UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ______.
Commission File No. 0-6034
STANSBURY HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Utah 87-0281239
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
11515 Amanda Drive, Studio City, CA 91604 (818) 763-0460
(Address of principal executive office) (Zip Code) (Registrant's telephone
number, including
area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934,
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __. No. X.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ].
The issuer had no revenues for this fiscal year. As of the week of October 2,
1995, the aggregate market value of common stock held by non-affiliates was
$8,724,896 based on the average bid and asked price for the week of October 9,
1995.
As of October 15, 1995, the number of share outstanding was 19,092,968.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format (check one): Yes __. No X.
NOTICE: [1] This Annual Report on Form 10-KSB does not contain audited
financial statements . If the audit now being conducted by Arthur
Andersen & Co., L.L.P., is completed, an amended Annual Report
will be filed.
[2] The persons who served as directors and officers of the Company
during the first half of this reporting period (July 1, 1994 -
December 12, 1994) have refused to cooperate with the Company in
preparing this Annual Report. There may, therefore, exist
material, adverse matters concerning the Company which are known
to former management but of which the Company is presently
unaware.
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TABLE OF CONTENTS
Page
ITEM 1. Description of Business...................................... 1
ITEM 2. Description of Properties.................................... 3
ITEM 3. Legal Proceedings............................................12
ITEM 4. Submission of Matters to a Vote of Security Holders..........16
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters......16
ITEM 6. Management's Discussion and Analysis of Plan of Operation.....17
ITEM 7. Financial Statements..........................................23
ITEM 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................26
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16 (a) of the Exchange Act.........26
ITEM 10. Executive Compensation........................................28
ITEM 11. Security Ownership of Certain Beneficial Owners and
Management.................................................29
ITEM 12. Certain Relationships and Related Transactions................30
ITEM 13. Exhibits and Reports on Form 8-K
Exhibits ................................................30
Reports on Form 8-K........................................31
SIGNATURES ...........................................................32
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ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development.
Stansbury Holdings Corporation ("Stansbury" or the "Company") is a
development stage mining company incorporated in the State of Utah in 1969.
Stansbury owns or leases the largest known undeveloped reserves of vermiculite
in North America. The property is located near Hamilton, Montana. Drill proven
mining reserves total 5 million tons of 11.6% vermiculite at a waste to ore
ratio of 0.37:1. Drill proven reserves are sufficient to sustain operations for
a period in excess of 12 years. Significant inferred reserves have yet to be
examined.
In the last three fiscal years, i.e., from June 30, 1992 to June 30, 1995,
the Company was not engaged in operations and did not derive revenue from any
source. On December 12, 1994, in a proxy contest initiated by a shareholders'
committee, a new board of directors was elected (the "New Board"); and new
officers were elected by the New Board. As a result, a change in control
occurred.
Since December 12, 1994, the Company has raised approximately $229,000 in
loans from existing shareholders. An additional $11,500 was raised in the form
of loans from non-shareholders on the same terms as those from existing
shareholders. The proceeds have been used to pay real estate taxes and
withholding taxes, trade debts, consultant's fees, attorneys' fees, some of the
expenses of the 1994 proxy contest and accountants' fees. Several thousand
dollars were also used to pay a contractor to perform reclamation work in
September, 1995 at the site of the Company's proposed mine in Montana, at the
request of the U.S. Forest Service.
On September 19, 1995, the Company engaged Arthur Andersen LLP to perform
an audit of the Company's financial statements for the year ended June 30, 1995.
The audit has been initiated; but is at a very preliminary stage. No assurance
can be given that the audit will be completed.
The proposed mine will not be in operation, i.e., producing mineral for
sale, during calendar year 1996.
(b) Business of Issuer.
The Company hopes to develop and operate an open-pit vermiculite mine on
mineral claims leased by the Company in Ravalli County,
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Montana. See Item 2, below. Since the construction of the proposed mine has not
begun, the Company does not have any principal products or services.
Final approval of the Company's Environmental Impact Statement ("EIS") was
obtained on January 3, 1994. An operating permit is available. However, to
obtain the permit, the Company must first post a reclamation bond in the amount
of $252,000, subject to revision as changes in the plan occur and, at a minimum,
once every 5 years. The Company does not currently have the funds available to
post the reclamation bond.
The Company's operations, if commenced, will be subject to regulation by
the United States Forest Service, the United States Environmental Protection
Agency and the Montana Department of Environmental Quality (formerly Department
of State Lands). Pursuant to the EIS, the Company is subject to certain
limitations and conditions as to the time of operation and the method of
operation. For example, operation of the proposed mine is limited to a 150-day
operating cycle from May through October 15 of any calendar year.
As a result, federal and state environmental, mining and land regulation of
the Company's construction and operations activities, if commenced, will
continue to be pervasive. Changes in any or all of these laws and regulations
could have a material, adverse impact on the Company's prospects or its future
operations, if commenced. In addition, the Company is required to comply with
the regulations of the United States Securities and Exchange Commission, the
Division of Corporations of the State of Utah and federal and state taxing
authorities.
The Company had no employees during the reporting period. As of May 23,
1995, the Company hired Michael F. LaFleur as an independent contractor, to
serve as a consultant at a fee of $5,000 per month. On September 18, 1995, Mr.
LaFleur was employed by the Company as its Chief Executive Officer; and he was
also elected to the Company's Board of Directors. Mr. LaFleur receives a salary
of $5,000 per month as Chief Executive Officer. Mr. LaFleur has no contract or
stock option plan. All other directors continue to serve without compensation or
stock option plan.
See Items 3 and 10, below, for discussion of issues relating to former
management, who were officers and directors of the Company from July 1, 1994 to
December 12, 1994.
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ITEM 2. DESCRIPTION OF PROPERTIES
(a) General.
The Company has no plants in any location.
The Field Office
The Company owns a small office building and surrounding land (1.25 acres)
in Victor, Montana (see Map "A"), which can be used for a field office (the
"Field Office Property"). The land is owned in fee simple. The Field Office
Property had been sold in a tax sale because the Company, under former
management, had not paid applicable real estate taxes. In May, 1995, under the
New Board, the Company redeemed the Field Office Property; and it is now free
and clear of any lien except for certain of the judgments discussed in Item 3
below.
The Company believes the condition of the Field Office Property is
acceptable for its purpose, should the Company be able to commence construction
activities in the future.
The Vermiculite Claims
The Company also leases certain mineral claims in the Bitterroot National
Forest in Ravalli County, Montana. Under the name of the "Western Vermiculite
Project," the Company proposes to build a project consisting of an open pit
mine, haul road, ore concentrator, host rock waste stockpile, water storage
tanks, sedimentation ponds and administrative and maintenance buildings. The
Company has not commenced construction; and the Company has no funds on hand or
committed to finance commencement of construction.
The Company proposes to ship vermiculite concentrate to an exfoliation
plant to be constructed at a location yet to be selected by the Company.
The Company's 85 unpatented lode mining claims, comprising approximately
1,750 acres, are located about 11 air miles east and slightly north of Hamilton,
Montana. (See Map A). Access to the property is by an improved, private road.
The nearest rail siding, located on the Montana Rail Link Railroad is an
additional 9 miles north of Hamilton in Victor, Montana.
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The claims lie near the crest of the south end of the Sapphire Mountains at
elevations of approximately 7,000 feet above sea level. The area is part of the
Bitterroot National Forest and the claims are found within the Skalkaho igneous
complex on the western flank of the Skalkaho mountains and in the upper portion
of the Saint Clair Creek drainage area. The Skalkaho igneous complex is an
elongated igneous body about four miles long by one mile wide with its major
axis tending east-west.
The zone of interest in the Skalkaho igneous complex consists of biotite
pyroxenite exposures which contain vermiculite. Biotite and vermiculite are both
hydrated sheet silicates. Principal exploration of the Company's claims to date
has been conducted on the ABM Ridge and Horse Ridge. These ridges are the most
accessible and have the best outcrops and consequently have been the first to be
studied. The average depth of the vermiculite deposits is 41.9 feet on ABM Ridge
and 62.2 feet on Horse Ridge.
The maps on the following pages give the location of the property:
- Map A, entitled "Project Location" indicates the geographical location of
the mine in relation to Victor and Hamilton, Montana and to the Montana Rail
Link Railroad.
- Map B, entitled "Proposed Facilities Plan and Wetlands Areas of Interest"
is a schematic showing the configuration of the mine site.
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MAP A - PROJECT LOCATION -
Graphic Omitted - see description on Page 4.
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MAP B - PROPOSED FACILITIES PLAN AND WETLANDS AREAS OF INTEREST -
Graphic Omitted - see description on Page 4.
Page 6
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The proposed mine would be located on ABM Ridge (see Map "B") and would
involve disturbance of approximately 77 acres. A portion of the permit area is
comprised of unreclaimed land disturbed by previous mining activities. Prior
mining operation at the proposed project site are documented in the EIS; and
remnants of these historic operations and structures are evident on the site.
Elevations for the mine site and vicinity range from about 6,600 to 7,200
feet. Most of the surrounding area is forested. Ground water would probably be
encountered approximately halfway through the mining operation.
At the request of the U.S. Forest Service, the Company performed
reclamation work at the proposed mine site in September, 1995.
The Company believes that its vermiculite deposits are unique in that they
appear to contain no fibrous asbestiform particulates. To date, periodic testing
of bore hole samples, and dust samples from the air has not identified fibrous
asbestiform particulates. Asbestos mineral particles can produce severe health
effects when trapped in the lungs or ingested.
Consequently, the Company's vermiculite deposits, if exploited, should
offer a significant safety and marketing advantage over other known
"contaminated" deposits.
Lease of Certain Vermiculite Claims
Twenty-two of the vermiculite claims are leased to the Company. The lease
was assigned to the Company on June 6, 1986 pursuant to a lease dated August 2,
1976 with a private party. The assignment by Green International, Inc. was in
connection with the settlement of certain obligations owed to the Green Trust.
The lease permits the lessee to purchase the claims for one million dollars
during the terms of the lease or any extensions thereof. The lease term was
renewed during November, 1987; and is renewable for additional consecutive 10
year terms upon five days prior notice. The lease requires an advance royalty
payment of $6,000 per year. Royalty payments, including any minimum advance
royalty payment, are applied against the purchase price of the claims.
The lease was supplemented on May 30, 1977 to grant the lessor a $2 per ton
royalty on 18 additional claims adjacent to the 22 claims referred to above.
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The Mineral Vermiculite and Its Uses
The Company hopes to mine and market vermiculite, a naturally occurring
mineral found in significant deposits in only a few locations widely scattered
throughout the world. These locations include the United States, Argentina,
Brazil, South Africa, Kenya, India and Japan.
Vermiculite is a sheet silicate which on the molecular level has water
molecules between layered sheets of vermiculite. Upon heating, the water
molecules turn to steam and cause the mineral to exfoliate (or "pop") to a size
as much as 15 times the original volume Vermiculite has the unusual property of
being able to expand several fold when heated, due to the presence of extra
molecules of water located within the crystal lattice. It exfoliates into worm
or accordion-like shapes. When exfoliated, it has a low bulk density with a high
insulating and cationic exchange capacity. It is used as an ingredient in high
value artificial soil mixes, fire proofing spray-on gunite mixes, as a fire
protection agent in gypsum wall board, as ladle covering in metal smelting, as a
toxic waste collector, as insulation in roofs, ceilings and walls, as well as in
a host of other industries. The dominant uses are in the construction and
agricultural sectors of the economy.
There are no substitutes for vermiculite in some applications, such as fire
proofing gunites, which finds substantial demand in the fireproofing of high
rise buildings. In the agricultural sector, vermiculite, when mixed with peat,
provides the most superior artificial soil mix available for the propagation of
commercial foodstuffs, trees and bushes.
The lightweight nature of expanded or exfoliated vermiculite makes it a
useful commodity with applications in industries such as (1) loose-fill
insulation, (2) lightweight board insulation, (3) gypsum board fire proofing,
(4) acoustical plasters and tiles, (5) insecticides and herbicides, (6) toxic
chemical storage and transportation, (7) packing materials, (8) filtration, (9)
fireproof gunite and (10) animal feedstuffs. The Company does not presently have
any commitments for purchase of its product by companies within these
industries; but believes that sales can be achieved if the proposed mine is
placed in production.
Exfoliated vermiculite is generally graded from 0 to 5 with 0 being the
largest and 5 the smallest grade in size. Initial testing shows that the
Company's deposit can produce the coarser grades 0 to 1 which are believed to be
the most desirable in significant quantities
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in the United States; and the Company may consequently be able to provide a
needed product commanding higher prices than the other grades of vermiculite.
Reserves
The Stansbury vermiculite deposit, located near Mt. Skalkaho, Bitterroot
National Forest, Ravalli County, Montana, was discovered many years ago and was
first identified as a sizable deposit in the 1930's. Sporadic attempts have been
made to develop a mine, with the latest attempt being in the late 1970's. Over
the years, it has been referred to as the Mt. Skalkaho deposit, the Western
Vermiculite deposit, the Gird Creek deposit and, most recently, the Stansbury
vermiculite deposit.
Since its discovery, a number of estimates have been made as to the mineral
resource inventory in the deposit, but until 1986, previous estimates were based
on visual observation of surface characteristics and the areal extent of the
mineralization, limited trenching and some drilling conducted in the late 1970's
with a rotary drill. None of these methods quantified the amount and grade of
vermiculite mineralization accurately.
However, in the summer and fall of 1986, Boyles Bros. Drilling Co., of
Spokane, Washington, was engaged to drill out two of the main sub-deposits,
referred to as ABM Ridge and Horse Ridge, with a diamond core drill. This work
was directed by Western Resources Company ("Western Resources").
During 1986, a total of 90 holes were drilled on approximately 31 acres of
the Company's 1,750 acres under claim. The 90 holes which produced in excess of
9,500 feet of core, included 44 holes on ABM Ridge and 46 holes on Horse Ridge.
The core samples were used to develop a mineral resource inventory for the
property. The triangle method of calculating resource blocks was used and core
samples with vermiculite grades of less than 6% were excluded from
consideration.
The results of the drilling program suggest that the reserves are
sufficient to sustain an open-pit vermiculite mine with a life expectancy in
excess of 12 years based upon proposed current business plans and cost analyses.
The overall geologic deposit consists of an ultramafic intrusive into the
Wallace calc-silicate formation. The ultramafic rocks are surrounded by an
intrusibe syenite halo. The ultramafic zone is approximately 1 mile wide by
around 3 miles long. The ultramafic rock dominantly consists of amphibolitic
minerals, such
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as green amphibole, pyroxene, hornblende, biotite, feldspar, magnetite,
vermiculite, sphene and other minor minerals. The rock is generically referred
to as pyroxenite. It is soft and weathered, generally to a depth of 40' to 100'.
The deposits, even though weathered, form local erosional highs.
Within the overall geologic setting, "pods" of vermiculite occur. The
vermiculite is an unusually weathered form of ordinary biotite mica, wherein the
potassium ion has been replaced by a magnesium ion in the crystal structure and
extra water molecules have been introduced between the crystal structure and
extra water molecules have been introduced between the crystal platelets. Thus,
at depth, the vermiculite grades into hydro-biotite and ultimately into biotite
mica. It is due to these changes in the crystal makeup that the vermiculite
becomes unique and of value. When heated to 280 degrees centigrade, it
"exfoliates", or expands in an accordion-like manner, to several times its
original volume. It can then be used in soil mixes, as light weight concrete
aggregate, as insulation and as carriers of fertilizers, insecticides and
mineral feed supplements for cattle etc., among other uses.
In addition to the two sub-deposits that have been drilled to any
consequence, several other sub-deposits exist that have yet to be drilled, such
as the area behind ABM Ridge, the Barber Pole area and the flanks of Mt.
Skalkaho.
In 1986-87, mineral resource inventory was prepared for both ABM and Horse
Ridges, using an arbitrary 6% cutoff as the limits of the mineral resource
inventory. The density of the in situ rock at varying grades of vermiculite and
percentages of magnetic minerals had previously been determined at Mountain
States. An average of 11.11 cubic feet per in-place short ton was used as the
density factor.
Potentially mineable mineral resources were calculated by examining the
geologic inventory described above and allowing for obvious in-pit waste
(material having an average grade of less than 6% vermiculite), unmineable roads
within the blocks and pit backslope waste.
The sub-deposit on ABM Ridge appears to have been thoroughly drilled out
with little potential for significant additional resources. There is still some
significant potential for additional resources to be discovered on Horse Ridge
as well as in a number of other areas within the claim block. The overall
mineralized zone under mining claim is quite large with substantial potential
for the delineation of
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additional quantities of vermiculite resources, which can only be delineated by
further drilling.
In the professional judgment of Mark R. Welch, Mining Engineer and
President of Western Resources, based on the 1986-87 work, that the following
mineral inventory has been confirmed as drill-proven vermiculite mineral
inventory:
Geologic Mineral Resources
Location Tons Grade, % V Contained Tons, V
ABM Ridge 2,415,000 @ 8.67% = 209,297
Horse Ridge 3,882,000 @ 10.79% = 418,841
Potentially Mineable Mineral Resources
ABM Ridge Tons Grade, % V Contained Tons, V
Ore 1,931,000 @ 9.74% = 188,124
In-pit Waste 934,000 - -
Horse Ridge
Ore 3,098,000 @ 12.79% 396,228
In-pit Waste 910,000 - -
The average depth of the geologic mineral resource for ABM Ridge for
resources greater than 6% weighted average vermiculite content is 41.9 feet, and
that of Horse Ridge, 62.6 feet.
The potentially mineable mineral resources of both sub-deposits assume a 6%
cutoff.
Not included in the potentially mineable mineral resource inventories are
the recovery and process losses that can be expected during mining, milling and
processing. It is expected that an overall recovery factor of approximately 57%
will be achieved. However, the mineability of these sub-deposit mineral
resources will be a function of the costs assigned to the operation.
The Western Resources study summarized above has not been updated. Mark
Welch, the mining engineer who furnished the above study, is a director, officer
and shareholder of Western Resources.
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James M. Rosel, a director of the Company (See Item 9), is also a director,
officer and shareholder of Western Resources. Subsequent to the 1987 study being
rendered, through Western Resources Company of Montana, Inc., a related New
Mexico corporation owned by Messers Rosel, Welch and David K. Hogan, Mr. Rosel
(with Messers Welch and Hogan) beneficially owns 500,000 shares of the Company,
which Western Resources accepted in settlement of the Company's debt to it for
services rendered pursuant to the consulting agreement between Stanbury and
Western Resources, which included furnishing the above study. In addition, Mr.
Rosel owns of record 50 shares, which were donated to him by Mr. Sanford.
Because the Company has not commenced operations, and will not commence
such operations in calendar year 1996, the Company refrains from discussing
general competitive conditions.
(b) Investment Policies.
The Company has no investments.
(c) Description of Real Estate and Operating Data.
The Company received inquiries from realtors during the reporting period as
to whether it wished to list the Field Office Property for sale. The Company
responded in the negative.
There is no insurance on any of the Company's properties. Insurance will be
necessary before commencing construction.
(d) Government Regulations and Environmental Matters.
Mineral exploration and production is subject to environmental regulations
by federal, state and county authorities. In most states, mineral exploration
and production is regulated by conservation laws and other statutes and
regulations relating to exploration procedures, reclamation, safety of mine
operations, employee health and safety, use of explosives, air and water quality
standards, noxious odors, noise, dust and other environmental protection
controls.
ITEM 3. LEGAL PROCEEDINGS
Simultaneously with the filing of this Report with the U.S. Securities and
Exchange Commission, the Company is commencing suit in the United States
District Court for the District of Utah against former management. The Company's
suit is against Robert V. Murton, its
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former president, Charles McLaughlin, also its former president, Dr. Sami I. A.
Samani, Peter Samani and Thomas DeRosa, its former secretary. All of the
defendants, with the exception of Mr. DeRosa who resigned as director and
secretary during the previous reporting period, served as directors and/or
officers of the Company during the first half of the reporting period.
This new litigation is discussed in Item 3(b) below.
(a) Judgments Against the Company.
There are two classes of monetary judgments against the Company, all
entered under former management.
First, in the course of the New Board's factual investigation after taking
office, the Company discovered that three recent judgments were entered against
the Company in 1993 and 1994 under former management:
1. In 1993, a judgment was entered against the Company in the Superior
Court of Bergen County, New Jersey, in favor of Michael Bauernfiend in the
amount of $8,163.82. The judgment is accruing interest and is not satisfied.
2. In 1994, a judgment was entered against the Company in the Third
District Court of the State of Utah (Salt Lake City) in 1994 in the amount of
$63,360 in favor of Mr. and Mrs. James Herd. The judgment is accruing interest
and is not satisfied. On September 20, 1994, this judgment was recorded (in the
amount of $71,473) as a lien in Montana on the Company's properties discussed in
Item 2 above.
3. On November 22, 1994, judgment was entered in favor of the law firm of
Dorsey & Whitney against the Company in the United States District Court for the
District of Montana in the amount of $85,310.10. The judgment is accruing
interest and is not satisfied. It constitutes a lien on the Company's properties
(See Item 2).
Second, in addition to these recent judgments, state court records in Utah
show the following prior unsatisfied judgments against the Company:
In Martineau & Assoc. vs. Stansbury, a judgment was entered in May, 1991 in
the amount of $4,268.66, $1,533.00 attorney's fees, $43.75 court costs, with
interest accruing since that date.
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In Jerry Brown vs. Stansbury, a judgment was entered on May 22, 1984, in
the amount of $32,457.72, and costs of $51.25, with interest accruing since that
date.
In Union Bank vs. Stansbury, a judgment was obtained on December 12, 1984,
in the amount of $41,632.92, $3,000.00, attorneys' fees and $45.50 costs, with
interest accruing since that date.
In Goodyear Tire vs. Stansbury, a judgment was obtained on August 16, 1984
in the amount of $1,397,186.29, $36.75 court costs, with interest accruing since
that date.
In Quality Oil Company vs. Stansbury, a judgment was entered on June 28,
1984, in the amount of $1,623,004.00, $451.65 costs and $11,457.75 attorney's
fees, with interest accruing at the rate of 20% annum from October 1, 1981.
Former management of Stansbury has refused to discuss any of these (or any
other) matters with current management. However, the Company believes that all
of the above judgments were entered by default; and that no defense was offered
by the Company. Because former management has refused to cooperate in
preparation of this Annual Report on Form 10-KSB, the Company is not able to
state whether there exist good and bona fide defenses to any of these claims.
The Company is seeking forbearance agreements from the three recent
judgment creditors listed above. In connection with the June 30, 1995 audit, the
Company intends to seek an opinion from Utah counsel as to whether the above
prior judgments are still valid and enforceable, especially in light of the
Company's involvement in Chapter 11 bankruptcy proceedings from February 21,
1985 until January 26, 1994.
Pending receipt of that opinion, the Company has not contacted the prior
judgment creditors because it believes all of those judgments (except Martineau)
were discharged in bankruptcy.
(b) Litigation with Former Management.
On September 19, 1995, counsel for Dr. Sami I. A. Samani and Thomas J.
DeRosa (two of the former directors of the Company who were ousted from office
by the shareholders on December 12, 1994) made a written demand on the Company
to pay a judgment obtained against them as a result of personal guarantees by
them of the Company's debt to Mr.
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and Mrs. Herd. See Item 3(a) above. Dr. Samani and Mr. DeRosa threatened to file
a suit against the Company to foreclose on two second mortgages allegedly held
by them on the Company's mineral claims. The Company has attempted to resolve
this demand, and to resolve all issues between these former directors and the
Company without litigation. However, Dr. Samani and Mr. DeRosa have set a
deadline of October 19, 1995, and they are refusing to negotiate until the
judgment obtained against them by Mr. and Mrs. James Herd is paid or settled by
the Company.
The Company's claims against former management, which was filed on October
15, 1995, include the following:
1) to enjoin violations of Section 13(d) of the Exchange Act;
2) to enjoin violations of Section 10(b) of the Exchange Act; and
3) to enjoin violations of their breach of fiduciary duty, fraud,
negligence, gross negligence and conspiracy.
The gist of the Company's case is that former management invalidly issued
to themselves 1,973,066 shares and demand notes in the amount of $342,295.23 on
or before December 12, 1994 for no consideration or for grossly inadequate
consideration. The Company has been unable to find sufficient evidence to
support the validly of that debt or the issuance of stock. As a result, the
Company is asking the Court for a temporary restraining order and a preliminary
injunction to (a) enjoin former management from commencing a suit to foreclose
on the second mortgage in any jurisdiction other than the District of Utah and
(b) to enjoin former management from offering, selling, pledging, voting or
transferring ownership of the above shares. As final relief, the Company is
seeking money damages, cancellation of the above shares and demand notes and the
invalidation of the second mortgage.
The Company expects former management to contest the suit vigorously. This
litigation may include an attempt by Dr. Samani and Mr. DeRosa to foreclose on
their alleged second mortgages. The Company believes that it has meritorious
defenses to such a foreclosure suit.
This type of litigation, however, may have a material, adverse impact on
the Company's prospects, as well as diverting management's time and financial
resources from the current attempt to resuscitate the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this Report, no
matters were submitted to security holders through the solicitation of proxies
or otherwise.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Because former management of the Company failed to file required reports
with the United States Securities and Exchange Commission and otherwise failed
to keep the Company in compliance with applicable federal and state laws, the
Company is not in compliance with the reporting requirements of applicable
federal securities laws. On January 21, 1992, the Company's shares were delisted
from the National Reporting System of the National Market System of Securities
Dealers. The shares continue to trade in the "pink sheets."
The following table shows the reported "bid" and "ask" price for the
Company's stock for each quarter of the reporting period and the previous
reporting period:
DATE OPEN HIGH LOW CLOSE
9/93 * * * .05
12/93 * * * 1/8
3/94 * * * 1/16
6/94 1/8 5/16 1/16 1/16
9/94 3/32 3/8 1/15 1/4
12/94 7/16 5/8 1/8 1/8
3/95 3/8 1/2 3/32 1/8
6/95 .35 7/16 1/8 3/16
*Information not available.
Source: Bloomberg.
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The Company believes there is not an efficient market for its stock; and
that market prices may not reflect either the value of the Company's shares or
current and available information concerning the Company or its prospects. The
quotations represent prices in the over-the-counter market between dealers in
securities; and do not include or reflect markups, markdowns or commissions; and
do not necessarily represent actual transactions.
As of October 15, 1995, there were approximately 3,723 shareholders of
record.
No dividends have been declared or paid; and it is not anticipated that
cash or stock dividends will be paid in the foreseeable future.
There can be no assurance that cash dividends can or ever will be paid
since payments are contingent upon future improvements, if any, to the Company's
financial condition, capital requirements, prevailing business conditions and
other factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company is not liquid. Should any of the current judgment creditors
(see Item 3) attach the Registrant's assets, the efforts now underway to revive
Stansbury would be imperiled. In the absence of forbearances or negotiated
settlements with judgment creditors, the Company's revival is unlikely.
Since taking office in December, 1994, the New Board has continued to
implement the platform of the Committee for New Management of Stansbury Holdings
(the "Committee") set forth in the Committee's proxy materials for the December
12, 1994 special meeting of shareholders. Pursuant thereto, the New Board has:
- placed "on hold" all actions approved by former management which had not
been fully implemented, pending a thorough review;
- attempted to identify, locate and take possession of the assets, books
and records of Stansbury;
- begun evaluating Stansbury's assets, including the status of its mineral
claims and leases, permits and environmental impact statement; and
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<PAGE>
- begun conducting an investigation of, and instituted litigation
involving, the activities of prior management.
Since the New Board was elected, the Company has (a) made the required
annual filings with the State of Utah's Division of Corporations (b) registered
to do business as a foreign corporation in Montana; (c) paid trade and tax
creditors, including redeeming the Field Office Property in Victor, Montana,
which had been sold at a tax sale. A principal executive office address and a
telephone number have been established. Since December, 1995, Stansbury has been
filing required periodic reports with the U.S. Securities and Exchange
Commission.
In addition, the New Board has:
- engaged Arthur Andersen LLP as the Company's independent public
accountant to perform an audit of the Company's financial statements for the
year ended June 30, 1995;
- identified, prioritized and begun paying trade debts, liens and
judgments;
- paid all real estate taxes and tax accountants' fees;
- engaged an experienced mining executive as a consultant (since September
18, 1995, the Company's Chief Executive Officer) to perform a review of the
assets, permits, financial records and a prior feasibility study of the Company;
- started to develop a business plan to maximize shareholder value; and
- started to prepare a capital plan for Stansbury for the next twelve
months.
It is expected that any auditor's opinion, if obtained, will be qualified
in nature and will include, among other things, a "going concern" qualification.
The Company is a development stage company which is not presently engaged in
business operations. Management anticipates that commencement of mining
operations will require the Company to raise $2 to 3 million of equity capital
and also an additional $15 to 20 million in permanent financing.
The following activities are currently "on hold" until the above goals are
achieved:
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<PAGE>
- seeking a re-listing of the Company's shares on the national quotation
system of the National Association of Securities Dealers; and
- studying other avenues for growth and profitability.
The Company has to date raised over $240,000 by way of interim financing.
The financing is in the form of loans from existing shareholders of the Company
and two non-shareholders, who either already are or thereby became members of
the Committee for New Management of Stansbury Holdings (the "Committee"). The
terms of the loans were previously disclosed in Form 10-QSB of March 31, 1995,
which is repeated and incorporated by reference herein.
The Company's fundraising effort is on-going, as the Company is seeking to
raise approximately $50,000 per month over the next six months. Additional
monies to be raised in the future will be principally devoted to:
(a) paying for preparation of a 1994 and 1995 corporate income tax return
and for Arthur Andersen's audit of the Company's financial statements for the
year ended June 30, 1995;
(b) preparation and filing of an amended Annual Report on Form 10-KSB for
the year ended June 30, 1995 (i) so that the Company may become current with the
SEC in its public filings and (ii) so that the Company may then apply to the
National Association of Securities Dealers to have its shares re-listed for
trading on the NASDAQ;
(c) payments of attorneys' fees (for Montana, Utah and corporate counsel);
(d) payment of the CEO's salary and expenses; and
(e) payment of directors' expenses.
In May, 1995 the Insurance Commissioner of the State of Utah, as liquidator
of two insurance companies, (the "State") offered, in principal, to enter into
an agreement with the Company (a) to amend the State's mortgage on the Company's
mineral claims so as to allow the Committee's members to have an equal, first
lien security interest in those claims as long as the State's position was not
adversely affected and (b) to enter into a forbearance agreement with the
Company regarding (i) sale of the State's shares of Stansbury's stock and (ii)
any foreclosure on its mortgage.
Page 19
<PAGE>
In July, 1995, the Company discovered that a set of second mortgages
existed on the Company's mineral claims, including two in the name of members of
former management. In light of the dispute with former management (See Item 3),
the State and the Company have not implemented their agreement in principal.
Among other things, the State has concluded that it is not possible at this time
to amend its first mortgage so as to permit the Committee to take an equal,
first lien position without jeopardizing its first lien priority vis-a-vis
former management's second mortgages (if valid). Counsel for the Company concurs
with this conclusion. Issuance of notes evidencing the Company's indebtedness to
various Committee members is, therefore, "on hold" pending resolution of the
dispute, and litigation, with former management. See Item 3.
By way of a business plan, should the additional $300,000 referred to above
be obtained, the New Board would then intend to file an amended Annual Report on
Form 10-KSB, to issue shares of Stansbury stock to Committee members, as agreed,
as additional consideration for their loans, to seek a re-listing of the
Company's shares on NASDAQ and thereafter to call a regular annual shareholders
meeting.
At such annual meeting, the New Board presently expects to ask the
shareholders to take some or all of the following actions:
(a) elect the nominees of the New Board;
(b) ratify and approve a stock option plan for management for the next
year;
(c) ratify the selection of an independent public accountant for the next
year;
(d) approve a class of preferred stock;
(e) approve amendments to the Company's articles of incorporation; and
(f) act on such other matters as may properly come before an annual
meeting.
The New Board would then propose that the Company seek new equity to pay
off remaining debts incurred under the former management and to furnish working
capital. With the net proceeds of such a $2 to 3 million "best efforts" offering
in hand, the Company would then seek debt and equity financing to fund
construction of $15 to 20 million.
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<PAGE>
If - and only if - such financing is obtained, construction of the proposed
open-pit vermiculite mine could begin in or about mid-1996.
This is a very ambitious program, especially in light of the problems
facing the Company. No assurance can be given that any of the above goals can be
achieved. The Company's shareholders (and any person considering purchasing
shares of Stansbury stock) should specifically note the following:
1. There are material ongoing disputes, and litigation, with former
management. See Item 3.
2. Even with the filing of this Report, Stansbury is still not in
compliance with the periodic reporting requirements of the SEC, which may impair
or prevent the Company's ability to raise capital because no Annual Report on
Form 10-KSB has been filed for any fiscal year after June 30, 1991.
3. The New Board expressly disclaims any responsibility for and denies any
express or implied representation as to the truth or completeness of any part of
the 1991 Annual Report filed by former management in July, 1992.
4. Exploration, development and mining of mineral properties involve unique
and greater risks than those generally associated with other industries. The
Company's operations are subject to all the hazards and risks normally incident
to the exploration, development and mining of mineral properties, including the
particular risks described herein.
5. The mining industry is subject to extensive federal, state and local
laws and regulations covering exploration, development, operations and
production, taxes, labor standards, occupational health, waste disposal,
environmental protection, reclamation, mine safety, toxic substances and other
matters. Environmental, operating, water, dust and other federal and state
permits are essential to any mining operation. The nature of the mining business
is such that mining companies are frequently in the process of applying for
additional permits or modifications to existing permits at any given time. There
can be no assurance that such permits will be granted in the future as needed,
and, if such permits are not granted, the Company or any mining venture in which
it is a participant could be required to curtail or cease its development plans
or operations with serious adverse consequences to its liquidity and
profitability. Amendments to current laws and regulations governing operations
and activities of mining
Page 21
<PAGE>
companies or more stringent implementation thereof or additional taxes could
have a material adverse impact on the Company.
6. Any development of Stansbury's leases or mineral resources will require
applications for issuance of permits from federal and state authorities,
including the U.S. Forest Service and the State of Montana's Department of
Environmental Quality.
7. There exists an unknown quantum of environmental and community
opposition to any mining activity by Stansbury in Ravalli County, Montana where
the proposed mine would be located. Last year, a newspaper article published in
Montana stated that a "concerned citizens coalition" was seeking to raise funds
to initiate litigation to block issuance of permits as part of a "No Stansbury"
campaign. No assurance can be given that any such environmental and citizens
litigation, if instituted, would not succeed in blocking Stansbury's development
of its mineral leases.
8. As of December 31, 1994, members of the Committee were collectively owed
$1,062,768 by Stansbury. The members of the Committee are now owed an additional
$240,100. The New Board is seeking at least an additional $300,000 from current
or future members of the Committee which, if obtained, will result in a total
indebtedness by the Company to members of the Committee of approximately $1.6
million.
The liquidator for Southern Insurance Company, a member of the Committee,
holds a recorded first mortgage for $796,435 on the mineral leases of Stansbury
securing a debt of $881,435, which is included in the above totals.
9. A successful resolution of any or all of the above matters will require
substantial injections of new capital. No assurance can be given that such
capital can be raised.
10. A successful resolution will also require cooperation and concessions
among members of the New Board, the former management of Stansbury, the State of
Utah, members of the Committee and Stansbury's creditors. Some creditors of the
Company have judgments against the Company upon which they could seek to
execute.
If a business plan with a reasonable likelihood of success, including
provision for new capital, appears unachievable, any or all the New Directors,
as well as the Company's Executive Officers, may elect to resign from the Board,
to cause Stansbury to file for reorganization under federal bankruptcy laws, to
adopt a plan of
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<PAGE>
recapitalization, to adopt a plan of liquidation or to seek a purchaser for
Stansbury. The foregoing list is not intended to be exhaustive.
The New Board believes that no current shareholder or prospective investor
should buy or sell shares of Stansbury stock in reliance on the 1991 Annual
Report.
ITEM 7. FINANCIAL STATEMENTS
The Company is presently unable to file, as required, audited, annual
financial statements in this Annual Report on Form 10-KSB for the year ended
June 30, 1995 for the reasons described below.
The Company last filed an Annual Report on Form 10-K for the year ended
June 30, 1991 in July, 1992. The current Board of Directors and management of
the Company are the result of a successful proxy contest to elect a new Board of
Directors at a special shareholders meeting held on December 12, 1994. Since
that time, the Board has focused on (a) raising money in the form of loans from
existing shareholders, on terms previously disclosed, to fund a factual and
legal investigation, retention of Arthur Andersen LLP as the Company's
independent public accountant and preparation of this Annual Report on Form
10-KSB; (b) payment of selected creditors, including Arthur Andersen, which was
owed approximately $20,000 for the 1991 audit; and (c) negotiation and
documentation of short-term forbearance agreements with other creditors. On
September 18, 1995, the Company paid Arthur Andersen LLP for its previous work
in 1991 and entered into an engagement letter for the 1995 audit.
For the reasons discussed below, the audit work is at a very preliminary
stage. The Company has paid an initial retainer to Arthur Andersen for the June
30, 1995 engagement. The Company believes that it will be able to borrow
sufficient funds from existing shareholders to fund the completion of the audit
by Arthur Andersen.
The Company hopes to complete this process over the next ninety (90) days.
No assurance, however, can be given that Arthur Andersen LLP will be able to
complete the audit and render the opinion required by regulations of the U.S.
Securities and Exchange Commission for the additional reasons discussed below.
Page 23
<PAGE>
The Company is presently confronting two sets of interrelated problems:
1. lack of cash flow since it has never been an operating company and has
no assets which can be readily converted to cash to fund the activities
necessary to complete the audit and Annual Report on Form 10-KSB; and
2. lack of corporate books and records, including financial records which
will afford the auditors sufficient, competent evidential material to enable
Arthur Andersen LLP to complete an audit and render an opinion.
The first class of problems was referred to above. The Company believes
that it will likely be able to raise sufficient funds from shareholder loans to
overcome this problem. Nevertheless, even if the additional $50,000 - $100,000
estimated to be necessary over the next sixty days is raised, there are certain
factors which could make these monies insufficient.
These are:
1. two members of former management who have alleged second mortgages on
the Company's mineral claims have threatened, pursuant to a letter dated
September 19, 1995 received from their counsel, to institute a foreclosure
action on these second mortgages if the Company does not pay a judgment obtained
against them by a former lender to the Company approximating $90,000.00; and
2. the Company has several money judgments against it.
See Item 3. Two of the three recent judgment creditors have been requested
to enter into forbearance agreements by the Company to facilitate completion of
the audit and Form 10-KSB process.
The Company has little or no liquidity, although it has been paying new
obligations accruing since December 12, 1994 as they come due. To date, no
judgment creditor has sought to execute on any judgment. Because of these
judgments, however, any or all of these creditors has the ability to levy on
corporate assets, cause a sheriff's sale of the Company's mineral claims or
attach any corporate bank account. The Company is talking with the recent
judgment
Page 24
<PAGE>
creditors to avoid this result. No assurance can be given, however, that a
favorable outcome will be obtained.
With respect to the second class of problems, although the Company believes
that the three (3) judgments referred to above result from mismanagement by the
former officers and directors, the Company is presently confronting the
following obstacles:
1. the Company is unable to find financial statements by former management
for any periods during the fiscal years 1992, 1993, 1994 or 1995 (and such may
not exist);
2. the Company will have to prepare financial statements for these years
before Arthur Andersen LLP can audit them;
3. other than trust account records, no bank accounts or financial records
have been located for those years;
4. former management is refusing to co-operate in furnishing requested
information or to make themselves available to the auditors for an interview;
5. former management on December 12, 1994, issued 1,973,066 million shares
of the Company's stock and $342,295.23 in demand notes to themselves; and
6. the Company believes no valid legal consideration or grossly inadequate
consideration existed for the issuance of these 1,973,066 shares and the demand
notes and has requested documentation supporting it; and has received incomplete
information. The Company's investigation is continuing.
In light of the foregoing problems and despite the loans from shareholders
and the best efforts of management and Arthur Andersen LLP, it is certain that
any audit report - if rendered - will contain a "going concern" qualification.
The 1991 audit report did as well. This is because it is impossible for the
Company to be able to commence construction or operations or to begin the
development work on its mineral property without raising very substantial
additional capital. This is estimated to include $2 to $3 million in new equity,
and permanent financing of $15 to $20 million. Without being in full compliance
with the SEC regulations and having a "bankable" feasibility study, these monies
probably cannot be raised and the Company will simply have to go out of
business.
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<PAGE>
At the present time, the Company believes that there is a substantial risk
that Arthur Andersen LLP will be unable to render any audit opinion - even one
including a "going concern" qualification. This is because the auditors may not
be able to obtain sufficient, competent evidentiary materials to prepare
financial statements, including balance sheets and income statements for the
last four (4) fiscal years, resulting in restrictions which will make it
impossible for Arthur Andersen LLP to perform an audit in compliance with
Generally Accepted Auditing Standards or to express an opinion that any
financial statements of the Company are consistent with Generally Accepted
Accounting Principles.
For the reasons set forth above, the Company's inability to file a timely
and complete Annual Report on Form 10-KSB for the year ended June 30, 1995 could
not be eliminated by the Company. Information is included in this necessarily
interim and incomplete Annual Report on Form 10-KSB insofar as it is known or
reasonably available to the Company, in accordance with SEC Rule 12b-21.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants, on accounting
and financial disclosure matters during the reporting period. The Company did
not have an independent public accountant during the reporting period. On
September 18, 1995, Arthur Andersen LLP, was engaged to perform an audit of the
Company's financial statements for the year ended June 30, 1995.
Arthur Andersen LLP, served as the Company's independent public accountant
for its last audit, for the year ended June 30, 1991.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16( A) OF THE EXCHANGE ACT
The following persons are currently the executive officers and directors of
the Company as of the date of the filing of this Report. Their dates of service
with the Company are given next to their names:
Executive Officers:
President...........................Donald Sanford (May 19, 1995 -
present)
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<PAGE>
Chief Executive Officer.............Michael F. LaFleur (elected September 18,
1995)
Secretary and Treasurer.............David Racher (February 1, 1995 -
present)
Directors:
Donald Sanford - (December 12, 1994 - present)
Michael F. LaFleur - (elected September 18, 1995)
Simon Grant-Rennick - (December 12, 1994 - present)
Dr. Martin Peskin - (February 1, 1995 - present)
Dr. Howard Pomerantz - (elected September 18, 1995)
James M. Rosel - (December 12, 1994 - present)
The following persons formerly served as Executive Officers or Directors
during the reporting period for the various time periods stated:
President: Charles L. McLaughlin (July 1, 1994 - December 12, 1994)
Lawrence T. Atkinson (December 12, 1994 - May 19, 1995)
Secretary: Virginia Phillips (December 12, 1994 - May 19, 1995)
Directors: Charles L. McLaughlin (July 1, 1994 - December 12, 1994)
Robert V. Murton (July 1, 1994 - December 12, 1994)
Peter Samani (July 1, 1994 - December 12, 1994)
Dr. Sami I. A. Samani (July 1, 1994 - December 12, 1994)
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<PAGE>
Lawrence T. Atkinson (December 12, 1994 - May 19, 1995)
Clyde Boyer (December 12, 1994 - May 19, 1995)
J. Benjamin Tyler (December 12, 1994 - February 1, 1995)
Suzette Green (February 1, 1995 - August 1, 1995)
Since December 12, 1994, all persons serving as directors and executive
officers, promoters and control persons have been in compliance with Section
16(a) of the Exchange Act with the exceptions of (a) Dr. Peskin, who filed a
Form 4 on August 28, 1995 to report a transaction from June 7, 1995 and (b) Mr.
Boyer, who filed a Form 3 on February 22, 1995 to report his election to the
Board on December 12, 1994 and who has yet to file a Form 5 to reflect his
resignation from the Board on May 19, 1995.
The Company believes there was no compliance by former management with
Section 16(a) of the Exchange Act from July 1, 1994 through December 12, 1994.
In addition, in the Company's opinion, former management have been in continuous
violation of Section 16(a) of the Securities Exchange Act of 1934 since December
12, 1994 by reason of their failure to file Form 5's, as required, reporting
their removal from all positions with the Company.
ITEM 10. EXECUTIVE COMPENSATION
Except for Mr. LaFleur, no executive officer or director of the Company
serving after December 12, 1994 has received any compensation from the Company.
There are no stock plans or stock options currently granted to anyone serving as
a director or executive officer after December 12, 1994. Mr. LaFleur (who has no
control in the Company) receives a salary of $5,000 a month, plus reimbursement
of expenses, as documented and submitted.
Directors are entitled to receive reimbursement of their reasonable and
necessary expenses as documented and submitted. The following directors have
submitted documentation to support and have received reimbursement in the
following amounts during the reporting period:
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<PAGE>
Donald Sanford - $1,663.00
James M. Rosel - $1,000.00
Lawrence T. Atkinson - $2,174.14
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) The stock holdings of the current directors and executive officers of
the Company are as follows:
No. of Shares %
Donald Sanford 285,475 1.5%
Michael F. LaFleur 50 0.0%
David Racher 31,050 0.2%
Simon Grant-Rennick 50 0.0%
Dr. Martin Peskin 485,000 2.5%
Dr. Howard Pomerantz 341,500 1.8%
James M. Rosel 500,050* 2.6%
------------ --------
TOTALS: 1,643,175 8.6%
*Owned by Western Resources Corporation of Montana, Inc., of which Mr.
Rosel is an officer, director and shareholder (See Item 2(a)).
(b) The Committee for New Management of Stansbury Holdings Corporation, of
which the above persons are all members, filed on September 5, 1995, an
Amendment No. 5 to its Schedule 13D disclosing that the Committee collectively
owns 4,636,544, or 27.8%, of the Company's stock.
(c) Other than the Committee, no person has filed a Schedule 13D. However,
the Company believes the following additional persons, acting as a "group",
collectively (or, with respect to Dr. Samani, individually) own stock in excess
of 5% of the Company's outstanding stock:
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<PAGE>
No. of Shares %
Dr. Sami I. A. Samani 2,418,440 12.7%
Thomas J. DeRosa 430,720 2.3%
Peter Samani 171,000 0.9%
Charles L. McLaughlin 578,005 3.0%
Robert V. Murton 630,428 3.3%
------------ --------
TOTAL: 4,228,593 22.2%
As discussed in Item 3 above, there is pending litigation between the
Company and these individuals as to whether 1,973,066 of these shares were
validly issued. If the court upholds the Company's position that these shares
were invalidly issued, then the above tables, and their relative percentages,
would have to be adjusted accordingly.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None as to persons serving as Directors and Executive Officers of the
Company since December 12, 1994.
The Company believes that compensation, in amounts presently unknown, may
have been paid to former management. However, in light of former management's
refusal to cooperate with the Company, this cannot be verified; nor can the
amounts paid (if any) be ascertained. The 1,973,066 shares issued to these
individuals on or before December 12, 1994, and the issuance of demand notes to
the same individuals on December 1, 1994, in the amount of $342,295 may have
been in consideration for these alleged services.
There are material ongoing disputes, and litigation, with former management
relating to these and other matters. See Item 3. The Company's investigation is
continuing.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
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<PAGE>
- Exhibit 13 - Quarterly Report on Form 10-QSB, for the period ended March
31, 1995.
- Exhibit 27 - Because this Annual Report on Form 10-KSB does not include
audited financial statements, the Financial Data Schedule is omitted.
(b) Reports on Form 8-K.
None.
Page 31
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
STANSBURY HOLDINGS CORPORATION
Dated October 17, 1995 /s/ Donald Sanford
- -------------------------------- ------------------------------
Donald Sanford, President
Dated October 17, 1995 /s/ Michael F. LaFleur
- -------------------------------- ------------------------------
Michael F. LaFleur,
Chief Executive Officer
Dated October 17, 1995 /s/ David Racher
- -------------------------------- ------------------------------
David Racher, Treasurer
and Secretary
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ Donald Sanford Dated October 17, 1995
- -------------------------------- ------------------------------
Donald Sanford, Director
/s/ Michael F. LaFleur Dated October 17, 1995
- -------------------------------- ------------------------------
Michael F. LaFleur, Director
Dated
- -------------------------------- ------------------------------
Simon Grant-Rennick, Director
/s/ Martin Peskin Dated October 17, 1995
- -------------------------------- ------------------------------
Dr. Martin Peskin, Director
/s/ Howard Pomerantz Dated October 17, 1995
- -------------------------------- ------------------------------
Dr. Howard Pomerantz, Director
/s/ James M. Rosel Dated October 17, 1995
- -------------------------------- ------------------------------
James M. Rosel, Director
Page 32
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1995
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission file number 0-6034
STANSBURY HOLDINGS CORPORATION
(Exact name of small business issuer as specified in its charter)
Utah 87-0281239
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
11515 Amanda Drive, Studio City, CA 91604
(Address of principal executive offices)
(818) 505-0884
(Issuer's telephone number)
Fish Lake Valley, Via Tonopah, Nevada 89049
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes________ No ____X____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes _________ No __________
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 19, 092, 968
Transitional Small Business Disclosure Format (check one);
Yes _________ No _____X_____
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
The Registrant is a development-stage mining company, which has not
commenced operations and has no revenue.
It is not possible to furnish a financial statement for the third quarter
of the Registrant's fiscal year ended March 31, 1994 because current management
(which first took office on December 12, 1994) has not yet obtained complete,
reliable current or historical information on the Registrant's activities in
prior periods. The Registrant hopes to have such information by July 15, 1995.
The following is believed to be materially correct:
- the Registrant has hired the accounting firm of Elizabeth Biett &
Associates to perform audit procedures preparatory to a GAAP audit for the year
ended June 30, 1995;
- the Registrant has hired legal counsel in Montana to review the state of
title of the Registrant's mineral claims, to assist in amending the mortgage on
the mineral claims to secure certain bonds to be issued by the Registrant and to
advise on land use and environmental matters;
- the Registrant has raised approximately $83,000 in the form of loans from
existing shareholders since January 1, 1995 on terms previously disclosed;
<PAGE>
- approximately $34,000 has been expended from these funds to pay expenses
of the 1994 proxy contest;
- approximately $42,000 has been expended from these funds to pay real
estate and business taxes, filing fees, mineral lease payments, consultants'
fees and expenses, attorneys' fees and expenses, directors' expenses, telephone
expenses, and accountants' fees;
- approximately $7,000 remains on deposit;
- the Registrant is seeking to raise at least an additional $62,000 on the
same terms;
- no additional debts and judgments (other than those previously disclosed)
have been discovered;
- as part of its audit process for the year ending June 30, 1995, the
Registrant will seek an opinion of counsel as to whether any of the judgments
entered against it before 1994 are still valid;
- the Registrant had no employees during the third quarter of fiscal 1994;
- the Registrant has negotiated a 45-day consulting agreement with an
experienced mining executive (Exhibit 99.2 and 99.3), who has started work;
- the Registrant did not engage in business operations during the third
quarter of fiscal 1994; and
- the Registrant is believed not to have incurred liabilities or expenses
in the third quarter of fiscal 1994,
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except as disclosed above, including accountants' fees, attorneys fees and
consulting fees.
Management's investigation of the actions of prior management is
continuing.
Obviously, the Registrant is not liquid on a balance sheet basis. Should
any of the current judgment creditors attach the Registrant's assets, the
efforts now underway to revive Stansbury would be imperiled. In the absence of
forbearances or negotiated settlements by creditors, the Registrant's revival as
a "going concern" is unlikely.
ITEM 2. Management's Discussion and Analysis of Plan of Operation.
See response to Item 1.
The Board of Directors (the "New Board") has continued to implement the
platform of the Committee for New Management of Stansbury Holdings (the
"Committee") set forth in the Committee's proxy materials for the December 12,
1994 special meeting of shareholders. Pursuant thereto, the New Board has:
- elected the following corporate officers:1
Donald Sanford - President
David Racher - Treasurer
- -------------------
1 As previously reported, Lawrence Atkinson has resigned as President of the
Company. The Board elected Donald Sanford, an existing director, as the new
President. Information concerning Mr. Sanford appears in the Proxy Statement of
the Committee for New Management of Stansbury Holdings. Mr. Sanford is presently
serving without compensation.
Donald Racher, formerly the Company's Treasurer, has also been elected as
Secretary, replacing Virginia Phillips, who resigned.
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- placed "on hold" all actions approved by former management which had not
been fully implemented, pending a thorough review;
- attempted to identify, locate and take possession of the assets, books
and records of Stansbury;
- begun evaluating Stansbury's assets, including the status of its mineral
claims and leases, permits and environmental impact statement; and
- begun conducting an investigation of the activities of prior management.
Since the New Board was elected, Stansbury has (a) made the required annual
filings with the State of Utah's Division of Corporations and with the State of
Montana's Department of State Lands and (b) registered to do business as a
foreign corporation in Montana. A principal executive office address and a
telephone number have been established. In March, 1995, Stansbury began making
required filings with the U.S. Securities and Exchange Commission for the first
time since July, 1992.
In addition, the New Board has:
- selected an independent public accountant to perform an audit and prepare
financial statements for the year ending June 30, 1995;
- identified, prioritized and begun paying debts, liens and judgments;
- paid all real estate taxes and tax accountants' fees;
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- engaged a consultant whose resume and contract are attached to perform a
review of the assets, permits and feasibility study of the Registrant in the
next 45 days;
- started to develop a business plan to maximize shareholder value; and
- started to prepare a capital plan for Stansbury for the next twelve
months.
It is expected that any auditor's opinion, if obtained, will be qualified
in nature and will include, among other things, a "going concern" qualification.
The Registrant is a development stage company which is not presently engaged in
business operations. Commencement of mining operations will likely require
Stansbury to raise equity capital and also an additional $15 million or more in
permanent debt financing.
The following activities are currently "on hold" until the above goals are
completed;
- seeking a re-listing of the Registrant's shares on the national quotation
system of the National Association of Securities Dealers;
- studying other avenues for growth and profitability.
The New Board continues to be unable to give any assurance that any of the
above activities can be carried to fruition. In particular, the New Board does
not expect to have before July 15, 1995 current reliable information on the
value or status of title of Stansbury's assets. Such additional information as
is
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available has been set forth in Part II of this Quarterly Report on Form 10-QSB.
The Registrant has raised approximately half of its goal of $150,000 by way
of interim financing. The financing is in the form of loans from existing
shareholders of the Company, who either already are or thereby become members of
the Committee for New Management of Stansbury Holdings (the "Committee"). The
terms of the loans were previously disclosed.
The additional monies being raised in the future will be devoted to:
(a) paying for a 1994 corporate income tax return and for a GAAP audit of
the Company for the year ending June 30, 1995;
(b) preparation and filing of an Annual Report on Form 10-K for the year
ending June 30, 1995 (i) so that the Company may finally be current with the SEC
in its public filings and (ii) so that the Company may apply to the National
Association of Securities Dealers to have its shares re-listed for trading on
the NASDAQ; and
(c) attorneys' fees (for Montana, Utah and corporate counsel), consulting
fees and directors expenses.
The State of Utah has offered, in principle, to enter into an agreement
with the Company (a) to amend its mortgage on the Company's mineral claims, so
as to allow the Committee's members to have an equal, first lien security
interest in those claims and (b) to enter into a forbearance agreement with the
Company
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regarding any foreclosure on its mortgage. It is likely that the amendment to
the mortgage will take the form of a deed of trust. No trustee has yet been
selected. Nor have the terms of the forbearance been agreed to.
The Board believes an agreement can be finalized with the State of Utah
within thirty (30) days. However, any delay in completion of the interim
financing described above may delay recordation of the amended mortgage and
issuance of the bonds, to the Committee members until all $150,000 has been
raised.
All officers and directors continue to serve without pay. Directors,
however, are reimbursed for their ordinary and reasonable expenses of attending
or participating in Board meetings.
By way of a business plan, should the additional $150,000 referred to above
be obtained by June 30, 1995, the New Board would then intend to prepare and
file an Annual Report on Form 10-KSB on a timely basis, seek a re-listing of the
Company's shares on NASDAQ and thereafter call a regular annual shareholders
meeting.
Should this occur, the New Board presently expects to ask the shareholders
to take some or all of the following actions:
(a) re-elect the New Board or its nominees;
(b) ratify and approve a stock option plan for management for the next
year;
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(c) ratify the selection of an independent public accountant;
(d) approve a class of preferred stock; and
(e) such other matters as may properly come before an annual meeting.
The New Board would then propose that the Registrant seek new equity to pay
off remaining debts incurred under the former management and to furnish working
capital. With the net proceeds of such a "best efforts" offering (probably
around $1.5 million) in hand, the Registrant would then seek debt financing to
fund operations. If such financing is obtained, operations could begin before
mid-1996.
No assurance can be given that any of the above goals can be achieved.
The Registrant's shareholders (and any person considering purchasing shares
of Stansbury) should specifically note the following:
1. Stansbury is still not in compliance with the periodic reporting
requirements of the SEC, which may impair or prevent the Registrant's ability to
raise capital because no Annual Report on Form 10-K has been filed for any
fiscal year after July 30, 1992.
2. No assurance can be given that Stansbury, as a legal matter, has
good title to complete and develop the mineral resources in Ravalli County,
Montana referred to in the Annual
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Report on Form 10-K, filed by Stansbury on July 14, 1992 for the year ended June
30, 1991 (the "1991 Annual Report").
3. The New Board expressly disclaims any responsibility for and denies
any express or implied representation as to the truth or completeness of any
part of the 1991 Annual Report. This disclaimer includes the financial
statements and auditor's report.
4. Any development of Stansbury's leases or mineral resources will
require applications for issuance of permits from federal and state authorities,
including the USDA, U.S. Forest Service and the State of Montana's Department of
Public Lands.
5. There exists an unknown quantum of environmental and community
opposition to any mining activity by Stansbury in Ravalli County, Montana where
the proposed mine would be located. Last year, a newspaper article published in
Montana stated that a "concerned citizens coalition" was seeking to raise funds
to initiate litigation to block issuance of permits as part of a "No Stansbury"
campaign. No assurance can be given that any such environmental and citizens
litigation, if instituted, would not succeed in blocking Stansbury's development
of its mineral leases.
6. As of December 31, 1994, members of the Committee were collectively
owed $1,062,768 by Stansbury. The members of the Committee are now owed an
additional $78,000. The New Board is seeking at least an additional $72,000 from
the Committee
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which, if obtained, will result in a total indebtedness by the Registrant to
members of the Committee of approximately $1.3 million.
The liquidator for Southern Insurance Company, a member of the
Committee (whose representative is a member of the Board of Directors) holds a
recorded mortgage for $796,435 on the mineral leases of Stansbury securing a
debt of $881,435, which is included in the above totals.
7. A successful resolution of any or all of the above matters will
require substantial injections of new capital. No assurance can be given that
such capital can be raised.
8. A successful resolution will also require cooperation and
concessions among members of the New Board, the State of Utah, members of the
Committee and Stansbury's creditors, some of whom have judgments against the
Registrant upon which they could seek to execute.
If a business plan with a reasonable likelihood of success, including
provision for new capital, appears unachievable, any or all the New Directors
may elect to resign from the board, to cause Stansbury to file for
reorganization under federal bankruptcy laws, to adopt a plan and
recapitalization, to adopt a plan of liquidation or to seek a purchaser for
Stansbury. The foregoing list is not intended to be exhaustive.
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The New Board believes that no current shareholder or prospective investor
should buy or sell shares of Stansbury in reliance on the 1991 Annual Report.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
From a docket and lien search in the states of Montana and Utah, the New
Board is aware of the legal proceedings judgments and liens previously disclosed
and filed with the previous Evaluating Report on Form 10-QSB as Exhibit "99.1."
As part of its annual audit process, the Registrant will seek an opinion of
counsel as to which of these judgments are still viable.
ITEM 2. Changes in Securities.
None. See Item 5, below.
ITEM 3. Defaults Upon Senior Securities.
None, because there are no senior securities.
ITEM 4. Submission of Matters to a Vote of Security Holders.
On December 12, 1994, a special meeting of shareholders of Stansbury
Holdings Corporation (the "Registrant") was held for the election of directors
(the "Meeting"). The Meeting was held pursuant to a Court Order obtained by
certain members of the Committee for New Management of Stansbury Holdings
Corporation
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(the "Committee"). The Committee solicited proxies for its nominees for director
pursuant to definitive proxy materials filed by the Committee with the U.S.
Securities and Exchange Commission pursuant to Section 14 of the Securities
Exchange Act of 1934.
At the Meeting, the following persons were elected Directors of the
Registrant: Lawrence T. Atkinson, Clyde Boyer, Simon Grant-Rennick, James M.
Rosel, Donald Sanford and J. Benjamin Tyler. These six persons (collectively,
the "New Directors") were all nominees of the Committee. Accordingly, upon the
New Directors' taking office at the conclusion of the election at the Meeting, a
change in control of the Registrant occurred. The Committee, and its nominees,
the New Directors, are now in control of the Registrant.
ITEM 5. Other Information.
The percentage of voting securities of the Registrant now beneficially
owed directly or indirectly by the Committee, including the New Directors, is
approximately 24.4 percent (excluding certain shares purportedly issued to prior
management on December 12, 1994, as discussed in this Report below). It is
probable that several additional persons will join the Committee shortly. The
Committee, through the New Directors, assumed control from the prior board of
directors and management of the Registrant, to the extent any such persons
remained in office at the time of the Meeting. According to an annual report
filed by
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the Registrant with the State of Utah on May 13, 1994, the prior board
and management of the Registrant (to the extent that any if the said persons
remained in office) consisted of the following persons: Peter Samani, director;
Robert Murton, director; Charles McLaughlin, President; and Thomas DeRosa,
Secretary.
At the Board of Directors meeting held on May 19, 1995, the Board accepted
the resignation of Lawrence T. Atkinson as a director. Mr. Atkinson had resigned
as president of the Registrant as of March 31. Mr. Atkinson's resignation is not
a result of any disagreement with the Registrant on any matter relating to the
Registrant's operations, policies or practices.
ITEM 6. Exhibits and Reports on Form 8-K.
A Current Report on Form 8-K was filed with the Commission on April 13,
1995.
The following exhibits are filed with this Report:
99.1 - current Report on Form 8-K, filed April 13, 1995;
99.2 - resume of Michael F. La Fleur; and
99.3 - consulting agreement with Michael La Fleur, dated May 23, 1995.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
STANSBURY HOLDINGS CORPORATION /s/ David Racher
----------------------------------
DAVID RACHER
Treasurer
(Chief Financial Officer and
duly authorized corporate officer)
DATE: May 30, 1995
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