As filed with the Securities and Exchange Commission on December ___, 1997
--------------------------------------------------------------------------
SEC Registration No. 33-81280-LA
--------------------------------
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
FORM SB-2
---------
(Post Effective Amendment No.1)
-------------------------------
REGISTRATION STATEMENT
----------------------
UNDER THE SECURITIES ACT OF 1933
--------------------------------
SUMMA METALS CORP.
------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 1041 88-0315984
- - ---------------------------- ---------------------- --------------------
(State or other Jurisdiction Primary Standard IRS Employer
of incorporation) Industrial Classification I.D. No.
28281 Crown Valley Parkway, Ste 225, Laguna Niguel, Ca, 92677-1461
(714) 348-9749
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(Address and Telephone Number of Registrant's Principal Executive Offices
and Principal Place Of Business)
Michael M. Chaffee
28281 Crown Valley Parkway, Ste 225, Laguna Niguel, Ca, 92677-1461
(714) 348-9749
------------------------------------------------------------------
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Steven L. Siskind, Esq.
645 Fifth Avenue, Suite 403
New York, New York 10022
(212) 750-2002
- - --------------------------------------------------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================
<S> <C> <C> <C> <C> <C>
Title of each | Amount of | Proposed | Proposed | Aggregate | Amount of
Class of | Securities to | Maximum | Maximum | Underwriters | Registration
Securities to | be Registered | Offering | Aggregate | Commission | Fee
be Registered | | Price Per | Offering | (2) |
| | Unit (1) | Price (1) | |
==============|===============|=============|==============|==============|================
Common Stock | | | | | $1,034.49
==============|===============|=============|==============|==============|================
Minimum | 130,000 | $6.00 | $ 780,000 | $ 78,000 |
==============|===============|=============|==============|==============|================
Maximum | 510,000 | $6.00 | $3,060,000 | $306,000 |
===========================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
Pursuant to Rule 457.
<PAGE>
(2) The Company has entered into a "best efforts" Underwriting Agreement to sell
the Units offered hereby and is, therefore, assuming net proceeds after a
commission would be paid. (See "Underwriting.") This amount does not include a
non-accountable expense allowance in an amount equal to 2% and Warrants equal to
10% of the public offering.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
i
<PAGE>
SUMMA METALS CORP.
------------------
Cross-Reference Sheet pursuant to Item 501(b) of Regulation S-K between
Registration Statement (Form SB-2) and Form of Prospectus.
Item Number and Caption Caption in Prospectus
- - ----------------------- ---------------------
1. Front of Registration Statement Cover Page-Inside Front
and Outside Front Cover Page Cover page-Back Cover
of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus Back Cover page
2. Summary Information and Risk Summary of Prospectus
Factors Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page; Description of Shares
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Cover Page; Inside Cover Page;
Offering
9. Legal Proceedings Litigation
10. Directors, Executive Officers Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Shareholders
Beneficial Owners and Management
12. Description of Securities Offering; Description of Shares
13. Interest of Named Experts and Legal Matters
Counsel
14. Disclosure of Commission Position Indemnification
on Indemnification for Securities
Act
15. Organization Within Last Five Certain Transactions
Years
16. Description of Business Business of the Company
17. Management's Discussion and Business of the Company
Analysis of Plan of Operation
ii
<PAGE>
18. Description of Property Business of the Company
19. Certain Relationships and Certain Transactions
Related Transactions
20. Market for Common Equity and Risk Factors
Related Stockholder Matters
21. Executive Compensation Management-Remuneration
22. Financial Statements Financial Statements
23. Changes in and Disagreements Not Applicable
With Accountants on Accounting
and Financial Disclosures
iii
<PAGE>
SUMMA METALS CORP.
(A Nevada Corporation)
Minimum 130,000 Units
Maximum 510,000 Units
---------------------
Offering Price $6.00 Per Unit
-----------------------------
Summa Metals Corp. (the "Company") hereby offers a minimum of 130,000 and a
maximum of 510,000 Units ("Units") each Unit consisting of one share of the
Company's common stock (the "Common Stock" or "Shares") and two redeemable
common stock purchase warrants ("Warrants"), designated "A Warrants" and "B
Warrants". Each of the A Warrants entitles the registered holder hereof to
purchase one share of the Common Stock at a price of $8.00, subject to
adjustment in certain circumstances at any time after the Warrants become
separately tradeable, until 12 months from the date of this Prospectus. Each of
the B Warrants entitles the registered holder therof to purchase one share of
the Common Stock at a price of $7.00, subject to adjustment in certain
circumstances, at any time after the exercise of the A Warrant related to the
Units until 24 months from the date of this Prospectus. The Common Stock and the
Warrants included in the Units will not be separately transferable until 90 days
after the date of this Prospectus or such earlier date as the Company may
determine. See "Description of Securities".
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION TO THE POTENTIAL INVESTORS AND SHOULD BE PURCHASED ONLY BY PERSONS WHO
CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. (SEE "RISK FACTORS" AND "DILUTION.")
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE SHARES OF
THE COMPANY, AND THERE CAN BE NO ASSURANCE THAT A PUBLIC MARKET WILL RESULT
FOLLOWING THE SALE OF THE SHARES OFFERED HEREBY OR THAT THE SHARES CAN BE SOLD
AT OR NEAR THE OFFERING PRICE, OR AT ALL. THE INITIAL PUBLIC OFFERING PRICE HAS
BEEN ARBITRARILY DETERMINED BY THE COMPANY BASED UPON WHAT IT BELIEVES
PURCHASERS OF SUCH SPECULATIVE ISSUES WOULD BE WILLING TO PAY FOR THE SECURITIES
OF THE COMPANY AND BEARS NO RELATIONSHIP WHATSOEVER TO ASSETS, EARNINGS, BOOK
VALUE OR ANY OTHER ESTABLISHED CRITERIA OF VALUE.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES DIVISION OF ANY STATE, NOR HAS THE
COMMISSION OR ANY STATE PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES AND WARRANTS ARE OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE,
ACCEPTANCE OF THE SUBSCRIPTIONS BY THE COMPANY AND APPROVAL OF CERTAIN LEGAL
MATTERS BY COUNSEL TO THE COMPANY.
OFFEREES AND SUBSCRIBERS ARE URGED TO READ THIS PROSPECTUS CAREFULLY AND
THOROUGHLY.
- - --------------------------------------------------------------------------------
Underwriter Proceeds to the
Price (1) Commissions Company (2)(3)
- - ---------------------------------------------------------------------
Price Per Unit $ 6.00 $ .60 $ 5.40
Aggregate
Subscription:
(130,000 Units
Minimum) $ 780,000 $ 78,000 $ 702,000
(510,000 Units
Maximum) $3,060,000 $ 306,000 $2,754,000
- - ---------------------------------------------------------------------
The date of this Prospectus is December , 1997.
iv
<PAGE>
1. The offering price of $6.00 per Unit has been arbitrarily determined by
the Company. The price per Unit was selected because the Company believes it can
sell the Units at that price. The price has no relation to the value of the
Company or its assets, or any other established criteria of value. The Units are
offered for cash or check only and must be accompanied by a properly completed
and executed subscription agreement. (See "OFFERING.")
A minimum of 130,000 Units are being offered on a "best efforts,
all-or-none" basis and an additional 380,000 Units are being offered on a
"best-efforts" basis by the Company on the terms described herein under the
caption "Offering". There is no assurance that any or all of the Units will be
sold. The Offering will commence on the effective date of this Prospectus and
continue for a period of 90 days, unless extended by the Company for an
additional 90 days, or until completion of the Offering, whichever occurs
sooner. All funds received in this Offering will be held in escrow by Steven L.
Siskind, counsel for the Company at First National Bank of Long Island, 253 New
York Avenue, Huntington, New York until a minimum of $780,000 has been received,
at which time such sum will be paid to the Company. Thereafter, all funds
received by the escrow agent will be immediately paid to the Company until a
maximum of $3,060,000 has been received or the Offering period expires,
whichever first occurs. If a minimum of $780,000 is not received by the
expiration of the offering period, all funds will be returned to subscribers
without interest or deduction. (See "OFFERING" and "UNDERWRITING.")
2. The Company has engaged the services of Boe & Company, 3668 So. Jasper
St., Aurora, CO 80013, an Underwriter who is a member of the National
Association of Securities Dealers, Inc. (NASD) as its agent to sell the Shares
to the public, and will agree to pay sales commissions equal to 10% of the gross
sales price of the Shares to said broker-dealer for any Shares they may sell. No
sales commissions will be paid unless a minimum of 130,000 Units have been
subscribed and paid for. For purposes of estimating net proceeds, it is assumed
the full 10% commission will be paid on all 510,000 Units.
In addition, Messrs. Michael M. Chaffee, Raymond Baptista, and Eric
Popkoff, the officers and directors of the Company, will also act as sales
agents for the Company, but will receive no commission from their sale of any
Shares offered hereby. Messrs. Chaffee, Baptista, and Popkoff, will not register
as broker-dealers pursuant to Section 15 of the Securities Exchange Act of 1934,
as amended, in reliance upon Rule 3a4-1, which sets forth those conditions under
which a person associated with an Issuer may participate in the Offering of the
Issuer's securities and not be deemed to be a broker-dealer:
(a) None of such persons are subject to a statutory disqualification, as
that term is defined in Section 3(a)(39) of the Act, at the time of his
participation; and,
(b) None of such persons are compensated in connection with his or her
participation by the payment of commissions or other remuneration based
either directly or indirectly on transactions in securities; and
v
<PAGE>
(c) None of such persons are, at the time of his participation, an
associated person of a broker-dealer; and
(d) All of such persons meet the conditions of Paragraph (a)(4)(ii) of Rule
3a4-1 of the Exchange Act, in that they (A) primarily perform, or are
intended primarily to perform at the end of the Offering, substantial
duties for or on behalf of the Issuer otherwise than in connection with
transactions in securities; and (B) are not a broker or dealer, or an
associated person of a broker or dealer, within the preceding twelve (12)
months; and (C) do not participate in selling and offering of securities
for any Issuer more than once every twelve (12) months other than in
reliance on Paragraphs (a)(4)(I) or (a)(4)(iii).
3. Before deduction for filing, printing and miscellaneous expenses
relating to this Offering, estimated at $5,000.00; legal and accounting fees,
estimated at $35,000.00; a possible nonaccountable expense allowance, payable to
the Underwriter in an amount equal to 2% of the sales price per Unit, or an
aggregate total of $61,200.00, to be paid by the Company out of the proceeds of
this Offering.
THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO SELL ANY SECURITIES TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
THE COMPANY HAS THE RIGHT, IN ITS SOLE DISCRETION TO ACCEPT OR REJECT
SUBSCRIPTIONS IN WHOLE OR IN PART, FOR ANY REASON OR FOR NO REASON.
THE COMPANY HAS TAKEN NO STEPS TO CREATE AN AFTERMARKET FOR THE COMMON
STOCK OFFERED HEREBY AND HAS MADE NO ARRANGEMENTS WITH BROKERS OR OTHERS TO
TRADE OR MAKE A MARKET IN THE COMMON STOCK. AT SOME TIME IN THE FUTURE, THE
COMPANY MAY ATTEMPT TO ARRANGE FOR INTERESTED BROKERS TO TRADE OR MAKE A MARKET
IN THE COMMON STOCK AND TO QUOTE THE COMMON STOCK IN A PUBLISHED QUOTATION
MEDIUM. HOWEVER, NO SUCH ARRANGEMENTS HAVE BEEN COMMENCED AND THERE IS NO
ASSURANCE THAT ANY BROKERS WILL EVER HAVE SUCH AN INTEREST IN THE COMMON STOCK
OR THAT THERE EVER WILL BE A MARKET THEREFOR.
THE COMPANY WILL PROVIDE AUDITED FINANCIAL STATEMENTS TO ITS SHAREHOLDERS
ON AN ANNUAL BASIS AND MAY, IN ITS DISCRETION, PROVIDE UNAUDITED FINANCIAL
STATEMENTS ON A QUARTERLY BASIS.
UNTIL_____________________, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
vi
<PAGE>
SUBSEQUENT TO THE COMPLETION OF THIS OFFERING, THE COMPANY WILL BECOME
SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, AND IN ACCORDANCE THEREWITH, WILL BE REQUIRED TO FILE REPORTS AND OTHER
INFORMATION WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH REPORTS AND
INFORMATION CAN BE INSPECTED AND COPIED AT THE PUBLIC REFERENCE FACILITIES
MAINTAINED BY THE COMMISSION AT 450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549
AND COPIES OF SUCH MATERIAL CAN BE OBTAINED FROM THE PUBLIC REFERENCE SECTION OF
THE COMMISSION, 450 FIFTH STREET, N.W. WASHINGTON, D.C. 20549 AT PRESCRIBED
RATES. THE COMPANY INTENDS TO FURNISH ITS SHAREHOLDERS WITH ANNUAL REPORTS
CONTAINING AUDITED FINANCIAL STATEMENTS AND WITH ADDITIONAL INFORMATION
CONCERNING THE BUSINESS AFFAIRS OF THE COMPANY WHEREVER DEEMED APPROPRIATE BY
ITS BOARD OF DIRECTORS.
vii
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE NO.
--------
SUMMARY OF PROSPECTUS 1
The Company 1
The Offering 1
RISK FACTORS 2
Previous Unsuccessful Attempts by Management to
Develop Mining Properties 2
Start-up Company 2
No Known Ore Reserves and Uncertainty in Attaining Successful
Exploration Results in the Company's Properties 3
Uncertainty in Attaining Environmental Permits 3
Speculative Nature of the Mineral Exploration Industry 3
High Risk 4
Reliance On Outside Financing 4
Dependence on Additional Financing; Risk of Unavailability 4
Reliance Upon Officers and Directors 4
Dependence on Key Employees 4
Conflicts of Interest 5
Certain Transactions 5
Control of the Company 5
Benefit to Present Shareholders 5
Dilution; Excessive Burden of Risk 5
Sale of Shares at Substantial Discount 6
Possible Rule 144 Sales 6
Markets Uncertain 6
Industry Conditions 7
Sensitivity to Economic Conditions 7
Competition 7
Supply Factors 7
Insurance; Indemnification 7
No Cash Dividends Paid 8
Arbitrary Determination of Offering Price 8
No Present Market for Securities 8
Compliance with "Penny Stock" Rules 8
Issuance of Additional Shares 9
No Commitments to Purchase Shares 9
Government Regulations 9
MANAGEMENT OVERVIEW 10
USE OF PROCEEDS 10
DILUTION 12
CAPITALIZATION 15
SUMMARY FINANCIAL INFORMATION 15
OFFERING 15
Engagement of the Services of an Underwriter:
Shares to be Sold by Officers and Directors 15
Offering Period and Expiration Date 17
Procedures for Subscribing 17
Determination of Offering Price 17
Escrow 17
Right to Reject 18
viii
<PAGE>
TABLE OF CONTENTS, Continued
----------------------------
PAGE NO.
--------
UNDERWRITING 18
Proposed Underwriting Agreement 18
Proposed Underwriter Compensation 18
BUSINESS OF THE COMPANY 19
General 19
Environmental Regulations and Cyclical Metal Prices 19
The Exploration Stage 21
Description of Properties 21
Government Regulations 27
Employees 28
Management's Discussion and Analysis of Financial
Condition and Results of Operations 28
Predecessor Company 28
MANAGEMENT 29
Officers and Directors 29
Background Information 30
Executive Compensation 31
Indemnification 32
Office Facilities 32
PRINCIPAL SHAREHOLDERS 32
Future Sales by Present Shareholders 33
DESCRIPTION OF SECURITIES 33
Common Stock 33
Units 34
Non-Cumulative Voting 35
Dividends 35
Reports to Shareholders 36
Transfer Agent 36
CERTAIN TRANSACTIONS 36
CONFLICTS OF INTEREST 37
LITIGATION 37
ADDITIONAL INFORMATION 37
EXPERTS 38
LEGAL MATTERS 38
FINANCIAL STATEMENTS 38
ix
<PAGE>
SUMMARY OF PROSPECTUS
- - ---------------------
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS, ALL
OF WHICH SHOULD BE READ CAREFULLY AND THOROUGHLY.
The Company
- - -----------
Summa Metals Corp., a Nevada corporation, (the "Company") was formed on
March 8, 1994. The Company currently maintains its principal offices at 28281
Crown Valley Parkway, Ste. 225, Laguna Niguel, CA, 92677-1461, and its
registered agent's office at 1025 Ridgeview Drive, Suite 400, Reno, Nevada
89509. The Company is engaged in the business of mineral processing, exploration
and mining. (See "BUSINESS OF THE COMPANY.")
The Company, as a Nevada corporation, has a limited operating history, In
1991, the Company's present management acquired a controlling interest in Summa
Metals Corp., a Colorado corporation (the "Predecessor Company"), and attempted
to develop the same mining properties which are now properties of the Company.
The Predecessor Company made no attempt whatsoever to raise money to develop the
properties currently in possession of the Company and had no business activities
or operations during the period the Company's officers and directors were
involved with it. In 1994, controlling interest in the Predecessor Company was
sold to an unrelated third party and, after due diligence and consideration of
the properties, the new management of the Predecessor Company decided not to
pursue exploration and development of the mining properties, or payment
therefor, and ownership of the properties reverted back to Mr. Chaffee, an
officer, director and principal shareholder of the Company and Dr. Ralph Pray, a
former officer, director and principal shareholder of the Company. The Company
then acquired the same mining properties that the Predecessor Company, under the
management and control of Messrs, Chaffee and Pray had been unsuccessful in
developing since 1991, due to a lack of funds, and is again attempting to raise
capital for exploration and development of the properties. There is no
assurance, however, that they will be successful in raising the capital or in
developing the properties. (See "MANAGEMENT" and "BUSINESS OF THE COMPANY").
The proceeds from the sale of Shares offered hereby will enable the Company
to continue its current drilling and exploration on the properties, assess and
acquire new properties, and generally develop and expand its business. (See
"BUSINESS OF THE COMPANY", "CERTAIN TRANSACTIONS", "RISK FACTORS" and "USE OF
PROCEEDS.")
Messrs. Chaffee, Baptista and Popkoff, the Company's current officers,
directors and principal shareholders, may be deemed to be "parents" and
"promoters" of the Company. (See "MANAGEMENT" and "PRINCIPAL SHAREHOLDERS.")
The Offering
- - ------------
Securities Offered: A minimum of 130,000 and a maximum of 510,000 Units of
Common Stock, par value $.001. (See "OFFERING.")
1
<PAGE>
Offering Price per Unit: $6.00 (See "OFFERING.")
Offering: The Shares are being offered for a period not to exceed 90 days. Such
period may be extended by the Board of Directors for an additional 90 days. (See
"OFFERING.")
Net Proceeds: Approximately $638,000 (Minimum) $2,622,000 (Maximum) (See "USE OF
PROCEEDS.")
Use of Proceeds: To be used for offering expenses, exploration, drilling and
working capital. (See "USE OF PROCEEDS.")
Number of Shares: Outstanding
Before the Offering: 4,555,000
After the Offering: 4,685,000 (Minimum)
5,065,000 (Maximum)
(See "OFFERING" and "DESCRIPTION OF SHARES.")
RISK FACTORS
------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES AN EXCEPTIONALLY
HIGH DEGREE OF RISK AND IS EXTREMELY SPECULATIVE IN NATURE. IN ADDITION TO THE
OTHER INFORMATION REGARDING THE COMPANY CONTAINED IN THIS PROSPECTUS, INVESTORS
SHOULD CONSIDER MANY IMPORTANT FACTORS IN DETERMINING WHETHER TO PURCHASE THE
SECURITIES OFFERED HEREBY. THE FOLLOWING RISK FACTORS ARE NOT EXHAUSTIVE, BUT
ARE MERELY ILLUSTRATIVE, OF THE SUBSTANTIAL RISKS INVOLVED IN AN INVESTMENT OF
THIS NATURE.
1. Previous Unsuccessful Attempts By Management to Develop Mining Properties.
--------------------------------------------------------------------------
Although the Company is a start-up company and has a limited operating
history, Mr. Chaffee, an officer, director and principal shareholder of the
Company, and Dr. Pray, a former officer, director and principal shareholder of
the Company were unsuccessful in previous attempts to explore and develop the
mining properties acquired by the Company under a former corporation, Summa
Metals Corp., a Colorado corporation, which is a predecessor of the Company and
of which Messrs. Chaffee and Pray were officers, directors and principals
shareholders. The Predecessor Company made no attempts whatsoever to raise any
funds to develop the properties and had no business activities or operations
during the period the Company's officers and directors were involved with it.
While the Company believes it will be able to acquire the funds necessary to
develop the properties through this Offering, there is no assurance that it will
be successful in raising the funds or, if raised, that the properties will be
developed and/or profitable if and when developed. (See "MANAGEMENT" and
"BUSINESS OF THE COMPANY.")
2. Start-up Company.
-----------------
The Company has only been in business for a short period of time and has
engaged in limited business since its inception. The Company anticipates being
2
<PAGE>
able to sustain operations for a period of at least twelve months after receipt
of the minimum proceeds ( and twenty-four months after receipt of the maximum
proceeds) of this Offering, without being forced to seek additional funds for
exploration and development of its current properties. (See "MANAGEMENT",
"CERTAIN TRANSACTIONS" and "BUSINESS OF THE COMPANY").
3. No Known Ore Reserves and Uncertainty in Attaining Successful Exploration
-------------------------------------------------------------------------
Results in the Company's Properties.
------------------------------------
A portion of the proceeds of this Offering will be used to explore the
properties held by the Company. Although Management believes there is a
sufficient basis to engage in exploration, there is absolutely no assurance that
such exploration will result in the discovery of known ore reserves. The Company
does not claim that known ore reserves exist on any of its properties. Further,
there can be no assurance that, in the event the Company is able to prove such
reserves in the future, it will have the financial resources to extract,
concentrate, or deliver for sale, any significant amounts of gold, silver,
copper, or any other commercially viable resource. The shares offered herein
have a real value only in the event significant bodies of commercial ore are
proven. (See "BUSINESS OF THE COMPANY".)
4. Uncertainty in Obtaining Environmental Permits.
-----------------------------------------------
The Company does not currently have any permits that may be required by the
various federal, state and local mining and environmental agencies to begin work
on any of its properties. While the Company has had preliminary conversations
with certain controlling agencies, and has been given general support for its
concepts in developing the properties, there can be no assurance that the
Company will be successful in obtaining such permits. (See "BUSINESS OF THE
COMPANY".)
5. Speculative Nature of the Mineral Exploration Industry.
-------------------------------------------------------
Gold, silver and strategic metals exploration is highly speculative in
nature, involving many risks which even a combination of scientific knowledge
and experience frequently cannot overcome, often resulting in unproductive
efforts. Further, the market price of gold, silver and strategic metals is quite
volatile and beyond the control of the Company. If the price of any of these
precious metals drops dramatically, the Company's exploration efforts, which
have been limited and have not, to date, been profitable, could be further
reduced or continue to be rendered uneconomical. The degree of speculation is
further magnified when a company is in the exploration stages and is operating
at a loss, as has been the case with the Company. While Management believes the
funds from this Offering will be sufficient to reach its exploration and
development objectives, there can be no assurance that it will be successful,
that any production will be obtained, or that production, if obtained, will be
profitable. In any such event, any investment in the Shares of this Offering
would be extremely risky and, where, as here, the mining exploration is poorly
financed, the risks become even higher and the most common result would be a
loss of the shareholder's entire investment. (See "BUSINESS OF THE COMPANY",
"MANAGEMENT" and "FINANCIAL STATEMENTS".)
3
<PAGE>
6. High Risk.
----------
An investment in the shares offered hereunder involves an extremely high
degree of risk. A prospective investor should, therefore, be aware that in the
event the Company's exploration and development program is not successful, any
investment in the Company's Common Stock may be entirely lost and the Company
may be faced with the possibility of liquidation. In the event of liquidation,
the existing shareholders would, to the extent that assets would be available
for distribution, receive a disproportionately greater share of the assets in
relation to their cash investment in the Company than would the public
shareholders, in that holders of Common Stock are entitled to share on a pro
rata basis in the assets, if any, of the Company that would be available for
distribution. (See "BUSINESS OF THE COMPANY", "DILUTION" and "PRINCIPAL
SHAREHOLDERS".)
7. Reliance on Outside Financing.
------------------------------
The Company believes that the minimum proceeds of this Offering will
provide sufficient cash to fund its operations and current obligations for the
next twelve months. Should the Company expand its operations and/or make
acquisitions that would require funds in addition to the funds received in this
Offering, it may have to seek additional debt or equity financing. There can be
no assurance that such financing would be available on terms acceptable to the
Company, as and when needed. Since its inception, the Company's operations have
been financed, in part, through private sales of the Company's securities, and
the balance of financing was obtained through a loan. (See "CERTAIN
TRANSACTIONS".)
8. Dependence On Additional Financing/Risk of Unavailability.
----------------------------------------------------------
The continued operation of the Company will be dependent upon its ability
to generate revenues from its current operations/properties and/or obtain
further financing, if and when needed, through borrowing from banks or other
lenders or equity funding. There is no assurance that sufficient revenues can be
generated or that additional financing will be available, if and when required,
or on terms favorable to the Company.
(See "USE OF PROCEEDS.")
9. Reliance Upon Officers and Directors.
-------------------------------------
The Company is wholly dependent, at present, upon the personal efforts and
abilities of its officers and directors. While the Company will solicit business
through its officers and directors, there can be no assurance as to the volume
of business, if any, which the Company may obtain, or that its operations will
prove to be profitable. Of the three officers and directors of the Company, Mr.
Chaffee and Mr. Baptista will devote full time to the Company's business. (See
"MANAGEMENT" and "CERTAIN TRANSACTIONS.")
10. Dependence on Key employees.
----------------------------
The success of the Company is dependent, in large part, on the active
participation of Messrs. Chaffee and Baptista, its officers and directors, who
4
<PAGE>
are also its key employees. The loss of their services would materially
adversely affect the Company's business and future success. The Company does not
have any employment agreements with the officers or any key-man life insurance
in effect at the present time; however, it is seeking information and quotations
regarding the same and may obtain such coverage, if the cost thereof is
reasonable. (See "MANAGEMENT.")
11. Conflicts of Interest.
----------------------
The Company anticipates obtaining certain of its products and services from
companies of which a former officer, director and principal shareholder is an
officer, director and/or principal shareholder. All such products and services
will be obtained by the Company at rates and on conditions competitive in the
marketplace and favorable to the Company. (See "CERTAIN TRANSACTIONS.")
12. Certain Transactions.
---------------------
The Company has previously engaged, and will continue to engage in certain
transactions with a former officer, director and principal shareholder, and will
endeavor to insure that such transactions will be as favorable to the Company as
comparable arm's-length transactions would be. (See PRINCIPAL SHAREHOLDERS",
"CERTAIN TRANSACTIONS" and "FINANCIAL STATEMENTS.")
13. Control of the Company.
-----------------------
Upon the sale of all the Shares offered hereby, the present shareholders of
the Company will continue to control the Company and will be able to elect a
majority of the Board of Directors and, thereby, control the business operations
and policies of the Company. (See "PRINCIPAL SHAREHOLDERS" and "DILUTION.")
14. Benefit to Present Shareholders.
--------------------------------
Following the successful completion of this Offering, the present
shareholders of the Company will own approximately 97% (minimum) or 90%
(maximum) of the outstanding Common Stock. The majority of the present
shareholders purchased their shares at prices substantially below the price at
which Shares are offered hereunder. Therefore, the present shareholders will
experience an immediate increase in the net tangible book value of their
securities, while the purchasers of Shares in this Offering will experience an
immediate dilution in the value of their securities. (See "PRINCIPAL
SHAREHOLDERS" and "DILUTION.")
15. Dilution: Excessive Burden of Risk.
-----------------------------------
The present shareholders of the Company acquired their shares at a cost
less than that which the purchasers hereunder will pay for their Shares.
Accordingly, an investment in the Common Stock of the Company by the Subscribers
will result in the immediate dilution of the net tangible book value of their
Shares. Subscribers purchasing Shares hereunder will bear a risk of loss, while
5
<PAGE>
control of the Company will effectively remain in the hands of the present
shareholders. (See "DILUTION" and "PRINCIPAL SHAREHOLDERS.")
16. Sale of Shares at Substantial Discount.
---------------------------------------
Based on the desperate financial straits of the Company and its dire need
to raise money to continue its business operations and remain viable until
approval of this Registration Statement and sale of the Units being sold herein,
the Company was compelled to sell a large number of its shares of restricted
Common Stock for a small amount of money in order to continue its existence.
(See "PRINCIPAL SHAREHOLDERS", "DILUTION" and "CERTAIN TRANSACTIONS.")
17. Possible Rule 144 Sales.
------------------------
A total of 4,555,000 shares of the Company's Common Stock have been issued
by the Company prior to this Offering and 1,260,000 of those shares are held by
persons who are, or were, officers, directors and control persons, who hold such
shares as "restricted securities", as that term is defined in Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act"). These
securities may only be sold in compliance with Rule 144, which provides, in
essence, that a person (or persons whose shares are aggregated) beneficially
owning restricted securities for a period of one year may sell, every three
months, in brokerage transactions, a number of shares equal to the greater of
one percent of the total number of the Company's then outstanding shares of
Common Stock or the average weekly trading volume in the Company's Common Stock
during the preceding four calendar weeks. 2,275,000 of the shares presently
outstanding were issued between March and June, 1994; 2,280,000 of the shares
presently outstanding were issued in March, 1995. The possible sale of these
restricted shares under Rule 144, may, in the future, have a depressive effect
on the price of the Company's Common Stock in the over-the-counter market,
assuming there is such a market, of which there can be no assurance.
Furthermore, persons holding restricted securities for two years who are not
"affiliates" of the Company, as that term is defined in Rule 144, may sell their
securities pursuant to Rule 144 without any limitations on the number of shares
sold. (See "PRINCIPAL SHAREHOLDERS -FUTURE SALES BY PRESENT SHAREHOLDERS" and
"DILUTION - RESTRICTED SHARES ELIGIBLE FOR FUTURE SALE.")
18. Markets Uncertain.
------------------
Despite the business experience of the officers, directors and principal
shareholders of the Company, there can be no assurance that the mining
properties acquired by the Company will be productive and/or profitable, or that
such production and/or profitability will be sufficient to permit the Company to
be successful in the future or to expand or continue to operate. The mineral
exploration and development business is directly linked to the price of and
market for precious metals and, if there were a drastic reduction in such prices
and/or market, the Company's business could be significantly impacted. (See
"MANAGEMENT" and " BUSINESS OF THE COMPANY.")
6
<PAGE>
19. Industry Conditions.
--------------------
The mineral exploration, processing and mining industry is directly linked
to the price and sale of precious metals and is, therefore, highly subject to
change. Assuming there were a drastic reduction or increase in the price and or
sale of precious metals, the Company's business could be significantly impacted.
There can be no assurance that the volume of production and/or sales that the
Company projects will be established, continue or grow in the future. The
Company's limited operating history and limited financial resources could result
in its being unable to respond quickly to market changes which may have an
adverse effect on the Company's revenues and earnings. (See "BUSINESS OF THE
COMPANY.")
20. Sensitivity to Economic Conditions.
-----------------------------------
The continued existence of the Company is highly dependent upon the
condition of the mineral exploration and development industry. The economic
viability of that market, in turn, is highly dependent on, among many other
factors, including political issues and general economic conditions. During
periods of economic downturn or slow economic growth, coupled with eroding
consumer confidence or rising inflation, the price and/or sale of precious
metals could be severely impacted. Such factors would likely have an immediate
effect on the Company's operations. (See "BUSINESS OF THE COMPANY.")
21. Competition.
------------
There is intense competition in the mineral exploration and development
industry in which the Company operates. Many of the Company's competitors have
greater financial and other resources, better distribution networks or greater
name recognition than the Company. There can be no assurance that the Company
will be able to successfully compete in this industry. (See "BUSINESS OF THE
COMPANY.")
22. Supply Factors.
---------------
Competition and unforeseen limited sources of supplies in the industry
could result in occasional spot shortages of supplies of certain products which
the Company may use in its operations. There can be no assurance the Company
will be able to obtain certain products and materials which it requires, without
interruption, or on terms favorable to the Company. (See "BUSINESS OF THE
COMPANY.")
23. Insurance; Indemnification.
---------------------------
The Company has limited capital and, therefore, does not currently have a
policy of insurance against liabilities arising out of the negligence of its
officers and directors and/or deficiencies in any of its business operations.
Even assuming it obtained insurance, there is no assurance that such insurance
coverage would be adequate to satisfy any potential claims made against the
Company, its officers and directors, or its business operations or products. Any
such liability which might arise could be substantial and may exceed the assets
7
<PAGE>
of the Company. However, the Articles of Incorporation and By-Laws of the
Company provide for indemnification of officers and directors to the fullest
extent permitted under Nevada law. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons, it is the opinion of the Securities and Exchange
Commission that such indemnification is against public policy, as expressed in
the Act, and is therefore, unenforceable. (See "FINANCIAL STATEMENTS" and
"BUSINESS OF THE COMPANY.")
24. No Cash Dividends Paid.
-----------------------
No cash dividends have been paid on the shares of the Company to date, nor
is it anticipated that any such dividends will be paid to shareholders in the
foreseeable future. Any income received from operations will be reinvested and
devoted to the Company's future operations and/or to expansion. (See
"DESCRIPTION OF SECURITIES.")
25. Arbitrary Determination of Offering Price.
------------------------------------------
The offering price of the Shares being offered hereunder was determined
arbitrarily by the Company. Such offering price should not be considered an
indication of, nor was it based upon, the actual value of the Company and the
offering price may bear no direct relationship to the book value, assets or
earnings of the Company, or any other recognized criteria of value. (See
"OFFERING.")
26. No Present Market for Securities.
---------------------------------
There is presently no market for the Company's securities and there can be
no assurance that any such market will develop. In the event a public trading
market does develop, there is no assurance it will continue. Therefore, any
investment in the Company's Common Stock may be highly liquid and without a
market value. (See "OFFERING.")
27. Compliance with "Penny Stock" Rules.
------------------------------------
Rule 3a51-1 of the Exchange Act defines a "penny stock" as an equity
security that is not, among other things: a) a reported security (i.e., listed
on certain national securities exchanges); b) a security registered or approved
for registration and traded on a national securities exchange that meets certain
guidelines, where the trade is effected through the facilities of that national
exchange; c) a security listed on NASDAQ; d) a security of an issuer that meets
certain minimum financial requirements, i.e., "net tangible assets" in excess of
$2,000,000 (if the issuer has been continuously operating for less than three
years) or $5,000,000 (if the issuer has been continuously operating for more
than three years), or "average revenue" of at least $6,000,000 for the last
three years); or e) a security with a price of at least $5.00 per share for the
transaction in question or that has a bid quotation (as defined in the Rule) of
at least $5.00 per share. Under Rule 3a51-1, if the Company's Common Stock sells
below $5.00 per share, the Company's Common Stock will fall within the
definition of "penny stock."
8
<PAGE>
If the Company's Common Stock is deemed to be a penny stock, trading
therein will be subject to the requirements of Rule 15g-9 and Section 15(g)
under the Exchange Act. Rule 15g-9 imposes additional sales practice
requirements on broker-dealers who sell non-exempt securities to persons other
than established customers. For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Pursuant to Section 15(g) and related Rules, brokers and/or dealers, prior
to effecting a transaction in penny stock, will be required to provide investors
with written disclosure documents containing information concerning various
aspects involved in the market for penny stocks as well as specific information
about the penny stock and the transaction involving the purchase and sale of
that stock, e.g., price quotes and broker-dealer and associated person
compensation. Subsequent to the transaction, the broker will be required to
deliver monthly or quarterly statements containing specific information about
the penny stock. The foregoing requirements will most likely negatively affect
the ability of purchasers herein to sell their shares in the secondary market.
28. Issuance of Additional Shares.
------------------------------
Assuming sale of all Shares offered hereby, there will still be 19,945,000
shares (assuming a minimum subscription) or 19,445,000 shares (assuming a
maximum subscription) of Common Stock which the Board of Directors will have
authority to issue. The issuance of any such shares to persons other than the
public investors herein will reduce the amount of control held by the public
investors following this Offering and may result in a dilution of the book value
per share. There are presently no commitments, contracts or intentions to issue
any additional shares to any persons other than as set forth herein.
(See "DILUTION.")
29. No Commitments to Purchase Shares.
----------------------------------
There is no commitment of any kind on the part of anyone to purchase all or
any part of the 510,000 Units being offered hereby; consequently, the Company
can give no assurance that all or any part of the Units will be sold. However,
the escrow arrangements provide that unless 130,000 Units are sold and $780,000
is raised within 90 days from the date of this Prospectus, unless extended at
the discretion of the Company for an additional 90 days, the proceeds will be
returned in full to the subscribers, without any interest thereon or deductions
therefrom. Thus, an investor could invest money in the Company for as long as
180 days, through the subscription for Shares hereunder, and have the money
returned without interest.
30. Government Regulations.
-----------------------
The Company will be subject to all governmental rules, laws and regulations
relating to the mining industry, both in the U.S. and Mexico, where its current
properties are located, and fully intends to comply therewith. However, there is
no assurance the governmental agencies having jurisdiction over the Company, its
operations and properties, may enact laws, rules and/or regulations in the
future which may have an adverse impact on the Company. (See "BUSINESS OF THE
COMPANY.")
9
<PAGE>
MANAGEMENT OVERVIEW
-------------------
All of the Company's properties are currently in the exploration stage and,
therefore, the Company has yet to determine the presence of any economically
viable resources.
The first business operations of the Company will consist of performing a
preliminary evaluation on each property to provide the Company with sufficient
information to determine the merits, if any, of each property. This first phase
of evaluation will consist of gathering information relative to the perceived
economic value of each property, the anticipated costs to develop the property
(including permitting and environmental costs), and the estimated amount of time
which will be needed to reach a positive cash flow status for each property. In
the event any of the properties appear to warrant further consideration, the
Company must then prioritize each proposed site development plan (Plan of
Operations) and allocate the funds necessary to execute the same, including a
substantial contingency reserve. The Company must then submit the Plan of
Operations to the appropriate environmental agencies for approval, of which
there can be no assurance ( See "RISK FACTORS-Uncertainty in Attaining
Environmental Permits", "RISK FACTORS-Government Regulations" and "BUSINESS OF
THE COMPANY".)
The first project the Company intends to develop will be the Deep Gold Mine
assuming, of course, that viable resources are identified during the exploration
process on the property and that the Company is able to meet federal, state and
local mining and environmental requirements for the property, of which there can
be no assurance. (See "RISK FACTORS-Uncertainty in Attaining Environmental
Permits", "RISK FACTORS-Government Regulations" and "BUSINESS OF THE COMPANY".)
The Company has determined that, if a viable resource is identified at the Deep
Gold Mine, and assuming favorable regulatory reviews, the materials would be
easy to access and process using existing technology and equipment. Depending on
the results of the exploration process at the Deep Gold Mine, the Company may,
at that time, postpone the exploration and development of its other properties
to insure sufficient financial resources are available to complete development
of the Deep Gold Mine.
USE OF PROCEEDS
---------------
As set forth below, the Company estimates the net proceeds from this
Offering will be approximately $638,600, assuming a minimum subscription, or
$2,622,000, assuming a maximum subscription, after deducting $78,000, assuming a
minimum subscription, or $306,000, assuming a maximum subscription, for sales
commissions and $40,000 for estimated offering expenses, including legal and
accounting fees. The proceeds from this Offering are expected to be disbursed,
in the priority set forth below, during the first 12 months after successful
completion of this Offering; however, not having completed the Phase I property
evaluations on any of its properties, the Company reserves the right to amend,
in its discretion, the proposed Use of Proceeds pending the results of such
evaluations.
10
<PAGE>
The following projections assume that a viable resource will be located on
each property, that it will be economically feasible to process the materials,
and that the mineralization is of the type that will lend itself to the
Company's proposed extraction techniques. None of these assumptions have been
proven, however, and there can be no assurance that they will be proven on each
property until the Phase I property evaluations have been completed.
Minimum Maximum
Description Subscription Subscription
- - ----------- ------------ ------------
Total Proceeds $ 780,000 $ 3,060,000
Offering Expenses:
Sales Commissions (1) 78,000 306,000
Non-Accountable Expense
Allowance (2) 23,400 91,800
Legal and Accounting Fees
and Offering Expenses (3) 40,000 40,000
--------- -----------
Net Proceeds $ 638,600 $ 2,622,200
Exploration and Development $ 50,000 $ 360,000
Administrative and Salaries 120,000 193,000
Subcontractors:
Deep Gold 10,000 15,000
Gold Spur 10,000 50,000
Promontorio 35,000
Equipment (4):
Deep Gold 120,000 120,000
Gold Spur 430,000
Promontorio 250,000
Indirect Expenses:
Insurance 14,000 28,000
Bonding 10,000 20,000
Repay Loans (5) 90,000 90,000
Working Capital 214,600 1,031,200
- - --------------- --------- -----------
Total Net Proceeds $ 638,600 $ 2,622,200
(1) Assumes that, if the services of an underwriter are engaged, an
underwriters' commission of 10% will be paid on all Shares sold. No
underwriters' commissions will be paid for Shares sold by management of the
Company (See "UNDERWRITING" and "OFFERING.")
(2) Assumes that a non-accountable expense allowance may be paid to the
underwriter equal to $5000.00
(3) The organizational and offering expenses, including accounting, legal,
printing, clerical and other expenses, and registration and filing fees, are
estimated to total $40,000.
(4) Similar equipment will be required to expand the exploratory stages of the
Deep Gold, Promontorio and the Gold Spur. This equipment will consist mainly of
11
<PAGE>
material handling and crushing machines, pumps, tanks and piping for use in a
leach process, portable power generators, and material separation devices. It is
the intent of the Company to use second-hand equipment for the largest segment
of the work, however, because of the exploratory nature of each of the projects,
the exact equipment specifications have not yet been determined. Management has
been able to generally identify the size, type and cost of the equipment which
will be needed and is confident that standard equipment currently available in
the Western U.S. will adequately meet the needs of the individual project
requirements. There can be no absolute assurance that this will be the case and,
in the event said equipment is not easily located, it could have a negative
impact on both the Company's ability to begin materials processing and the use
of the proceeds of this Offering. (See "MANAGEMENT OVERVIEW" and "BUSINESS OF
THE COMPANY-The Exploration Stage".)
(5) On March 7, 1995, the Company entered into a Loan Agreement with C.W. and
Neva B. Lewis, unrelated third parties, wherein the Lewis' advanced $20,000 in
cash to the Company. In consideration for the loan, the Company agreed to pay
the Lewis' $50,000 from the proceeds of this Offering and issue them 30,000
shares of restricted Common Stock of the Company. The $20,000 loan was used as
partial payment for acquisition of the Big Mike property. (See "CERTAIN
TRANSACTIONS.")
On April 8, 1994, the Company entered into a promissory note in the amount
$100,000 with Amyn Dahya, an officer, director and principal shareholder of
Casmyn Corp. The Note was due and payable on March 29, 1995, but was extended by
the parties to October 31, 1998. It was also agreed between the parties that no
portion of the Note would be repaid from the proceeds of this Offering, but
rather, the Note will be repaid from revenues generated by the Company from its
mining operations. The $100,000 loan was used for operating expenses and
salaries. (See "CERTAIN TRANSACTIONS", "BUSINESS OF THE COMPANY" and
"MANAGEMENT".)
While the Company currently intends to utilize the proceeds of this
Offering substantially in the manner set forth above, the Company reserves the
right to reassess and reassign such use if, in the judgement of the Board of
Directors, such changes are necessary or advisable in the circumstances. At
present, no material changes are contemplated, however, working capital could be
used to acquire other mining properties or interests therein. The Company does
not know of any such properties nor is there any assurance that any such
properties could be acquired with the limited funds in working capital it will
have available. Should there be any material changes in the Company's use of
proceeds in connection with this Offering, it will issue an amended Prospectus
reflecting such change.
Until used, the working capital proceeds will be invested in certificates
of deposit or U.S. Treasury Notes.
DILUTION
--------
"Dilution" represents the difference between the offering price and the net
tangible book value per share immediately after the completion of this Offering.
12
<PAGE>
"Net tangible book value" is the amount that results from subtracting the total
liabilities and intangible assets from the Company's total assets. Dilution
arises mainly from the arbitrary decision by the Company to establish the
offering price of the Shares offered hereunder based on market factors rather
than book value considerations
In addition, it is important to note that the present shareholders of the
Company's Common Stock acquired their shares at a price substantially lower than
the Offering price due to the Company's need to acquire working capital during
the past two years. The present shareholders, therefore, will incur an immediate
substantial increase in the price which they paid for their shares and the
purchasers of shares in the Offering will incur an immediate substantial
dilution in the price which they pay for their shares.
As of October 31, 1997, the net tangible book value of the shares of the
Company (total assets, excluding intangible assets, less total liabilities,
excluding contingent liabilities) was ($180,642) or ($.04) per share based upon
4,555,000 shares outstanding at that time.
Upon completion of this Offering, but without taking into account any
change in such net tangible book value after completion of this Offering, other
than that resulting from the sale of the Shares offered hereby, the net tangible
book value of the 4,685,000 shares, based upon a minimum subscription (or
5,065,000 shares, based upon a maximum subscription) to be outstanding will be
approximately $599,358, based upon a minimum subscription (or $2,879,358, based
upon a maximum subscription), or approximately $.13 per Share, based upon a
minimum subscription (or $.57 per Share, based upon a maximum subscription).
Accordingly, the net tangible book value of the Shares held by the present
shareholders of the Company (i.e., 4,555,000 Shares) will be increased by $.17
per Share, based upon a minimum subscription (or increased by $.61 per Share,
based upon a maximum subscription), without any additional investment on their
part and the purchasers of the Shares offered hereby will incur immediate
dilution (a reduction in net tangible book value per Share from the offering
price of $6.00 per Unit) of approximately $5.83 per Share, based upon a minimum
subscription (or $5.43 per Share, based upon a maximum subscription).
After completion of this Offering, the purchasers of the Shares offered
hereby will own approximately 3% (10%) of the total number of shares then
outstanding, for which they will have made a cash investment of $780,000, based
upon a minimum subscription (or $3,060,000, based upon a maximum subscription),
or $6.00 per share. The current shareholders of the Company will own
approximately 97% (90%) of the total number of shares then outstanding, for
which they have made actual cash contributions of $4,555, or $.001 per share.
The following table sets forth a comparison of the respective investments
of the current shareholders and the public investors, assuming both a minimum
and maximum subscription.
13
<PAGE>
PRESENT SHAREHOLDERS
--------------------
Minimum Subscription Maximum Subscription
-------------------- --------------------
Price Per Share $ .001 $ .001
Net Tangible Book
Value per Share $ (.04) $ (.04)
before Offering
Net Tangible Book
value per Share $ .13 $ .57
after Offering
Increase to present
Shareholders in
net tangible book
value per share due
to Offering $ .17 $ .61
Capital
contributions $ 4,555 $ 4,555
Number of Shares
outstanding
before Offering 4,555,000 4,555,000
Number of Shares
outstanding
After Offering 4,555,000 4,555,000
Percentage of ownership
after the Offering 97% 10%
PUBLIC INVESTORS
----------------
Minimum Subscription Maximum Subscription
-------------------- --------------------
Price per Share $ 6.00 $ 6.00
Dilution per Share $ 5.87 $ 5.43
Capital contributions $ 780,000 $ 3,060,000
Number of Shares after the 130,000 510,000
Offering held by the Public
Investors
Percentage of ownership after 3% 10%
the Offering
14
<PAGE>
All 4,555,000 of the Company's currently outstanding shares of Common Stock
are "restricted securities" which, in the future, may be sold pursuant to Rule
144 under the Securities Act of 1933, as amended, if available. Rule 144
currently provides, in essence, that persons holding restricted securities for a
period of one year may each sell, every three months, in brokerage transactions,
a number of shares equal to one percent of the aggregate number of the Company's
outstanding shares, and after two years, persons other than "affiliates" of the
Company, may sell shares without any volume restrictions.
Sales of shares (a) held by present shareholders, after applicable
restrictions expire; and (b) offered in this Offering, which would be
immediately resalable, may have a depressing effect on the price of the
Company's shares in any market that may develop. (See "DILUTION.")
CAPITALIZATION
--------------
The following table sets forth the capitalization of the Company as of
October 31, 1997, and as adjusted to reflect the sale of the minimum (maximum)
Shares offered hereby and the application of the net proceeds therefrom. (See
"FINANCIAL STATEMENTS.")
Present As Adjusted
------- -----------
(Minimum) (Maximum)
Common Stock:
25,000,000 Shares
authorized, par value
$.001, issued and
outstanding 4,555,000 4,685,000 5,065,000
Shareholders' Equity: ($ 180,642) $ 599,358 $ 2,879,358
SUMMARY FINANCIAL INFORMATION
-----------------------------
BALANCE SHEET DATA: October 31, 1997
Current Assets.......................................$ 30
Current Liabilities..................................$ 239,795
Total Assets.........................................$ 59,153
Shareholders' Equity.................................$(180,642)
(See "FINANCIAL STATEMENTS)
OFFERING
--------
Engagement of the Services of an Underwriter: Shares to be sold by Officers and
- - --------------------------------------------------------------------------------
Directors:
- - ----------
The Company has engaged the services of an underwriter who is a member of
the National Association of Securities Dealers, Inc. ("NASD") to offer its
Shares directly to prospective investors on a "best-efforts, all-or none" basis
as to a minimum of 130,000 Units and on a "best-efforts" basis as to an
additional 380,000 Units.
15
<PAGE>
The Company has agreed to pay a sales commissions equal to 10% of the gross
sales price of the Shares to such underwriter for any Shares it may sell, plus a
nonaccountable expense allowance of 2% of the gross proceeds and Warrants equal
to 3% of the Units sold to the public. However, no sales commissions or expense
allowance will be paid unless a total of 130,000 Units have been subscribed and
paid for. In addition, the Company also intends to sell the shares offered
hereunder through its officers and directors, Messrs. Michael M. Chaffee,
Raymond C. Baptista and Eric Popkoff who will receive no commission from their
sale of any Shares offered hereby. It is assumed that a full 10% underwriters'
commission may be paid on the maximum of 510,000 Units. (See "UNDERWRITING.")
Messrs. Chaffee, Baptista and Popkoff will not register as broker-dealers
pursuant to Section 15 of the Securities Exchange Act of 1934, as amended, in
reliance upon Rule 3a4-1, which sets forth those conditions under which a person
associated with an Issuer may participate in the Offering of the Issuer's
securities and not be deemed to be a broker-dealer:
1. None of such persons are subject to a statutory disqualification, as that
term is defined in Section 3(a)(39) of the Act, at the time of his
participation; and,
2. None of such persons are compensated in connection with his or her
participation by the payment of commissions or other remuneration based either
directly or indirectly on transactions in securities; and
3. None of such persons are, at the time of his participation, an associated
person of a broker-dealer; and
4. All of such persons meet the conditions of Paragraph (a)(4)(ii) of Rule
3a4-1 of the Exchange Act, in that they (A) primarily perform, or are intended
primarily to perform at the end of the Offering, substantial duties for or on
behalf of the Issuer otherwise than in connection with transactions in
securities; and (B) are not a broker or dealer, or an associated person of a
broker or dealer, within the preceding twelve (12) months; and (C) do not
participate in selling and offering of securities for any Issuer more than once
every twelve (12) months other than in reliance on Paragraphs (a)(4)(i) or
(a)(4)(iii).
The officers and directors intend to advertise and hold investment meetings
in various states where the Offering will be registered. The officers and
directors will distribute the Prospectus to prospective investors at the
meetings and to friends and relatives interested in the Offering.
The Units will be offered by the Company subject to prior sale and subject
to approval of certain legal matters by the Company's legal counsel. The Company
reserves the right to reject any subscription in whole or in part, for any
reason or for no reason.
A total of 2,050,000 shares of the Company's Common Stock were issued to
two persons who were officers, directors and control persons of the Company, in
16
<PAGE>
April, 1994 and a total of 2,505,000 shares were issued to unrelated third
parties in March, 1994 and March, 1995. Such shares are all "restricted
securities" as that term is defined in Rule 144, promulgated under the
Securities Act of 1933, as amended, and under such Rule, may not be sold for a
period of at least two years from acquisition thereof. (See "CERTAIN
TRANSACTIONS.")
Prior to this Offering, there has been no market for the Company's Shares.
Consequently, the offering price has been determined arbitrarily by the Company
and should not be considered an indication of the actual value of the Company's
Shares. There can be no assurance that the Common Stock offered hereby can be
resold at the offering price, or at all. Nor can there be any assurance that any
public market for the Company's Common Stock will develop. It is anticipated
that the Shares will trade in the over-the counter market.
Offering Period and Expiration Date
- - -----------------------------------
This Offering will commence on the date of this Prospectus and continue for
a period of ninety (90) days, unless extended, by the Company for an additional
ninety (90) days, or unless this Offering is completed or otherwise terminated
by the Company (the "Expiration Date").
Procedures for Subscribing
- - --------------------------
Each investor subscribing for any of the Shares offered hereby will be
required to execute a Subscription Agreement and tender it, to the Company,
together with a check or certified funds payable to the Escrow Agent, for
acceptance or rejection of their subscription.
Determination of Offering Price
- - -------------------------------
The public offering price of the Shares has been determined arbitrarily by
the Company. The price does not bear any relationship to the Company's assets,
book value, earnings, or other established criteria for valuing a privately held
company. In determining the number of Shares of Common Stock to be offered and
the offering price, the Company's capital structure, financial condition,
prospects for the Company and the industry in general, and the general condition
of the securities market were considered by the Company. Accordingly, the
offering price should not be considered an indication of the actual value of the
Company's securities.
Escrow
- - ------
Proceeds from the subscription for Units will be transmitted by noon of the
next business day after receipt by the Company to be deposited in a special
account at First National Bank of Long Island, 253 New York Avenue, Huntington,
New York, 11743 until a minimum of 130,000 Units have been sold, at which time
the proceeds will be paid to the Company. Thereafter, proceeds will be paid
directly to the Company until a maximum of 510,000 Units have been sold or the
offering period expires, whichever first occurs. If 130,000 Units are not sold
by the Expiration Date, or any extension thereof, or if this Offering is
terminated sooner, all funds which have been received will be promptly returned
to the subscribers without interest or deduction.
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All checks for subscriptions should be made payable to Steven L. Siskind,
Attorney Escrow Account for the benefit of Summa Metals Corp.
Right to Reject
- - ---------------
The Company shall have the right to accept or reject subscriptions in whole
or in part, for any reason or for no reason. All monies from rejected
subscriptions shall be returned immediately to the investors without interest or
deduction. Subscriptions for securities shall be accepted or rejected within 48
hours after receipt thereof by the Company.
UNDERWRITING
------------
Underwriting Agreement
- - ----------------------
The Company has entered into an Underwriting Agreement (the "Underwriting
Agreement") with Boe & Company, a member of the National Association of
Securities Dealers ("NASD") as its agent to publicly offer and sell a minimum of
130,000 Units on a "best-efforts, all-or-none basis" up to a maximum of 510,000
Units on a "best-efforts basis" at a public offering price of $6.00 per Unit,
for a total maximum offering of $3,060,000. If a total of 130,000 Units is not
sold within 90 days from the commencement of the Offering, which period may be
extended for an additional period of up to 90 days upon the mutual consent of
the Company and the Underwriter, all proceeds received would be promptly
refunded to subscribers in full, without interest or deductions for commissions
or expenses. All proceeds from the sale of the Units will be payable to Steven
L. Siskind, Attorney Escrow Account for the benefit of Summa Metals Corp., and
will be deposited in an escrow account maintained at First National Bank of Long
Island, by Steven L. Siskind, counsel for the Company as Escrow Agent (the
"Escrow Agent"), pursuant to an Escrow Agreement among the Company, the
Underwriter and the Escrow Agent.
Proposed Underwriter Compensation
- - ---------------------------------
The Underwriting Agreement further provides that, subject to the sale of a
minimum of 130,000 up to a maximum of 510,000 Units offered hereby, the
Underwriter will receive (a) a cash commission of 10% of the gross price of each
Unit it sells (i.e. $.60 per Unit, or a total of $78,000.00, assuming a minimum
subscription, or $306,000.00, assuming a maximum subscription) and
(b) a non-accountable expense allowance of 2%, and warrants to purchase
additional units in the amount of 3% of the number of Units sold to the Public.
(SEE "UNDERWRITERS AGREEMENT") Any unexpended portion of the non-accountable
expense allowance may be retained by the underwriter and may be deemed
additional underwriting compensation for the purposes of the Securities Act of
1933, as amended.
The foregoing is a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is made to the copy of
said proposed Underwriting Agreement which is on file as Exhibit 28(c) to the
Registration Statement of which this Prospectus is a part.
18
<PAGE>
BUSINESS OF THE COMPANY
- - -----------------------
Summa Metals Corp., a Nevada corporation, was incorporated on March 8,
1994. The Company maintains its statutory registered agent's office at 1025
Ridgeview Drive, Suite 400, Reno, Nevada 89509. The Company presently maintains
its business offices at 28281 Crown Valley Parkway, Ste. 225, Laguna Niguel, CA,
92677-1461. (See "OFFICE FACILITIES" in this section.)
General
- - -------
The Company is a mineral processing and mining company engaged in the
acquisition, and exploration of properties with an uncertain mineral potential.
The Company acquired certain mining and tailing properties from Mr. Chaffee, an
officer, director and principal shareholder and from Dr. Pray, a former officer,
director and principal shareholder, in exchange for the issuance of an aggregate
of 2,050,000 shares of the Company's restricted Common Stock (See "CERTAIN
TRANSACTIONS").
In November, 1991, Messrs. Chaffee and Pray were officers, directors and
principal shareholders of the Predecessor Company. Some of the mining properties
listed below, which the Company acquired from Messrs. Chaffee and Pray, were
also acquired by the Predecessor Company. The Predecessor Company made no
attempt whatsoever to raise any funds to develop the properties and had no
business activities or operations during the period the Company's officers and
directors were involved with it. In 1994, controlling interest in the
Predecessor Company was sold to an unrelated third party, and after due
diligence and consideration of the properties, the new management of the
Predecessor Company decided not to pursue exploration and development of the
mining properties, or payment therefor, and ownership of the properties reverted
back to Messrs. Chaffee and Pray. The Company then acquired the same mining
properties that the Predecessor Company, under the management and control of
Messrs, Chaffee and Pray had acquired in 1991 and is attempting to raise the
capital required for exploration and development of the properties. There is no
assurance, however, that the Company will be successful in raising the capital
or in developing the properties. (See "MANAGEMENT" and "BUSINESS OF THE
COMPANY").
The Nevada corporation was formed for several reasons, the most important
of which was its close proximity to the properties being acquired by the Company
and to the laboratory owned by Dr. Pray and heavily utilized by the Company in
its exploration and development of the properties and because of certain
potential tax benefits realized by corporations doing business in the State of
Nevada.
Environmental Regulations and Cyclical Metal Prices
- - ---------------------------------------------------
Environmental laws and regulations relating to federal lands are expected
to be tightly enforced by the U.S. Bureau of Land Management and U.S. Forest
Service. The Company, however, feels that as long as Forest Service regulations
19
<PAGE>
are fully complied with, there should be no serious economic problems
encountered because of wilderness laws or any other federal, state or local
environmental protection laws. The Company anticipates no discharge of water
into any active stream, creek, river, lake or any other body of water regulated
by environmental laws or regulations and that no significant endangered specie
will be disturbed by its operations. Recontouring and revegitation of disturbed
surface areas will be completed pursuant to federal, state and local
requirements. Any portals, adits or shafts will be sealed upon abandonment of a
property. It is difficult to estimate the cost effects of compliance with
environmental laws inasmuch as the methods and procedures of exploration within
federal lands or U.S. Bureau of Land Management and Forest Service lands are
similar to those methods and procedures adopted by the Company as a matter of
Company policy and procedure.
The Company intends to operate its properties in strict compliance with all
environmental regulations applicable to the mineral processing and mining
industry. While the Company considers itself to be pro-active with respect to
environmental considerations and has a history of working with the federal,
state and local agencies in the mining industry, there can be no assurance that
the Company will be able to procure the necessary permits to operate any of its
properties. In addition, it is possible that certain regulatory agencies could,
in fact, make it impossible for the Company to even explore its properties
and/or prohibit the Company from performing the work necessary for the Company
to complete its "economic" evaluations. (See "BUSINESS OF THE COMPANY-The
Exploration Stage" and "MANAGEMENT".)
Prior to the Company being able to perform any work on any of the
properties, including certain pilot plant operations, the Company will be
required to submit, and have approved, a Plan of Operations specific to each
particular property with each appropriate regulatory agency. This approval
process is often time consuming and expensive and the outcome is always
uncertain. Even assuming the Company is successful in obtaining a permit to
explore or operate its properties, the financial responsibilities placed upon
the Company as a condition for the issuance of such approvals may render some or
all of its properties uneconomic to develop and the Plans of Operation may, at
that time, be abandoned.
Other factors which could have a material impact upon the Company's future
financial performance include such considerations as the cyclical nature of the
mining industry, which may have an effect on the Company's potential
profitability. However, it is difficult to determine whether the cyclical price
of precious metals and other minerals explored for by the Company will increase
or decrease. Thus, management feels that the inherent risk of a decrease in the
price of minerals is balanced by the possibility of an increase in the price of
minerals. In general, the costs of mining today are much greater than in
previous years due to both inflation and the added costs of complying with the
variety of environmental laws and safety regulations which govern the mining
industry.
20
<PAGE>
The Exploration Stage
- - ---------------------
All of the Company's properties are in the exploration stages. In general,
the exploration work has included research of historical data, geologic mapping,
geochemical sampling, geophysical surveys and minor excavation and repairs.
During the exploration stage, the Company will seek to determine if any mineral
resources do, in fact, exist and then will further determine if the Company can
economically develop the same. No ore bodies have yet been located and/or
identified on any of the Company's properties and there can be no assurance that
they exist.
At the completion of the exploration stage, and assuming that an
economically viable resource does exist, the Company will then prioritize the
development of each of its properties based upon the financial resources
available at that time.
The exploration process in general is divided into three (3) phases.
Phase 1 begins with a thorough search of the available geologic literature,
personal interviews with geologists, mining engineers and others familiar with
the properties. This initial work is then augmented with geologic mapping,
geophysical testing and geochemical testing. Phase I has been completed on all
of the Company's properties.
The second phase of the exploration process involves an initial examination
of the underground characteristics of the vein structure that was identified by
Phase 1 of exploration. Phase 2 is aimed at identifying a deposit of potential
economic importance. While the exact exploration process is site specific, the
general methods of exploration may include trenching, advanced geophysical work
and core drilling to aid in the determination of subsurface characteristics of
the structure. The geophysical work is designed to give a general understanding
of the location and extent of mineralization at depths that are unreachable by
surface excavations, and provide a target for more extensive trenching and core
drilling. After a thorough analysis of the data collected in Phase 2, a
determination is made as to whether or not the property warrants a Phase 3
study.
Phase 3 is aimed at precisely defining the depth, the width, the length,
the tonnage and the value per ton of the mineral deposits so that it can be
considered a proven ore body within stringent industry standards. This is
accomplished through extensive surface trenching and extensive core drilling. A
mineral deposit is not a proven ore body until it has been technically,
economically and legally proven.
A more detailed description of the proposed exploration process for each of
the Company's properties is contained in the "Description of Properties" section
which follows.
Description of Properties
- - -------------------------
The Company has acquired rights and interests in and to certain mining
properties, as listed below. Most of these properties consist of unpatented
21
<PAGE>
mining claims. The validity of unpatented mining claims depends, to an extent,
upon numerous circumstances and factual matters, many of which are discoverable
of record or by other available means, and is subject to many uncertainties of
existing law and its applications. One of the requirements of initiating a valid
mining claim is that the claim must be staked on a mineralized area. Further
exploration and mineral assessments will be performed during Phase l of the
exploration process to determine if sufficient mineralization exists to develop
the properties. The Company intends to continue to perform annual assessment
work on all of its properties, as well as comply with state and federal
regulations regarding the claims, until Phase 1 results can be assessed. (See
"CERTAIN TRANSACTIONS" and "CONFLICTS OF INTEREST.")
The Deep Gold Mine
The Deep Gold Mine, consisting of one unpatented placer claim is located on
approximately 80 acres. The claim was located amidst some old 1930's mining
claims. Dr. Ralph E. Pray, a former officer, director and principal shareholder
of the Company located one of the claims in 1981 and over the course of several
years, acquired the other three (3) claims from their respective locators. In
1981, a new road was built into the property, a new headframe was placed over
the 150-ft. deep shaft and the workings were cleaned out. The property is
subleased to the Company for $100.00 per year in perpetuity. In addition, Dr.
Pray received shares of Common Stock of the Company as consideration for the
sublease. During the term of the sublease, the Company will have all of Dr.
Pray's right, title and interest in and to the property, and any revenues
derived therefrom.
During 1994, the Company maintained the required permits for the mine,
reviewed geophysical data establishing a probable channel and mapped three drill
sites for early exploration. The volume of placer material available on the Deep
Gold claims has been estimated using the channel width and thickness values
reported in the California Division of Mines Report XXXIV for Lewis and Iron
Nugget claim groups, now included in the Deep Gold group. The average width of
the channel is 57 feet and the average thickness is reported to be 6 feet.
The Deep Gold Mine is not located in a Wilderness Study area and is not,
therefore, subject to the federal rules and regulations regarding such an area.
Assuming that the Phase 1 evaluation of the Gold Spur Mine is positive, the
Company intends to mine the property in the following manner. The channel at the
shaft elevation, near the north bank, will be delineated by reverse circulation
hammer drilling. The compacted, lightly cemented sand and gravel will be drilled
and blasted. Large rock fragments will be left behind in high, underground
fence-wire enclosures.
When removal of the material closest to Entry No. 2 has been completed, the
treatment plant will be moved down slope to the collar of Entry No. 3 and
material in the lower 500 feet of the drift will reach the surface through Entry
No. 3.
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<PAGE>
Broken sand/gravel placer materials from the channel will be dumped
directly onto a heavy vibrating screen. Oversize will go to waste. Minus 1/2
inch will be screened at 20 mesh. Fine concentrate will be treated to remove
magnetics and all concentrates, if any are found to exist, will be further
processed, examined, weighed and prepared for shipment. The mine will have three
drill roads cut from the main road to the geophysical anomalies found recently
during a magnetometer survey by Dr. Pray. A contract driller will be employed to
rotary drill three holes to depths of about 150 feet, where bedrock will be
encountered. Once the channel has been located, if one is found to exist, it
will be delineated by rapid drilling on 10 or 20 foot centers. A shallow decline
will be driven to the channel, and the material will be processed on site to a
heavy concentrate for delivery to the Monrovia laboratory.
Allocation of Proceeds - Deep Gold Mine
- - ---------------------------------------
The Company has allocated $10,000, assuming receipt of the minimum proceeds
of this Offering to complete its Phase 1 evaluation, and $135,000, assuming
receipt of the maximum proceeds of this Offering, to the exploration and
development of the Deep Gold Mine. The Company estimates that the evaluation
process on this property will take approximately 30 days to complete. The
balance of the funds allocated will be expended at the discretion of the Company
based upon the results of the Phase 1 exploration process and the status of the
Company's financial commitments to other projects being explored and/or
developed at the time.
If only the minimum proceeds from this Offering are realized, and the
results of the Phase 1 exploration process are positive, the Company believes
that the amount allocated to the exploration and development will be sufficient
to place into operation a small pilot plant to process any minerals which are
found. However, additional funds would be required to expand the mining
operations and no assurance can be given that the Company will have or will be
able to obtain such funds if and when they are needed.
The Gold Spur Mine
The Gold Spur Mine, an underground gold mine located on nine lode claims
and one mill site in Coyote Canyon County, on the southwest flank of the
Panamints, in Inyo County, California, is located directly between mines
operated by Canyon Resources and Keystone, a prolific gold producer during the
1980's. The Gold Spur Mine originally operated between 1907 and 1940 and
consists of 11 Lode Claims and 1 mill site on approximately 80 acres. Dr. Ralph
E. Pray, a former officer, director and principal shareholder of the Company,
re-filed the claims in 1973 and again in 1979 as sole owner and subleases the
property to the Company for the sum of $100.00 per year and a work clause
guaranteeing Dr. Pray's involvement in the exploration and development thereof.
As additional consideration, Dr. Pray received shares of Common Stock of the
Company in exchange for the sublease. During the term of the sublease, the
Company will have all of Dr. Pray's right, title and interest in and to the
property and any revenues derived therefrom.
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<PAGE>
In 1994, the Company performed extensive repairs on a two-mile mine road,
using a rented 6-yard loader; rebuilt the aerial tramway mid-point cable tower;
re-timbered the 50-ton main ore bin floor; repaired the stationary aerial
tramway engine; and rebuilt the facilities operating the freshwater well on the
property. About 3,000 lbs. of heavy timber was delivered to the mine, most of
which was obtained from freeway repair crews following the Northridge,
California earthquake. The total cost expended on this work by the Company was
approximately $14,500.00.
Approximately 200 tons of material was drilled and stockpiled by the
Predecessor Company in 1991. This material lies in the mine awaiting transport
to either a millsite established by the Company or to a nearby milling operation
for extraction and treatment. The camp is at the base of the mountain, 600 feet
below. A small mine and mill operation could be fabricated immediately,
utilizing existing facilities.
The property is already equipped with a fresh water well and tanks, basic
housing facilities, an improved access road, septic system, buried utilities for
gas and water, main ore bins, a cable-type ore delivery system from the main
portal, structural timbers, a 225 CFM air compressor and security dates at the
main access road.
The Gold Spur mine was at one time considered part of a Wilderness Study
area, but was removed from the same in 1994 and is, therefore, no longer subject
to the federal rules and regulations regarding such an area.
The validity of unpatented mining claims, depends, to an extent upon
numerous circumstances and factual matters, many of which are discoverable of
record or by other available means, and is subject to many uncertainties of
existing law and its applications. One of the requirements of initiating a valid
mining claim is that the claim be staked on a mineralized area. The Gold Spur
Mine was, in the opinion of the Company, mineralized to an extent sufficient to
meet government requirements and common mining industry practice. However,
further Company exploration and mineral assessments performed by government
agencies may indicate that these claims are not sufficiently mineralized and may
later be abandoned or determined to be invalid because of insufficient
mineralization. The Company intends to perform the annual assessment work, as
well as comply with state and federal regulations regarding this claim, until
full exploration of potential mineralization can be assessed.
Upon completion of this Offering, the Company intends to continue with its
exploratory work in the upper workings of the mine using the newly repaired
aerial tramway system. The Company also intends to start the repair of the
surface mine rail system, utilizing the timbers delivered to the mine in 1994.
Mine product, assuming any valuable minerals exist, will be stockpiled during
the exploration of the present underground workings. The purpose of this
exploratory effort will be to establish that there is a sufficient amount and
grade of minerals to warrant placing the mine into production. The existing
exposed veins will be explored, measured, tested and assayed during this
exploration process.
24
<PAGE>
From the results of the exploration process, the Company intends to prepare
a complete economic evaluation for presentation to the Company's Board of
Directors who will make the final decision whether to expand mining activities
on the property. There is no assurance the Company will be able to locate any
valuable minerals at the Gold Spur Mine, or if any are found, that they will be
able to be successfully removed and/or sold profitably, or at all.
Allocation of Proceeds - Gold Spur
- - ----------------------------------
In the event only the minimum received from the offering, the Company will
delay expending funds for the production of the Gold Spur until such time as it
has completed its evaluation of the other properties in its portfolio. The
Company my seek a joint venture partner or develop the property from income from
operations. The Company has allocated $480,000, assuming receipt of the maximum
proceeds of this Offering, to the exploration and development of the Gold Spur
Mine, subject to completion of the Phase 1 evaluation process. The Company
estimates that the cost for the evaluation process on this property will be
approximately $10,000 and should take approximately 30 days to complete. The
balance of the funds allocated will be expended at the discretion of the Company
based upon the results of the Phase 1 exploration process and the status of the
Company's financial commitments to other projects being explored and/or
developed at the time.
Promontorio
The Promontorio property is designated as the "La Campana" and is located
35 miles northwest of the City of Durango in the municipality of El Oro, Mexico,
at Latitude 25.13 North and Longitude 105.09 West. The actual property is 13
kilometers north of the mining city of Promontorio and consists of approximately
135 acres of mill tailings.
On January 8, 1992, Dr. Ralph E. Pray, a former officer, director and
principal shareholder of the Company, entered into an Agreement with Jose A.
Echenique, an unrelated third party, whereby Dr. Pray acquired the rights to
treat and/or remove the mill tailings at the Promontorio. Dr. Pray has no
possessory rights to the property; merely the tailings on the property. The term
of the Agreement is for a period of ten years and provides for a royalty payment
to Mr. Echenique of 5% of any gross revenues derived from the tailings. Mr.
Echenique retains full ownership in the land and improvements thereon, but the
same is fully available to Dr. Pray during the term of the Agreement. The
Company subleases the rights to the mill tailings from Dr. Pray for the sum of
$100.00 U.S. per year. As additional consideration, Dr. Pray received shares of
Common Stock of the Company in exchange for the sublease. During the term of the
sublease, which extends from 1992 to 2002, the Company will have all of Dr.
Pray's right, title and interest in and to the mill tailings and any revenues
derived therefrom.
The mill tailings lie behind the Promontorio Dam, built in 1890, and were
washed in behind the dam by repeated rainfall across upstream Promontorio silver
cyanide mill tailings. This fill material reaches within one foot of the stone
structure top of the dam. In 1994, while under lease to Dr. Pray, a crew of six
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men removed 700 lbs. of samples from the 1880-1915 tailing deposit and delivered
them to the Mineral Research Laboratory, owned by Dr. Pray since 1967. Tests
were conducted at the lab to establish the feasibility of upgrading the material
by gravity before chemical processing as previous efforts to extract the silver
contained in the Promontorio tailings by unrelated third parties had proven not
to be economically viable. It is the Company's opinion that the low recovery
rates using standard cyanide extraction have been the result of a lack of
understanding of the presence of manganese within the mineral structure. The
manganese effectively blocks the action of the cyanide. The Company believes
that the solution is to first separate the manganese and then use conventional
cyanide techniques to extract the silver materials. Due to lack of finances,
however, the Company has only performed laboratory tests to substantiate its
theories relative to the presence and actions of the manganese.
Although Dr. Pray has held the lease to the Promontorio since January 1992,
and has performed extensive laboratory testing and sampling of the Promontorio,
he has never attempted to fully explore or develop the property and extract any
minerals due to a lack of funding. The proceeds from this Offering will afford
Dr. Pray and the Company an opportunity to determine the economic potential of
this property.
Upon the successful completion of this Offering, the Company intends to
place a small pilot plant in operation to perform scale-up tests and make final
adjustments to the extraction process. The tailings behind the massive stone dam
and the tailings still retained on the original site will be chemically treated
to first remove the manganese oxide masking the silver, followed by lime
addition and agitation cyanide leaching to remove the silver.
Access to the property is via an existing mining and logging 17 kilometer
road from the village at the base of the mountain to the dam. While this access
road is currently passable, some improvements will have to be made in order for
the Company to be able to transport the equipment and machinery necessary to
conduct its extraction operations. The Company has estimated the cost to improve
the road for the pilot plant to be approximately $30,000.00. The Company is
hopeful that some of these costs will be shared with the local logging
companies; however, there is no assurance that this will be the case and the
Company is, therefore, prepared to pay the entire amount. The Federal Government
in Mexico has offered to supervise the repairs. Upon completion of the repairs
to the access road, the Company intends to set up a pilot plant to run 24 hours
per day at the Monrovia laboratory facility owned and operated by Dr. Pray to
enable proper tank size determination, utilizing the 700 lbs. of samples
remaining at the lab. The Company intends to utilize portable power generation
equipment for its extraction operation at this site.
The Company is also researching whether the extracted manganese may have
commercial value as a byproduct of the proposed process and intends to fully
explore such possibility as a means of generating additional revenues.
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Allocation of Proceeds - Promontorio
- - ------------------------------------
In the event only the minimum proceeds are raised in this Offering,
exploration and development of the Promontorio will be abandoned until further
funds are generated by the Company, either by revenues from other properties, or
from additional financing.
In the event the maximum proceeds are received in this Offering, the
Company has allocated $285,000 to the exploration and development of the
Promontorio, subject to completion of the Phase 1 evaluation process. The
Company estimates that the cost for the evaluation process on this property will
be approximately $10,000 and should take approximately 30 days to complete. The
balance of the funds allocated will be expended at the discretion of the Company
based upon the results of the Phase 1 exploration process and the status of the
Company's financial commitments to other projects being explored and/or
developed at the time.
Government Regulations
- - ----------------------
Any mineral exploration program undertaken by the Company will be subject
to extensive federal, state and local laws, rules and regulations both in
existence now and future legislation. Such laws, rules and regulations could
cause additional expenses, capital expenditures, restrictions and/or delays in
the proposed exploration and/or the Company's properties.
Most of the Company's properties are under the jurisdiction of the Federal
Bureau of Land Management (the "BLM"). The BLM presently requires that a plan of
operation, which must include tailing disposal information and reclamation
policies for a property, be filed and approved prior to the commencement of any
mining or milling operations. In addition, in some instances, regulatory filings
and approvals must be obtained from other agencies such as the State Mining
Inspectors Office, the Federal Mining Inspectors Office, MSDHA and/or OSHA. The
Company's properties outside the U.S. are no less sensitive to environmental
compliance. The Company fully intends to comply with all laws, rules and
regulations specific to any country, state and/or municipality in which it will
conduct its mining and milling operations. Compliance with such regulations
increases the costs of mining operations.
The Company will also be subject to the U.S. Occupational Safety and Health
Act and various California statutes dealing with working conditions at its mines
and mill sites. The Company intends to fully comply with all such environmental,
health and safety laws, rules, regulations and statutes.
At this time, no specific environmental plans have been disclosed in the
plans of operation filed and/or approved by the Company on any of its properties
and, therefore, no specific environmental concerns have been addressed herein.
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<PAGE>
Employees
- - ---------
The Company intends to use the services of subcontractors for all drilling,
exploration and site construction. The only direct employees of the Company will
be its officers and directors.
Management's Discussion and Analysis of Financial Condition and Results of
- - --------------------------------------------------------------------------------
Operation
- - ---------
The Company has not yet commenced its mining operations and, therefore, has
no income or expenses, except for start-up costs expended by its officers and
directors and loans the Company secured to acquire the foregoing properties and
for operating expenses. (See "FINANCIAL STATEMENTS" and "CERTAIN TRANSACTIONS.")
No dividends have been paid out to date and the Company's directors,
officers and management have received no remuneration for their services, except
Mr. Chaffee, who has received $5,000.00 per month since March 8, 1994.
Predecessor Company
- - -------------------
Fintech, Inc., a predecessor of the Company, was incorporated in the state
of Colorado on December 4, 1984 and changed its name to Summa Metals
Corporation.
In November 1991, Messrs. Chaffee and Pray acquired the right, title and
interest in and to the Predecessor Company, originally called Fintech, Inc., and
changed its name to Summa Metals Corporation. In November, 1991 Messrs. Chaffe
and Pray were officers, directors and principal shareholders of the Predecessor
Company. Some of the mining properties listed above, which the Company acquired
from Messrs. Chaffee and Pray, were also acquired by the Predecessor Company.
The Predecessor Company made no attempts whatsoever to raise any funds to
develop the properties and had no business activities or operations during the
period the Company's officers and directors were involved with it. In 1994,
controlling interest in the Predecessor Company was sold to an unrelated third
party and after due consideration of the properties, the new management of the
Predecessor Company decided not to pursue exploration and development of the
mining properties, or payment therefor, and ownership of the properties reverted
back to Messrs. Chaffee and Pray. The Company then acquired the same mining
properties that the Predecessor Company, under the management and control of
Messrs, Chaffee and Pray had been unsuccessful in developing since 1991, due to
a lack of funds, and is again attempting to raise capital for exploration and
development of the properties. There is no assurance, however, that the Company
will successful in raising the capital or in developing the properties. (See
"MANAGEMENT" and "BUSINESS OF THE COMPANY").
On February 23, 1994, Messrs. Chaffee and Pray, resigned and transferred
all of their right, title and interest in and to 2,400,000 shares of Common
Stock, consisting of 75% of the total issued and outstanding shares in the
Predecessor Company to Mr. Amyn Dahya, an unrelated third party. As
consideration therefor, Mr. Dahya personally loaned the Company $100,000 to be
28
<PAGE>
repaid on or before March 29, 1995, at the rate of 12% interest per annum. The
payment date was subsequently extended for 12 months, and the note was due and
payable on March 29, 1996, and was further extended to October 31, 1998. As
additional consideration for the loan, Mr. Dahya received 225,000 shares of
restricted Common Stock of the Company. (See "CERTAIN TRANSACTIONS.")
The Nevada corporation was formed for several reasons, the most important
of which was its close proximity to the properties being acquired by the Company
and to the laboratory owned by Dr. Pray and heavily utilized by the Company in
its exploration and development of the properties and certain potential tax
benefits realized by corporations doing business in the State of Nevada.
The Predecessor Company's business operations and finances are totally
separate, unrelated and independent from the Company's business operations and
finances. The corporations are both independently owned and operated by
unrelated parties. The only relationship that exists between the Company and the
Predecessor Company involves Mr. Dahya, who is an officer, director and
principal shareholder of the Predecessor Company and is a shareholder and note
holder of the Company.
The Predecessor Company is engaged in the business of developing water
purification systems for under-developed countries and acquiring and exploring
mining properties in South Africa, whereas the Company is engaged in the mining
business in the U.S. and Mexico.
Until April 1, 1994, the Predecessor Company held leases on three (3)
separate mining properties, leased from the Pray Group, which consisted of
Michael M. Chaffee, Dr. Ralph E. Pray and National Metals Company, a corporation
of which Mr. Chaffee is the sole officer, director and shareholder. Mr. Chaffee
is an officer, director and principal shareholder of the Company and Dr. Pray
was an officer, director and principal shareholder of the Company. Messrs
Chaffee and Pray were also, until February 23, 1994, officers, directors and
principal shareholders of the Predecessor Company. However, since the
Predecessor Company did not have the funds to develop the properties or pay the
minimum fees set forth in the Agreement relating to the subject mining
properties on or before April 1, 1994, the Agreement was terminated and the
properties reverted back to their owner, the Pray Group. The Company
subsequently acquired the three (3) mining properties from Messrs. Chaffee and
Pray, who had, subsequent to April 1, 1994 acquired the interests of National
Metals Company in said properties. (See "CERTAIN TRANSACTIONS" and "BUSINESS OF
THE COMPANY.")
MANAGEMENT
----------
Officers and Directors
- - ----------------------
Each director of the Company is elected to a term of one year and serves
until his/her successor is elected and qualified. Each officer of the Company is
elected by the Board of Directors to a term of one year and serves until his/her
successor is duly elected and qualified or until he/she is removed. The Board of
Directors has no nominating, auditing or compensation committees.
29
<PAGE>
The officers and directors of the Company, and further biographical information
concerning them are as follows:
Name and Address Age Position
- - ---------------- --- --------
Michael M. Chaffee 55 Chairman of the Board
1588 Sea Lancer Dr.
Lake Havasu City, Arizona
86403
Raymond Baptista 56 Executive V.P. and Chief
5405 Miracopa Drive Financial Officer and
Simi Valley, CA. 94671 Director
Eric A. Popkoff 43 Vice President Investor
1750 East 23rd Street Relations and Director
Brooklyn, NY 11229
Background Information
- - ----------------------
Michael M. Chaffee - Mr. Chaffee has been the President and Chairman of the
Board of Directors of the Company since inception. From January 1989 to April 1,
1994, Mr. Chaffee was the President and Chief Executive Officer of Summa Metals
Corp., a Colorado corporation engaged in the extraction and processing of metals
and other elements from previously discarded natural mineral deposits. He
recently retired as President, Chief Executive Officer and Chairman of the Board
of Applied Biomedical Sciences, a public company engaged in the business of
developing proprietary products to improve wound care management and a variety
of drug delivery systems. Prior to forming Applied Biomedical Sciences, he held
senior positions as Executive Vice President and Chief Operating Officer of
several large corporations. Mr. Chaffee graduated from the Northrop Institute of
Technology in 1964 with a B.S. Degree in Electronic Engineering and completed
additional graduate work at the University of Southern California in Business
and Biomedical Engineering. He is devoting full time to the business of the
Company.
Raymond Baptista - Mr. Baptista has been the Chief Financial Officer and a
Director of the Company since inception. He will be responsible for all finance,
corporate strategies and business policies. From 1986 to 1994, Mr. Baptista was
the Senior Vice President and Chief Financial Officer for Applied Biomedical
Sciences, a public company engaged in the research and development of
collagen-based biomedical products. Applied Biomedical Sciences was founded by
Michael M. Chaffee, another officer, director and principal shareholder of the
Company. Mr. Baptista has over 25 years experience in the banking industry, both
nationally and internationally. He is a graduate of St. Stanislaus College,
Georgetown, Guyana and the Graduate School of Banking, Pacific Coast Banking
School, University of Washington, Seattle, Washington. He is devoting full time
to the business of the Company.
30
<PAGE>
Eric A. Popkoff - From 1989 to 1994 Mr. Popkoff was a teacher of social studies
and accounting and business practices at various sites in the New York City
Public School system. He is currently an adjunct lecturer in economics at
Brooklyn College, City University of New York. Since 1994 he has been the
President and Chief Executive Officer of Undiscovered Equities Research Corp.,
an information services company located in Brooklyn, New York, which provides
research on request from securities brokers and broker dealers, and distributes
from time to time a written review of selected securities. Since October 1996,
he has been a vice president and director of Atlantis Aquafarm Inc. located in
Brooklyn, New York, which is presently in registration with the Securities
Exchange Commission. Mr. Popkoff holds an MBA in Management and an MBA in
International Business from Baruch College, CUNY.
Executive Compensation
- - ----------------------
None of the officers and/or directors of the Company are party to any
standard arrangements or contracts regarding compensation for their services.
Michael M. Chaffee, President and Chairman of the Board, is the only officer
and/or director receiving compensation for his services. Mr. Chaffee has
received a salary of $5,000.00 per month since the Company's inception on March
8, 1994. There are presently no plans to provide any of the officers and/or
directors of the Company with any pension plan, stock option, annuity, bonus,
insurance, profit-sharing or similar benefit plans. Each of the officers and/or
directors will, however, be reimbursed for any out-of-pocket expenses incurred
on behalf of the Company.
Upon completion of the minimum Offering the following salaries will be paid
to the officers and directors of the Company:
Name Capacities Served Annual Compensation
- - ------------------ ---------------------- -------------------
Michael M. Chaffee President and Chairman $ 80,000.00
of the Board
Raymond Baptista Chief Financial Officer $ 70,000.00
and Director
Eric A. Popkoff Vice-President-Corporate $ 70,000.00
Relations, Director
These salaries will not be retroactive and will only commence upon
completion of the minimum Offering.
There are proposed employment contracts between the Company and Messrs.
Chaffee, Baptista and Popkoff, effective upon the Closing of the minimum
offering. There are no proposed terminations of employment or change-in-control
arrangements between the Company and any of its officers and/or directors.
No Option/SAR Grants or long-term Incentive Plans-Awards have been granted
or awarded to any officers or directors of the Company and there are presently
31
<PAGE>
no plans to implement any such benefits, except as provided in the employment
contract of Mr. Popkoff, which grants him, upon commencement of his employment
by the Company, the option to purchase up to 900,000 shares of the Company's
restricted common stock at a price of $.001 per share.
Indemnification
- - ---------------
Pursuant to the By-Laws of the corporation, the Company has agreed to
indemnify an officer or director who is made a party to any proceeding,
including a law suit, because of his/her position, if he/she acted in good faith
and in a manner he/she reasonably believed to be in the best interest of the
corporation and, in certain cases, may advance expenses incurred in defending
any such proceeding. To the extent that the officer or director is successful on
the merits in any such proceeding as to which such person is to be indemnified,
the Company must indemnify him/her against all expenses incurred, including
attorney's fees. With respect to a derivative action, indemnity may be made only
for expenses actually and reasonably incurred in defending the proceeding, and
if the officer or director is judged liable, only by a court order. The
indemnification is intended to be to the fullest extent permitted by Nevada law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company, pursuant to the foregoing provisions, the Company has
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in said Act and is
therefore. unenforceable.
Office Facilities
- - -----------------
The Company's principal offices are located at 28281 Crown Valley Pkwy, Ste
225 Laguna Niguel, California. on a rent-free basis. Upon successful completion
of this Offering, the Company intends to remain on these premises. The fees to
be charged to the Company for rent will be approximately $735 per month.
The Company also maintains a small field office in Lake Havasu City,
Arizona, on a month-to-month verbal lease and pays $180.00 per month and
utilizes office space at the Mineral Research Laboratoy in Monrovia California
on an "as needed" basis.
PRINCIPAL SHAREHOLDERS
----------------------
The following table sets forth certain information regarding ownership of
the Company's Common Stock as of the date of this Memorandum, and as adjusted to
reflect the sale of the Shares offered hereby, by each officer and director, all
officers and directors as a group, and by all other shareholders who own 5% or
more of the Company's Common Stock.
32
<PAGE>
No. Percent Ownership Percent Ownership
of Before Offering After Offering
Shares Minimum Maximum
------ ------- -------
Michael M. Chaffee 1,050,000 23% 22.4% 20.7%
Raymond C. Baptista 200,000 4.4 4.3 3.9
Anchor Holdings Corp. 727,500 16 15.5 14.4
Bruce Cooper 500,000 11 10.7 9.9
All Officers and
Directors as a 1,250,000 27.4% 26.7 24.7
Group (2)
Future Sales by Present Shareholders
- - ------------------------------------
The aggregate of 4,555,000 shares of Common Stock held by the present
shareholders are deemed "restricted securities, as that term is defined in Rule
144 of the Rules and Regulations of the SEC promulgated under the Act ("Rule
144"). Under Rule 144, such shares can be publicly sold, subject to volume
restrictions and certain restrictions on the manner of sale, commencing two
years after their acquisition. Sales of shares by "affiliates" are also subject
to volume restrictions and certain other restrictions pertaining to the manner
of sale, all pursuant to Rule 144.
The 130,000 (510,000) Shares offered hereby are not "restricted securities"
under Rule 144 and can be publicly sold without compliance with Rule 144,
assuming there is a market therefor, of which there can be no assurance.
DESCRIPTION OF SECURITIES
-------------------------
Common Stock
- - ------------
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, par value $.001 per share. The holders of Common Stock (i) have
equal ratable rights to dividends from funds legally available therefor, when,
as and if declared by the Board of Directors, of the Company; (ii) are entitled
to share ratably all of the assets of the Company available for distribution to
holders of Common Stock upon liquidation, dissolution or winding up of the
affairs of the Company; (iii) do not have preemptive, subscription or conversion
- - --------------------------------------------------------------------------------
(2) Assumes that all of the Units offered hereby are sold, of which there can be
no assurance, and that Eric A. Popkoff does not exercise his option to purchase
Shares in the event his employment contract becomes effective, and that the
present shareholders do not purchase any Units in this Offering. In any of such
events, their percentage ownership would increase accordingly. (See "RISK
FACTORS-CONTROL OF THE COMPANY", "DILUTION" and "OFFERING.")
33
<PAGE>
rights and there are no redemption or sinking fundprovisions or rights
applicable thereto; and (iv) are entitled to one non-cumulative vote per share
on all matters on which stockholders may vote. All shares of Common Stock now
outstanding are fully paid for and non-assessable and all shares of Common Stock
which are the subject of this Offering, when issued, will be fully paid for and
nonassessable.
The Board of Directors is authorized to issue additional Common Stock
within the limits authorized by the Company's Articles of Incorporation and
Bylaws.
The foregoing description concerning the Common Stock of the Company does
not purport to be complete. Reference is made to the Company's Articles of
Incorporation and Bylaws, as well as the applicable statutes of the State of
Nevada, for a more complete description of the rights and liabilities of
shareholders.
Units
- - -----
The Company is offering a minimum of 130,000 and a maximum of 510,000 Units
of Common Stock, par value $.001, pursuant to this Prospectus, at a price of
$6.00 per Unit. No fractional Units may be purchased. Each Unit consists of one
Share of Common Stock (the "Common Stock" or "Shares") and two redeemable common
stock purchase warrants ("Warrants"), designated "A Warrants" and "B Warrants".
Each of the A Warrants entitles the registered holder hereof to purchase one
share of the Common Stock at a price of $8.00, subject to adjustment in certain
circumstances at any time after the Warrants become separately tradeable, until
12 months from the date of this Prospectus. Each of the B Warrants entitles the
registered holder therof to purchase one share of the Common Stock at a price of
$7.00, subject to adjustment in certain circumstances, at any time after the
exercise of the A Warrant related to the Units until 24 months from the date of
this Prospectus. The Common Stock and the Warrants included in the Units will
not be separately transferable until 90 days after the date of this Prospectus
or such earlier date as the Company may determine.
Each of the 510,000 A Warrants sold in this offering will entitle the
registered holders thereof to purchase one share of the Common Stock at an
aggregate price of $8.00, subject to adjustment in certain circumstances, at any
time after the Warrant becomes separately tradeable, until 12 months from the
date of this Prospectus. Each of the 510,000 B Warrants will entitle the
registered holders thereof to purchase one share of Common Stock at a price of
$7.00, subject to adjustment in certain circumstances, at any time after
exercising the A Warrant related to the Units, until 24 months from the date of
this Prospectus or such earlier date as the Company may determine. The shares of
Common Stock underlying the Warrants when issued upon the exercise thereof and
payment of the purchase price, will be fully paid and nonassessable.
The Warrants may be exercised upon the surrender of the Warrant Certificate
on or prior to the expiration of the exercise period, with the form of election
to purchase included on the Warrant Certificate properly complete and executed,
together with payment of the exercise price to the Warrant Agent. No fractional
shares will be issued upon the exercise of the Warrants. The Warrants do not
34
<PAGE>
confer upon the holders thereof any voting rights or any other rights as
shareholders of the Company. Upon notice to the Warrant holders, the Company has
the right to reduce the exercise price or extend the expiration date of the
Warrants. The exercise price and number of shares of Common Stock issuable upon
the exercise of the Warrants are subject to adjustment upon the occurrence of
certain events, including stock splits, combinations and reclassification.
The exercise price of the Warrants is arbitrary and there can be no
assurance that the value of the Common Stock will ever rise to a level where
exercise of the Warrants would be of any economic benefit to the Warrant holder.
In order for the holder to exercise the Warrants, there must be a current
registration statement on file with the Securities and Exchange Commission and
various state securities commissions to continue registration of the shares of
Common Stock underlying the Warrants. The Company intends to file an amendment
to this Registration Statement covering the Warrants at a time when the market
price of the Common Stock is higher than the exercise price of the Warrants. The
filing of an amendment to this Registration Statement could result in
substantial expense to the Company, and there can be no assurance that the
Company will be able to file an amendment to this Registration Statement. The
Company will make reasonable efforts and believes that is will be able to
qualify the shares of Common Stock underlying the Warrants for sale in those
states where the Units are offered. The Warrants may be deprived of any value if
a current prospectus covering the Shares issuable upon exercise thereof is not
kept effective, if the underlying Shares are not qualified in states in which
the Warrant holder resides, or if the holder is unable to sell the Warrants.
Warrant holders who move to states in which the Warrants are not qualified for
sale may not be able to exercise their Warrants. The Warrants will be issued
subject to the terms and conditions of a Warrant Agency Agreement between the
Company and American Securities Transfer, Inc. of Denver, as Warrant Agent.
Non-Cumulative Voting
- - ---------------------
The holders of shares of Common Stock of the Company do not have cumulative
voting rights, which means that the holders of more than 50% of such outstanding
shares, voting for the election of directors, can elect all of the directors to
be elected, if they so choose, and, in such event, the holders of the remaining
shares will not be able to elect any of the Company's directors. After this
Offering is completed, the present shareholders will own 97% (90%) of the
outstanding shares. (See "PRINCIPAL SHAREHOLDERS.")
Dividends
- - ---------
As of the date of this Prospectus, the Company has not paid any cash
dividends to shareholders nor does it anticipate payment of any such cash
dividends in the foreseeable future. The declaration of any future cash dividend
will be at the discretion of the Board of Directors and will depend upon
earnings, if any, capital requirements and the financial position of the
Company, general economic conditions, and other pertinent actors.
35
<PAGE>
Reports to Shareholders
- - -----------------------
The Company will furnish annual reports to shareholders containing audited
financial statements of the Company, and may furnish unaudited quarterly
financial statements.
Transfer Agent
- - --------------
The Company has appointed American Securities Transfer, Incorporated,
Denver, Colorado, as the transfer agent for its Common Stock.
CERTAIN TRANSACTIONS
- - --------------------
In April, 1994, the Company issued 1,050,000 shares of restricted Common
Stock to Michael M. Chaffee, an officer, director and principal shareholder of
the Company and 1,000,000 shares of restricted Common Stock to Dr. Ralph E.
Pray, who at that time was an officer, director and principal shareholder, in
exchange for assets (mining properties)owned by Messrs. Chaffee and Pray prior
to becoming officers, directors and principal shareholders of the Company. (See
"BUSINESS OF THE COMPANY", "PRINCIPAL SHAREHOLDERS", "MANAGEMENT" and "FINANCIAL
STATEMENTS.")
In a private sale of securities in March, 1994, the Company issued 225,000
shares of restricted Common Stock to Amyn Dahya, an unrelated third party, as
additional consideration for a loan in the amount of $100,000.00, a portion of
which was used to acquire some of the current properties owned by the Company.
Mr. Dayha does not have registration rights with respect to any of the shares
purchased. The loan was due and payable on March 29, 1995 and accrues interest
at the rate of 12% per annum until paid in full. The payment date was
subsequently extended and the note is now due on October 31, 1998. (See
"PRINCIPAL SHAREHOLDERS" and "FINANCIAL STATEMENTS.")
In a private sale of securities in March, 1995, the Company issued
2,200,000 shares of restricted Common Stock to Anchor Holdings, Inc., an
unrelated third party, in exchange for $2,200.00 in cash. Anchor Holdings, Inc.
does not have registration rights with respect to any of the shares purchased.
(See "PRINCIPAL SHAREHOLDERS" and "FINANCIAL STATEMENTS.")
On March 7, 1995, the Company entered into a Loan Agreement with C.W. and
Neva B. Lewis ("Lewis"), unrelated third parties, wherein Lewis advanced
$20,000.00 to the Company. In consideration for the loan, the Company will pay
Lewis the sum of $50,000 from the proceeds of this Offering and has issued
30,000 shares of its restricted Common Stock to Lewis. (See "USE OF PROCEEDS.")
On March 10, 1995, the Company entered into a Purchase Agreement with Big
Mike Limited Partnership to acquire all right, title and interest in and to
certain unpatented mining claims in Pershing County, Nevada. The purchase price
for the property was $125,000.00, and 150,000 shares of the Company's common
stock upon Closing of the transaction. The purchase price was to be paid as
follows: $25,000 upon signing the contract ; the balance of $100,000 and the
36
<PAGE>
150,000 shares upon closing of the transaction. Because of the currently reduced
price of copper, the Company has elected not to complete the purchase, and has
forfeited the $25,000 down payment. The Company has no further liability
pursuant to the contract.
The Company anticipates using the services of Mineral Research Laboratory
for all of its primary geological sampling, testing and ore certification.
Mineral Research Laboratory is wholly owned by Dr. Ralph Pray, a former officer,
director and principal shareholder of the Company. Dr. Pray may be required to
hire additional personnel to work directly on the Company's projects and the
salaries of all such personnel would be reimbursed by the Company for the hours
devoted to the business of the Company. The Company estimates that the amount
expended to Mineral Research Laboratory could be between $2,000 and $3,000 per
month, depending on the work load and number of additional employees required.
Any such services obtained from the Mineral Research Laboratory and/or Dr. Pray
will be obtained at rates and on conditions competitive in the marketplace and
favorable to the Company. (See "MANAGEMENT", "BUSINESS OF THE COMPANY" and
"CONFLICTS OF INTEREST".)
CONFLICTS OF INTEREST
---------------------
Certain conflicts of interest presently exist from the standpoint that one
of the former Officers of the Company is directly involved in and owns another
business which will be utilized by the Company and for which he will receive
compensation from the Company. Dr. Ralph E. Pray, a former officer, director and
principal shareholder of the Company, is an officer, director and principal
shareholder of Mineral Research Laboratory in Monrovia, California, a facility
which will act as the Company's primary geological sampling, testing and
certification center. (See "RISK FACTORS - CONFLICTS OF INTEREST", "CERTAIN
TRANSACTIONS", "MANAGEMENT", "USE OF PROCEEDS" and "PRINCIPAL SHAREHOLDERS.")
The foregoing arrangements with Dr. Pray was made by the Company and did
not result from arm's-length negotiations. Accordingly, this arrangement could
be deemed as a conflict of interest, not only from the standpoint that Dr. Pray
will be paid from proceeds of this Offering, but also to the extent that he will
be devoting his time and energy to other companies and projects which may
compete with the Company. (See "RISK FACTORS - CONFLICTS OF INTEREST", "CERTAIN
TRANSACTIONS", "MANAGEMENT", "USE OF PROCEEDS" and "PRINCIPAL SHAREHOLDERS.")
LITIGATION
----------
The Company is not a part to any pending litigation and, to the best of its
knowledge, none is contemplated or threatened.
ADDITIONAL INFORMATION
----------------------
The Company has filed with the Securities and Exchange Commission
("Commission"), 450 Fifth Street N.W., Washington, D.C. 20549, an SB-2
Registration Statement under the Securities Act of 1933, as amended, with
respect to the securities offered by this Prospectus. This Prospectus omits
37
<PAGE>
certain information contained in the Registration Statement. For further
information, reference is made to the Registration Statement and the Exhibits
and Schedules filed therewith. Statements contained in this Prospectus as to the
contents of any document referred to are not necessarily complete, and where
such document is an Exhibit to the Registration Statement, each such statement
is deemed to be qualified and amplified in all respects by the provisions of the
Exhibit. Copies of the complete Registration Statement, including Exhibits, may
be examined at the Securities and Exchange Commission offices in Washington,
D.C. Copies of the Registration Statement may be obtained upon payment of the
usual fees prescribed by the Commission for reproduction and handling.
EXPERTS
-------
The audited financial statements of the Company as of December 31, 1995,
1996 and October 31, 1997, included in this Prospectus, have been examined by
Luxenberg & Associates, Certified Public Accountants, 22431 Antonio Parkway,
#B160-457, Rancho Santa Margarita, California 92688. The audited financial
statements of the Predecessor Company as of its fiscal years ending September
30, 1993 and 1992, included in this Prospective, have been examined by Albright,
Persing & Associates, Ltd, 1025 Redgeview Drive, Suite 300, Reno, Nevada 89509.
LEGAL MATTERS
-------------
The law office of Steven L. Siskind, 645 Fifth Avenue, Suite 403, New York,
New York 10022, Telephone (212) 750-2002, has acted as legal counsel for the
Company regarding the validity of the securities offered hereby.
FINANCIAL STATEMENTS
--------------------
The Company's fiscal year ends December 31. The audited financial
statements for the Company for the period October 31, 1997, December 31, 1996
and December 31, 1995 follow immediately.
38
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
---------------------------------------
The Stockholders
Summa Metals Corp.
Lake Havasu City, Arizona
I have audited the accompanying balance sheet of Summa Metals Corp. as of
October 31, 1997 and December 31, 1996 and 1995 and the related statements of
operations, changes in stockholders equity and cash flows for the periods
January 1, 1995 through October 31, 1997. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of Summa Metals Corp. as of
October 31, 1997 and December 31, 1996 and 1995, and the results of its
operations, changes in stockholders equity and its cash flows for the period
January 1, 1995 through October 31, 1997, in conformity with generally accepted
accounting principles.
The aforementioned financial statements have been prepared using generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. As discussed in the attached notes, the Company has been in the
exploration stage since its inception on March 8, 1994. The Company has no
present source of income and will require financial assistance to pursue its
objectives and meet obligations as they become due. Realization of a major
portion of the assets is dependent upon the Company's ability to meet its future
financing requirements, and the success of future operations, the outcome of
which cannot be determined at this time.
/s/ Luxenberg & Associates
November 24, 1997
Rancho Santa Margarita, California
<PAGE>
SUMMA METALS CORP.
(an Exploration Stage Company)
Balance Sheets
December 31, December 31, October 31,
1995 1996 1997
----------- ----------- ----------
ASSETS
CURRENT ASSETS
Cash $ 17 $ 1,694 $ 30
-------- --------- ---------
TOTAL CURRENT ASSETS 17 1,694 30
Leasehold deposit - Notes 2 and 4 25,000 30,000 30,000
Due from stockholders 2,050 2,050 2,050
Syndication costs - 19,000 27,073
Investments in leasehold - Notes 2 and 3 - - -
-------- --------- ---------
TOTAL ASSETS $ 27,067 $ 52,744 $ 59,153
======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable - stockholder - Note 3 $102,500 $ 155,200 $ 173,200
Note payable - stockholder - Note 3 20,000 20,000 20,000
Accounts payable 2,500 3,595 3,595
Accrued interest payable - Note 3 21,000 33,000 43,000
-------- --------- ---------
TOTAL LIABILITIES - all current 146,000 211,795 239,795
-------- --------- ---------
COMMITMENTS AND CONTINGENCIES - Note 4
STOCKHOLDERS' EQUITY
Common stock - 25,000,000 shares
authorized, par value $.001,
2,325,000 and 4,555,000 issued
and outstanding - Note 2 4,555 4,555 4,555
Accumulated deficit (123,488) (163,606) (185,197)
-------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY (118,933) (159,051) (180,642)
-------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 27,067 $ 52,744 $ 59,153
======== ========= =========
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
SUMMA METALS CORP.
(an Exploration Stage Company)
Statements of Operations
For The Year For The Year For the Ten
Ended Ended Months Ended
Dec. 31, 1995 Dec. 31, 1996 October 31, 1997
------------- ------------- ----------------
Interest income $ 99 $ - $ -
------------- ------------- ------------
Expenses
On-site operating expenses 12,000 12,720 3,890
General and administrative 18,802 14,398 7,701
Interest 12,000 12,000 10,000
------------- ------------- ------------
Total expenses 42,802 40,118 21,206
------------- ------------- ------------
Net loss $ (42,703) $ (40,118) $ (21,591)
============= ============= ============
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
SUMMA METALS CORP.
(an Exploration Stage Company)
Statements of Changes in Stockholders' Equity
For The Period January 1, 1995 through October 31, 1997
Common Stock
Par Value $.001
--------------- Accumulated
Shares Amount Deficit
--------- ------- -----------
Balance - December 31, 1994 2,325,000 $ 2,325 $ (80,785)
Issuance of common stock
(March 1995 - cash) 2,200,000 2,200 -
Issuance of common stock
(March 1995 - note payable)
Note 3 30,000 30 -
Net loss - - (42,703)
--------- ------- ----------
Balance - December 31, 1995 4,555,000 4,555 (123,488)
Net loss - - (40,118)
Balance - December 31, 1996 4,555,000 4,555 (163,606)
Net loss (21,591)
--------- ------- ----------
Balance - October 31, 1997 4,555,000 $ 4,555 $ (185,197)
======== ======= ==========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SUMMA METALS CORP.
(an Exploration Stage Company)
Statements of Cash Flows
For The Period January 1, 1995 through October 31, 1997
<TABLE>
<CAPTION>
For The Year For The Year For The Ten
Ended Ended Months Ended
Dec. 31, 1995 Dec. 31, 1996 Oct. 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (42,703) $ (40,118) $ (21,591)
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in accounts payable 2,500 1,095 -
Increase in interest payable 12,000 12,000 10,000
------------- ------------- -------------
Cash consumed by operating activities (28,203) (27,023) (11,591)
------------- ------------- -------------
Cash Flows From Investing Activities:
Leasehold deposit (25,000) (5,000) -
------------- ------------- -------------
Cash consumed by investing activities (25,000) (5,000) -
------------- ------------- -------------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 2,230 - -
Syndication costs - (19,000) (8,073)
Proceeds from notes payable - stockholders 22,500 52,700 18,000
------------- ------------- -------------
Cash provided from financing activities 24,730 33,700 9,927
------------- ------------- -------------
Increase in cash and cash equivalents (28,473) 1,677 (1,664)
Cash balance - beginning 28,490 17 1,694
------------- ------------- -------------
Cash balance - ending $ 17 $ 1,694 $ 30
============= ============= =============
Cash paid for interest and income taxes are as follows:
Interest $ - $ - $ -
============= ============= =============
Income taxes $ - $ - $ -
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SUMMA METALS CORP.
(an Exploration Stage Company)
Notes to Financial Statements
For The Period January 1, 1995 through October 31, 1997
THE COMPANY
Summa Metals Corp. (the Company) was incorporated on March 8, 1994, in the
state of Nevada, for the purpose of drilling and exploration of precious
metals on land that it currently has rights to and future properties it
intends to obtain. The Company has been in the development and exploration
stage since its formation.
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The following is a summary of the accounting policies and practices of the
Company:
Accounting method - The Company utilizes the accrual method of accounting
for financial statement reporting and income tax filing purposes.
Accounting for investments - Investments are accounted for using the cost
method of accounting.
NOTE 2 - INVESTMENT IN LEASEHOLD
The investment in leasehold consists of subleased rights to mine four
separate parcels of real property. One of the leasehold investments consists
of the subleased rights to certain mill tailings, primarily of gold and
silver, located in Durango, Mexico. The second and third investments are the
subleased rights to explore and mine properties located in Northern
California. The fourth investment is the subleased rights to mine a
currently non-operating, unpatented load and placer mining claim located in
Pershing County, Nevada.
During April 1994, the Company acquired the first three investments from two
of its stockholders. The Company issued 2,050,000 shares of its common stock
in exchange for the investment. The investment has been recorded at the cost
basis of the stockholders in accordance with generally accepted accounting
principles. Since the costs incurred by the stockholders would have been
operating expenses if the Company had incurred them, the cost basis for
these rights is zero and has been recorded at zero on the Company's balance
sheet.
The fourth investment was purchased in March 1995 for total consideration of
$125,000 (cash of $25,000 plus a note payable of $100,000, see note 3" )
plus an agreement on behalf of the Company to issue 150,000 shares of
restricted stock upon the payment of the note payable. If the note payment
is not paid when due, the seller has the option to terminate the agreement
and keep the $25,000 down payment. The terms of the agreement require that
in the event of termination, the Company will not issue the 150,000 shares
of stock.
F-5
<PAGE>
NOTE 3 - NOTES PAYABLE
The notes payable - stockholders consists two notes to two different
stockholders. The first note, in the amount of $100,000, bears interest at
an annual rate of twelve percent (12%). The note is payable to one of the
stockholders of the Company. The entire amount of principal and interest is
due at maturity of the note, October 1, 1998. As of October 31, 1997,
$43,000 of interest has been accrued on the note payable.
The second stockholder note, in the amount of $20,000, arose in connection
with the purchase by the stockholder of 30,000 shares of Company stock. The
terms of the note require a lump sum repayment of $50,000 upon receipt of
funds from the public offering of the Company. As of October 31, 1997, no
interest has been accrued on this note.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company has entered into an agreement to acquire a leasehold interest in
a mining claim located in Pershing County, Nevada (See note 2). The terms of
the agreement require that the Company make a payment of $100,000 to
complete the acquisition. As of September 30, 1995, the Company has made a
non-refundable deposit of $25,000 for the option to acquire the mine. If the
Company decides to complete the transaction, it will need to make a final
payment of $100,000 on or before the extended due date of October 1, 1998.
F-6
<PAGE>
SUMMA METALS CORPORATION
FINANCIAL STATEMENTS
MARCH 7,1994 AND
SEPTEMBER 30, 1993 AND 1992
<PAGE>
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT F-9
BALANCE SHEETS F-10
STATEMENTS OF OPERATIONS F-12
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY F-13
STATEMENTS OF CASH FLOWS F-16
NOTES TO FINANCIAL STATEMENTS F-18
F-8
<PAGE>
Albright, Persing & Associates, Ltd
CERTIFIED PUBLIC ACCOUNTANTS
1025 Ridgeview Dr., Suite 300
Reno, Nevada 89509
Phone (702) 826-5432
FAX (702) 826-5510
INDEPENDENT AUDITORS' REPORT
Board of Directors
Summa Metals Corporation
We have audited the accompanying balance sheets of Summa Metals
Corporation (a development stage company), as of March 7, 1994 and September 30,
1993 and 1992 and the related statements of operations, changes in stockholders'
equity and cash flows for the period December 4, 1984 (date of inception) to
March 7, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in aLl material respects, the financial position of Summa Metal Corporation as
of March 7, 1994 and September 30, 1993 and 1992, and the results of its
operations, changes in stockholders' equity and its cash flows for the period
December 4, 1984 (date of inception) to March 7, 1994, in conformity with
generally accepted accounting principles.
The aforementioned financial statements have been prepared using generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. As discussed in Note 2, the Company has been in the development stage
since its inception on December 4, 1984. The Company has no present source of
income and will require financial assistance to pursue its objectives and meet
obligations as they become due. Realization of a major portion of the assets is
dependent upon the Company's ability to meet its future financing requirements,
and the success of future operations, the outcome of which cannot be determined
at this time.
/s/ Albright, Persing & Associates, Ltd.
Reno, Nevada
December 20, 1995
F-9
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
MARCH 7, 1994 AND
SEPTEMBER 30, 1993 AND 1992
(See Accountants Report)
ASSETS
March 7, September 30, September 30,
1994 1993 1992
-------- ------------- -------------
Current Assets
Cash in bank $ - $ - $ -
------- ------- -------
Total Current Assets - - -
------- ------- -------
Investments
Investment in mineral
properties (Note 3) 150,000 150,000 150,000
------- ------- -------
Total Investments 150,000 150,000 150,000
------- ------- -------
Total Assets $150 000 $150 000 $150 000
======= ======= =======
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
MARCH 7,1994 AND
SEPTEMBER 30,1993 AND 1992
(See Accountants Report)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 7, September 30, September 30,
1994 1993 1992
------- ------------ ------------
Current Liabilities
Accounts payable $ 4,300 $ - $ -
Accrued interest payable
(Note 5) - - -
Loans payable (Note 5) - - -
-------- -------- --------
Total Liabilities 4,300 - -
-------- -------- --------
Stockholders' Equity
Preferred stock, $. 10 par
value: Authorized
20,000,000 shares;
issued and outstanding,
none. - - -
Common stock, $.04 par
value: Authorized
300,000,000 shares;
issued and outstanding,
3,244,296 shares 129,765 129,765 129,765
Additional paid-in capital 216,740 216,740 216,740
Retained deficit (200,805) (196,505) (196,505)
-------- -------- --------
Total Stockholders' Equity
(Deficit) 145,700 150,000 150,000
-------- -------- --------
Total Liabilities and
Stockholders' Equity
(Deficit) $ 150,000 $ 150,000 $ 150,000
======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIOD DECEMBER 4, 1984 (DATE OF INCEPTION)
TO MARCH 7, 1994
(See Accountants Report)
12-4-84
Period Year Year (date of
Ended Ended Ended inception)
3-7-94 9-30-93 9-30-92 to 3-7-94
------- ------- ------- ---------
Revenues $ $ $ $ 160
------- ------- ------- --------
Expenses
General and Admin-
istrative 4,300 - - 59,670
Bad debts - related
parties (Note 5) - - - 121,000
Interest - - - 11,295
------- ------- ------- --------
4,300 - - 191,965
------- ------- ------- --------
Net Loss Before Other
Income (Expense) (4,300) - - (191,805)
Loss on Options - - - (9,000)
------- ------- ------- --------
Net Loss $ (4,300) $ - $ - $(200,805)
======= ======= ======= ========
Loss per Common Share $ (.001) $ - $ - $ (.06)
======= ======= ======= ========
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 4, 1984
(DATE OF INCEPTION)
TO MARCH 7, 1994
(See Accountants Report)
Common Stock Deficit
------------ Accumulated
Par Value $0.04 Additional During
--------------- Paid In Development
Shares Amount Capital Stage
------ ------ ------- -----
Balance, 12-4-84
(Date of Inception) - $ - $ - $ -
Issuance of common
stock (restricted)
December 4, 1984 16,225,000 1,622 10,528 -
March 29, 1985 1,375,000 138 5,362 -
Net loss for period (217)
---------- ------ -------- --------
Balance at September 30, 1985 17,600,000 1,760 15,890 (217)
Public offering 10,276,500 1,028 147,816 -
Net loss for year - - - (183,075)
---------- ------ -------- --------
Balance at September 30, 1986 27,876,500 2,788 163,706 (183,292)
Net loss for year - - - (4,218)
---------- ------ -------- --------
Balance at September 30, 1987 27,876,500 2,788 163,706 (187,510)
Net loss for year - - - (3,980)
---------- ------ -------- --------
Balance at September 30, 1988 27,876,500 2,788 163,706 (191,490)
Net loss for year - - - (2,165)
---------- ------ -------- --------
Balance at September 30, 1989 27,876,500 2,788 163,706 (193,655)
Net loss for year - - - (2,527)
---------- ------ -------- --------
Balance at September 30, 1990 27,876,500 2,788 163,706 (196,182)
Net loss for year - - - (323)
---------- ------ -------- --------
Balance at September 30, 1991 27,876,500 2,788 163,706 (196,505)
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
SUMMA METALS CORPORATION (A DEVELOP STAGE COMPANY)
STATEMEENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD DECENMER 4, 1984
(DATE OF INCEPTION)
TO MARCH 7,1994
(See Accountants Report)
<TABLE>
<CAPTION>
Common Stock Deficit
------------ Accumulated
Par Value $0.04 Additional During
--------------- Paid In Development
Shares Amount Capital Stage
------ ------ ------- -----
<S> <C> <C> <C> <C>
Reverse stock split on a 1 to
400 basis on November 29,
1991 (Note 4) (27,806,626) - - -
Issuance of 774,422 shares of
common stock to share-
holders to eliminate the
Company's debt to them
(Note 5) 774,422 30,977 (966) -
Issuance of 2,400,000 shares of
common stock in exchange
for assignment of interest
in certain mining properties
(Note 3) 2,400,000 96,000 54,000 -
---------- ------- ------- -------
Balance at September 30, 1992 3,244,296 129,765 216,740 (196,505)
Voluntary return of 2,400,000
shares of common stock
previously issued for
interest in mining properties
(Note 3) (2,400,000) (96,000) (54,000) -
Issuance of 2,400,000 shares of
common stock in exchange
for assignment of interest
in certain mining properties
(Note 3) 2,400,000 96,000 54,000 -
Net loss for year - - - -
---------- ------- ------- -------
Balance at September 30, 1993 3,244,296 129,765 216,740 (196,505)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 4,1984
(DATE OF INCEPTION)
TO MARCH 7,1994
(See Accountants Report)
Common Stock Deficit
------------ Accumulated
Par Value $0.04 Additional During
--------------- Paid In Development
Shares Amount Capital Stage
------ ------ ------- -----
Balance at September 30, 1993 3,244,296 $ 129,765 $ 216,740 $ (196,505)
Net loss for the period - - - (4,300)
---------- -------- -------- ---------
Balance at March 7, 1994 3,244,296 $ 129,765 $ 216,740 $ (200,805)
========== ======== ======== =========
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE CONTANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD DECEMBER 4,1984
(DATE OF INCEPTION)
TO MARCH 7,1994
(See Accountants Report)
12-4-84
Period Year Year (date of
Ended Ended Ended inception)
3-7-94 9-30-93 9-30-92 to 3-7-94
Operating Activities
Net Loss $ (4,300) $ - $ - $(200,805)
-------- ------- ------- ---------
Adjustments to reconcile net
loss to net cash required
by operating activities:
Amortization - - - 800
Changes in operating assets
and liabilities:
Increase (decrease) in
accounts payable 4,300 - - 6,300
Increase in accrued
interest payable - - - 11,295
-------- ------- ------- ---------
4,300 18,395
-------- ------- ------- ---------
Net Cash Required by Operating
Activities - - - (182,410)
-------- ------- ------- ---------
Investing Activities
Organization costs - - - (800)
-------- ------- ------- ---------
Net Cash Required by Investing
Activities - - - (800)
-------- ------- ------- ---------
Financing Activities
Proceeds from loans - - - 16,716
Proceeds from sale of common
stock - - - 166,494
-------- ------- ------- ---------
Net Cash Provided by Financing
Activities - - - 183,210
-------- ------- ------- ---------
Increase in Cash and Cash
Equivalents - - - -
-------- ------- ------- ---------
Cash and Cash Equivalents at
Beginning of Period - - - -
-------- ------- ------- ---------
Cash and Cash Equivalents at
End of Period $ - $ - $ - $ -
======== ======= ======= =========
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD DECEMBER 4,1984
(DATE OF INCEPTION)
TO MARCH 7, 1994
(See Accountants Report)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the year ended September 30, 1992, the Company issued 774,422 shares
of common stock to convert $28,011 in liabilities to equity.
During the years ended September 30, 1993 and 1992, the Company issued
2,400,000 shares of common stock in exchange for mineral properties with a fair
market value of $150,000.
DISCLOSURE OF ACCOUNTING POLICY
For purposes of the statement of cash flows, the Company considers all
short-term investments with an original maturity of three months or less to be
cash equivalents.
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMEENTS MARCH 7, 1994
(See Accountants Report)
NOTE 1 - SUMMARY OF SIGNMCANT ACCOUNTING POLICIES
- - -------------------------------------------------
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying financial statements follows:
Accounting Methods
- - ------------------
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
- - ---------------
The Company has not yet adopted any policy regarding payments of dividends.
Organizational Costs
- - --------------------
Costs incurred in connection with the Company's organization have been
capitalized and were amortized on the straight line method over five years.
Loss per Share
- - --------------
Loss per common share has been computed by dividing the net loss by the weighted
average number of shares of common stock outstanding.
Income Taxes
- - ------------
The Company records the income tax effect of transactions in the same year that
the transactions enter into the determination of income, regardless of when the
transactions are recognized for tax purposes. Tax credits are recorded in the
year realized. Since the Company has not yet realized income as of the date of
this report, no provision for Federal or State income taxes has been made. In
prior years, the Company has incurred net operating losses, which could be
carried over and offset against future income. However, due to the change in the
ownership of the Company (that occurred subsequent to March 7, 1994), it is
probable that the Company will not qualify under current Internal Revenue Codes
to use its prior year operating loss carryfowards. The actual tax laws
concerning this transaction are complex, accordingly, the Company may file tax
returns taking the position that a portion of its prior net operating loss
carryforwards are available for its future use.
F-18
<PAGE>
METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS MARCH 7,1994
(See Accountants Report)
NOTE 1 - SUMMARY OF SIGNMCANT ACCOUNTING POLICIES - Continued
- - -------------------------------------------------
Marketable Securities
- - ---------------------
Current and non-current marketable securities are stated at their lower of
aggregate cost or market.
Adoption of SFAS No. 109
- - ------------------------
During the period ended March 7, 1994, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
which supersedes Accounting Principles Board. ("APB") No. 1 1. SFAS No. 109
retains the current requirements to record deferred income taxes for temporary
differences that are reported in different years for financial reporting and tax
purposes; however, the methodology for calculating and recording deferred income
taxes has changed. Under the liability method adopted by SFAS No. 109, deferred
tax liabilities or assets are computed using the tax rates that will be in
effect when the temporary differences reverse. Also, requirements for
recognition of deferred tax assets and operating loss carryforwards were
liberalized by requiring their recognition when and to the extent that their
realization is more likely than not. There was no effect of the accompanying
financial statements for the adoption of SFAS No. 109 on either the current
periods presented or the cumulative periods from inception.
NOTE 2 - DEVELOPMEENT STAGE COMPANY
- - -----------------------------------
The Company was incorporated under the laws of the State of Colorado on
December 4 1984. The Company has been in the development stage since
incorporation. On November 29, 1991, the Company changed its name from Fintech,
Inc., to Summa Metals Corporation.
During 1986 the Company loaned funds obtained in the initial public
offering to companies in the medical diagnostic field. The loans were
subsequently written off. See Note 5 for additional detail.
The Company still intends to acquire interests in various business
opportunities which, in the opinion of management, will provide profits to the
Company. The Company had no operations as of March 7, 1994.
F-19
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 7, 1994
(See Accountants Report)
NOTE 3 - INVESTMENT IN MINING PROPERTIES
- - ----------------------------------------
On November 29, 1991, the Company entered into an agreement with the
Giacalone Group for the purchase of several mining properties in exchange for
2,400,000 shares of the Company's restricted common stock. The purchase was
recorded at $150,000, which represented the estimated predecessor cost of such
properties. On January 7, 1993, the agreement was rescinded, and the mining
properties were returned in exchange for the return of the 2,400,000 shares
issued.
Also on January 7, 1993, the Company entered into an agreement with the
Pray Group for the purchase of several similar mining properties in exchange for
2,400,000 shares of the Company's restricted common stock. The purchase was
recorded at $150,000, which approximated the estimated predecessor cost of such
similar properties and the fair market value of the Company's stock on this
date. As a part of the agreement, the Company agreed to pay the Pray Group the
amount of $300,000, or 5% of the net profits from the operations of the mining
properties. In the event that the Company does not develop the properties or pay
the minimum fees set forth in the agreement by April 1, 1994, the properties
will revert back to the Pray Group.
NOTE 4 - CAPITALIZATION
- - -----------------------
The Company initially authorized 100,000,000 shares of $.OOO1 par value
common stock and 20,000,000 shares of $.10 par value preferred stock. At
inception, the Company issued 16,225,000 shares for $.0007 per share. In March,
1985, the Board of Directors authorized the issuance of an additional 1,375,000
shares of stock for $.004 per share: On June 10, 1985, the Board of Directors
increased the authorized common shares from 100,000,000 to 300,000,000. On
November 29, 1991, the Board of Directors authorized a 1 for 400 reverse stock
split, thereby decreasing the number of issued and outstanding shares from
27,876,500 to 69,874 on that date, and increasing the par value of each share to
$.04. All references in the accompanying financial statements to the number of
common shares and per-share amounts have been restated to reflect the stock
split.
No preferred shares have been issued, and no preference items have been
determined by the Board of Directors. The Company had not declared any dividends
through March 7, 1994.
The Company has adopted an incentive stock option plan to provide
incentives for key employees. A total of 4,000,000 shares of authorized but
unissued common stock are reserved for issuance under the plan. At March 7,
1994, no options have been granted.
F-20
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 7,1994
(See Accountants Report)
NOTE 4 - CAPITALIZATION-Continued
- - -----------------------
In November, 1985, the Company completed its initial public offering of
securities. A total of 10,276,500 Units were sold at a public offering price of
$.02 per Unit. After deduction of expenses the Company received net proceeds of
approximately $167,503 after costs of $56,686 related to the offering.
Purchasers of the Company's Units in the public offering received Class A
Warrants to purchase an additional 10,276,500 Common Shares of the Company at an
exercise price of $.06 per share and 10,276,500 Class B Warrants to purchase an
additional 10,276,500 Common Shares of the Company at an exercise price of $.12
per share. The Class A Warrants were immediately detachable from the Common
Shares and were exercisable commencing November 16, 1985, for a period of twelve
months. The Class B Warrants were also immediately detachable from the Common
Shares and exercisable commencing January 16, 1986, for a period of twelve
months thereafter. No warrants were exercised and all warrants have expired.
NOTE 5 - RELATED PARTY TRANSACTIONS
- - -----------------------------------
The Company neither owns nor leases any real property. Office services are
currently provided without charge. Such costs are immaterial to the financial
statements and, accordingly, have not been reflected herein.
During 1986, $121,000 was loaned to companies controlled by related
parties with the intent to develop products that would generate revenue for the
Company. The plans did not materialize however, and the Company determined the
loans to be uncollectible at September 30, 1986.
Loans payable due to stockholders of $16,716, together with accrued
interest thereon of $11,295, were converted to equity on November 29, 1991,
after the Company's Board of Directors approved the issuance of 774,422 shares
of common stock in exchange for the related party liabilities.
F-21
<PAGE>
SUMMA METALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 7, 1994
(See Accountants Report)
NOTE 6 - SUBSEQUENT EVENTS
- - --------------------------
Change of Ownership
- - -------------------
On March 8, 1994, a controlling interest in the Company was sold to an
unrelated third party and, after due diligence and consideration of the mining
properties held by the Company at the time, the new management of the Company
decided not to pursue exploration and development of the mining properties by
the required April 1, 1994 deadline and the ownership of the properties reverted
back to its original owners.
Issuance of Common Stock
- - ------------------------
On April 25, 1994, the Company's Board of Directors approved the purchase
of 1,000,000 shares of stock of Auromar Development Corporation, a Canadian
corporation, from five individuals in exchange for 1,000,000 restricted shares
of the Company's stock. This agreement was later modified to reflect the
purchase of 1,000,000 shares of stock in Auromar Development Corporation in
exchange for 3,500,000 restricted shares of the Company's stock.
Investment in Mining Properties
- - -------------------------------
On April 25, 1994, the Company entered into an agreement to acquire a
three year option to purchase certain mining rights from Diamond Fontein
International, Limited, an entity related to the new owners by common ownership,
consisting of several diamond mining properties in South Africa. The
consideration to be paid for the mining rights was the issuance of 25,000 shares
of the Company's restricted common stock, and 3 % of gross production derived by
the Company from the properties subject to the mining rights.
The option will be recorded at $25,000, which represents the fair market
value of the Company's common stock in trading activity on outside private
markets, and also approximates the cost of the development to date on the mining
properties by Diamond Fontein International, Ltd.
NOTE 8 - COMPARABILITY
- - ----------------------
Since the Company has been in the development stage since its inception
and had remained virtually dormant since 1987, no comparability can be made
current year operations and those from prior years. In addition, the Company has
not incurred any material expenses or,earned any revenues of a material nature
since 1987.
F-22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
Item 22. Indemnification of Directors and Officers.
------------------------------------------
The only statute, charter provision, bylaw, contract, or other arrangement
under which any controlling person, director or officer of the Registrant is
insured or indemnified in any manner against any liability which he may incur in
his capacity as such, is as follows:
(1) Article XII of the Articles of Incorporation of the Company, filed as
Exhibit 3.1 to the Registration Statement.
(2) Article XI of the By-Laws of the Company, filed as Exhibit 3.2 to the
Registration Statement.
(3) Nevada Revised Statutes, Chapter 78.
1
<PAGE>
The general effect of the foregoing is to indemnify a control person,
officer or director from liability, thereby making the Company responsible for
any expenses or damages incurred by such control person, officer or director in
any action brought against them based on their conduct in such capacity,
provided they did not engage in fraud or criminal activity.
Item 23. Other Expenses of Issuance and Distribution.
--------------------------------------------
The estimated expenses of the offering (assuming all Shares are sold), all
of which are to be paid by the Registrant, are as follows:
SEC Registration Fee $ 1,035.00
National Association of
Securities Dealers, Inc.
Filing Fees 800.00
Printing Expenses 500.00
Accounting Fees and Expenses 5,000.00
Legal Fees and Expenses 30,000.00
Blue Sky Fees/Expenses 1,000.00
Transfer Agent Fees 500.00
Miscellaneous Expenses 1,165.00
----------
TOTAL $40,000.00
Item 24. Recent Sales of Unregistered Securities.
----------------------------------------
During the past three years, the Registrant sold securities, all of which
were shares of Common Stock which were not registered under the Securities Act
of 1933, as amended, pursuant to an exemption under Section 4(2) of that Act, as
follows:
Name and Address Date Shares Consideration
- - ---------------- ---- ------ -------------
Anchor Holdings, Inc. 3-24-95 2,200,000 raise capital
5277 Cameron Street #130
Las Vegas, NV 89118
C.W. & Neva B. Lewis 3-7-95 30,000 Additional consideration
P.O. Box 1160 for $20,000 loan
Powell, Wyoming 82435
In 1994, the Registrant sold securities, all of which were shares of Common
Stock which were not registered under the Securities Act of 1933, as amended,
pursuant to an exemption under Section 4(2) of that Act, as follows:
Name and Address Date Shares Consideration
- - ---------------- ---- ------ -------------
Michael M. Chaffee 3-8-94 1,050,000 Assets/Leasehold Rights
(see 1588 Sea Lancer Dr. (see "Financial
LHC, Arizona 86403 Statements")
Dr. Ralph E. Pray 3-8-94 1,000,000 Assets/leasehold Rights
805 S. Shamrock Avenue (see "Financial
Monrovia, CA 91091 Statements")
2
<PAGE>
Amyn Dahya 4-8-94 225,000 $100,000 Loan 3/25/94
1335 Greg Street (see "Financial
Sparks, NY 89431 Statements")
Glen Dobbs 6-28-94 4,000 Repay $10,000 Loan dated
1536 W. Pacific 10/3/92
Coast Highway
Long Beach, CA
90810
Robert Kay 6-28-94 10,000 Services
611 W. 6th Street
#2610
Los Angeles, CA
92262
Oline Higginbothem 6-28-94 10,000 Repay two Loans $15,000
722 N. Calle Rolph each dated 3/12/91
Palm Springs, CA & 8/1/91
92262
William Palmertree 6-28-94 5,000 Repay $15,000 Loan dated
13766 Star Hill Lane 3/2/93
La Punte, CA 91764
Maria Cammelo 6-28-94 10,000 Repay two Loans $15,00
Berth 202 each dated 3/12/91
Long Beach, CA 90744 & 8/1/91
Coy Green 6-28-94 1,000 Repay $2,000 Loan dated
12480 Cedar Street 6/2/92
Chino, CA 91709
John Adams 6-28-94 1,000 Repay $2,00 Loan
c/o Newmarks Center dated 1/15/93
Berth 204
Wilmington, CA 90744
Jospeh Granitelli 6-28-94 8,000 Repay $24,000 Loan
1260 Calle Suerte dated 1/23/92
Camerio, CA 93012
Tom Gibson 6-28-94 1,000 Repay $1,000 Loan
6821 Masquito Rd. dated 8/2/93
Placerville, CA 95667
All purchasers of the Registrant's Common Stock acknowledged in writing
that they were obtaining "restricted securities", as defined in Rule 144 under
the Act; that such shares cannot be transferred without appropriate registration
or exemption therefrom; that they must bear the economic risk of the investment
for an indefinite period of time; that they would not sell the securities
without registration or exemption therefrom; and that the Registrant would
restrict the transfer of the securities in accordance with such representations.
Each purchaser agreed that any certificate representing such shares would be
stamped with the usual legend restricting the transfer of such shares.
3
<PAGE>
No underwriters were used in the sale and issuance of the foregoing shares
and none of the shares were offered publicly.
All of the foregoing shares were issued in transactions between the Company
and third parties not involving any public offering. The purchasers were all
friends and/or associates of the Company's officers and directors, some of whom
were "accredited investors", as that term is defined in Regulation D, Rule 501.
In addition, each of the sales was effected without the benefit of advertising
or any general solicitation and each purchaser represented that he/she had such
knowledge and experience in financial and business matters such that he/she is
capable of evaluating the merits and risks of the prospective investment and
purchased the shares for their personal account without any view toward resale
or future distribution of whatsoever nature.
The shares issued to repay loans were issued to purchasers who fell within
the scope of the paragraph set forth above. The loans were advanced to the
Company on verbal agreements with the lenders and the funds were used in the
organizational phase of the Company.
The services provided by Robert Kay were for assistance in financial
consulting and structuring of the Company and its plan of distribution for this
Offering.
Item 25. Exhibits.
---------
The following Exhibits are filed as part of this Registration Statement,
pursuant to Item 601 of Regulation K:
Exhibit No. Title
- - ----------- -----
1 Proposed Underwriting Agreement drafted by the Company
3.1 Articles of Incorporation
3.2 Bylaws
5 Opinion of Michael J. Morrison, Esq. regarding the legality of
the Securities being registered
Opinion of Steven L. Siskind, Esq. regarding the legality of
the Securities being registered
24 Consent of Michael J. Morrison, Esq. (See Exhibit 5)
Consent of Steven L. Siskind, Esq. (See Exhibit 5)
24(a) Consent of Luxenberg & Associates, CPA
24(b) Consent of Albright, Persing & Associates
28(a) Escrow Agreement
28(b) Subscription Agreement
28(c) Proposed Selected Dealers Agreement
28(e) Promissory Note payable to Amyn Dahya
28(f) Agreement with Jose Echenique re: Promontorio Mine Tailings
28(g) Gold Spur Mine Sublease
28(h) Deep Gold Mine Sublease
28(i) Loan Agreement with C.W. & Neva Lewis
4
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(This Space Left Blank Intentionally)
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized in Lake Havasu City, Arizona on the day of December, 1997.
SUMMA METALS CORP.
By: /s/ Michael M. Chaffee
------------------------------------
Michael M. Chaffee, President
Pursuant to the requirements of the Securities At of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Date
/s/ Michael M. Chaffee 12-11-97
-----------------------------
Michael M. Chaffee
President and Director
/s/ Kathy A. Folkers 12-10-97
-----------------------------
Kathy A. Folkers, Secretary
/s/ Raymond Baptista 12-11-97
-----------------------------
Raymond Baptista, Director,
Treasurer and Chief Financial Officer
/s/ Eric A. Popkoff 12-19-97
-----------------------------
Eric A. Popkoff, Vice-President
Corporate Relations, Director
6
PROPOSED
--------
UNDERWRITING AGREEMENT
Gentlemen:
SUMMA METALS CORP. (the "Company"), a Nevada corporation, incorporated on
March 8, 1994, desires to offer for Sale to the public, an aggregate of 510,000
Units of its Common Stock $.001 par value (the "Units"). The Units will be
offered to the public at an offering price of $6.00 per share for an aggregate
of $3,060,000.
The Company desires to offer such Units for sale through you, Boe & Co. (the
"Underwriter"). The offering will be undertaken by the Underwriter as agent for
the Company on a "best efforts, 130,000 Units or none" basis as to a minimum of
130,000 Units and on a "best efforts" basis thereafter up to a maximum of
510,000 Units. In the event $780,000 for the minimum purchase of 130,000 Units
is not received within the agreed period, no Units will be sold and the
Underwriter will not be entitled to any compensation other than as set forth
herein.
1. Appointment of Underwriter
--------------------------
The Company hereby appoints Underwriter, on all the terms and conditions
hereinafter set forth, as the Company's exclusive agent to use its best efforts
to sell on behalf of the Company up to 510,OOO Units at the public offering
price set forth herein.
2. Representations and Warranties of the Company
---------------------------------------------
As an inducement to and to obtain the reliance of the Underwriter in
connection herewith, the Company represents, warrants and agrees with the
Underwriter as follows:
(a) The Company has prepared and filed with the United States
Securities and Exchange commission (the "Commission") , a Registration
Statement on Form SB-2, including a Prospectus, relating to the Units in
accordance with Section 5 of the Securities Act of 1933, as amended, and
the Rules and Regulations of the commission promulgated thereunder
(collectively referred to hereinafter as the "Act") As used in this
Agreement, the term "Registration Statement" means such Registration
Statement, including exhibits, financial statements and schedules, as
amended, when the post-effective amendment thereto naming the Underwriter
as "underwriter" becomes effective and the term "Prospectus" means the
Prospectus filed with said Registration Statement. (The Registration
Statement and Prospectus, as defined herein, are herein-after collectively
referred to as the "Filing") . The company will utilize its best efforts to
cause the Registration Statement to become effective and to maintain its
effectiveness during the term hereof.
1
<PAGE>
(b) The Commission has not issued and to the knowledge and belief of
the Company does not have cause to issue an order preventing or suspending
the use of the Prospectus; the Registration Statement and Prospectus
conform in all material respects with the requirements of the Act and the
rules and regulations of the Commission promulgated thereunder (the
"Regulations") and do not include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
and on the Effective Date (as hereinafter defined) and at all times
subsequent thereto up to the Termination Date (as hereinafter defined) ,
the Filing and any amendment or supplement thereto will fully comply with
the provisions of the Act and the Regulations, and will not contain any
untrue statements of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided that the foregoing
representations and warranties shall not apply to statements in or
omissions from the Filing, or any amendments or supplements thereto, made
in reliance upon and in conformity with information furnished herein or in
writing to the Company by or on behalf of the Underwriter expressly for use
therein.
(c) The Company has no subsidiaries.
(d) Except as reflected in or contemplated by the Filing, since the
respective dates as of which information is given in the Filing, there has
not been and on the Effective Date there will not have been, any material
adverse changes in the condition of the Company, financial or otherwise, or
in the results of its operations.
(e) The authorized capital stock of the Company consists of 25,000,000
shares of common stock, par value $.001, of which 4,555,000 shares of
common stock are duly and validly authorized and issued, are fully paid and
non-assessable, and conform to the description thereof contained in the
Filing. On the Termination Date, the Units (as hereafter defined) will be
duly and validly authorized, and, when issued and paid for in accordance
with this Agreement, will be validly issued, fully paid and non-assessable,
and will conform to the description thereof contained in the Filing. The
execution and delivery of, and compliance with, this Agreement, and the
issuance of the Units will not conflict with or constitute a breach of or
default under the Articles of Incorporation or By-Laws of the Company, and
any indenture, agreement or other instrument by which the company is bound
or any order, decree, rule or regulation of any court, or any law or
administrative regulation, applicable to the Company.
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Nevada, with
an authorized and outstanding capitalization as set forth in the Filing and
with full corporate power and authority to carry on the business in which
it is now engaged. The Company is qualified or licensed and in good
standing as a foreign corporation in each jurisdiction in which the
ownership or leasing of any properties or the character of its operations
requires such `qualification or licensing. The Company has all requisite
corporate power and authority, and all material and necessary
2
<PAGE>
authorizations, approvals, orders, licenses,certificates and permits of and
from all governmental regulatory officials and bodies to own or lease its
properties and conduct its businesses as described in the Prospectus, and
the Company is doing business in strict compliance with all such
authorizations, approvals, orders, licenses, certificates and permits and
all federal, state and local laws, rules and regulations concerning the
business in which the company is engaged. The disclosures in the Filing
concerning the effects of federal, state and local regulations on the
Company's business as currently conducted and as contemplated are correct
in all material respects and do not omit to state a material fact. The
Company has all corporate power and authority to enter into this Agreement
and to carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have
been obtained or will have been obtained prior to the Closing Date. No
consent, authorization or order of, and no filing with any court,
governmental agency or other body is required for the issuance of the Units
pursuant to the Prospectus and the Registration Statement, except with
respect to applicable federal and State securities laws.
(g) The Filing contains or will contain on the Effective Date an
audited balance sheet of the Company as of October 31, 1997 ("the Balance
Sheet") ; the related audited statements of operations, changes, in
stockholders' equity and changes in financial position of the Company for
the period from inception to said date including the notes hereto, together
with the opinion of Luxenberg & Associates certified public accountants,
with respect thereto (the "Financial Statements"). Such Financial
Statements have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods
indicated, except as otherwise indicated in the notes thereto. The Balance
Sheet presents fairly as of its date the financial condition of the
Company; the Company did not have, as of the date of such Balance Sheet,
except as and to the extent reflected or reserved against in such Balance
Sheet (including the notes thereto) , any liabilities or obligations
(absolute or contingent) of a nature customarily reflected in a balance
sheet or the notes thereto prepared in accordance with generally accepted
accounting principles. The statement of income included in the Financial
Statements present fairly the results of operations of the Company for the
period indicated. The statement of stockholders' equity and changes in
financial position present fairly the information which should be presented
therein in accordance with generally accepted accounting principles.
(h) Except as set forth in the Filing, there is no action, suit or
proceeding before any court or government agency, authority or body pending
or, to the knowledge of the Company, threatened which night result in
judgments against the Company which is not adequately covered by insurance,
or which is pending or, to the knowledge of the Company, threatened by any
public body, agency or authority, which might result in any material
adverse change in the condition (financial or otherwise) , business or
prospects of the Company or would materially affect its properties or
assets.
(i) The execution and delivery of this Agreement, the consummation of
the transactions herein contemplated, and compliance with the terms and
provisions hereof will not conflict with, or constitute a breach of, any of
the terms provisions or conditions of any agreement or instrument to which
the Company is a party, nor will any one or any combination of the
foregoing have such a result.
3
<PAGE>
(j) The Company has the legal right, power and authority to enter into
this Agreement, and the execution, delivery and, except as otherwise
indicated in this Agreement, performance thereof by the Company do not
require the consent or approval of any governmental body, agency or
authority which has not been obtained.
(k) The Company is not a party to any material contract (meaning
thereby a contract materially affecting its business or properties) that is
not referred to in the Filing. No default of any material significance
exists in the due performance and observance by the company of any term,
covenant or condition of any such contract; all such contracts are in full
force and effect and are binding upon the parties thereto in accordance
with their terms; and, to the knowledge of the Company, no other party to
any such material contract has threatened or instituted any action or
proceeding wherein the Company is alleged to be in default thereunder.
(1) No stock options or warrants are or will be outstanding or issued
during the period covered by this Agreement except as set forth in the
Filing.
(m) The Company is not delinquent in the filing of any tax return or
in the payment of any taxes, knows of no proposed redetermination or
assessment of taxes; and has paid or provided for adequate reserves for all
known tax liabilities.
(n) The Company has obtained a CUSIP number for its Shares.
(o) During the period of the offering of the Shares and for six (6)
months from the Effective Date, the Company will not sell any securities
without the Underwriter's prior written consent, which will not be
unreasonably withheld.
(p) The Company's securities, however characterized, are not subject
to pre-emptive rights.
(q) The Company will have the legal right and authority to enter into
this Agreement upon its execution, to effect the proposed sale of the
Units, and to effect all other transactions contemplated by this Agreement.
(r) The Company knows of no person who rendered any services in
connection with the introduction of the Company to the Underwriter. No
broker's or other finder's fees are due and payable by the Company and none
will be paid by it.
(s) The Company and its affiliates are not currently offering any
securities nor has the Company or its affiliates offered or sold any
securities except as required to be described in the Prospectus.
4
<PAGE>
(t) All original documents and other information relating to the
Company's affairs have and will continue to be made available upon request
to the Underwriter and to its counsel at the Underwriter's office or at the
office of the Underwriter's counsel and copies of any such documents will
be furnished upon request to the Underwriter and to its counsel. Included
within the documents made available have been at least the Articles of
Incorporation and any Amendments, Minutes of all of the meetings of the
Incorporators and Directors and Shareholders, all financial statements and
copies of all contracts, leases, patents, copyrights, licenses or
agreements to which the Company is a part or in which the Company has an
interest.
(u) The Corporation will use the proceeds from the sale of the Shares
as set forth in the Prospectus.
(v) There are no contracts or other documents required to be described
in the Prospectus or to be filed as exhibits to the Prospectus which have
not been described or filed as required.
(w) The Company has not made any representations, whether oral or in
writing, to anyone, whether an existing shareholder or not, that any of the
units will be reserved for or directed to them during the proposed
offering.
(x) The Company has caused each of its current shareholders to agree
in writing with respect to shares acquired by them prior to the effective
date that they have acquired the shares for investment purposes only and,
they acknowledge that they hold "restricted securities" as defined in Rule
144.
3. Employment of the Underwriter
-----------------------------
Upon the foregoing representations, agreements, and warranties and subject
to the terms and conditions of this Agreement:
(a) The Company hereby employs the Underwriter as its, exclusive agent
to sell for the company's account up to 510,000 Units of Common Stock. The
Underwriter agrees to use its best efforts as agent, promptly following the
receipt of written notice of the Effective Date of the Registration
Statement, to offer for sale the aggregate of 510,000 Units subject to the
terms, provisions, and conditions hereinafter set forth.
(b) In the event the Underwriter does not find subscribers for the
minimum number of Shares having a total aggregate purchase price of
$780,000 within 90 days following the Effective Date (unless extended for
up to an additional 90 days by written agreement of the Company and the
Underwriter) , this Agreement shall terminate and neither party to this
Agreement shall have any obligations to the other party hereunder except
for certain expenses payable to the Underwriter. Appropriate arrangements
for placing all funds received for the Shares in escrow shall be made prior
to the commencement of the offering hereunder, with provisions for refund
to the purchasers as set forth above or for delivery to the Company of the
net proceeds therefrom if more than $780,000 in cash has been received from
the sale of Shares hereunder.
5
<PAGE>
(c) The 510,000 Units shall be offered to the general public at the
initial public offering price of $6 00 per Unit.
(d) The Underwriter is granted irrevocable authority as agent for the
Company to declare any contract to purchase Units offered to the public
hereunder in default if such Units are not paid for in cash within seven
(7) days after the contract date. The Underwriter shall deposit promptly
pursuant to the requirements of Rule 15c2-4 promulgated under the
Securities Exchange Act of 1934 the gross proceeds from sales of Units in
the amount with the escrow agent until $ 780,000 is received from said
sale. In no event shall the deposit in escrow of any proceeds required
hereunder be made later than noon of the business day after receipt of such
funds by the Underwriter. Said deposit shall include all cash and checks
received with respect to the offering and all checks received from
customers shall be made payable to the escrow agent.
(e) As its compensation and subject to the sale of the minimum number
of Units , the Underwriter shall be entitled to receive a commission of 10%
of the sales price per Unit and a non-accountable expense allowance of 2%
of the sales price per Unit. If this Agreement terminates prior to the sale
of the Units , accountable expenses of the Underwriter shall be paid by the
Company.
(f) The Company agrees to issue or have issued such Units in such
names and denominations as nay be specified by the Underwriter, and to
deliver certificates representing the Units against payment to the Company
in cash or cashier's check in the amount of the selling price of the Units
less the Underwriter's sales commission and expenses as provided herein.
Such payment and delivery shall be made to _____________________ at such a
date and time within three (3) days following the sale of the minimum
number of Units as provided in subparagraph 3 (b) hereof as shall be agreed
upon by the Underwriter and the Company (the "Closing Date"). The
Underwriter's requisitions for certificates shall be in writing shall be
given to the Company before the delivery date. The Underwriter agrees to
deliver certificates to the buyers of the Units within seven (7) days of
the delivery of certificates to the Underwriter as provided herein. For
purposes of expediting the checking and packaging of the certificates, the
Company agrees to make the certificates available for inspection by the
Underwriter, the transfer agent or other authorized representative at the
Company's principal office at least 24 hours prior to the time of each
closing.
(g) The Underwriter is hereby authorized to organize a group of
participating dealers consisting exclusively of members of the National
Association of Securities Dealers, Inc. (the "selling group"). Such members
of the selling group are to act as agents, and shall be allowed to purchase
from the Underwriter at a price which provides a concession out of the
Underwriter's commission in such amount as the underwriter nay determine.
6
<PAGE>
(h) Prior to the Effective Date, the Company will appoint a
duly-licensed, qualified and bonded transfer agent, subject to approval by
the Underwriter.
4. Representations and Warranties of the Underwriter
-------------------------------------------------
As an inducement and to obtain the reliance of the Company in connection
herewith, the Underwriter represents, warrants and agrees with the Company as
follows:
(a) The Underwriter is duly registered as a securities broker-dealer
in accordance with the Securities Exchange Act of 1934 and the states in
which the offering shall be sold by it.
(b) The Underwriter will not publish, issue or circulate or authorize
the publication, issuance or circulation of any circular, notice or
advertisement which offers the Units, for sale which shall not have
previously been approved by the Company and its counsel, except for
so-called "tombstone" advertisements, and which has not been approved by
the commission prior to its use, if such prior approval is required.
(c) The Underwriter is, to the best of its information and belief, in
good standing with and in full and current compliance in all material
respects with the rules of the National Association of Securities Dealers,
Inc., ("NASD"). It is understood that any Dealer to whom an offer may be
made as hereinbefore provided shall be a member of the NASD or a foreign
dealer not eligible for membership in the NASD who agrees not to re-offer,
resell or deliver the Stock in the United States of to persons to whom it
has reason to believe are citizens or residents of the United States and,
in making sales, to comply with the NASD's Interpretation with Respect to
Free-riding and Withholding and Sections 8, 24 and 36 of Article III of the
NASD's Rules of Fair Practice as if such foreign dealer were an NASD member
and Section 25 of such Article III as it applies to a non-member broker or
dealer in a foreign country.
5. Covenants by the Company
------------------------
In further consideration of the agreements by the Underwriter herein
contained, the Company covenants as follows:
(a) At least 48 hours prior to submission of the Filing or any
amendment or supplement thereto to the Commission, the Underwriter and its
counsel shall be provided with a copy of such Filing or amendment, and no
such Filing will be made to which the Underwriter or its counsel shall
object within the 48 hour period.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective and will not at any time, whether before, on
or after the Effective Date, file any amendments to the Filing or
supplement to the Prospectus without first obtaining the Underwriter's
approval. Such approval shall be obtained by compliance with subsection (a)
above. Said Filings or any amendments or supplements thereto shall be in
compliance with the Act and the Regulations of the commission to best of
the company's knowledge, information and belief.
7
<PAGE>
(c) As soon as the Company is advised thereof, the Company will advise
the Underwriter and confirm the advice in writing (i) as to when the
Registration ` Statement has become effective; (ii) of any request made by
the Commission for amendment of the Filing, for supplementing the
Prospectus or for additional information with respect thereto; and (iii) of
the issuance by commission of any stop order suspending the effectiveness
of the Registration Statement or of any amendment thereto or the
initiation, or threat of initiation, of any proceedings for such purpose,
and the company will use its best efforts to prevent the issuance of any
such order and to obtain as soon as possible the lifting thereof, if
issued.
(d) The Company will deliver to the Underwriter and members of the
selling group, as designated by the Underwriter, prior to the Effective
Date, preliminary prospectuses and, on the Effective Date of the
Registration Statement, without charge and from time to time thereafter,
Prospectuses and amendments thereto as required by law to be delivered in
connection with sales, in such quantities as the Underwriter may request.
(e) The company will deliver to the Underwriter, without charge, one
manually executed copy and one conformed copy of the Registration Statement
together with all required exhibits, as filed and all amendments thereto
with exhibits which have not previously been furnished to the Underwriter,
and will deliver to the Underwriter and to members of the selling group, as
designated by the Underwriter, without charge, such reasonable number of
copies of the Registration Statement and Prospectus (excluding exhibits)
and all amendments thereto as the Underwriter may reasonable request.
(f) Prior to the Termination Date if, in the opinion of the
Underwriter's counsel, any statements are contained in the Prospectus which
are misleading or inaccurate in light of the circumstances under which they
are made, the Underwriter may require the Company to amend or supplement
the Prospectus to correct said statements and may request such reasonable
number of copies of any amended or supplemented Prospectus as may be
necessary to comply with the Act and Regulations.
(g) The Company will secure, on or before the Effective Date of the
Registration Statement, and maintain for such period as may be required for
distribution, such exemptions, registrations and qualifications of the
Units as will permit the public offering thereof under the securities or
"blue sky" laws of the states of Colorado, New York, Illinois and Florida
and any additional states as the Underwriter and the Company shall agree
upon; provided, that no such qualification shall be required if, as a
result thereof, the Company would be made subject to service or general
process or would be required to qualify for authority to do business as a
foreign corporation in any jurisdiction where it is not now so subject or
qualified.
(h) The Company will pay all costs and expenses incident to the
performance of its obligations under this Agreement, including (i) all
expenses incident to its insurance and delivery of the Shares, (ii) the
fees and expenses incident to the preparation, printing and filing of the
Registration Statement and Prospectus
8
<PAGE>
(including all exhibits thereto) with the Commission, the various "blue
sky" agencies and the National Association of Securities Dealers, Inc., and
(iii) the costs of furnishing the Underwriter copies of the Registration
Statement, Prospectus and preliminary prospectuses. The Company shall not,
however, be required to pay for transfer tax stamps on any sales of the
Units which the Underwriter may make; or to pay for any of the
Underwriter's expenses or those of any other dealers other than as herein
set forth.
(i) For a period of five years from the Effective Date, the Company
will furnish the Underwriter with (i) all reports and financial statements,
if any, filed with or furnished by the Company to the commission or any
stock exchange upon which the securities of the company are listed, (ii)
such other periodic and special reports as the Company from time to time
furnishes generally to holders of any class of its stock, (iii) every press
release and every news item and article with respect to the affairs of the
Company which was released by the Company, and (iv) such additional
documents and information with respect to the affairs of the company which
was released by the Company, if any, as the Underwriter may from time to
time reasonably request. For 180 days following the Effective Date of the
Registration Statement, the Company will cause its transfer agent or agents
to furnish to the Underwriter weekly transfer sheets covering the transfers
of the Company's securities, including the Shares.
(j) The Company will mail or otherwise make generally available to its
security holders as soon as practicable, but in no event more than fifteen
months after the close of the fiscal quarter ending after the Effective
Date of the Registration Statement, an earnings statement, which need not
be audited, covering a period of at least twelve months beginning after the
Effective Date of the Registration Statement.
(k) The Company will, as promptly as practicable after the end of each
fiscal year, release to the press an appropriate report covering its
operations for such year, and send to the Underwriter, to all holders of
record of the Company's common stock and to recognize statistical services,
a report covering operations for such year, including a balance sheet of
the Company and statements of earnings and of retained earnings, as
examined by the Company's independent accountants.
(1) The Company will apply the net proceeds from the offering received
by it in substantially the manner set forth in the Prospectus.
(m) The Company will comply with the reporting requirements to which
it is subject pursuant to Section 15(d) of the Securities Exchange Act of
1934.
(n) The Company will file with the Commission the required Reports on
Form SR and will file with the appropriate state securities commissioners
any sales and other reports, required by the rule and regulations of such
agencies and will supply copies to the Underwriter.
9
<PAGE>
(o) Except with the Underwriter's approval, the Company agrees that
the Company will not do the following unit (a) the completion of the
offering of the Shares, or (b) the termination of this Agreement, or (c) 90
days after the Effective Date, whichever occurs later:
(i) Undertake or authorize any change in its capital structure or
authorize, issue, or permit any public or private offering of
additional securities;
(ii) Authorize, create, issue, or sell any funded obligations,
notes or other evidences of indebtedness, except in the ordinary
course of business and within 12 months from their creation;
(iii) Consolidate or merge with or into any other corporation;
or
(iv) Create any mortgage or any lien upon any of its properties
or assets except in the ordinary course of its business.
(p) The Company agrees to have the Units listed in the "Pink Sheets"
of the National Quotation Bureau on the first day of trading in the Units.
(q) With ` in 30 days after the successful termination of the offering
of the Units, the Company agrees to submit information about the Company to
be included in various securities manuals, including Standard & Poor's
Standard Corporation Records to facilitate secondary trading in the Units.
(r) The Company agrees to cause the stock certificates of all of the
current shareholders of the Company and of any future officers or directors
of the Company to be clearly legended as being restricted against transfer
without compliance with the Act and to cause the Company's transfer agent
to put stop transfer instructions against such stock certificates.
6. Reciprocal Indemnification
--------------------------
(a) The Company agrees to indemnify and hold harmless the Underwriter
and members of the selling group and any person who may be deemed to be in
control of the Underwriter or any member of the selling group within the
meaning of Section 15 of the Act; and
(b) The Underwriter agrees to indemnify and hold harmless the Company,
its directors, such of its officers as sign the Registration Statement and
any person who may be deemed to control and company within the meaning of
the Act, and to obtain a similar indemnification from each of the members
of the selling group; against any and all losses, claims, damages or
liabilities whatsoever (including, but not limited to, any and all legal or
other expenses whatsoever reasonably incurred in investigating, preparing
or defending against any actions or threatened actions or claims) based on
10
<PAGE>
or arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or Prospectus (as
from time to time amended or supplemented) or any application or other
document filed in any state in order to register, qualify or obtain an
exemption for the Shares under the laws thereof ("blue sky application") ,
as the case may be, or any 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 any violation by any of the
indemnifying parties of any provisions of the Act or any Regulation, or of
common or statutory law, and against any and all losses, claims, damages or
liabilities whatsoever to the extent of the aggregate amount paid in
settlement of any action, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission or any such
violation (including but not limited to any and all legal or other expenses
whatsoever reasonably incurred in investigation, preparing or defending
against any such actions or claims) if such settlement is effected with the
written consent of any indemnifying party. The indemnification by the
Underwriter and members of the selling group shall not extend to any such
statements or omissions made in reliance upon and in conformity with
written information furnished by the Company to the Underwriter or members
of the selling group.
Each of the foregoing indemnifications is expressly conditioned upon the
indemnifying parties being notified by the person seeking indemnification,, by
letter or by telegram confirmed by letter, of any action commenced against such
person, within a reasonable time after such person shall have been served with
the Summons or other first legal process giving information as to the nature and
basis of the claim, and in any event at least ten days' prior to the entry of
any judgment in such action, but the failure to give such notice shall not
relieve any indemnifying party of any liability which such party may have to
such person otherwise than on account of this indemnity agreement. Any party
whose indemnification is being relied upon shall assume the defense of any
action or claim, including the employment of counsel and the payment of all
expenses. Any indemnified party shall have the right to separate counsel in any
such action and to participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
employment thereof shall have been specifically authorized by the indemnifying
party of (ii) the indemnifying party shall have failed to assume the defense and
employ counsel.
The indemnification contained above in this Section 6, and the
representations and warranties of the Company set forth in this Agreement will
remain operative and in full force and effect, regardless of any investigations
made by or on behalf of the Underwriter or any controlling person thereof, or by
or on behalf of the Company or its directors or officers and will survive
delivery of and payment for the Shares.
7. Conditions to Obligations of the Company
----------------------------------------
The obligation of the Company to deliver the Units being sold by the
Underwriter hereunder is subject to the conditions that (i) the Registration
Statement shall have become effective not later than 5:00 p.m., West Coast Time
the twenty-fifth business day following the date hereof or such later time and
date as is acceptable to the Company; and (ii) no stop order suspending the
effectiveness of the Registration Statement shall have been issued and shall be
in effect at the time of closing and no proceeding for that purpose shall have
been initiated or, to the knowledge of the Company, threatened by the
Commission, it being understood that the Company shall use its best efforts to
prevent the issuance of any such stop order and, if one has been issued, to
obtain the lifting thereof. In the event that the Units (or any part thereof)
are not delivered by virtue of the provisions of clause (i) of this paragraph,
the Company shall not be liable to the Underwriter.
11
<PAGE>
8. Conditions to the Obligations of the Underwriter
------------------------------------------------
The several obligations of the Underwriter hereunder are subject to the
accuracy, as of the date hereof and on the Closing Date of the representations
and warranties made herein by the Company; to the accuracy in all material
respects of the statements of the officers of the Company made pursuant to the
provisions hereof; to the performance by the Company of its obligations
hereunder required on its part to be performed or complied with prior to or at
such Closing Date; and to the following additional conditions:
(a) The Registration Statement and Prospectus shall have fully
complied with the provisions of the Act and the Regulations, and neither
document shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that statements
or omissions in the Registration Statement or Prospectus in reliance upon,
and, in conformity with, information furnished in writing by or on behalf
of the Underwriter expressly for use therein shall not be considered within
the scope of this provision.
(b) The Underwriter shall not have advised the company that the
Registration Statement or prospectus, or any amendment or supplement
thereto, contains an untrue statement or fact which, in the opinion of
counsel for the Underwriter, is material, or omits to state a fact which,
in the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) The Registration Statement shall have become effective not later
than the date specified in Section 7, or such later time and date as is
acceptable by the Underwriter, and prior to the Closing Date no stop order
shall have been issued by the Commission with respect to the Registration
Statement and Prospectus, no proceedings therefor shall have been initiated
by the Commission, and to the knowledge of the Company or the Underwriter,
no such proceedings shall be contemplated by the Commission.
(d) Each contract to which the Company is a party and which is filed
as an exhibit to the Registration Statement shall be in full force and
effect at the Closing Date, or shall have been terminated, in accordance
with its terms; no party to any such contract shall have given any notice
of cancellation, or to the knowledge of the Company, shall have threatened
to cancel any such contract; and there shall be no material misstatement in
any description of a contract contained in the Registration Statement or
Prospectus.
12
<PAGE>
(e) From the date hereof until the Closing Date, no material
litigation or legal proceedings of any nature shall have been commenced or
threatened against the Company, nor any litigation of the transactions
herein contemplated; and no substantial change, financial or otherwise,
shall have occurred in or relating to the condition, business or assets of
the Company which shall render such condition, business or assets
substantially less favorable, in the Underwriter's judgment, than as set
forth in the Filing.
(f) The Underwriter shall have received at the Closing Date an
opinion, addressed to the Underwriter, of Steven L. Siskind, counsel for
the Company, dated as of the Closing Date and in a form and substance
satisfactory to counsel for the Underwriter, to the following effect:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Nevada,
with power and authority to own its properties, hold its franchises
and conduct its business, as described in the Prospectus, and, to the
best of the knowledge and information of said counsel, is duly
qualified to do business and is in good standing in every other
jurisdiction where the location of its properties or the conduct of
its business makes such qualification necessary;
(ii) The Company has authorized capital stock as set forth in the
Prospectus; the Units and all other outstanding shares of common stock
of the Company have been duly and validly authorized and issued and
are fully paid and non-assessable; and the description of the capital
stock of the company made in the Registration Statement and Prospectus
accurately set forth matters respecting such shares required to be set
forth therein;
(iii) The Agreement has been duly authorized, executed and
delivered by the company and constitutes a valid and binding agreement
of the Company;
(iv) The certificates to be issued for the Units, are in due and
proper form;
(v) The Registration Statement has become, and at the Closing
Date is, effective under the Act, and is effective in each state in
which the Units are sold and, to the best of the knowledge of such
counsel, no proceedings for a stop order are pending or threatened
under the Regulations and the Act; (vi) The Registration Statement and
Prospectus (except as to the financial statements contained therein,
with respect to which said counsel need express no opinion) comply
13
<PAGE>
as to form in all material respects with the requirements of the Act
and the applicable Regulations, and said counsel has no reason to
believe that either the Registration Statement or Prospectus as then
amended or supplemented contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading;
(vii) All contracts and documents summarized in the Registration
Statement and Prospectus are accurately summarized, such summaries
fairly presented the information required to be show; and such counsel
does not know of any contract or document required to be summarized `
disclosed or filed which have not been so summarized, disclosed or
filed;
(viii) Such counsel knows of no material legal proceedings
pending or threatened against the Company except as set forth in the
Prospectus; and
(ix) To the best of said counsels knowledge, the consummation of
the transactions contemplated herein did not and will not conflict
with or result in a breach of any of the terms, provisions or
conditions of any agreement or instrument to which the Company is a
party or by which the Company may be bound.-
Such counsel may rely, as to matters of local law, upon opinions of local
counsel satisfactory to him, and, as to matters of fact, upon affidavits or
certifications of officers of the Company.
(g) The Company shall have furnished to the Underwriter a certificate
of the president or vice president and any financial officer of the
Company, dated as of the Closing Date, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct at and as of the Closing Date, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
first Closing Date.
(ii) The Registration Statement has become effective and no order
suspending the effectiveness of the Registration Statement has been
issued; and to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission.
14
<PAGE>
(iii) The respective signers have each carefully examined the
Registration Statement and the Prospectus and any amendments and
supplements thereto, and to the best of their knowledge the
Registration Statement and the Prospectus and any amendments and
supplements thereto and all statements contained therein are true and
`correct, and neither the Registration Statement nor any amendment or
supplement thereto includes any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and since the
effective date of the Registration Statement, there has occurred no
event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth.
(iv) Except as set forth in the Registration Statement and
Prospectus, since the respective dates as of which or periods for
which information is given in the Registration Statement and
Prospectus, and prior to the date of such certificate, (A) there has
not been any substantially adverse change, financial or otherwise, in
the affairs or condition of the Company, and (B) the Company has not
incurred any liabilities, direct or contingent, or entered into any
transactions otherwise than in the ordinary course of business.
(h) The Company shall have furnished to the Underwriter, at each
Closing Date, such other certificates, additional to those specifically
mentioned herein, as the Underwriter may have reasonably requested as to
the accuracy and completeness, at the Closing Date, of any statement in the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, as to the accuracy, at the Closing Date, of the representations
and warranties of the Company herein and as to the performance by the
company of its obligations hereunder, or as to the fulfillment of the
conditions concurrent and precedent to its obligations hereunder, which are
required to be performed or fulfilled on or prior to the Closing Date.
(i) The Company shall have furnished to the Underwriter a letter
of auditors to the company, in form and substance satisfactory to the
Underwriter, to the effect that:
(i) They are independent accountants within the meaning of the
Act and the Regulations.
(ii) In the opinion of said auditor, the financial statements of
the Company included in the Prospectus and covered by their opinion
thereon comply as to form in all material respect with the applicable
accounting requirements of the Act and the Regulations.
(iii) on the basis of a limited review (but not an audit or
"examination" as used in accountants' opinions) of the latest
available financial statements of the Company, a reading of the
minutes of the Company and consultations with and inquiries of
officers of the company responsible for financial and accounting
matters, said auditor has no reason to believe that during the period
from March 8, 1994, to a specified date not more than five business
days prior to the Closing Date, there has been any material change in
the capital stock, or funded or current debts of the Company, or any
significant increases or decreases in the financial position, or
results of operations, if any, of the Company from that set forth in
the financial statements included in the prospectus, except as set
forth or contemplated therein.
15
<PAGE>
(iv) On the basis of the examination referred to in their opinion
included in the Prospectus, the other procedures referred to in
subdivision (iii) above and such other procedures as the Underwriter
may specify, nothing came to their attention which in their judgment
would indicate that the statements appearing in the Registration
Statement and the information of a financial or accounting nature
pertaining to the Company set forth in the Prospectus under the
captions "Use of Proceeds", "Capitalization", "Dilution", "Description
of the Common Stock" to the extent such statements and information are
derived from the general accounting records of the Company, and
excluding any questions requiring interpretation by legal counsel, are
not in all material respects a fair and reasonable presentation of the
information purported to be shown.
All the opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
to the Underwriter, whose approval shall not be unreasonably withheld. The
Underwriter reserves the right to waive any of the conditions hereinabove set
forth.
(j) All proceedings taken and to be taken in connection with the sale
of the Units pursuant to this Agreement shall be satisfactory as to legal
aspects to counsel to the Underwriter.
(k) If (`i) any of the foregoing conditions shall not have been
fulfilled as above provided; or (ii) prior to the Closing Date, the
conditions of the securities market, or any material factor, whether of an
economic or military or political nature or otherwise, bearing upon the
marketability of the Shares proposed to be sold shall be such as, in the
Underwriter's reasonable judgment, would seriously affect the offering,
sale or delivery to the public of the Units , or would render such delivery
at the initial public offering price impracticable or inadvisable, the
Underwriter shall have the right to terminate its obligations under this
Agreement forthwith, by written or telegraphic notice to the Company,
without any liability on the part of the Underwriter.
(1) If at any time prior to the closing Date (i) trading in securities
on the New York Stock Exchange shall be suspended, (ii) minimum prices
shall be established on said Exchange by action of said Exchange or the
Commission, (iii) there shall be an outbreak of hostilities between the
United States and any foreign power which resulted in the declaration of a
national emergency or declaration of war or there shall be an outbreak of
civil disorder within the United States which has resulted in the
declaration of a national emergency, the Underwriter shall have the right
to terminate its obligations under this Agreement forthwith, by written or
telegraphic notice to the Company, without any liability on the part of the
Underwriter.
16
<PAGE>
If the sale of the Units as herein contemplated shall not be carried out
because of any of the conditions set forth in Sections 7 or 8 hereof shall not
have been fulfilled, then the Company shall not be liable to the Underwriter for
lost profits or expenses incurred by it in connection herewith; provided that
the Underwriter shall be entitled to retain the accountable legal expenses
allowance to the extent necessary to reimburse it for legal expenses actually
incurred. In no event shall the Underwriter be liable to the Company for lost
profits or for expenses incurred in connection herewith.
9. Definitions
-----------
(a) "Effective Date" shall mean the date, following any required waiting
period, when the Registration Statement shall have been declared effective by
the Commission.
(b) "Termination Date" shall mean the date specified below which first
occurs:
(i) The date which is 90 days following the Effective Date, or the
date 180 days from the Effective Date if the company and the Underwriter
have agreed to so extend the offering period.
(ii) The date upon which all offered Shares are sold and payment
received therefor by the company.
11. Miscellaneous Provisions
------------------------
(a) This Agreement contains the entire agreement of the parties hereto and
cannot be altered except in a writing signed by both parties hereto and which
makes specific reference to this Agreement.
(b) The representations and warranties contained herein shall be effective
regardless of any investigations made or participation in the preparation of the
Filing, or any amendment or supplement thereto and shall survive the Termination
Date and the delivery of and payment of the Units contemplated herein.
(c) This Agreement has been and is made solely for the benefit of the
Underwriter, the Company and their respective successors, and, to the extent
expressly provided herein, for the benefit of the directors of the Company, the
officers of the company who signed the Filing, or authorized the same, the
persons controlling the Underwriter or the Company, and their respective
successors and assigns, and no other person or persons shall acquire or have any
right under or by virtue of this Agreement. The term "successor" shall not
include any purchaser, as such, of any Units from the Underwriter.
(d) Each of the parties hereto hereby respectively warrant and represent
that the person executing this Agreement on its behalf has full power and
authority to execute, acknowledge and deliver this Agreement for and on behalf
of such corporation.
(e) Except as otherwise provided herein, all communications hereunder shall
be in writing and, if sent to the Underwriter, shall be mailed, delivered or
telegraphed to it at the following address:
17
<PAGE>
with copies to:
Or, if sent to the Company, shall be mailed, delivered or telegraphed and
confirmed to it at the following address:
1588 Sea Lancer
Lake Havasu City, Arizona 86403
with copies to:
Steven L. Siskind, Esq.
645 Fifth Avenue, Suite 403
New York, NY 10022
(f) In the event that any party prevails in any action or suit brought by
them to obtain relief for any default under the terms hereof, the non-prevailing
party shall be liable to the prevailing party for all costs', including
reasonable attorney's fees, incurred in connection with such action or suit.
(g) The representations, warranties and undertakings herein on the part of
the Company and the Underwriter shall not create any rights in or duties to any
person not a party to this Agreement. It is expressly understood and agreed that
such persons as shall purchase Units in the public offering described herein,
shall be entitled to rely solely and only on the statements and representations
made in the Prospectus.
(h) This Agreement may be executed in one or more counterparts which taken
together shall constitute one and the same instrument.
As evidence of our understanding, this Agreement has been signed, accepted
and copies thereof delivered by or on behalf of, and to, the Company and the
Underwriter, on ____________________________, 1997.
Very truly yours,
BY
-----------------------------------
Duly Authorized Officer
The foregoing Underwriting Agreement is accepted on the date first above
written.
By
-----------------------
Duly Authorized Officer
18
LAW OFFICES
STEVEN L. SISKIND
SUITE 403
645 FIFTH AVENUE
NEW YORK, N.Y. 10022
---
(212) 750-2002
FAX (212) 371-8527
MEMBER OF NEW YORK FLORIDA OFFICE
AND FLORIDA BARS ONE FINANCIAL PLAZA
SUITE 2626
FT. LAUDERDALE, FL. 33394
(305) 523-2626
December 19, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Summa Metals Corp.
SEC Registration # 33-81280-LA
------------------------------
Dear Sir/Madam:
Enclosed herewith you will find for filing, Post-Effective Amendment to the
above referenced Registration Statement for Summa Metals Corp. (the
liCompany"). As your file may indicate, the origina@ registration statement
filed on behalf of the Company was declared effective on January 26, 1996.
The Company made no sales after same was declared effective. The proposed
offering has been restructured. The primary changes, all of which are
reflected in the Post Effective Amendment, are:
1. The offering was changed to 130,000 Units minimum - 510,000 Units
maximum at a price of $6.00 per Unit.
2. The Company has entered into an Underwriting Agreement with Boe &
Company, 3668 So. Jasper St., Aurora, CO 80013.
3. Eric A. Popkoff has been elected as a Vice President of Corporate
Relations and a Director in place of Dr. Ralph Pray, who has resigned
as an officer and director of the Company.
4. The undersigned has become counsel to the Company.
5. The Company has determined not to proceed with the "Big Mike,, mine
project.
6. The Post Effective Amendment contains current financial statements.
Other than the foregoing, there have been no substantive changes, and the
Post Effective Amendment is the same as was previously declared effective
by the Commission.
Very truly yours
/s/ Steven L. Siskind
---------------------
Steven L. Siskind
cc: Summa Metals Corp.
Boe & Company
Luxenberg & Associates, CPA
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
----------------------------------------
I consent to the use in this Registration Statement of my report, dated November
24, 1997, on the financial statements of Summa Metals Corporation, as of October
31, 1997 and December 31, 1996 and 1995, included herein and to the reference
made to me under the caption "Experts" in the prospectus.
/s/ Luxenberg & Associates
-------------------------------
Luxenberg & Associates
November 25, 1997
Rancho Santa Margarita, California
- - --------------------------------------------------------------------------------
22431 Antonio Parkway, #BI60-457, Rancho Santa Margarita, California 92688
Tel: (714) 788-0402 Fax: (714) 788-0006
PROCEEDS ESCROW AGREEMENT
-------------------------
THIS PROCEEDS ESCROW AGREEMENT (the "Agreement") is made and entered into
this ____ day of _______________ 1997 by and between SUMMA METALS CORP., a
Nevada corporation (the "Company/Issuer") and Steven L. Siskind, 645 Fifth
Avenue, Suite 403, New York, NY 10022 (the "Escrow Agent").
Premises
--------
The Company proposes to offer for sale to the general public, up to
510,000 Units of Company Stock (the "Offering"), at an offering price of $6.00
per unit (the "Units'), in accordance with the registration provision of the
Small Business Investment Incentive Act of 1980, now contained in Section 19 of
the Securities Act of 1993, as amended; Rule 504 of Regulation D; and pursuant
to a Registration Statement on Form SB-2 (the "Registration Statement" filed
with the Securities and Exchange Commission.
Agreement
---------
NOW THEREFORE, the parties hereto agree as follows:
1. Until termination of this Agreement, all funds collected by the Company
and/or an Underwriter from subscriptions for the purchase of Units in the
subject offering shall be deposited promptly with the Escrow Agent, but in any
event no later than noon of the next business date following receipt.
2. Collections. All subscription payments (which payments shall be made
payable to Steven L. Siskind, Attorney Escrow Account for the benefit of Summa
Metals Corp.) received for Units by the Company and/or Underwriter, will be
transmitted to the Escrow Agent by the Company and/or Underwriter by noon of the
next business day following receipt by the Company and/or Underwriter. The
Company and/or Underwriter shall include a written account of sale, which shall
include the Investor's name and address, the number of Units purchased, the
amount paid therefor, social security number, taxpayer identification number,
and whether the consideration received was in the form of a check, draft or
money order ("Payment").
3. The Escrow Agent shall establish the Escrow Account, forward for
collection all Payments received by it and deposit all funds collected by it
into the Escrow Account. Any Payment received that is payable to a party other
then Steven L. Siskind, Attorney Escrow Account for the benefit of Summa Metals
Corp., and any payment returned unpaid to the Escrow Agent, shall be returned to
the Company and/or Underwriter. In the event Issuer rejects an Investor after
the Investor's Payment has been deposited into the Escrow Account, Issuer shall
certify in writing to the Escrow Agent the fact of such rejection, the name of
the investor so rejected, and the amount of Payment for Units made by such
Investor, and shall direct the Escrow Agent to return to such Investor a check
in the amount of such Payment, without deduction, including such investor's pro
rata share of any interest earned while such Investor's funds were on deposit;
provided, however, that if Payment by such Investor has been forwarded for
collection but funds on which have not been collected, the Escrow Agent shall
have no duty to make payment pursuant to this paragraph until receipt of such
Collected Funds by Escrow Agent. In the event Issuer rejects an Investor before
the Investor's Payment has been deposited in the Escrow Account, Issuer shall
direct Escrow Agent to return promptly the Investor's Payment, without interest,
directly to Investor.
<PAGE>
4. Interest, Except to the extent that interest is payable to Investors
pursuant to Section 3 of this Agreement, Escrow Agent shall deliver to Issuer in
a single, lump-sum payment all interest earned on funds deposited in the Escrow
Account.
Except as provided in Section 3 of this Agreement, no interest shall be
earned by or payable to Investors. If interest is payable to Investors pursuant
to Section 3 of this Agreement, the amount of interest payable to each Investor
shall be calculated by Escrow Agent and provided to the Company and/or
Underwriter. Company and/or Underwriter shall file Form 1099's and any other
required reports in connection with the interest earned on the Escrow Account
and distributed to Investors.
5. Investments. Collected funds deposited into the Escrow Account shall be
invested only in a money market account at First National Bank of Long Island,
253 New York Avenue, Huntington, New York. Issuer represents such fund is an
investment permitted under rule 15c2-4 of the Securities Exchange Act of 1934,
as amended.
6. Concurrently with transmitting funds to the Escrow Agent, the Company
and/or Underwriter shall also deliver to the Escrow Agent a schedule setting
forth the name and address of each subscriber whose funds are included in such
transmittal, the number of Units subscribed for, and the dollar amount paid, All
funds so deposited shall remain the property of the subscriber until the dollar
threshold is met. Until the threshold is reached, the subscribers funds held by
the Escrow Agent shall not be subject to any lien or charges by the Escrow
Agent, or judgments or creditors' claims against the Company and/or the
Underwriter.
7. If at any time prior to the expiration of the minimum offering period,
as specified in Paragraph 8, $780,000 has been deposited pursuant to this
Agreement, the Escrow Agent shall confirm the receipt of such funds to the
Company and/or Underwriter, and on written request of the Company, the Escrow
Agent shall promptly transmit the balance to the Company (such event is
hereinafter referred to as the "Closing"). Thereafter, the Escrow Agent shall
continue to accept deposits from the Company and/or Underwriter and transmit,
upon written request of the Company the balance to the Company until the
offering is terminated. The Company shall notify the Escrow Agent in writing of
the completion of the Offering and shall schedule a final closing for the final
disbursement and settlement of the balance of funds in the Offering.
8. If the Company and/or Underwriter have not deposited a minimum of
$780,00 in collected funds with the Escrow Agent on or before _________, the
Escrow Agent shall so notify the Company. Upon receipt by Escrow Agent of its
fee, Escrow Agent shall within ten days of such receipt promptly transmit to
those investor who subscribed for the purchase of Shares from the Company the
amount of money each such investor so paid with out interest. The Escrow Agent
shall furnish to the Company verification of refunds to all subscribers.
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9. If at any time prior to the termination of this escrow the Escrow Agent
is advised by the Securities and Exchange Commission, or any state securities
division, that a stop order has been issued with respect to the Registration
Statement, the Escrow Agent shall, upon receipt of its fee, thereon return all
funds without interest to the respective subscribers.
10. It is understood and agreed that the duties if the Escrow Agent are
entirely ministerial, being limited to receiving monies from the Company and/or
Underwriter and holding and disbursing such monies in accordance with this
Agreement.
11. The Escrow Agent is not responsible or liable in any manner whatsoever
for the sufficiency, correctness, geniuses, or validity of any instrument
deposited with it, or with respect to the form or execution of the same, or the
identity, authority, or rights of any person executing or depositing the same.
12. The Escrow Agent shall not be required to take or be bound by notice of
any default of any person or to take any action with respect to such default
involving any expense or liability, unless notice in writing is given to any
officer of the Escrow Agent of such default by the undesigned, or any of them,
unless it is indemnified in manner satisfactory to it against any expense or
liability arising therefrom.
13. The Escrow Agent shall not be liable for acting on any notice, request,
waiver, consent, receipt, or other paper or document believe by the Escrow Agent
to be genuine and to have been signed by the proper party or parties.
14. The Escrow Agent shall not be liable for any error of judgment or for
any act done or step taken or omitted by it in good faith, or for any mistake of
fact or law, or for having anything which it may do or refrain from doing in
connection herewith, except its own willful misconduct.
15. The Escrow Agent shall not be answerable for the default or misconduct
of any agent, attorney or employee appointed by it if such agent, attorney or
employee shall have been selected with reasonable care.
16. The Escrow Agent may consult with legal counsel in the event of any
dispute or question as to the consideration of the foregoing instructions or the
Escrow Agent's duties hereunder and the Escrow Agent shall incur no liability
and shall be fully protected in acting in accordance with the opinion and
instructions of such counsel.
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17. In the event of any disagreement between the undersigned, or any of
them, the person or persons named in the foregoing instructions, and/or any
other person, resulting in adverse claims and/or demands being made in
connection with or for any papers, money or property involved herein or affected
hereby, the Escrow Agent shall be entitled at its option to refuse to comply
with any such claim or demand so long as such disagreement shall continue and,
in so refusing, the Escrow Agent shall not be or become liable to the
undersigned or any of them or to any person named in the foregoing instructions
for the failure or refusal to comply with such conflicting or adverse demands,
and the Escrow Agent shall be entitled to continue to so refrain and refuse to
so act until:
(a) The rights of adverse claimants have been finally adjudicated in a
court assuming and having jurisdiction of the parties and the money, papers and
property involved herein or affected hereby; and/or
(b) All differences shall have been adjusted by agreement and the Escrow
Agent shall have been notified thereof on writing signed by all of the person
interested.
18. The fee of the Escrow Agent is $2,500. The fee agreed upon for services
rendered hereunder is intended as full compensation for the Escrow Agent's
services as contemplated by this Agreement; however, in the event that the
conditions of this agreement are not fulfilled, or the Escrow Agent renders any
material service not contemplated by this Agreement, or there is any assignment
of interest in the subject matter of this Agreement, or any material
modification thereof, or if any material controversy arises hereunder, or the
Escrow Agent is made a party to or justifiably intervenes in any litigation
pertaining to this Agreement, or the subject matter hereof, the Escrow Agent
shall be fully reimbursed for all such extraordinary expenses, including
reasonable attorney's fees, including the reasonable value of legal services
rendered by the Escrow Agent in his capacity as attorney in connection with such
services, and all extraordinary expenses shall be paid by the Company.
19. Resignation. Escrow Agent may resign at any time and be discharged from
its duties as Escrow Agent hereunder by giving the other parties hereto at least
fifteen (15) days notice hereof. As soon as practicable after the resignation,
Escrow Agent shall turn over to a successor escrow agent all monies and property
held hereunder (less such amount as Escrow Agent is entitled to retain) upon
presentation to Escrow Agent of the document appointing the new escrow agent and
its acceptance of such appointment. If no successor Escrow Agent is to appointed
within a thirty day period following such notice of resignation, Escrow Agent
shall deposit the monies and property with the Superior Court of the State of
Arizona in and for the County of Maricopa or United States District Court for
the District of Arizona, as it deems appropriate.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers, as of the date first
above written.
SUMMA METALS CORP.
1588 Sea Lancer
Lake Havasu, Arizona 86403
(602) 680-5513
By: /s/ Michael M. Chaffee, President
----------------------------------
Michael M. Chaffee, President
/s/ Steven L. Siskind, as Escrow Agent
----------------------------------
Steven L. Siskind, as Escrow Agent
5
PROPOSED
SELECTED DEALER AGREEMENT
Dear Sirs:
Subject to the terms and conditions of the Underwriting Agreement with
__________________________________________, we have been employed to find
purchasers for an aggregate of 510,000 Units of Common Stock of Summa Metals
Corp., (the "Company") (on a best efforts, 130,000 Units or none basis), as to
the minimum offering, and on a best efforts basis thereafter up to 510,000
`Units, as more fully described in and subject to the conditions set forth in
the Prospectus contained in the Registration Statement on Form SB-2 under the
Securities Act of 1933 with respect to the `Units , which is effective. The
public offering price is $6.OO per Unit.
As Underwriters, we are offering to certain selected dealers who are
members in good standing of the National Association of Securities Dealers, Inc.
("NASD") (herein collectively called the "Selected Dealers") the right as set
forth herein to subscribe to a portion of the Shares at the public offering
price of $6.00 per Unit.., less a concession as set forth below and on the
following terms and conditions; provided, however, that no NASD member may
re-allow commissions to any non-member broker-dealer.
1. Terms and Allotment. We expressly reserve the right to accept or reject
in our discretion, either in whole, or in part, and to allot and over-allot. In
the case of over-allotment, we agree to accept subscriptions, up to the amount
of a Selected Dealer's Allotment, in the order of their receipt by us. If the
above-described offering is overallotted, we agree to notify you as soon as
practicable if we may not be able to fill orders for the entire number of Shares
indicated on your acceptance hereof.
2. Concessions. Except as may otherwise expressly be agreed, we agree to
allow a concession of $ per Share on all Shares confirmed by us. We reserve the
right to modify or change, but not decrease, the foregoing concessions, and
shall be under no obligation to allow the same concession to all Selected
Dealers. We reserve the right not to pay such concession on Shares purchased by
members from us and repurchased by us at or below the public offering price
prior to termination of this Agreement.
Subscribers will be permitted to purchase only whole number of Shares in
round lots as the Company will issue no fractional Shares.
3. Delivery and Payment. You will notify us in writing when you have
obtained subscriptions to the Shares allotted to you and have received the
purchase price therefor. All ` checks received in payment for the Shares shall
be payable to "Steven L. Siskind, - Escrow Agent for Summa Metals Corp.". You
agree and covenant to transmit such subscriptions (if any) without deduction for
concessions promptly upon the receipt thereof, (but in any event by noon of the
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business day following receipt) for deposit directly to the escrow account of
Steven L. Siskind, For the Benefit of Summa Metals Corp. at First National Bank
of Long Island, 253 New York Avenue, Huntington, New York 11743, where they will
be held until paid to the Company on the closing date, hereinafter specified or
until returned to the respective subscribers. Each transmittal of funds to the
escrow account must be accompanied by a transmittal letter specifying the total
amount transmitted and the name, address, tax I.D. number and number of Shares
purchased for each subscriber whose funds are being transmitted. A copy of such
letter must be sent to us at ___________________________________________________
_________________________________________. In the event that subscriptions for a
minimum of 130,000 Units are obtained, you will receive a notice from us to that
effect specifying a closing date on which delivery will be made to you of Units
purchased by you pursuant hereto against payment therefor at the public offering
price. The closing shall be held at the offices of _____________________ on such
closing date. In the event that a minimum of 130,000 Units are not sold prior to
___________, 19____ (90 days from the Effective Date) or the date 90 days
thereafter if we have notified you of such extension, you will be so notified,
and you covenant and agree, in such event, that all subscriptions received by
you (other than those subscriptions returned directly by the Escrow Agent) shall
be returned without charge and without interest to the respective subscribers
promptly upon receipt of notice from us. Delivery of certificates for Units
subscribed for by you and confirmed by us hereunder will take place at the
closing or as soon thereafter as practicable. Certificates delivered will be in
customer's names where practicable and the balance in street name and in
denominations of 1,000 Units,. Settlement for concessions payable will be made
as promptly as practicable after delivery of certificates. In the event that you
fail to make payment of an accepted subscription as above provided, we may, in
addition to any other remedies provided by law, cancel such subscription by
letter, telephone or telegraph notice to you.
4. Offering . Selected Dealers may immediately offer Units for sale and
take orders therefor, but only subject to confirmation. We, in turn, are
prepared to receive subscriptions and orders, subject, as set forth above, to
acceptance and allotment by us in whole or in part. Orders transmitted to us by
telephone should be confirmed by you by letter or telegram.
You agree to make a bona fide public offering of said Units but you will
not offer or sell any of such Units below the public offering price before the
termination of this Agreement.
You also agree to abide by all applicable provisions of the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934, and the Rules and
Regulations under such Acts.
You agree, upon our request, at any time or times prior to the termination
of this Agreement to report to us as to the number of Units purchased by you
pursuant to the provisions hereof which then remain unsold and sell to us, for
our account, such portion of such unsold Units as we may designate, at the
public offering price less an amount to be determined by us not in excess of the
concession allowed to you.
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No expenses shall be charged to Selected Dealers; however, you shall pay
any transfer tax on sales of the Units by you and you shall pay your
proportionate share of any transfer tax or other tax in the event that any such
tax shall from time to time be assessed against you and other Selected Dealers
as a group or otherwise.
You further agree not to sell any of the Units - offered hereunder to any
officer, director, controlling stockholder, partner, employee or agent of your
organization, or member of the immediate family of any such person, except as
permitted under the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and the interpretations thereof.
5. Blue Sky. You agree to limit your offers and sales of the Units to the
following state in which you are qualified to act as a broker or dealer in
securities:
6. Termination. This Agreement shall terminate 90 days from the Effective
Date unless the offering is extended for an additional 90 days or unless sooner
terminated by us by notice to you for any reason.
You understand that the offering is being made on a 130,000 Units or none
best efforts basis, as to the minimum of 130,000 Units, by the Underwriter in
accordance with the terms of the Underwriting Agreement and will be terminated
in the event 130,000 Units, are not sold in accordance with the terms thereof.
In such event, none of the Units to be sold hereunder shall be issued or sold;
and you agree that in such case you will promptly return all funds received by
you and which you may be holding on account of proposed purchases of the Units
to the persons who tendered the same, without deduction. In the event of any
termination, the Underwriter shall have no responsibility to you.
Notwithstanding such termination, you may remain liable to the extent
provided by law for your proportionate amount of any claim, demand or liability
which may be asserted against you alone or against you together with other
Selected Dealers and/or us, based upon the claim that the Selected Dealers or
any of them and/or we constitute an association, an unincorporated business, or
any other separate entity.
7. `Use of Prospectus. Neither you nor any other person is authorized by
the Company or by us to give any information or make any representation other
than those contained in the Prospectus in connection with the sale of the Units
and, if given or made, such information or representation must not be relief
upon as having been authorized by the Company or us. You also agree to deliver a
copy of the Prospectus to each prospective purchaser as required by the
Securities Act and by the Rules and Regulations thereunder. Additional copies of
the Prospectus will be supplied in reasonable quantity upon request.
You are not authorized to act as our agent or as agent for the Company in
offering the Units to the public or otherwise. Nothing contained herein or
otherwise shall constitute Selected Dealers partners with us or with one
another.
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8. Underwriter's Authority. We shall have authority to take such action as
we deem advisable in respect of all matters pertaining to the offering or
arising hereunder. We and our agents shall be under no liability to you for or
in respect of the authorization, issue, full payment, non-assessability or
validity of the Units or the component securities thereof; for or in respect of
the form of, or the statements contained in or omitted from the Prospectus, the
Underwriting Agreement, or other instruments executed by the Company or by
others; for or in respect of the delivery of the Units or the performance by
the Company or by others of any agreement on its or their part; for or in
respect of the qualifications of the Units for sale under the laws of any
jurisdiction; or for or in respect of any other matter connected with this
Agreement, except agreements expressly assumed by us herein and for lack of good
faith. No obligations not expressly assumed herein shall be implied; provided
that nothing herein contained shall be deemed to deny, exclude or impair any
liability imposed upon us or our agents as an underwriter by state or federal
securities law.
9. Applicable Securities Laws. By accepting this offer to become a Selected
Dealer, you represent to the Underwriter that you are qualified under the
Securities Exchange Act of 1934 and the Blue Sky laws of any State in which you
offer the Shares, as a dealer or broker in securities, and that you are a member
in good standing of the National Association of Securities Dealers, Inc. ;
provided, however, that no NASD member may re-allow commission to any non-member
broker-dealer. Alternatively, this offer may be accepted by a foreign dealer not
eligible for membership in the NASD who agrees not to re-offer, resell or
deliver the Shares in, the United States or to persons to whom it has reason to
believe are citizens or residents of the United States and, in making sales, to
comply with NASD's Interpretation with Respect to Free-Riding and Withholding
and Sections 8, 24 and 36 of Articles III of the NASD's Rules of Fair Practice
as if such foreign dealer were an NASD member and Section 25 of such Article III
as it applies to a nonmember broker or dealer in a foreign country.
10. Communications. All communications from you to us should be addressed
to _____________________________________________________________________________
__________________________________. All communications from us and/or the
Company to you shall be deemed to have been duly given if mailed, telegraphed or
telephoned to you at the address to which this letter is mailed, unless written
notification shall be received from you of a change in address.
If you desire to become a Selected Dealer, please advise us immediately by
signing and returning to us the form of acceptance attached hereto.
Very truly yours,
By ________________________________
DATED________________________
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Dear Sirs:
We agree to become a Selected Dealer with respect to the offering of Units
of Common Stock of Summa Metals Corp. at the public offering price of $6.00 per
Unit as outlined in this Agreement, and we acknowledge receipt of the
Prospectus, dated ____________ 1998.
We agree to subscribe on the terms set forth in this Agreement for Units -
of Common Stock of Summa Metals Corp., as described in the Prospectus, and to
make payment for such securities within (10) days of the date of the
confirmation from you of our order, provided that funds received from our
customers on subscription for Shares shall be transmitted to the escrow account
of Steven I,. Siskind, for the benefit of Summa Metal Corp; at First National
Batik of Long Island in accordance with Rule 15c2-4.
We confirm, that we are a member in good standing of the National
Association of Securities Dealers, Inc., and we agree to abide by the "Rules of
Fair Practice" of the National Association of Securities Dealers, Inc., and the
interpretations thereof.
DATED _____________________
-------------------------------
Signature of Selected Dealer
Address:_______________________
_______________________________
Phone:_________________________
5
