this paragraph 8(f),
unless and to the extent that the indemnifying
party is materially prejudiced thereby, and the
omission so to deliver written notice to the
indemnifying party will not relieve it of any
liability that it may have to any indemnified
party otherwise than under this paragraph 8(f).
(iv) The foregoing indemnity
agreements of the Company and Holders are subject
to the condition that, insofar as they relate to
any Violation made in a preliminary prospectus but
eliminated or remedied in the amended prospectus
on file with the SEC at the time the registration
statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to
SEC Rule 424(9) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit
of any person if a copy of the Final Prospectus
was furnished to the person asserting the loss,
liability, claim or damage at or prior to the time
such action is required by the Act.
(v) The obligations of the Company
and Holders under this paragraph 8(f) shall
survive the exercise of this Warrant, the
completion of any offering of Registrable
Securities in the registration statement under
this paragraph 8, and otherwise.
(g) Assignment of Registration Rights.
---------------------------------- The
rights to cause the Company to register
Registrable Securities pursuant to this paragraph
8 may be assigned by a Holder to a transferee or
assignee of at least 25,000 Registrable
Securities. The Company shall be furnished,
within a reasonable time after such transfer, with
written notice of the name and address of such
transferee or assignee and the securities with
respect to which such registration rights are
being assigned.
(h) Suspension of Registration Rights.
----------------------------------
Provided that there then exists an active public
trading market for the Company's Common Stock, the
registration rights contained in this paragraph 8
shall be suspended as to any Holder who is legally
able to sell all such Holder's Registrable
Securities to the public without registration in
two (2) consecutive three (3) month periods
pursuant to the provisions of Rule 144 promulgated
under the Act.
(i) Amendment of Registration Rights.
--------------------------------- Any
provision of this paragraph 8 may be amended and
the observance thereof may be waived (either
generally or in a particular instance and either
retroactively or prospectively), only with the
written consent of the Company and the holders of
sixty percent (60%) of the Registrable Securities
then outstanding. Any amendment or waiver
effected in accordance with this paragraph 8(i)
shall be binding upon each Holder and the Company.
10
<PAGE>
(j) Binding Effect.
--------------- By the exercise of this
Warrant and the acceptance of any benefits under
this paragraph 8, each Holder of Registrable
Securities hereby consents and agrees to be bound
by all of the provisions of this paragraph.
9. Rights as Shareholders; Information.
------------------------------------ No
holder of this Warrant, as such, shall be entitled
to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of
the Company which may at any time be issuable on
the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer
upon the holder of this Warrant, as such, any
right to vote for the election of directors or
upon any matter submitted to shareholders at any
meeting thereof, or to receive notice of meetings,
or to receive dividends or subscription rights or
otherwise until this Warrant shall have been
exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as
provided herein.
10. Representations and Warranties.
------------------------------- The Company
represents and warrants to the holder of this
Warrant as follows:
(a) This Warrant has been duly authorized
and executed by the Company and is a valid and
binding obligation of the Company enforceable in
accordance with its terms;
(b) The Shares have been duly authorized and
reserved for issuance by the Company and, when
issued in accordance with the terms hereof, will
be validly issued, fully paid and nonassessable;
(c) The execution and delivery of this
Warrant are not, and the issuance of the Shares
upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with
the Company's Amended and Restated Articles of
Incorporation, as amended, or by-laws, and do not
and will not constitute a default under, any
indenture, mortgage, contract or other instrument
of which the Company is a party or by which it is
bound.
11. Modification and Waiver.
------------------------ This Warrant and
any provision hereof may be changed, waived,
discharged or terminated only by an instrument in
writing signed by the party against which
enforcement of the same is sought.
12. Notices.
-------- Any notice, request or other
document required or permitted to be given or
delivered to the holder hereof or the Company
shall (a) be in writing, (b) be delivered
personally or sent by mail or overnight courier to
the intended recipient to each such holder at its
address as shown on the books of the Company or to
the Company at the address indicated therefor on
the signature page of this Warrant, unless the
recipient has given notice of another address, and
(c) be effective on receipt if delivered
personally, five (5) days after dispatch if
mailed, and one business day after dispatch if
sent by overnight courier service.
13. Transferability.
---------------- Subject to the satisfaction
of all of the provisions of paragraph 7 thereof,
the holder hereof may transfer this Warrant at any
time, but only in whole and not in part.
11
<PAGE>
14. Lost Warrants or Stock Certificates.
------------------------------------ The
Company covenants to the holder hereof that upon
receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or
mutilation of this Warrant or any stock
certificate and, in the case of any such loss,
theft or destruction, upon receipt of a bond or
indemnity reasonably satisfactory to the Company,
or in the case of any such mutilation upon
surrender and cancellation of such Warrant or
stock certificate, the Company will make and
deliver a new Warrant or stock certificate, of
like tenor, in lieu of the lost, stolen, destroyed
or mutilated Warrant or stock certificate.
15. Descriptive Headings.
--------------------- The descriptive
headings of the several sections and paragraphs of
this Warrant are inserted for convenience only and
do not constitute a part of this Warrant.
16. Governing Law.
-------------- This Warrant shall be
construed and enforced in accordance with, and the
rights of the parties shall be governed by, the
internal laws (and not the law of conflicts) of
the State of Nevada.
ALTA GOLD CO.
By:
----------------------
Robert N. Pratt
Title: President
Address:
601 Whitney Ranch Road
Suite 10
Henderson, Nevada 89104
Dated effective June 28, 1996
12
<PAGE>
EXHIBIT "A"
-----------
NOTICE OF EXERCISE
To: ALTA GOLD CO.
1. The undersigned hereby elects to
purchase
----- shares of Common Stock of ALTA
GOLD CO. pursuant to the terms of the attached
Warrant,and tenders herewith payment of the
purchase price of such shares in full.
2. Please issue a certificate or
certificates representing said shares in the name
of the undersigned or in such other name or names
as are specified below:
--------------------
(Name)
--------------------
--------------------
(Address)
3. The undersigned represents that the
aforesaid shares are being acquired for the
account of the undersigned for investment and not
with a view to, or for resale in connection with,
the distribution thereof and that the undersigned
has no present intention of distributing or
reselling such shares. In support thereof, the
undersigned has executed an Investment
Representation Statement attached hereto as
Schedule 1.
--------------------
(Signature)
- -----------
(Date)
13
<PAGE>
SCHEDULE 1
-----------
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: ALTA GOLD CO.
Security: Common Stock
Amount:
Date:
In connection with the purchase of the
above-listed securities (the "Securities"), the
undersigned (the "Purchaser") represents to and
agrees with the Company as follows:
(a) The Purchaser is aware of the Company's
business affairs and financial condition, and has
acquired sufficient information about the Company
to reach an informed and knowledgeable decision to
acquire the Securities. The Purchaser is
purchasing the Securities for its own account for
investment purposes only and not with a view to,
or for the resale in connection with, any
"distribution" thereof for purposes of the
Securities Act of 1933 ("Securities Act").
(b) The Purchaser understands that the
Securities have not been registered under the
Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein.
In this connection, the Purchaser understands
that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such
exemption may be unavailable if the Purchaser's
representation was predicated solely upon a
present intention to hold these Securities for the
minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an
increase or decrease in the market price of the
Securities, or for a period of one year or any
other fixed period in the future.
(c) The Purchaser further understands that
the Securities must be held indefinitely unless
subsequently registered under the Securities Act
or unless an exemption from registration is
otherwise available. Moreover, the Purchaser
understands that the Company is under no
obligation to register the Securities. In
addition, the Purchaser understands that the
certificate evidencing the Securities will be
imprinted with the legend referred to in the
Warrant under which the Securities are being
purchased.
(d) The Purchaser is aware of the provisions
of Rule 144, promulgated under the Securities Act,
which, in substance, permit limited public resale
of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an
affiliate of such issuer), in a non-public
14
<PAGE>
offering subject to the satisfaction of certain
conditions, if applicable, including, among other
things: The availability of certain public
information about the Company; the resale
occurring not less than two years after the party
has purchased and paid for the securities to be
sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in
transactions directly with a market maker (as said
term is defined under the Securities Exchange Act
of 1934) and the amount of securities being sold
during any three-month period not exceeding the
specified limitations stated therein.
(e) The Purchaser further understands that
at the time it wishes to sell the Securities there
may be no public market upon which to make such a
sale, and that, even if such a public market then
exists, the Company may not be satisfying the
current public information requirements of Rule
144, and that, in such event, the Purchaser may be
precluded from selling the Securities under Rule
144 even if the two-year minimum holding period
had been satisfied.
(f) The Purchaser further understands that
in the event all of the requirements of Rule 144
are not satisfied and the provisions of Rule
144(k) do not apply, registration under the
Securities Act, compliance with Regulation A, or
some other registration exemption will be
required; and that, notwithstanding the fact that
Rule 144 is not exclusive, the Staff of the SEC
has expressed its opinion that persons proposing
to sell private placement securities other than in
a registered offering and otherwise than pursuant
to Rule 144 will have a substantial burden of
proof in establishing that an exemption from
registration is available for such offers or
sales, and that such persons and their respective
brokers who participate in such transactions do so
at their own risk.
(g) If all or any portion of the Warrant
Price for the Securities is paid by the Purchaser
through the delivery of common shares of the
Company owned by the Purchaser, such common shares
are free and clear of all liens and encumbrances
of every type and nature.
Purchaser:
--------------------
Date: , 19-----
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 687
<SECURITIES> 0
<RECEIVABLES> 111
<ALLOWANCES> 0
<INVENTORY> 3,577
<CURRENT-ASSETS> 4,458
<PP&E> 33,169
<DEPRECIATION> 8,960
<TOTAL-ASSETS> 40,717
<CURRENT-LIABILITIES> 3,438
<BONDS> 2,190
0
0
<COMMON> 29
<OTHER-SE> 33,637
<TOTAL-LIABILITY-AND-EQUITY> 40,717
<SALES> 10,371
<TOTAL-REVENUES> 10,371
<CGS> 7,827
<TOTAL-COSTS> 7,827
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128
<INCOME-PRETAX> 1,708
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,708
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
