UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to __________.
Commission File 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 February 10, 1997, the aggregate market value of common stock held by
non-affiliates was $3,922,705 based on the average bid and asked price for the
week of February 17, 1997.
As of March, 1997, the number of shares outstanding was 21,203,812.
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...........................................................20
Part II
Item 5. Market for Common Equity and Related Stockholder
Matters...........................................................20
Item 6. Management's Discussion and Analysis or Plan of
Operation.........................................................21
Item 7. Financial Statements................................................27
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...............................50
Part III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act...............................................52
Item 10. Executive Compensation..............................................56
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....................................................................59
<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 fiscal year being reported upon, i.e., from July 1, 1995 to June 30,
1996 (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 1998, if project
financing and additional equity capital can be obtained by May, 1998.
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 $674,835 in
loans from 55 existing shareholders. An additional $140,000 has been obtained
since June 30, 1996 in the form of loans from 12 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
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 Reporting Period and the period thereafter to
date, focused its efforts primarily on (a) evaluating the feasibility of its
vermiculite deposits, (b) resolving legal impediments and debts generated by its
former management, who were replaced at a special shareholders' meeting on
December 12, 1994 and (c) identify other opportunities for profitability and
commencement of operations. A description 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
Page 2
<PAGE>
completion, and of a dispute with former management, 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 ("EIS"), 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 1998. No representation as to the result of that
updated feasibility study is made.
(c) Government Regulation.
Final approval of the Company's 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 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
Page 4
<PAGE>
and local taxing authorities.
(d) Employees/Offices.
The Company has its corporate office at 20 Battle Ridge Place, Atlanta,
Georgia. The Company also maintains a field office in Victor, Montana. From time
to time the Company has employed technical specialists on an as-needed basis.
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.
On January 14, 1997, he filed a back pay claim with the Montana Department of
Labor and Industry for $16,250. See Item 7, Notes to Financial Statements, n. 9.
The Company is opposing the claim.
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. On January 6, 1997, the Board adopted a deferred
compensation plan for Donald Sanford, the Company's president, at the rate of
$5,000/month plus $800/month in office rental since Mr. Sanford's becoming
president on April 12, 1995. The question of stock options for the Board will be
re-visited in the future.
See Items 3 and 10, for discussion of issues relating to former management,
who were officers and directors of the Company for some or all of the period
from July 1, 1991 to December 12, 1994.
Page 5
<PAGE>
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 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.
The Vermiculite Claims
The Company 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 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
Page 6
<PAGE>
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>
MAP A - PROJECT LOCATION -
[GRAPHIC OMITTED]
Page 8
<PAGE>
MAP B - PROPOSED FACILITIES PLAN AND WETLANDS AREAS OF INTEREST -
[GRAPHIC OMITTED]
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 feet. 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
operations before May, 1998, 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:
(i) 550,048 shares of the Company's stock, which have been canceled;
(ii) notes issued to them by the Company totaling $181,250.68, which
have been canceled;
(iii) subordination agreements and forbearances on the second mortgage
which they (and others) hold on the Company's mineral claims; and
(iv) 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 in the possession of
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 canceled. 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) Pending Suits Against the Company.
(i) Dr. Sami Samani and Thomas DeRosa, members of former management, have
sued the Company in state court in Salt Lake City, Utah. The suit alleges that
the Company has breached the Global Settlement Agreement. The Company denies the
claim and has filed a counterclaim.
(ii) Simon Grant-Rennick (a former director and an original member of the
New Board), through Southampton Metals Limited, has sued the Company for $30,000
supposedly owed to Southampton Metals since 1993. The Company has not yet been
required to answer the suit.
(iii) Michael LaFleur, a former officer and director of the Company, has
made a claim in the Montana Department of Labor and Industry for $16,250 in back
pay. The Company has filed an answer denying any liability.
(c) 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.
During the Reporting Period, the Company made several partial payments against
the judgment.
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.
Page 18
<PAGE>
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.
Pursuant to the Global Settlement Agreement with former management, the
Herd judgment is to be marked "justified" when the Global settlement Agreement
has been performed.
3. On November 22, 1994, a 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 have refused to discuss any of
these (or any other) matters with current management. However, the Company
believes that all of the above judgments were entered by default; and that no
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 the Herd
and Bauernfeld 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.
Page 19
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended June 30, 1996, 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
Market System of the National Association of Securities Dealers because of
former management's neglect. The shares continue to trade in the "pink sheets."
The following table shows the reported "bid" and "ask" price in dollars for
the Company's stock for each quarter of the Reporting Period:
DATE OPEN HIGH LOW CLOSE
09/95 .1875 .4375 . 06 .487
12/95 . 31 . 4 . 06 . 18
03/96 . 147 . 312 . 05 .312
06/96 . 375 . 5 . 05 .437
Sources: Bloomberg; Smith Barney.
Page 20
<PAGE>
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 February 10, 1997, there were 3,702 shareholders of record.
No dividends have been declared or paid; and it is not anticipated that
cash or stock dividends will be paid in the foreseeable future.
There can be no assurance that cash dividends can or ever will be paid
since payments are contingent upon future improvements, if any, to the Company's
financial condition, capital requirements, prevailing business conditions and
other factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company is not liquid. Should any of the current judgment creditors
(see Item 3) attach the Registrant's assets, the efforts now underway to revive
Stansbury would be imperiled. In the absence of 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;
Page 21
<PAGE>
- 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 all 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.
In addition, the Company has done the following:
- engaged an independent public accountant to perform audits of the
Company's financial statements for the years ended June 30, 1992 through June
30, 1996 (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 of the Company 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 from a lender.
Page 22
<PAGE>
With the filing of this Annual Report on Form 10-KSB, 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 $915,835 in interim
financing. The financing is in the form of loans from 54 existing shareholders
of the Company and 14 non-shareholders, who either already are or thereby became
members of the Committee for New Management of Stansbury Holdings (the
"Committee") . The terms of the loans were previously disclosed in the Company's
Form 10-QSB for the quarter ended March 31, 1995.
Plan of Development for the Next Twelve Months.
The Company's fund-raising effort is on-going.
(a) Six-Month Goals.
Additional monies to be obtained in the next six (6) months will be
principally devoted to:
(i) preparation and filing of Quarterly Reports on Form 10- QSB for
September 30, 1996, December 30, 1996 and March 31, 1997 so that the Company may
become fully current with the SEC in its public filings and so that the Company
may then apply to have its shares re-listed for trading on NASDAQ and the OTC
Bulletin Board;
(ii) seeking new equity and interim project financing;
(iii) payment of consultants' fees and expenses to complete an updated
feasibility and profitability study;
(iv) settlement and payment of judgments;
Page 23
<PAGE>
(v) payments of attorneys' fees(for Montana, Utah and corporate counsel);
and
(vi) reimbursement of directors' expenses.
(b) Issue of Secured Debentures to Committee Members.
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.
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, the Company 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 and to seek a relisting of the Company's shares for trading.
(c) Annual Meeting.
The Company expects to call a regular, annual shareholders'
Page 24
<PAGE>
meeting in the fall of 1997.
At such annual meeting, the Company 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.
(d) New Equity - De-Legending of Committee Stock.
The Company 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 1998 of $15 to 20
million. As part of such financing, the Company will also register the shares
issued to the members of the Committee as restricted study so that they will
become freely tradable.
If such financing is obtained, construction of the proposed open-pit
vermiculite mine could begin in or about mid-1998
(e) Possible Acquisition(s).
As an initial step to commence operations during calendar 1997, the Company
is exploring the possibility of acquiring (a) one or several existing
vermiculite mines and mills and (b) one or more vermiculite-related businesses.
One such indication of interest by the Company has been declined. Two others are
pending.
Page 25
<PAGE>
The Company believes the ability to use its large net operating loss carry
forward makes such acquisitions attractive. Should such acquisition occur, the
Company will seek interim "bridge" financing.
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. 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.
2. The mining industry is subject to extensive federal, state and
local laws and regulations covering exploration, development, operations and
production, taxes, labor standards, occupational health, waste disposal,
environmental protection, reclamation, mine safety, toxic substances and other
matters. Environmental, operating, water, dust and other federal and state
permits are essential to any mining operation. The nature of the mining business
is such that mining companies are frequently in the process of applying for
additional permits or modifications to existing permits at any given time.
There can be no assurance that such permits will be granted in the future
as needed, and, if such permits are not granted, the Company or any mining
venture in which it is a participant could be required to curtail or cease its
development plans or operations with serious adverse consequences to its
liquidity and profitability. Amendments to current laws and regulations
governing operations and activities of mining companies or more stringent
implementation thereof or additional taxes could have a material adverse impact
on the Company.
3. 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.
Page 26
<PAGE>
4. 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.
5. 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 fiscal
year ended June 30, 1996:
Page 27
<PAGE>
Taylor & Company
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
Board of Directors
Stansbury Holdings Corporation
We have audited the accompanying balance sheets of Stansbury Holdings
Corporation (a Utah corporation) as of June 30, 1996 and 1995 and the related
statements of operations, stockholders' equity, and cash flows for each of the
two years in the period ended June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our 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
as of June 30, 1996 and 1995 and the results of their operations and their cash
flows for each of the two years in the period ended June 30, 1996 in conformity
with generally accepted accounting principles.
As discussed further in Note 2 to the financial statements, the Company acquired
a mineral property valued at $34,577,270. The Company has capitalized related
development costs of $2,303,108 as of June 30, 1996. 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 financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred cumulative losses before unusual
and extraordinary items of approximately $10,747,000 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, 1996, the Company's current liabilities
exceeded its current assets by $4,634,000. The foregoing factors raise
substantial doubt about the Company's
341 South Main Street, Suite 214
Salt Lake City, Utah 84111
Fax (801) 355-2019
(801) 521-8118
Page 28
<PAGE>
ability to continue as a going concern. Management's plan in regard to these
matters also are disclosed in Note 2. The 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
January 15, 1997
Page 29
<PAGE>
STANSBURY HOLDINGS CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
Year Ended June 30, 1996 1995
<S> <C> <C>
ASSETS
Current Assets
Due from attorney's
escrow account $ 81,318 $ --
Prepaid expenses -- 15,000
----------- -----------
81,318 15,000
----------- -----------
Property & Equipment
Building 31,365 33,539
Mineral property 34,577,270 34,577,270
Development costs 2,203,108 2,199,503
----------- -----------
36,811,743 36,810,312
----------- -----------
Other Assets
Deposits 20,000 20,000
----------- -----------
20,000 20,000
----------- -----------
TOTAL ASSETS $36,913,061 $36,845,312
=========== ===========
</TABLE>
See accompanying notes
Page 30
<PAGE>
STANSBURY HOLDINGS CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
Year Ended June 30, 1996 1995
LIABILITIES AND
SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Current portion - long term debt $ 1,654,100 $ 1,981,025
Accounts payable 452,013 293,285
Accrued interest 2,528,074 1,983,319
------------ ------------
Total Current Liabilities 4,634,187 4,257,629
------------ ------------
Long-Term Debt Liabilities
Notes payable 672,750 159,100
------------ ------------
Total Long Term Liabilities 672,750 159,100
------------ ------------
Shareholders' Equity
Common stock $.25 par value,
authorized 25,000,000 shares,
issued and outstanding 20,285,048 and
19,609,368 shares at June 30, 1996,
and 1995 respectively 5,071,262 4,902,342
Capital in excess of par value 30,399,745 30,399,745
Deferred interest (510,529) (116,084)
Retained earnings (3,354,354) (2,757,420)
------------ ------------
Total Shareholders' Equity 31,606,124 32,428,583
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 36,913,061 $ 36,845,312
============ ============
</TABLE>
See accompanying notes
Page 31
<PAGE>
STANSBURY HOLDINGS CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended June 30, 1996 1995 1994
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
------------ ------------ ------------
Gross Profit -- -- --
------------ ------------ ------------
Expenses
Taxes 33 -- 642
General and administrative 564,990 251,435 65,028
Interest 704,976 1,071,333 560,308
------------ ------------ ------------
Total Expenses 1,269,999 1,322,768 625,978
------------ ------------ ------------
Operating Income (Loss) (1,269,999) (1,322,768) (625,978)
------------ ------------ ------------
Other Income
Cancellation of debt 673,065 -- --
Other income -- 8,450 --
Interest income -- 188 279
------------ ------------ ------------
673,065 8,638 279
------------ ------------ ------------
Net Income (Loss) $ (596,934) $ (1,314,130) $ (625,699)
------------ ------------ ------------
Earnings (loss) per share
of common stock $ (.031) $ (.071) $ (.037)
============ ============ ============
Weighted average shares
outstanding during
the period 19,522,250 18,512,385 16,727,160
============ ============ ============
</TABLE>
See accompanying notes
Page 32
<PAGE>
STANSBURY HOLDINGS CORPORATION
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, 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 (1,314,130)
------------ ------------ ------------ ------------ ------------
Balance June 30, 1995 19,609,368 $ 4,902,342 $ 30,399,745 $ (116,084) $ (2,757,420)
------------ ------------ ------------ ------------ ------------
Issuance of shares for
interest on long-term debt 1,856,176 464,044 (464,044)
Shares canceled (1,180,496) (295,124)
Amortize deferred interest 69,599
Net loss (596,934)
------------ ------------ ------------ ------------ ------------
Balance June 30, 1996 20,285,048 $ 5,071,262 $ 30,399,745 $ (510,529) $ (3,354,354)
========== ============ ============ ============ ============
</TABLE>
See accompanying notes
Page 33
<PAGE>
STANSBURY HOLDINGS CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30, 1996 1995 1994
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Income (loss) $(1,269,999) $(1,314,130) $ (625,699)
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation & Amortization 2,174 2,174 2,174
Amortization of deferred interest
related to stock options 65,599 511,170 117,804
Stock issued for services and interest 616,366 119,000
Changes in operating assets
and liabilities:
(Increase) decrease in accounts receivable (81,318) 13,000 (13,000)
Change in prepaid expenses 15,000 (9,559) (121)
Increase (decrease) in accounts payable 158,729 (214,967) (3,838)
Increase (decrease) in accrued liabilities 544,755 558,801 444,402
----------- ----------- -----------
Net Cash (Used) By
Operating Activities (561,060) 162,855 40,722
----------- ----------- -----------
Cash Flows From Investing Activities
Increase in development costs (3,605) -- --
----------- ----------- -----------
Net Cash Flows Used By
Investing Activities (3,605) -- --
----------- ----------- -----------
Cash Flows From Financing Activities
Proceeds from long-term debt 474,044 465,395 87,000
Payment of long-term debt (287,320) (12,000) (10,000)
Sale of common stock 464,044
Cancellation of debt 673,065
Stock canceled (464,044)
(Increase) decrease in deferred interest (295,124) (616,366) (118,500)
----------- ----------- -----------
Net Cash Provided By
Financing Activities 564,665 (162,971) (41,500)
----------- ----------- -----------
Net Increase (Decrease) in Cash -- (116) (778)
Cash - Beginning of Period -- 116 894
----------- ----------- -----------
CASH-END OF YEAR $ -- $ -- $ 116
=========== =========== ===========
</TABLE>
See accompanying notes
Page 34
<PAGE>
STANSBURY HOLDINGS CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30, 1996 1995 1994
<S> <C> <C> <C>
Supplemental Disclosure
of Non-cash Investing
and Financing Activities
Common stock issued for
services and interest
during the year $464,044 $616,366 $119,000
Debt was cancelled to three
former officers in exchange
for the company dismissing a
lawsuit against them. 673,065 -- --
======== ======== ========
</TABLE>
See accompanying notes
Page 35
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Stansbury Holdings Corporation (the Company) is engaged in the development of a
mineral 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.
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.
Page 36
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
At June 30, 1996, the Company has a net operating loss carry- forward totaling
approximately $9,580,000 that may be offset against future taxable income. The
loss carry-forward expires at various dates through 2011. 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 carry- forward.
Accordingly, the approximate tax benefit of the $9,580,000 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.
Page 37
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
NOTE 2 GOING CONCERN
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 $2,303,108 as of June 30, 1996. 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 a former affiliate. Also, as discussed in
Note 6, 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 1993. 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
Page 38
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
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.
NOTE 4 BUILDING
The building and accumulated depreciation by year is summarized as follows:
Accumulated Net Book
Building Depreciation Value
6-30-95 $ 50,000 $ 16,461 $33,539
6-30-96 50,000 18,635 31,365
Depreciation expense for each of the two years is $2,174.
NOTE 5 NOTES PAYABLE AND LONG-TERM DEBT
Notes and mortgages payable are summarized as follows:
Page 39
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
Mortgages Payable 1996 1995
Mortgages payable consist of promissory notes
due 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, 1996. $496,000 $496,000
Mortgages payable to a life insurance company
in liquidation. 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, 1996 550,000 1,046,000
--------- ---------
Mortgages Payable 1,046,000 1,046,000
--------- ---------
Page 40
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
Mortgages Payable 1996 1995
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, 1996. $304,968 $304,968
Note payable to an insurance company, in
liquidation, with interest at 12% per annum
due on demand, guaranteed by a shareholder of
the Company. 10,000 10,000
Unsecured note payable to an individual with
interest at 20% per annum, past due and in
default at June 30, 1995. Settled during
1996. -- 40,000
Note payable to an insurance company, in
liquidation, with interest at 12% per annum,
past due and in default at June 30, 1996. 85,961 85,961
Unsecured notes payable to six shareholders,
with interest at 10% to 18% per annum, past
due and in default at June 30, 1996. 83,100 83,100
Page 41
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
Unsecured notes payable to five shareholders,
with interest at 10% to 18% per annum and in
default at June 30, 1996. 23,200 23,200
Unsecured notes payable due nine
shareholders, with interest at 14% to 15% per
annum, past due and in default June 30, 1996. 16,500 16,500
Unsecured note payable due shareholders of
the Company, the notes mature February 1,
2000, with interest at 12% per annum. 603,144 129,100
Unsecured notes payable due three
shareholders of the Company with interest at
14% to 15% past due and in default. 29,000 29,000
Unsecured note due a shareholder, the note
matures December 31, 2000 with interest at
12%. 12,000 -
Page 42
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
Unsecured note payable due a shareholder, the
note matured January 18, 1996, with interest
at 12% per annum. Past due and in default,
June 30, 1996. 30,000 30,000
Unsecured notes 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. 25,370 342,296
Unsecured note payable due a former officer.
The note matures December 31, 2000 with
interest at 12%. 57,607 -
---------- ----------
TOTAL NOTES PAYABLE 1,280,850 1,094,125
---------- ----------
TOTAL MORTGAGES and NOTES PAYABLE 2,326,850 2,140,125
---------- ----------
CURRENT PORTION 1,654,100 1,981,025
---------- ----------
TOTAL LONG-TERM $ 672,750 $ 159,100
========== ==========
Page 43
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
NOTE 6 COMMITMENTS AND CONTINGENCIES
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: $6,150 for 1996, $14,100 for 1995, $6,000
for 1994.
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.
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
issued a final EIS by May 1993.
There are two matters of potential administrative action or
Page 44
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
judicial litigation as follows:
(a) Judicial appeal of the 1993 Forest Service approval and approval on
the administrative appeal of the Western Vermiculite Corporation Plan
of Operations.
(b) An administrative appeal of a claim by letter dated March 14, 1996 to
the Bitterroot National Forest and the Montana Department of State
Lands that the EIS must be withdrawn or supplemented.
Insurance
The Company discontinued its insurance coverages during fiscal 1991 and has been
uninsured since that time.
Income Tax
The Company has not filed federal income tax returns since June 30, 1990.
Consultant
In 1995 and 1996 the Company employed an individual as an independent
consultant. In late 1995 he became chief executive officer of the Company,
without a contract. He resigned his position with the Company on April 1, 1996
because of a dispute with the board of directors.
He submitted an invoice to the Company claiming an amount due him of $23,900.
The Company has denied this liability. While he has not filed a lawsuit against
the Company, the statute of limitations has not expired.
Page 45
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
NOTE 7 LITIGATION AND JUDGMENTS
A claim was filed by a law firm in the U.S. District Court for the District of
Montana. Judgment was entered in the U.S. 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.
A judgment 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.
A judgment was 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 payments against the judgment.
In the U.S. District Court for the State of Utah, the Company filed a claim
against five (5) former members of the 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
Page 46
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
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.
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.
Two members of former management filed a lawsuit in the State District Court of
Salt Lake County, Utah on October 3, 1996. This suit alleges that the Company
breached the settlement agreement by ceasing to make payments under the
agreement.
The Company filed a counter claim on November 4, 1996 setting up the prior
breach by the plaintiffs of the settlement agreement as a complete defense.
No discovery has commenced in the case and the matter is in its
Page 47
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
early states. Management, therefore, makes no conclusion as to its merits.
A claim was filed by a former director and officer with the Wage & Hour Division
of the Department of Labor of the State of Montana in the amount of $23,000. The
Company is opposing the claim.
A former director filed a lawsuit in the Montana Fourth Judicial Court in
Missoula County, Montana in the amount of $30,000 plus past due interest. The
suit alleges that the Company has failed to remit payment on a loan.
ITEM 8 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 was in violation of the reporting
requirements of section 12(g) 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, 1996 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 citizen of the United Kingdom served as a member of the board of directors
from December 11, 1994 until he resigned from the board on November 20, 1996.
This individual claims to be owed an amount of $30,000, plus interest. This
claim arose from an undocumented loan supposedly made by him to the Company in
1993. The Company has an oral agreement to settle the loan. However, it is
possible,
Page 48
<PAGE>
STANSBURY HOLDINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
in light of his resignation from the board, that this matter may result in
litigation.
The board of directors approved compensation for the president at a meeting held
January 6, 1997. The president's salary will be $5,000 per month effective April
12, 1995. He will be allowed $800 per month for office space in his home
effective December 14, 1994. The president agreed to defer the salary and rent
until such time as the Company funds are available. He may, at his option, take
all or part of the compensation in Company stock. Retained earnings has been
adjusted by $17,700 for rend and salary prior to July 1, 1995.
Page 49
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There was a change in accountants during the Reporting Period.
The Company did not have an independent public accountant during the first
three months of 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, had previously 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 notified on April 3, 1996 that Arthur Andersen & Co., LLP,
intended to resign from its audit of 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 had previously served as the independent public accountant
for the Company's last completed audit for the year ended June 30, 1991 (filed
in July, 1992). Arthur Andersen's opinion on the June 30, 1991 statements
contained explanatory paragraphs as to uncertainties with respect to the
recoverability of the Registrant's mineral property and its ability to continue
as a "going concern."
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.
The Registrant authorized the former accountant to discuss any matters it
feels appropriate with the successor auditor.
(b) Engagement of Registrant's New Independent Accountant.
The Company announced on May 13, 1996 that it had engaged
Page 50
<PAGE>
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 report of the audit for the year ended June 30, 1996 appears at Item 7.
Taylor & Company continues as the Company's auditor.
The audit by Taylor & Company will address, among other things, the
following issues:
1. the valuation of the Company's mineral reserve at $34 million, which
appears, subject to a qualification, in Arthur Andersen's June 30,
1991 audit report;
2. the possible unavailability of management representation letters from
former management for the years June 30, 1992 through June 30, 1994
and, even if they are available, whether the auditor may reasonably
rely upon them;
3. audit confirmations;
4. the resignation of two of the Registrant's three directors who have
mining backgrounds; and
5. the Company's viability as a "going concern" in light of the previous
Paragraph and the fact that there has been no construction activity
commenced at the proposed mine site in the five years since June 30,
1991.
In a letter to the Registrant dated June 3, 1996, the Staff of Corporate
Finance Division of the SEC has expressed its belief that the five items listed
above constituted disagreements or "reportable events." After consultation with
Arthur Andersen and the Staff, the Registrant still believes there were no
disagreements or "reportable events," as defined.
Page 51
<PAGE>
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
President Writers Guild of
America Pension Plan
and Health Fund since
1973
David Racher (February 1, 1995 - Reporter for
(Age 59) present) Philadelphia Daily
Treasurer 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
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.
Page 52
<PAGE>
The following persons formerly served as Executive Officers or Directors
during the Reporting Period for the various time periods stated:
Chief Executive
Officer: Michael LaFleur (September 18, 1995 -
April 1, 1996)
Directors: Suzette Green (February 1, 1995
August 1, 1995)
Michael F. LaFleur (September 18, 1995 -
April 1, 1996)
James M. Rosel (December 12, 1994 -
April 1, 1994)
Simon Grant-Rennick (December 12, 1994 -
November 20, 1996)
(a) Asia Pacific Proposal; Resignation of Directors.
On February 26, 1996, Michael LaFleur, the Company's CEO and a director,
presented a fully negotiated and signed agreement with a company called Asia
Pacific Timber Corporation to the Board and requested that the Board approve it
at a meeting which he requested be called for forty-eight hours later. The
Agreement, which was signed by Mr. LaFleur and another director, James Rosel,
under date of February 25, 1996, is attached hereto as Exhibit "99.4" (the
"Agreement").
The four other directors, the Registrant's president and corporate counsel
had all previously been unaware of any discussions with Asia Pacific; and they
had not been consulted or informed of the Agreement until two days after it was,
apparently, signed. Based on a review of the Agreement, the Board determined
that one aspect of the Agreement raised a question as to its legality under
state corporate law; it was also viewed as raising a potential "change in
control," requiring special due diligence with respect to Asia Pacific and its
principals. Accordingly, after a two and one-half hour telephone Board meeting,
the Board voted 3 to 3 on the issues of whether to approve the deal or to table
it. As a result, no action was taken; and the President
Page 53
<PAGE>
directed that the matter be carried to a Board meeting set for March 25, 1996.
Subsequently, the Company was able to determine that Asia Pacific was not
registered to do business in British Columbia or Montana; had no phone listings
or assets there; and apparently was based in its president's home. In telephone
conferences with Mr. Alan Nichols, the person representing himself to be the
president of Asia Pacific, Asia Pacific refused to furnish financial
information; refused to confirm by banker's letter or otherwise the availability
of the amount of monies supposedly committed to in the Agreement; and refused to
furnish information regarding directors and shareholders. Asia Pacific's
representative stated that this information would be furnished once the Board
approved the Agreement. The Company sent "14(a)" and "13(d)" questionnaires to
Asia Pacific seeking information regarding directors and shareholders. No
response was received.
An attempt was made to renegotiate the Agreement through counsel during the
week of March 18, 1996. However, Asia Pacific was unwilling to make all the
concessions sought. In addition, directors LaFleur and Rosel took the position
that the Company should not be seeking these concessions at all.
Accordingly, because (a) no more information was available on Asia Pacific
as at the previous Board meeting, (b) no re-negotiated agreement was before the
Board to be acted upon and (c) a poll of directors showed that the division of 3
to 3 had not changed, the Board of Directors meeting for March 25, 1996 was
cancelled.
The Company then sent a detailed counter-proposal to Asia Pacific and again
sought information regarding directors, shareholders, bank accounts and
financial statements. Asia Pacific again refused to negotiate or to furnish due
diligence information in advance. The division of the Board essentially made it
impossible for the Company to present a unified front in negotiations.
Directors LaFleur and Rosel offered their resignations on April 1, 1996, as
discussed in more detail in Item 6. The President has now accepted these
resignations. Although the Company sought thereafter to reopen negotiations,
Asia Pacific has refused to renew discussions. The Company still has no
information
Page 54
<PAGE>
regarding the bona fides of Asia Pacific, or its principals or its finances
after having requested this information repeatedly.
The Company believes, therefore, that no transaction with Asia Pacific is
in prospect. Nor could the Company, in any event, enter into a transaction
without first obtaining and reviewing the information which Asia Pacific has
repeatedly refused to furnish.
Michael LaFleur and James Rosel resigned from the Board on April 1, 1996.
The resignations were accepted by the President on April 23, 1996.
(b) Resignation of Mr. Grant-Rennick as Director.
Simon Grant-Rennick, a director of the Company, submitted his resignation
on November 20, 1996. A legible copy of the letter of resignation was received,
and the resignation was accepted, on December 6, 1996.
The Company believes that Mr. Grant-Rennick's statement of the reasons for
his resignation are inaccurate. Since joining the Board on December 12, 1994,
Mr. Grant-Rennick has sought to recover a $30,000 debt which he claims the
Company incurred to him under its prior management in 1993. The Company believes
Mr. Grant- Rennick's resignation relates to this personal matter and not to any
disagreement with the Company relating to its operations, policies or
performance.
(c) Compliance With Section 16(b) of the Exchange Act.
During the Reporting Period, 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.
Grant-Rennick, 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 management with
Section 16(a) of the Exchange Act from July 1, 1991 through December 12, 1994 or
thereafter.
Page 55
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Except for Mr. LaFleur (a former officer), no executive officer or director
of the Company serving after December 12, 1994 has received any compensation
from the Company. On January 6, 1997, the Board adopted a default compensation
plan for the president, Mr. Sanford, at the rate of $5,000 per month, plus
$800/month, to rent a home office since May 19, 1995. The matter of a stock
option plan for directors is under discussion.
Directors are entitled to receive reimbursement of their reasonable and
necessary expenses as documented and submitted. The following directors have
submitted documentation to support and have received reimbursement during the
Reporting Period:
Donald Sanford
Michael LaFleur (former director)
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 451,350 2.1%
David Racher 45,050 .21%
Dr. Martin Peskin 588,200 2.7%
Dr. Howard Pomeranz 402,300 1.9%
------- ----
TOTALS: 1,486,900 7.01%
(b) The Committee for New Management of Stansbury Holdings Corporation, of
which the above persons are all members, filed on March 21, 1996, an Amendment
No. 7 to its Schedule 13D disclosing that the Committee collectively owns
4,841,844, or 26%, of the Company's stock.
Page 56
<PAGE>
(c) Other than the Committee, no person has filed a Schedule 13D except the
following:
No. of Shares %
Dr. Sami I. Samani 1,999,892 9.4%
Source: 13-D filed by Dr. Samani on April 11, 1996.
The Company believes the following additional persons, acting as an
undisclosed "group", collectively (or, with respect to Dr. Samani, individually)
own stock in excess of 5% of the Company's outstanding stock.
No. of Shares %
Dr. Sami I. A. Samani (1) 1,999,892 9.4
Thomas J. DeRosa 272,200 1.28
Peter Samani 171,000 .80
Charles L. McLaughlin 356,478 1.68
---------- ----
TOTAL: 2,799,570 13.16%
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.
- --------
(1) Either owned jointly or individually with his wife.
Page 57
<PAGE>
- Exhibit 27 - Financial Data Schedule for year ended June 30, 1996.
(b) Reports on Form 8-K.
The following Special Reports on Form 8-K were filed by the Registrant
during the quarter ended June 30, 1996 or thereafter:
- - April 18, 1996 (change in certifying public
accountant; Asia Pacific Proposal;
Resignation of Messrs. LaFleur and
Rosel as directors);
- - August 22, 1996 (receipt of audit report for four
years ended June 30, 1995); and
- - December 6, 1996 (resignation of Mr. Grant-Rennick as
director).
Page 58
<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 March 12, 1997 /s/ Donald Sanford
Donald Sanford, President
Dated March 12, 1997 /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 March 12, 1997
Donald Sanford, Director
/s/ Martin Peskin Dated March 12, 1997
Dr. Martin Peskin, Director
/s/ Howard Pomeranz Dated March 12, 1997
Dr. Howard Pomeranz, Director
Page 59
Simon Grant-Rennick
4 Creswell Gardens
London, England SW5 OBJ
November 20, 1996
Sent via facsimile to: (215) 735-8420
James G. Wiles
Ellsworth, Wiles & Chalphin, P.C.
The Fidelity Building
123 South Broad Street, Suite 1812
Philadelphia, PA 19109
RE: Stansbury Holdings Corporation
Dear Mr. Wiles:
I, Simon Grant-Rennick, do hereby resign my position as Director of
Stansbury Holdings Corporation, a Utah corporation, effective immediately. I
also resign from the "Committee."
I have not been kept apprised of Board matters and understand that meetings
are being held without my participation. While I am listed as a Director on the
10K that was recently filed, I was neither contacted nor requested to review or
participate in the information contained in that report. Prior to yesterday, the
corporation had not notified me or contacted me for several months despite the
fact that meetings were being held and decisions were being made. Yesterday, I
was contacted by the Board of Directors and informed that a Directors' meeting
was being held. I was not properly notified and the meeting was not properly
convened. I was provided with no agenda and no advance opportunity to review the
financial records that were being discussed. It was by impression from the
meeting that shares of stock were being authorized and issued which I find
wholly inappropriate given the lack of notice mentioned above.
I demand that a copy of this resignation letter be reported in full in an
8-K Report filing by Stansbury to be made as soon as possible to place the
general public on notice of my resignation and the reasons therefore.
Sincerely,
/s/ Simon Grant-Rennick
Simon Grant-Rennick
CONSENT OF INDEPENDENT AUDITOR
We consent to the use in Form 10-K to be filed by Stansbury Holdings Corporation
of our report dated January 15, 1997 accompanying the audited financial
statement of Stansbury Holdings Corporation as of June 30, 1996 and 1995 and to
the use of our name under the captions "Experts" in the filings.
/s/ Taylor & Company
February 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000093566
<NAME> STANSBURY HOLDINGS CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 81,318
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 81,318
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,913,061
<CURRENT-LIABILITIES> 4,634,187
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,913,061
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,269,999
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 704,976
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
