UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/AMENDMENT NO. 1
(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 (I.R.S. Employer Identification No.)
incorporation or organization)
20 Battle Ridge Place, Atlanta, GA 30342 (404) 845-0473
(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 the fiscal year being reported on. As of the week
of September 23, 1996, the aggregate market value of common stock held by
non-affiliates was $6,745,677 based on the average bid and asked price for the
week of September 23, 1996.
As of September 23, 1996, the number of shares outstanding was 17,988,472.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format (check one): Yes __. No X.
<PAGE>
TABLE OF CONTENTS
Page
Part I
Item 1. Description of Business............................................1
Item 2. Description of Properties..........................................6
Item 3. Legal Proceedings.................................................16
Item 4. Submission of Matters to a Vote of Security Holders...............19
Part II
Item 5. Market for Common Equity and Related Stockholder Matters..........19
Item 6. Management's Discussion and Analysis or Plan of Operation.........21
Item 7. Financial Statements..............................................26
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................52
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act...............53
Item 10. Executive Compensation.............................................55
Item 11. Security Ownership of Certain Beneficial Owners and Management.....56
Item 12. Certain Relationships and Related Transactions.....................57
Item 13. Exhibits and Reports on Form 8-K...................................57
Signatures...................................................................58
<PAGE>
HOW TO READ THIS REPORT
Given the unusual nature of this filing, a note to the reader is
indicated.
This document is unusual in two respects. First, this Report is a
single Annual Report on Form 10-KSB which covers four separate fiscal years
i.e., June 30, 1992 through June 30, 1995. It is being done in this way to speed
available information to shareholders, to save shareholders' money by filing one
Report (rather than four) and to put in the hands of shareholders and others one
document which contains a single audit report covering these four years. It is
hoped that, by doing it in this way, persons reading this Report on Form 10-KSB
and the Company's financial statements contained in it will find the combined
Report more efficient of their time and also more effective in relating the
narrative to the financial statements.
In accordance with SEC Rule 12b-21, information is given herein insofar
as it is known or reasonably available to the Company. On December 12, 1994, the
Company's shareholders elected a new Board of Directors, resulting in new
management for the Company. Insofar as this Report on Form 10-KSB provides
information on periods prior to December 12, 1994, the information provided is
that which is known or reasonably available to the
<PAGE>
Company today, and may omit other information which is peculiarly within the
knowledge of prior Directors and prior management. These prior Directors and
prior management members are no longer affiliated with the Company and have
refused to cooperate in any manner with the current Board of Directors or
management of the Company. Requests for relevant information from such persons
have met with no affirmative response.
Second, although this Report relates to a time period which ended on
June 30, 1995, it is being furnished in September 1996, three months after the
end of yet another fiscal year. As a result, there is a great deal of
"subsequent events" information (i.e., events occurring after the end of the
reporting period) contained in the narrative. An attempt has been made to
integrate the "subsequent events" information into the specific "line item"
disclosure to which it relates. As a result, information on employees and
officers of Stansbury, the development work being done at the Company, and other
information is, to the fullest extent possible, "as of" the date of this Report,
not "as of" June 30, 1995. All available historical information, covering the
four (4) years being reported on is, however, included in the body of the
narrative.
Assuming continued funding from the Shareholders' Committee, whose
nominees currently constitute the Board of Directors of the
<PAGE>
Company, the Company intends to file an annual report on Form 10- KSB for the
year ended June 30, 1996 in approximately thirty (30) days. Shareholders and
others will be able to obtain it by contacting, among other sources, the
Company's president at the address below:
Mr. Donald Sanford
President
STANSBURY HOLDINGS CORPORATION
20 Battle Ridge Place
Atlanta, GA 30342
(404) 845-0473
<PAGE>
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 to 6.5 million tons of 10.09% - 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 four fiscal years being reported upon, i.e., from June 30, 1991 to
June 30, 1995 (the "Reporting Period"), the Company was not engaged in
operations and did not derive revenue from any source. Nor has the Company done
so since that date. The Company proposes to build and operate a vermiculite mine
in 1997, if project financing and additional equity capital can be obtained by
May, 1997.
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 (previously reported on a Report on Form 8-K dated December 12, 1994).
Since December 12, 1994, the Company has obtained approximately $650,000 in
loans from sixty-eight existing shareholders. An additional $132,000 was
obtained in 1996 in the form of loans from eight non-shareholders on the same
terms as those from existing shareholders.
Such loan proceeds have been used to pay real estate taxes and withholding
taxes, governmental reporting and filing fees, old and current trade debts,
creditors, transfer agent's fees, consultants' fees, attorneys' fees, 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. Monies were paid in September 1996 to Fluor,
Daniel Wright Ltd. (successor to Wright Engineers, Ltd.) in
Page 1
<PAGE>
Vancouver, British Columbia, to obtain engineering studies, drawings and other
documents necessary to prepare an updated feasibility study for the proposed
mine and mill (See Item 7, Plan of Operation).
Since December 1994, approximately $25,000 has been used to reimburse the
Company's directors and consultants for traveling expenses, faxes and telephone
charges. The majority of the monies obtained has been used to pay attorneys'
fees and related expenses. The legal costs relate to the very extensive "legal
clean-up" - now almost complete - necessary to move the Company into the next
phase of its development.
The Company has not been involved in any bankruptcy, receivership or
similar proceeding or any material reclassification, merger, consolidation or
purchase of sale of a significant amount of assets, not in their ordinary course
of business since July 1, 1991. See Item 7, Notes to Financial Statements, n. 2.
The proposed vermiculite mine and mill will not, at the earliest, be in
full operation (i.e., producing mineral concentrate for sale) before 1998.
(b) Business of Issuer.
The Company hopes to develop and operate an open-pit vermiculite mine on 96
unpatented mining and mill site claims owned or leased by the Company in Ravalli
County, Montana. See Item 2, below. Since the construction of the proposed mine
and mill has not begun, the Company does not have revenue or accounts
receivable; and the Company does not have any principal products or services.
The Company has, during the four years ended June 30, 1995 (the "Reporting
Period") and the period thereafter to date, focused its efforts primarily on (a)
development of its vermiculite deposits and (b) resolution of legal impediments
and debts generated by its former management, who were replaced at a special
shareholders' meeting on December 12, 1994. A description of the status of the
vermiculite deposits is more fully set forth below (see Item 2). A description
of the status of the "legal clean-up", which is approaching completion, and of a
dispute with former
Page 2
<PAGE>
management, which is now largely resolved, is contained in Items 3 and 10
hereof.
Since 1985, the Company has spent in excess of $2 million to establish the
viability of its mining project. This has included research on the quality of
the ore, conditions of the market and preparation and approval of the necessary
environmental impact statement, which was approved in January 1994.
Vermiculite is a mica-like mineral which exfoliates (rapidly expands upon
heating) to produce a low-density material. The exfoliated product is used
extensively as lightweight aggregate in fire-proofing and thermal installation,
in construction applications, as a fertilizer carrier and soil conditioner in
agriculture, as a filler for plastics and rubber, and for auto brake shoes,
among other uses. It is also being used in the construction industries as fire
retardant, a substitute for asbestos. Applications are reportedly being explored
by the automotive industry as well.
The United States represents the world's largest vermiculite market. This
market was traditionally dominated by W.R. Grace Company which controlled
approximately 75% of the vermiculite sold. W.R. Grace operated an open pit
vermiculite mine in Libby, Montana and additional sites in South Carolina. The
Company's current mining consultant, William J. McCaig, was employed by W.R.
Grace from 1971 to 1995, and served as the Operations Manager of W.R. Grace's
vermiculite mine in Libby, Montana, from 1979 to 1988.
The Company's determination of the economic viability of its vermiculite
deposits was made during the years when W.R. Grace was in full production at its
Libby, Montana site. The Company then anticipated a potential of capturing
between 5% and 10% of the domestic market based upon several studies prepared by
industry consultants. At those levels, the Company's project exhibited
significant potential profitability.
In September 1990, W.R. Grace permanently closed its operation in Libby,
Montana. W.R. Grace has (and had) significantly greater resources, including
capital, staff and equipment, than does the Company. The Company would also be
new entrant in the vermiculite market. The Company believes, however, that its
vermiculite would be superior to that produced by many producers due to the
quality
Page 3
<PAGE>
of the vermiculite, better yields and the lack of asbestos material in the
Company's product.
As part of the work undertaken by the New Board, the Company's mining
consultant and others will be preparing an updated feasibility and profitability
study in connection with the Company's goal of obtaining additional equity and
project financing before May 1997. No representation as to the result of that
updated feasibility study is made. However, at present, the Company expects to
be able to capture an easier penetration of the existing market than was
originally projected under its prior feasibility study.
(c) Government Regulation.
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 operating 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.
In August 1996, the Company engaged Watershed Consultants to commence its
water quality monitoring at the proposed mine site pursuant to a requirement of
the EIS.
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
Page 4
<PAGE>
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, state and local taxing authorities.
(d) Employees/Offices.
The Company's previous annual report on Form 10-K filed in July, 1992
(which reports on the year ended June 30, 1991) states that the Company employed
Robert Murton and Don Stevens as consultants to the Corporation. At the time,
Mr. Murton was the Company president and CEO; and Mr. Stevens was a director.
The individuals were apparently compensated with stock.
The Company also maintained a small corporate office in Salt Lake City,
Utah and a field office in Victor, Montana. However, on a date unknown to
present management, those offices were closed. From time to time the Company has
employed technical specialists on an as-needed basis.
Today, the Company has its corporate office at 20 Battle Ridge Place,
Atlanta, Georgia.
The Company has had no salaried or hourly employees during the Reporting
Period. On 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. From
September 18, 1995, to April 1996, 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 resigned all his positions with the Company on April 1, 1996.
See Item 7, Notes to Financial Statements, n. 9. The Company presently employs
William J. McCaig, P.E., as its mining consultant on a month-to-month basis at a
fee of $5,000 per month.
All other directors and officers since December 12, 1994 have served
without compensation.
See Items 3 and 10, for discussion of issues relating to former management,
who were officers and directors of the Company
Page 5
<PAGE>
for some or all of the period from July 1, 1991 to December 12, 1994.
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, based on visits to Victor by Mr. LaFleur in 1995 and
Mr. McCaig in 1996, that the condition of the Field Office Property is
acceptable for its purpose, should the Company be able to commence construction
activities in May 1997.
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 96 unpatented mining and mill site claims, comprising
approximately 1,750 acres, are located about 11 air
Page 6
<PAGE>
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.
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.
Page 7
<PAGE>
[GRAPHIC OMITTED - SEE DESCRIPTION OF MAP A ON PAGE 7]
Page 8
<PAGE>
[GRAPHIC OMITTED - SEE DESCRIPTION OF MAP B ON PAGE 7]
Page 9
<PAGE>
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 operations 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 forest. 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 the
risk of fibrous asbestiform particulates posing potential health risks are
extremely small to non-existent. 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 ninety-five mining and mill 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.
Page 10
<PAGE>
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.
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, China 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 its original volume. Vermiculite has the unusual property of
being able to expand severalfold 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.
Vermiculite is used as an ingredient in high value artificial soil mixes,
in 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 a water furifier/conditioner, as a
foliar application for increased crop yields of food grains and legumes, as well
as in a host of other industries such as a carrier for fertilizers, nor
urbasides and animal food supplements.
As noted, the United States is the principal consumer of vermiculite. 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 a superior artificial soil mix for the propagation of commercial
foodstuffs, trees and bushes.
Page 11
<PAGE>
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 approximately 30% of the vermiculite in sizes #0,
#1 and #2, which are believed to be the most desirable in significant quantities
in the United States. There is no current domestic supply for these coarser and
most desirable sizes since the Grace Libby operation closed. 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 1930s. Sporadic attempts have been
made to develop a mine, with the latest attempt being in the late 1970s. 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 1970s
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,
Page 12
<PAGE>
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
9,5OO 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 suggested that the reserves are
sufficient to sustain an open-pit vermiculite mine with a life expectancy in
excess of 12 years based upon proposed then-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
intrusive syenite halo. The ultramafic zone is approximately 1 mile wide by
around 3 miles long. The ultramafic rock dominantly consists of amphibolitic
minerals, such 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 401
to 1001. 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.
In 1986-87, a 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
Page 13
<PAGE>
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 minable 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 back slope 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 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, 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 Minable 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 - -
Page 14
<PAGE>
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 minable mineral resources of both sub-deposits assume a 6%
cutoff.
Not included in the potentially minable 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. Mr. Welch is no longer associated with the
Company.
James M. Rosel, during part of the Reporting Period a director of the
Company (See Item 9), is also a director, officer and shareholder of Western
Resources. Mr. Rosel is no longer associated with the Company.
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 acquired 500,000 shares of the Company, which Western Resources
accepted these shares in settlement of the Company's debt to it for services
rendered pursuant to the consulting agreement between Stansbury and Western
Resources, which included furnishing the above study. Western Resources is no
longer involved with the Company.
Because the Company has not commenced operations, and will not commence
such operations before May, 1997, the Company refrains from discussing general
competitive conditions.
(b) Investment Policies.
The Company has no investments.
Page 15
<PAGE>
(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. See also Item 1(c) hereof.
ITEM 3. LEGAL PROCEEDINGS
(a) Pending Suit Against Former Management.
On October 16, 1996, the Company commenced suit in the United States
District Court for the District of Utah against former management. The Company's
suit was against Robert V. Murton, its former president, Charles McLaughlin,
another 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 previously), served as directors and/or
officers of the Company until the December 12, 1994 shareholders' meeting.
On October 19, 1995, after a hearing, the Company obtained a preliminary
injunction against former management freezing all transactions involving the
Company's stock by them.
Since August 1, 1995, the Company had made four attempts to settle all
disputes between it and former management on a basis that would also resolve the
Herd claim (discussed below). However, the defendants have refused to settle.
Indeed, on November 15,
Page 16
<PAGE>
1995, Dr. Samani and Mr. DeRosa refused to execute a fully negotiated settlement
agreement or to meet with the Company's counsel.
On December 14, 1995, the Company entered into a Global Settlement
Agreement with three (3) of the defendants. After prolonged delays by Dr.
Samani, Mr. Samani and Mr. DeRosa, the settlement closed on February 5, 1996. At
that time, they delivered the following:
(a) 550,048 shares of the Company's stock, which have been cancelled;
(b) notes issued to them by the Company totalling $181,250.68, which have
been cancelled;
(c) subordination agreements and forbearances on the second mortgage which
they (and others) hold on the Company's mineral claims; and
(d) certain corporate minutes, correspondence and other corporate records,
all of which they had previously denied having.
As a result of the settlement, the preliminary injunction against these
defendants has been vacated and the Company's claims against them, and their
counterclaim, have been dismissed with prejudice.
On December 20, 1995, Robert Murton, formerly the president of the Company,
appeared before the Honorable Thomas Green, a United States District Judge for
the District of Utah, and placed a settlement agreement with the Company on the
record. As part of that settlement, Mr. Murton was to deliver all his shares of
stock of Stansbury to the Company for cancellation.
Mr. Murton now claims that his stock certificates are with Mr. Charles
McLaughlin, also a former president of the Company, and the remaining defendant
in the case. The Company has now acted through its transfer agent to cancel Mr.
Murton's shares; the Note is deemed cancelled. The preliminary injunction
against Mr. Murton has been vacated; and the Company's suit has been dismissed
as to him.
Page 17
<PAGE>
Mr. McLaughlin, the only remaining defendant, is evading service of
process.
(b) Judgments Against the Company.
There are two classes of monetary judgments against the Company, all
entered prior to the December 12, 1994 shareholders' meeting and the resulting
change in 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 one prior unsatisfied judgment 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.
Former directors and management of Stansbury has refused to discuss any of
these (or any other) matters with current
Page 18
<PAGE>
management. However, the Company believes that all of the above judgments were
entered by default; and that no defenses were 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 ever existed good
and bona fide defenses to any of these claims.
The Company has sought forbearance agreements from the four judgment
creditors listed above. Forbearance agreements have been obtained in Herd and
Bavernfeld suits; the matters have been settled; and the Company has begun to
pay off these settlements.
The Dorsey & Whitney and Martineau matters have not been settled and there
are no forbearance agreements in place.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended June 30, 1995, no
matters were submitted to security holders through the solicitation of proxies
or otherwise.
Otherwise, during the Reporting Period, there was an election of directors
at a special meeting of shareholders held on December 12, 1994 (which was
previously reported on Form 8-K dated December 12, 1994).
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 was not in compliance with the reporting requirements of applicable
federal securities laws during the Reporting Period. 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:
Page 19
<PAGE>
DATE OPEN HIGH LOW CLOSE
09/93 * * * .05
12/93 * * * 1/8
03/94 * * * 1/16
06/94 1/8 5/16 1/16 1/16
09/94 3/32 3/8 1/15 1/4
12/94 7/16 5/8 1/8 1/8
03/95 3/8 1/2 3/32 1/8
06/95 .35 7/16 1/8 3/16
*Information not available.
Source: Bloomberg.
The Company makes no representation as to whether there is an efficient
market for its stock; or that market prices reflect either the value of the
Company's shares or current and available information concerning the Company or
its prospects. Rather, 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 September 23, 1996, there were 3,673 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.
Page 20
<PAGE>
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 forbearance or negotiated
settlements with judgment creditors, the Company's revival is unlikely.
Since taking office in December 1994, the New Board has implemented 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;
- identified, located and taken possession of the assets, books and
records of Stansbury;
- evaluated Stansbury's assets, including the status of its mineral
claims and leases, permits and environmental impact statement; and
- conducted 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 did the following:
- engaged an independent public accountant to perform an audit of the
Company's financial statements for the year ended
Page 21
<PAGE>
June 30, 1995 (See Item 8);
- identified, prioritized and begun paying trade debts, liens and
judgments;
- paid all real estate taxes and tax accountants' fees;
- engaged experienced mining executives as consultants to perform a
review of the assets, permits, financial records and to update a prior
feasibility and profitability study of the Company;
- started to develop a business plan designed to maximize shareholder
value; and
- started to prepare a capital plan for Stansbury for the next twelve
months.
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.
With the filing of this Form 10-KSB/Amendment No. 1, the Company will now
seek to achieve the following goals:
- seek a re-listing of the Company's shares on the national quotation
system of the National Association of Securities Dealers and the OTC Bulletin
Board;
- study other avenues for growth and profitability;
- seek new equity; and
- seek project financing for the mine and mill.
The Company has to date obtained approximately $780,000 in interim
financing. The financing is in the form of loans from 68 existing shareholders
of the Company and 8 non-shareholders, who either already are or thereby became
members of the Committee for New Management of Stansbury Holdings (the
"Committee") . The terms
Page 22
<PAGE>
of the loans were previously disclosed in the Company's Form 10-QSB of March 31,
1995.
Plan of Operation for the Next Twelve Months.
The Company's fund-raising effort is on-going. Additional monies to be
obtained in the next six (6) months will be principally devoted to:
(a) preparation of the Company's financial statements for the year ended
June 30, 1996; preparation of 1994 and 1995 corporate income tax returns; and an
audit of the Company's financial statements for the year ended June 30, 1996;
(b) preparation and filing of amended Quarterly Reports on Form 10-QSB for
September 30, 1993, December 30, 1995 and March 31, 1996 and an Annual Report on
Form 10-KSB for the year ended June 30, 1996 (i) so that the Company may become
fully current with the SEC in its public filings and (ii) so that the Company
may then apply to have its shares re-listed for trading on NASDAQ;
(c) payments of attorneys' fees (for Montana, Utah and corporate counsel);
(d) payment of consultants' fees and expenses to complete an updated
feasibility and profitability study;
(e) reimbursement of directors' expenses;
(f) settlement and payment of judgments; and
(g) seeking new equity and project financing.
In May, 1995, the Insurance Commissioner of the State of Utah, as
liquidator of two insurance companies (the "State"), offered, in principle, 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 23
<PAGE>
In July 1995, however, 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
principle. Among other things, the State concluded that it is not possible,
until subordination agreements were obtained from all second mortgage holders,
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 the
second mortgages.
Counsel for the Company concurred with this conclusion. Issuance of notes
evidencing the Company's indebtedness to various Committee members was,
therefore, put "on hold" pending resolution of the dispute, and litigation, with
former management. See Item 3. These obstacles have now been removed.
With the filing of this 10-KSB/Amendment No. 1, the New Board proposes to
issue restricted shares of Stansbury stock to Committee members, as agreed, as
additional consideration for their loans, to amend the mortgages, to issue notes
to Committee members, to seek a re-listing of the Company's shares for trading,
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) 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 certain amendments to the Company's articles of incorporation;
and
(f) act on such other matters as may properly come before an annual
meeting.
Page 24
<PAGE>
The New Board also proposes, in the next six (6) months, 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 project financing
in the form of debt to fund construction of the mine in 1997 of $15 to 20
million.
If such financing is obtained, construction of the proposed open-pit
vermiculite mine could begin in or about mid-1997.
This is a very ambitious program. 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. Even with the filing of this Report, Stansbury is still not in full
compliance with the periodic reporting requirements of the SEC, which may impair
or prevent the Company's ability to raise capital.
2. 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.
3. 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
Page 25
<PAGE>
plans or operations with serious adverse consequences to its liquidity and
profitability. Amendments to current laws and regulations governing operations
and activities of mining companies or more stringent implementation thereof or
additional taxes could have a material adverse impact on the Company.
4. 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 Department of
Environmental Quality.
5. 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.
6. 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 equity and project financing, 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 recapitalization to adopt a plan of
liquidation or to seek a purchaser for Stansbury. The foregoing list is not
intended to be exhaustive.
ITEM 7. FINANCIAL STATEMENTS
There follows the Company's audited financial statements for the four
fiscal years ended June 30, 1995:
Page 26
<PAGE>
Taylor & Company
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
Board of Directors
Stansbury Holdings Corporation
We have audited the accompanying consolidated balance sheets of Stansbury
Holdings Corporation (a Utah corporation) and subsidiary as of June 30, 1995,
1994, 1993, and 1992 and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the four years in the period
ended June 30, 1995. 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. The consolidated financial statements
of Stansbury Holdings Corporation as of June 30, 1991 were audited by other
auditors whose report dated April 20, 1992 expressed an unqualified opinion on
those financial statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require 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 audit provides 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 Stansbury Holdings Corporation
and subsidiary as of June 30, 1995, 1994, 1993, and 1992 and the results of
their operations and their cash flows for each of the four years in the period
ended June 30, 1995 in conformity with generally accepted accounting principles.
As discussed further in Note 2 to the consolidated financial statements, the
Company acquired a mineral property valued at $34,577,270. The Company has
capitalized related development costs of $2,199,503 as of June 30, 1995.
Recovery of the carrying amount of the mineral property and related development
costs is dependent on the success of future operations and the Company's ability
to obtain financing through borrowing or the sale of its common stock. As of the
date of this report, the Company has not obtained the necessary financing to
meet its working capital requirements and to operate the mineral property which
is the Company's major asset. There can be no assurance that the Company will be
successful in obtaining the necessary financing or recover the costs associated
with the mineral property through successful future operations.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred cumulative losses
before unusual and extraordinary items of
341 South Main Street, Suite 214
Salt Lake City, Utah 84111
Fax (801) 355-2019
(801) 521-8118
Page 27
<PAGE>
approximately $10,150,000 since April 27, 1985 (the effective date of the plan
of reorganization under Chapter 11 of the bankruptcy Reform Act of 1978). As of
June 30, 1995, the Company's current liabilities exceeded its current assets by
$ 3,912,000. The foregoing factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plan in regard to these
matters also are disclosed in Note 2. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to develop and operate the mineral
property and continue as a going concern.
/s/ Taylor & Company
July 15, 1996
Page 28
<PAGE>
STANSBURY HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Year Ended June 30, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash $ -- $ 116 $ 894 $ 1,188 $ 444
Prepaid expenses 15,000 5,441 5,320 5,320 5,320
----------- ----------- ----------- ----------- -----------
15,000 5,557 6,214 6,508 5,764
----------- ----------- ----------- ----------- -----------
Property & Equipment
Building 33,539 35,713 37,887 40,061 42,235
Mineral property 34,577,270 34,577,270 34,557,270 34,577,270 34,577,270
Development costs 2,199,503 2,199,503 2,199,503 2,191,503 2,133,542
Equipment -- -- -- -- 4,828
----------- ----------- ----------- ----------- -----------
36,810,312 36,812,486 36,814,660 36,808,834 36,757,875
----------- ----------- ----------- ----------- -----------
Other Assets
Deposits 20,000 20,000 20,000 20,000 20,000
Accounts receivable 13,000
----------- ----------- ----------- ----------- -----------
20,000 33,000 20,000 20,000 20,000
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS $36,845,312 $36,857,043 $36,840,874 $36,835,342 $36,783,639
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes
Pages 29 & 30
<PAGE>
STANSBURY HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Year Ended June 30, 1995 1994 1993 1992 1991
LIABILITIES AND
SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Current Liabilities
Current portion - long term debt $ 1,981,025 $ 1,650,729 $ 1,609,729 $ 1,593,228 $ 354,968
Accounts payable 275,585 508,254 512,092 442,346 276,904
Accrued interest 1,983,319 1,424,518 980,116 614,679 319,885
------------ ------------ ------------ ------------ ----------
Total Current Liabilities 4,239,929 3,583,501 3,101,937 2,650,253 951,757
------------ ------------ ------------ ------------ ----------
Long-Term Debt Liabilities
Mortgages and notes payable 159,100 36,000 -- -- 1,046,000
------------ ------------ ------------ ------------ ----------
Total Long Term Liabilities 159,100 36,000 -- -- 1,046,000
------------ ------------ ------------ ------------ ----------
Redeemable Common Stock -- -- 100,000 100,000 100,000
------------ ------------ ------------ ------------ ----------
Shareholders' Equity
Common stock $.25 par value,
authorized 25,000,000 shares,
issued and outstanding 19,609,368,
17,143,902, 16,667,902 and
16,601,902 shares at June 30, 1995,
1994, 1993, and 1992 respectively 4,902,342 4,285,975 4,166,975 4,150,475 3,994,175
Capital in excess of par value 30,399,745 30,399,745 30,399,745 30,399,745 30,399,745
Deferred interest (116,084) (10,888) (10,192) (628,918) (989,818)
Retained earnings (2,739,720) (1,443,290) (917,591) 163,787 1,281,780
------------ ------------ ------------ ------------ ----------
Total Shareholders' Equity 32,446,283 33,231,542 33,638,937 34,085,089 34,685,882
------------ ------------ ------------ ------------ ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 36,845,312 $ 36,851,043 $ 36,840,874 $ 36,835,342 36,783,639
============ ============ ============ ============ ==========
</TABLE>
See accompanying notes
Pages 31 & 32
<PAGE>
STANSBURY HOLDINGS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended June 30, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
Gross Profit -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Expenses
Taxes -- 642 -- -- --
General and administrative 233,735 65,028 80,735 351,357 493,843
Interest 1,071,333 560,308 1,000,664 387,013 269,477
------------ ------------ ------------ ------------ ------------
Total Expenses 1,305,068 625,978 1,081,399 738,370 763,320
------------ ------------ ------------ ------------ ------------
Operating Income (Loss) (1,305,068) (625,978) (1,081,399) (738,370) (763,320)
------------ ------------ ------------ ------------ ------------
Other Income
Loss on disposal of equipment -- -- --
Cancel redeemable common stock -- -- -- (9,533)
Other income 8,450 -- -- -- --
Interest income 188 279 21 205 --
------------ ------------ ------------ ------------ ------------
8,638 279 21 (9,328) --
------------ ------------ ------------ ------------ ------------
Net Income (Loss) $ (1,296,430) $ (625,699) $ (1,081,378) $ (747,698) $ (763,320)
------------ ------------ ------------ ------------ ------------
Earnings (loss) per share
of common stock $ (.070) $ (.037) $ (.065) $ (.040) $ (.051)
============ ============ ============ ============ ============
Weighted average shares
outstanding during
the period 18,512,385 16,727,160 16,624,302 16,194,925 14,957,382
============ ============ ============ ============ ============
</TABLE>
See accompanying notes
Pages 33 & 34
<PAGE>
STANSBURY HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Capital in Deferred
Number of Excess of Interest Retained
Shares Amount Par Value Earnings
<S> <C> <C> <C> <C> <C>
Balance June 30, 1991 15,976,702 $ 3,994,175 $ 30,399,745 $ (989,818) $ 1,284,485
------------ ------------ ------------ ------------ ------------
Issuance of shares
for interest on long-term debt 625,200 156,300 (106,300)
Amortize deferred interest 92,200
Write-off deferred
compensation-right
to receive has expired 375,000 (375,000)
Correct balance of
equipment 7-1-91 2,000
Net loss (747,698)
------------ ------------ ------------ ------------ ------------
Balance June 30, 1992 16,601,902 4,150,475 30,399,745 (628,918) 163,787
------------ ------------ ------------ ------------ ------------
Issuance of shares
for interest on long-term debt 66,000 16,500 (16,500)
Amortize deferred interest 635,226
Net loss (1,081,378)
------------ ------------ ------------ ------------ ------------
Balance June 30, 1993 16,667,902 4,166,975 30,399,745 (10,192) $ (917,591)
------------ ------------ ------------ ------------ ------------
Issuance of shares
interest on long-term debt 476,000 119,000 (118,500)
Write-off expired redeemable
common stock 100,000
Amortize deferred interest 117,804
Net loss (625,699)
------------ ------------ ------------ ------------ ------------
Balance June 30,1994 17,143,902 4,285,975 30,399,745 (10,888) (1,443,290)
------------ ------------ ------------ ------------ ------------
Issuance of shares for
interest on long-term debt 2,465,466 616,367 (616,366)
Amortize deferred interest 511,170
Net loss (1,296,430)
------------ ------------ ------------ ------------ ------------
Balance June 30, 1995 19,609,368 $ 4,902,342 $ 30,399,745 $ (116,084) $ (2,739,720)
========== ============ ============ ============ ============
</TABLE>
Page 35
<PAGE>
STANSBURY HOLDINGS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net Income (loss) $(1,296,430) $ (625,699) $(1,081,378) $ (747,698) $ (718,380)
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation & Amortization 2,174 2,174 2,174 2,174 2,174
Loss disposition of equipment -- -- -- 9,533 --
Amortization of deferred interest and
compensation related to stock options 511,170 117,804 635,227 92,200 108,570
Stock issued for services and interest 616,366 119,000 16,500 156,300 213,750
Compensation related to stock options -- -- -- -- 30,000
Changes in operating assets
and liabilities:
(Increase) decrease in accounts receivable 13,000 (13,000)
Change in prepaid expenses (9,559) (121)
Increase (decrease) in accounts payable (232,667) (3,838) 69,746 165,442 138,966
Increase (decrease) in accrued liabilities 558,801 444,402 365,437 294,794 126,394
----------- ----------- ----------- ----------- -----------
Net Cash (Used) By
Operating Activities 162,855 40,722 7,706 (27,265) (99,600)
----------- ----------- ----------- ----------- -----------
Cash Flows From Investing Activities
Increase in development costs -- -- (8,000) (57,961) (161,576)
----------- ----------- ----------- ----------- -----------
Net Cash Flows Used By
Investing Activities -- -- (8,000) (57,961) (161,576)
----------- ----------- ----------- ----------- -----------
Cash Flows From Financing Activities
Proceeds from long-term debt 465,395 87,000 178,180 251,000
Payment of long-term debt (12,000) (10,000) -- -- (10,000)
(Increase) decrease in deferred interest (616,366) (118,500) (92,210)
----------- ----------- ----------- ----------- -----------
Net Cash Provided By
Financing Activities (162,971) (41,500) -- 85,970 241,000
----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Cash (116) (778) (294) 744 (20,176)
Cash - Beginning of Period 116 894 1,188 444 20,620
----------- ----------- ----------- ----------- -----------
CASH-END OF YEAR $ -- $ 116 $ 894 $ 1,188 $ 444
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes
Pages 36 & 37
<PAGE>
STANSBURY HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Supplemental Disclosure of
Cash Flow Information
Cash Paid for Interest $ -- $ -- $ -- $ -- $3442
Cash Paid for Taxes -- 642 -- --
------- ------- ------ ------- -------
Supplemental Disclosure
of Non-cash Investing
and Financing Activities
Common stock issued for
services and interest
during the year 616,366 119,000 16,500 156,300 213,750
------- ------- ------ ------- -------
</TABLE>
See accompanying notes
Page 38
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 31, 1995, 1994, 1993, and 1992
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Stansbury Holdings Corporation (the Company) is engaged in the development of a
mining property. The Company is seeking qualified business alliances and/or
mergers with entities closely associated with the distribution and/or marketing
of vermiculite related products.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary after elimination of all material intercompany
accounts and transactions.
Development Costs
The Company capitalizes development costs directly associated with the
development of the mineral property.
Depreciation and Amortization
Depreciation is calculated using the straight-line method over the estimated
useful lives of the related assets, which is twenty three years for the
building. The mineral property and related development costs will be charged to
operations over the productive life of the property after mining operations
commence, using the units of production method of cost amortization.
Income Taxes
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" which incorporates the use of
the asset and liability approach of accounting for income taxes. The asset and
liability approach requires the recognition of deferred tax assets and
liabilities for the expected future consequences of temporary differences
between the financial reporting basis and tax basis of assets and liabilities.
At June 30, 1995, the Company has a net operating loss carry-forward totaling
approximately $8,983,000 that may be offset against future taxable income. The
loss carry-forward expires at various dates through 2010. A tax benefit has not
been reported in the accompanying financial statements, however, because the
Company is uncertain as to the likelihood of utilization of the
Page 39
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 31, 1995, 1994, 1993, and 1992
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES -Continued-
carry-forward. Accordingly, the approximate tax benefit of the $8,893,000 loss
carry-forward has been offset by valuation allowance of the same amount.
Statement of Cash Flows
For purpose of the statement of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less to be cash
equivalents.
Net Income (Loss) Per Share
Primary net income of loss per share is computed by dividing net income by the
weighted average number of common shares outstanding during the period.
Net (Loss) Income Per Common Share
Net income (loss) per common share is based upon the weighted average number of
shares of common stock outstanding during the period.
Reclassifications
Certain reclassifications have been made to the prior year financial statements
to conform with the fiscal year presentation.
NOTE 2 CHAPTER 11 REORGANIZATION
On February 21, 1985, the Company filed for bankruptcy under Chapter 11 of the
Bankruptcy Reform Act of 1978. On March 22, 1985, the Company filed a plan of
reorganization (the Plan) with the United States Bankruptcy Court (the Court),
which was confirmed by the Court on April 17, 1985, and became effective as of
April 27, 1985. A 25 to 1 reverse common stock split and a change in par value
from $.01 to $.25 per share was approved in the Plan.
The reverse split reduced the shares outstanding from 24,707,199 to 988,288
shares. The accumulated deficit at April 27, 1985, of $8,647,255 was eliminated
against capital in excess of par value. Since April 27, 1985, the Company has
incurred cumulative losses before unusual and extraordinary items of
approximately $10,150,000 (during the same period, the Company recognized
extraordinary and unusual gains of approximately $7,600,000 from settlement of
debt and net operating loss carry forwards) and, as of June 30, 1995, its
current liabilities exceed its current assets by $3,912,634.
Page 40
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 31, 1995, 1994, 1993, and 1992
NOTE 2 CHAPTER 11 REORGANIZATION -Continued-
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company has acquired a mineral
property valued at $34,577,270. The Company has capitalized related development
costs of $2,199,503 as of June 30, 1995. Recovery of the carrying amount of the
mineral property and related development costs is dependent on the success of
future operations and the Company's ability to obtain financing through
borrowing or the sale of common stock. In December 1994, the Company's Board of
Directors and management were changed. The Company is seeking business alliances
and/or mergers with entities associated with vermiculite related products.
Management is attempting to raise financing through borrowing and sale of common
stock to meet its cash needs.
The Company has not obtained the necessary financing to meet its working capital
requirements and to operate the mineral property, which is the Company's major
asset, and there can be no assurance that the Company will be successful in
obtaining the necessary financing. The Company has pledged the mineral property
as collateral for a note payable to an affiliate. Also, as discussed in Note 7,
the United States Forest Service required that an Environmental Impact Statement
(EIS) be issued for the mineral property prior to granting mining rights to the
Company. The EIS was completed in 1992. The financial statements do not include
any adjustments relating to the recoverability and classification of asset
carrying amounts and the amount or classification of liabilities that might
result should the Company be unable to develop and operate the mineral property
and continue as a going concern.
NOTE 3 ACQUISITION OF MINERAL PROPERTY
During 1984, the Company entered into an agreement with Northland Mills, Inc.
(Northland), to acquire 100 percent of the outstanding stock of National
Vermiculite Company, Inc. (Which held a 40 percent interest in a certain
vermiculite property) and Northland's option to reacquire from a trust the
remaining 60 percent of the vermiculite property plus land and a building. The
Company assumed debts from Northland of $7,805,277, entered into an agreement to
reimburse the trust $3,250,000 by October 19, 1985, and issued 4,112,000 shares
of common stock. The land and vermiculite property have been recorded in the
accompanying financial statements at their fair market value at the date of this
transaction, as determined by an independent appraisal and as confirmed by an
order of the Court.
The Company donated a building to the Montana Historical Museum Society during
the year ended June 30, 1991.
Page 41
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993 and 1992
NOTE 4 BUILDING
The building and accumulated depreciation by year is summarized as follows:
Accumulated Net Book
Building Depreciation Value
6-30-92 $50,000 $ 9,939 $40,061
6-30-93 50,000 12,113 37,887
6-30-94 50,000 14,287 35,713
6-30-95 50,000 16,461 33,539
Depreciation expense for each of the four years is $2,174.
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT
Notes and mortgages payable are summarized as follows:
1992 Mortgages Payable
Mortgages payable consist of promissory notes to
shareholders of the Company, collateralized by interest in
the mineral property, interest accrues at 23 % per annum,
maturity is December 31, 1992. $ 496,000
Note payable to an affiliated company. Bearing interest at
10 % due on or before the earliest to occur of the
following:
a. Within 90 days after completion of the environmental
impact statement. (see note 7); or
b. December 31, 1992, collateralized by the Company's
mineral property. (see note 9) 550,000
---------
1,046,000
---------
1992 Notes Payable
Unsecured notes payable to three corporations for
development costs, bearing interest at 9% to 12% per annum
past due and in default at June 30, 1992. 304,968
Page 42
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993 and 1992
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT -Continued-
1992 Notes Payable Continued
Note payable to an affiliated company, with interest at 12%
per annum due on demand, guaranteed by a shareholder of the
Company. 10,000
Unsecured note payable to an individual with interest at 20%
per annum, past due and in default at June 30, 1992. 40,000
Note payable to an affiliated company, with interest at 12%
per annum, past due and in default at June 30, 1992. 85,961
Unsecured notes payable to five shareholders, with interest
at 10% to 18% per annum, past due and in default at June 30,
1992. 83,100
Unsecured notes payable to five shareholders, with interest
at 10% to 18% per annum. 23,200
----------
547,229
----------
Total Mortgages & Notes Due June 30, 1992 1,593,229
Less Current Portion 1,593,229
----------
Total Long-Term Debt $
==========
1993 Mortgages Payable
Mortgages payable consist of promissory notes to
shareholders of the Company, collateralized by interest in
the mineral property, interest accrues at 23 % per annum,
past due and in default at June 30, 1993. $ 496,000
Note payable to an affiliated company. Bearing interest at
10 % due on or before the earliest to occur of the
following:
a. Within 90 days after completion of the environmental
impact statement. (see note 7); or
b. December 31, 1992, collateralized by the Company's
mineral property. (see note 9)
Past due and in default at June 30, 1993 550,000
----------
1,046,000
----------
1993 Notes Payable
Unsecured notes payable to three corporations for
development costs, bearing interest at 9% to 12% per annum
past due and in default at June 30, 1993. 304,968
Note payable to an affiliated company, with interest at 12%
per annum due on demand, guaranteed by a shareholder of the
Company. 10,000
Page 43
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993 and 1992
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT -Continued-
1993 Notes Payable Continued
Unsecured note payable to an individual with interest at 20%
per annum, past due and in default at June 30, 1993. 40,000
Note payable to an affiliated company, with interest at 12%
per annum, past due and in default at June 30, 1993. 85,961
Unsecured notes payable to five shareholders, with interest
at 10% to 18% per annum, past due and in default at June 30,
1993. 83,100
Unsecured notes payable five shareholders, with interest at
10% to 18% per annum. 23,200
Unsecured notes payable due nine shareholders with interest
at 14% to 15% per annum, due January 1, 1994. 16,500
563,729
----------
Total Mortgages and Notes Due June 30, 1993 1,609,729
Less Current Portion 1,609,729
----------
Total Long-Term Debt $ --
==========
1994 Mortgages Payable
Mortgages payable consist of promissory notes to
shareholders of the Company, collateralized by interest in
the mineral property, interest accrues at 23 % per annum,
past due and in default at June 30, 1994. $ 496,000
Mortgages payable consist of promissory notes due
shareholders of the Company, secured by first mortgages on
the mineral property, the notes mature February 1, 2000,
with interest at 12% per annum. 6,000
Note payable to an affiliated company. Company bearing
interest at 10 % due on or before the earliest to occur of
the following:
a. Within 90 days after completion of the environmental
impact statement. (see note 7); or
b. December 31, 1992, collateralized by the Company's
mineral property. (see note 9)
Past due and in default June 30, 1994. 550,000
----------
Mortgages Payable June 30, 1994 1,052,000
----------
Page 44
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993 and 1992
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT -Continued-
1994 Notes Payable
Unsecured notes payable to three corporations for
development costs, bearing interest at 9% to 12% per annum
past due and in default at June 30, 1994. 304,968
Note payable to an affiliated company, with interest at 12%
per annum due on demand, guaranteed by a shareholder of the
Company. 10,000
Unsecured note payable to an individual with interest at 20%
per annum, past due and in default at June 30, 1994. 40,000
Note payable to an affiliated company, with interest at 12%
per annum, past due and in default at June 30, 1994. 85,961
Unsecured notes payable to five shareholders, with interest
at 10% to 18% per annum, past due and in default at June 30,
1994. 83,100
Unsecured notes payable five shareholders, with interest at
10% to 18% per annum. Past due and in default at June 30,
1994. 13,200
Unsecured notes payable due nine shareholders, with interest
at 14% to 15% per annum, past due and in default June 30,
1994. 16,500
Unsecured notes payable due three shareholders, with
interest at 14% to 15% per annum. 29,000
Unsecured note payable due a shareholder who is also a
member of the board of directors, the note matures January
18, 1996, with interest at 12% per annum. 30,000
Unsecured note payable due a shareholder with interest at
12% per annum, past due and in default at June 30, 1994. 12,000
----------
624,729
----------
Total Mortgages and Notes Payable Due June 30, 1994 1,676,729
Less current portion 1,610,729
----------
Total Long-Term Debt $ 36,000
==========
1995 Mortgages Payable
Mortgages payable consist of promissory notes to
shareholders of the Company, collateralized by interest in
the mineral property, interest accrues at 23 % per annum,
past due and in default at June 30, 1995. $ 496,000
Page 45
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993 and 1992
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT -Continued-
1995 Mortgages Payable Continued
Mortgages payable consist of promissory notes due
shareholders of the Company, secured by first mortgages on
the mineral property, the notes mature February 1, 2000,
with interest at 12% per annum. 6,000
Mortgages payable consist of promissory notes due
shareholders of the Company, secured by first mortgages on
mineral property, the notes mature February 1, 2000, with
interest at 12% annum. 123,100
Note payable to an affiliated company. Bearing interest at
10 % due on or before the earliest to occur of the
following:
a. Within 90 days after completion of the environmental
impact statement. (see note 7); or
b. December 31, 1992, collateralized by the Company's
mineral property. (see note 9)
Past due and in default June 30, 1995. 550,000
----------
Mortgages Payable June 30, 1995. 1,175,100
----------
1995 Notes Payable
Unsecured notes payable to three corporations for
development costs, bearing interest at 9% to 12% per annum
past due and in default at June 30, 1995. 304,968
Note payable to an affiliated company, with interest at 12%
per annum due on demand, guaranteed by a shareholder of the
Company. 10,000
Unsecured note payable to an individual with interest at 20%
per annum, past due and in default at June 30, 1995. 40,000
Note payable to an affiliated company, with interest at 12%
per annum, past due and in default at June 30, 1995. 85,961
Unsecured notes payable to five shareholders, with interest
at 10% to 18% per annum, past due and in default at June 30,
1995. 83,100
Unsecured notes payable five shareholders, with interest at
10% to 18% per annum. Past due and in default at June 30,
1995. 23,200
Unsecured notes payable due nine shareholders, with interest
at 14% to 15% per annum, past due and in default June 30,
1995. 16,500
Page 46
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993 and 1992
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT -Continued-
1995 Notes Payable Continued
Unsecured notes payable due three shareholders, with
interest at 14% to 15% per annum, past due and in default
June 30, 1995. 29,000
Unsecured note payable due a shareholder who is also a
member of the board of directors, the note matures January
18, 1996, with interest at 12% per annum. 30,000
Unsecured note payable due four shareholders, these notes
payable resulted from settlement of claims with the former
officers, the notes are due on demand and accrue interest at
12% annum. 342,296
----------
965,025
----------
Total Mortgages and Notes Due June 30, 1995 2,140,125
Less Current Portion 1,981,025
----------
Total Long-Term Debt June 30, 1995 $ 159,100
==========
NOTE 6 COMMITMENTS AND CONTINGENCIES
Employment Agreements
The Company entered into an employment agreement with its former chief executive
officer during 1986. The agreement was for a period of five years with automatic
extension unless otherwise terminated.
In August 1988, the Company entered into an employment agreement with an
individual to act as president of the Company. The term of the agreement was
from September 1, 1988 to August 31, 1992, and was to automatically be renewed
for one-year periods unless terminated.
In October 1989, the Company terminated the employment agreements with the
former chief executive officer and former president. Obligations to these
officers for their services were satisfied through the issuance of 300,000
shares of restricted common stock. As part of the employment termination
agreement with the former president, the Company guaranteed him the right to
sell 50,000 shares of the Company's restricted common stock back to the Company
at $2 per share on December 31, 1991. In January 1992, the Company amended the
agreement with the former president to extend the period of the right to sell
the 50,000 shares. These shares have been reflected as redeemable common stock
in the accompanying consolidated balance sheets. The redeemable common stock
expired subsequent to June 30, 1993.
Page 47
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993 and 1992
NOTE 6 COMMITMENTS AND CONTINGENCIES -Continued-
In October 1989, the Company entered into an employment agreement with an
individual to act as chief executive and chief financial officer of the company.
The term of the agreement was for five years unless terminated earlier under the
provisions of the contract. The employment agreement provided for the individual
to be compensated through the issuance of stock options. The individual was
granted 850,000 options which are exercisable as follows: 250,000 immediately,
100,000 upon the completion of the environmental impact statement and 500,000
upon the commencement of operations at the mine or upon the sale of the mine.
The exercise price is $.25 per share and the options expire five years from the
date of grant. The Company has recognized compensation on 850,000 shares of
which compensation on 600,000 shares has been deferred and will be amortized to
operating expenses when events described above occur. Subsequent to June 30,
1991 the officer resigned and the options expired.
During the year ended December 31, 1991, the Company's chief executive officer
exercised 120,000 options to acquire shares of common stock for no consideration
in lieu of cash compensation.
In January 1992, the Company entered into a preliminary agreement with Theodore,
Barry & Associates (TBA) to assume the daily administrative responsibilities of
managing the Company. The Company's former president is a director and employee
of TBA. Payment for services provided by TBA may be made using either cash or
restricted common stock.
Royalty and Lease Agreements
Certain of the vermiculite claims are leased to the Company under a lease
assigned to the Company during June 1986 in connection with the settlement of
the obligations owed to a trust. The Lease permits the Company to purchase the
claims for $1,000,000 during the term of the lease or any extensions thereof.
The current lease term expires November 15, 1997, and is renewable for
additional consecutive ten-year terms upon five days' notice. The lease requires
a royalty payment to the lessors of $2 per ton of milled vermiculite ore, or 3
1/3 percent of the selling price, whichever is greater, and ten percent of the
selling price of other mineral and ores. A minimum royalty of $1,500 per quarter
is specified, although the lessors have agreed the minimum royalty payment is
not required. Royalty payments, including any minimum advance royalty payments,
are applied against the purchase price of the claims. The Company made payments
under the lease agreement as follows: $6,000 for 1995, $6,000 for 1994, $6,000
for 1993, and $6,000 for 1992.
Beginning in 1993 the US Forest Service required a payment of $9,600 per year.
The mineral property is on forest service land, requiring the lease payment to
be made annually to the US Forest Service.
Page 48
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30,1995,1994,1993 and 1992
NOTE 6 COMMITMENTS AND CONTINGENCIES -Continued-
Environmental Impact Statement
During 1988, the Company was notified by the United States Forest Service that
an Environmental Impact Statement (EIS) will be required for the vermiculite
property. A draft EIS was issued in January 1991. The Company's management the
issuance of a final EIS by June 1992. Total cost of the EIS is expected to be
approximately $325,000. The Company has paid $215,000 on its EIS as of June 30,
1991. Subsequent to June 30, 1991, the balance of $65,961 was paid toward the
EIS.
Insurance
The Company discontinued its insurance coverages during fiscal 1991 and as a
result is uninsured.
NOTE 7 RELATED PARTY TRANSACTIONS
During 1988, the Company entered into an agreement with Southern American
Insurance Company (SAIC), an affiliate of the Company's former chief executive
officer, to procure a loan of $550,000 for the Company at ten percent interest.
The principal balance owing to SAIC for advances made through June 30, 1989 was
$449,682.
During the year ended June 30, 1990, the Company received advances against the
loan and rolled accrued interest into the loan which raised the principal
balance to the full $550,000 allowed under the agreement. In addition, the note
was assigned from SAIC to Commercial Surety and Insurance Corp. (CSIG), during
September 1989, an affiliate of the Company's former chief executive officer.
As of June 30, 1995, the principal balance of the loan is $550,000 with accrued
interest of approximately $400,000. This loan is collateralized by the Company's
interest in the vermiculite property, including all development, engineering and
management contract rights.
As discussed in Note 4, the Company issued promissory notes to certain
stockholders of the Company during the years ended June 30, 1995, 1994, 1993,
and 1992.
An error resulting in an understatement of previously reported assets and
retained earnings was discovered during the current period. Correction of this
error resulted in a decrease of previously reported net loss for 1991 amounting
to $42,235. The 1991 consolidated statement of operation has been restated for
the effect of correcting this error.
The following schedule details the nature and amount of the error:
Overstatement of expenses $ 42,235
Overstatement of retained earnings 42,235
This error has no effect on net income for 1995, 1994, 1993, and 1992.
Page 49
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993 and 1992
NOTE 8 LITIGATION AND JUDGEMENTS
A lawsuit was filed in the District Court of Ravilli County, Montana on
September 29, 1994. Judgement was entered in the District Court of Salt Lake
County for $63,360 plus interest. This claim has been settled and the Company
has commenced performance under the settlement agreement.
A claim was filed by an engineering partnership in the District Court of Ravalli
County, Montana. Judgement was entered in the US District Court for the District
of Montana on November 11, 1994 in the amount of $85,310, plus interest. This
claim is not settled and the Company has not commenced making payments
thereunder.
This judgement was entered against the Company in Bergen County, New Jersey in
the amount of $8,164 plus interest. The Company entered into a settlement and
has commenced performance thereunder.
This is a judgement entered against the Company in favor of a Salt Lake City,
Utah CPA firm in the amount of $5,845 plus interest. The claim has not been
settled and the Company has not commenced making payment against the judgement.
In the Us District for the State of Utah, the Company filed a claim against five
(5) former board of directors for damages and an injunction relating to prior
acts while they were in control of the Company as well as acts subsequent to
their removal from office by the shareholders on December 12, 1994. The action
was filed on October 16, 1995. The Company obtained a preliminary injunction
against the former management after a hearing held October 16, 1995.
The Company entered into settlements with four (4) of the five (5) former board
members. However, before doing so the former board members asserted counter
claims against the Company. These counter claims have now been dismissed with
prejudice.
The remaining defendant has not been served and is believed to be evading
service. It is likely that when he is served and is called upon to file an
answer, he will assert a counter claim against the Company. Management feels
that any such counter claim will have no merit.
An investigation made of public records revealed there were a series of
mortgages placed on the Company's mineral property in Montana.
A mortgage evidencing a debit of $881,435 was given by prior management to two
(2) insurance companies which they controlled. Subsequently, in 1994, the State
of Utah's Insurance Commissioner declared those companies insolvent and placed
them in receivership. The receiver then succeeded to the rights of those
companies under the mortgage.
Page 50
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995, 1994, 1993 and 1992
NOTE 8 LITIGATION AND JUDGEMENTS -Continued-
The mortgage is in default. However, no efforts are being made by the receiver
to foreclose pursuant to an oral agreement.
Under prior management in 1989 and 1990, the Company entered into a series of
mortgage notes in the amount of $608,280 with persons who loaned money to the
Company. These persons were also shareholders of the Company.
These mortgages are in default. However the Company has entered into
subordination agreements with most of the mortgages including members of former
management.
NOTE 9 SUBSEQUENT EVENTS
The Company has not been in compliance with federal securities laws. Former
management did not file any of the required reports with U.S. Securities and
Exchange Commission. Therefore, the Company is in violation of the reporting
requirements of section 12(q) of the Exchange Act and its associated
regulations.
Since taking office in December 1994, the new management has made the required
filings, although, not always on a timely basis.
However, because there were no financial records for the Company and because the
audit of June 30, 1995 was not completed the Company has not been able to
include the required annual and quarterly financial information in any of its
periodic filings.
Accordingly, the Company is still in violation of the Rules and Regulations of
the U.S. Securities and Exchange Commission.
A former manager has filed a claim against the Company for back pay and expenses
in the amount of $22,000. This is for work done in the fiscal year ended June
30, 1996. The Company disputes the claim. This claim is not in litigation.
Page 51
<PAGE>
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.
(a) Resignation of Registrant's Independent Accountant.
The Company was orally notified on April 3, 1996 that Arthur Andersen &
Co., LLP, intended to resign from its audit engagement relating to the Company's
financial statements for the years ended June 30, 1992 through June 30, 1995. On
April 18, 1996, the Company received Arthur Andersen's letter to this effect.
Arthur Andersen's termination was not recommended or approved by an audit
committee or similar committee of the Board of Directors.
Based on the April 3, 1996 meeting, however, the Company concluded there
were no disagreements between management and this former accountant.
(b) Engagement of Registrant's New Independent Accountant.
The Company announced on May 13, 1996 that it had engaged Taylor & Company,
a firm of independent certified public accountants in Salt Lake City, to perform
an audit of its financial statements for the years ended June 30, 1992, 1993,
1994 and 1995. The engagement letter was signed on April 29, 1996 and the
initial retainer was paid on May 6, 1996.
The results of the audit appear at Item 7. Taylor & Company continues as
the Company's auditor and, on September 4, 1996, Taylor & Company was engaged to
perform an audit on the Company's financial statements for the year ended June
30, 1996. The Company
Page 52
<PAGE>
anticipates that Taylor & Company's audit report will contain the same
qualifications as the audit report contained in this Report at Item 7.
The amount of the retainer was $3,500. The estimated total cost of the June
30, 1996 audit is $10,000. The audit report is expected to be received within
thirty (30) days after the audit work is begun.
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:
Name and Age Term Business Experience
Executive Officers:
Donald Sanford (May 19, 1995 - Retired screen writer;
(Age 78) present) investor; trustee of
Writers Guild of
America Pension Plan
and Health Fund since
1973
David Racher (February 1, 1995 - Reporter for
(Age 59) present) Philadelphia Daily News
Directors:
Donald Sanford (December 12, 1994 - Retired screen writer;
(Age 78) present) investor; trustee of
Writers Guild of
America Pension Plan
and Health Fund since
1973
Page 53
<PAGE>
Name and Age Term Business Experience
Simon Grant-Rennick (December 12, 1994 - Mining Engineer
(Age 38) present) Director, Middlesex
Holding, plc., and London
Fiduciary Trust, plc., (metal
traders) since 1989.
Dr. Martin Peskin (February 1, 1995 - Retired Periodontist
(Age 59) present)
Dr. Howard Pomeranz (elected September Part-time Professor of
(Age 61) 18, 1995) Endodontics at
Columbia University
Dental School and New
Jersey Dental School.
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)
Chief Executive
Officer: Michael LaFleur (September 18, 1995 -
April 1, 1996)
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)
Page 54
<PAGE>
Dr. Sami I. A. Samani (July 1, 1994 -
December 12, 1994)
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)
Michael F. LaFleur (September 18, 1995 -
April 1, 1996)
James M. Rosel (December 12, 1994 -
present)
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 on 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 but 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 directors management
with Section 16(a) of the Exchange Act from July 1, 1994 through December 12,
1994 or thereafter.
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 who has
served as a director or executive officer after December 12, 1994.
Directors are entitled to receive reimbursement of their
Page 55
<PAGE>
reasonable and necessary expenses as documented and submitted. The following
directors have submitted documentation to support and have received
reimbursement during the Reporting Period:
Donald Sanford
Michael LaFleur
James M. Rosel
Lawrence T. Atkinson
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%
David Racher 31,050 0.1%
Simon Grant-Rennick 50 0.0%
Dr. Martin Peskin 485,000 2.6%
Dr. Howard Pomeranz 341,500 1.8%
--------- ----
TOTALS: 1,143,075 6.3%
(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 25.7%, 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:
Page 56
<PAGE>
No. of Shares %
Dr. Sami I. A. Samani1 2,193,284 12.9
Thomas J. DeRosa 137,700 .76
Peter Samani 171,000 .95
Charles L. McLaughlin 356,478 1.98
--------- -----
TOTAL: 2,858,462 15.88%
As discussed in Item 3 above, there is pending litigation between the
Company and Mr. McLaughlin as to whether any of his 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.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
- Exhibit 17 - Letter on Director Resignation.
- Exhibit 23 - Consent of Independent Accountants.
- Exhibit 27 - Financial Data Schedule for year ended June 30,
1995.
(b) Reports on Form 8-K.
No special reports on Form 8-K were filed by the Registrant during the
quarter ended June 30, 1995.
- --------
1 Either owned jointly or individually with his wife.
Page 57
<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 September 27, 1996 /s/ Donald Sanford
---------------------- ----------------------------------------
Donald Sanford, President
Dated September 27, 1996 /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 September 27, 1996
- --------------------------------- -----------------------------
Donald Sanford, Director
Dated
- --------------------------------- -----------------------------
Simon Grant-Rennick, Director
/s/ Martin Peskin Dated September 27, 1996
- --------------------------------- -----------------------------
Dr. Martin Peskin, Director
/s/ Howard Pomeranz Dated September 27, 1996
- --------------------------------- -----------------------------
Dr. Howard Pomeranz, Director
Page 58
James M. Rosel
1507 Falcon Ledge
Austin, Texas 78746
Home: (512) 306-1416
Work: (512) 445-6606
April 1, 1996
VIA FACSIMILE 215/569-0216
Mr. James G. Wiles
Attorney at Law
Two Penn Center Plaza
1500 JFK Boulevard, Suite 200
Philadelphia, PA 19102
Dear Mr. Wiles:
I hereby resign as a director of Stansbury, effective immediately. I also
resign from the "Committee."
My reasons for resignation are many, the principal one being the
unreasonable refusal by three of the board members to accept the offer of
$500,000 in finance by Asia Pacific, with no alternate finance in place and in
the face of mounting debts and mortgages in default. The last straw was the
inconsiderate behavior in canceling the long-standing March 25 Board Meeting at
the absolute last moment, not even giving final consideration to the Asia
Pacific proposal. The proposal was subsequently withdrawn. This attractive offer
would have allowed the company to move forward tremendously.
Secondly, you and Mr. Sanford have continued to operate as if on behalf of
the company, but without authority of the Board. I remain extremely concerned
about security sales by your clients that may well not be proper. I have no
knowledge of or control over these activities, even after repeated demands for
reports on this activity and requests that it cease unless determined to be
proper and approved by the full Board. You have failed to provide a legal
opinion on these sales in spite of my written requests. You and Don are
undertaking many other activities in the name of Stansbury that are not being
disclosed, much less approved.
After attracting an able CEO to the company, Mike LaFleur, and helping to
obtain the Asia Pacific offer, both of which have been ignored and refused of
late, I can no longer help the company. Board members who have no mining
knowledge or expertise, along
<PAGE>
Mr. James G. Wiles
April 1, 1996
with yourself, are trying to run the company. The interests of all the
shareholders are no longer being represented, and the mining property is now
much less likely to be developed.
I demand that this resignation letter be reported in full in an 8-K filing
by Stansbury to be made as soon as possible.
Very truly yours,
/s/ James M. Rosel
--------------------------------------
James M. Rosel
cc: Board of Directors
2
Taylor &
Company
Certified Public Accountants
CONSENT OF INDEPENDENT AUDITOR
We consent to the use in Form 8-K to be filed by Stansbury Holdings Corporation
of our report dated June 30, 1995, 1994, 1993, and 1992 accompanying the audited
financial statements of Stansbury Holdings Corporation as of June 30, 1995,
1994, 1993, and 1992 and to the use of our name under the caption "Experts" in
the filings.
/s/ Taylor & Company
August 20, 1996
341 South Main Street, Suite 214
Salt Lake City, Utah 84111
Fax (801) 355-2019
(801) 521-8118
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000093566
<NAME> STANSBURY HOLDINGS CORPORATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,000
<PP&E> 36,810,312
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,845,312
<CURRENT-LIABILITIES> 4,239,929
<BONDS> 0
0
0
<COMMON> 4,902,342
<OTHER-SE> 30,399,745
<TOTAL-LIABILITY-AND-EQUITY> 36,845,312
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,305,068
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,071,333
<INCOME-PRETAX> (1,296,430)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,296,430)
<EPS-PRIMARY> (0.070)
<EPS-DILUTED> 0
</TABLE>
