SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended December 31, 1998 Commission File No. 0-6034
STANSBURY HOLDINGS CORPORATION
----------------------------------------
(Exact Name as Specified in Its Charter)
STATE OF UTAH 87-0281239
- ------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
676 LOUIS DRIVE
WARMINSTER, PA 18974 UNITED STATES
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(Address of Principal (Country)
Executive Offices)
Registrant's telephone number, including area code:
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(215) 328-9566
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 shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
at least the past 90 days.
YES [ ] NO [X]
Indicate the number of shares outstanding of the issuer's classes of common
stock as of the latest practicable date.
At February 9, 1999 there were outstanding: 24,899,585 common shares, $0.25 par
value
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STANSBURY HOLDINGS CORPORATION
INDEX TO FORM 10-Q
PART 1 - FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements
Condensed Balance Sheets December 31, 1998 and June 30, 1998 ....... 1
Condensed Statement of Operations and Accumulated Deficit .......... 2
Condensed Statement of Cash Flows .................................. 3
Notes to Condensed Financial Statements ............................ 4
PART II - OTHER INFORMATION
Item 1. Description of Business ........................................... 17
Item 2. Description of Property ........................................... 21
Item 3. Legal Proceedings ................................................. 27
Item 4. Items For Submission to Shareholders .............................. 27
Item 5. Market For Common Stock and Related Shareholder Matters ........... 28
Item 6. Plan of Operations ................................................ 29
Item 7. Financial statements .............................................. 31
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures ...................................... 32
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with section 16(a) of the Exchange Act .......... 32
Item 10. Executive Compensation ........................................... 33
Item 11. Security Ownership of Certain Beneficial Owners and Management .... 34
Item 12. Certain Relationships and Related Transactions .................... 34
Item 13. Exhibits and Reports on Form 8-K .................................. 35
Signatures ................................................................. 36
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STANSBURY HOLDINGS CORPORATION
BALANCE SHEET
December 31, 1998
SIX MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1998
(UNAUDITED) (AUDITED)
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ASSETS
Current Assets
Cash $ 3,076 $ 1,685
Other Receivables 22,283 --
------------ ------------
Total Current Assets 25,359 1,685
Property & Equipment
Building 25,930 27,017
Mineral Property 11,833,355 11,833,355
Development Costs 3,139,105 3,139,105
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Total Property and Equipment 14,998,390 14,999,477
Other Assets
Other Assets 24,500 20,000
------------ ------------
Total Other Assets 24,500 20,000
TOTAL ASSETS $ 15,048,249 $ 15,021,162
============ ============
LIABILITIES AND CAPITAL
Current Liabilities
Notes Payable-Short Term $ 454,863 $ 169,863
Current Portion Long-Term Debt 1,605,100 1,605,100
Accounts Payable 347,659 276,898
Accrued Interest 1,151,372 2,597,820
------------ ------------
Total Current Liabilities 3,558,994 4,649,681
Long-Term liabilities
Notes Payable-Noncurrent 575,716 1,086,677
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Total Notes Payable-Noncurrent 575,716 1,086,677
Capital
Common Stock 6,224,784 6,009,823
Common Stock to Issue 175,000 50,000
Capital in Excess of Par 7,535,330 7,535,330
Deferred Interest (586,771) (586,771)
Retained Earnings (3,723,578) (2,705,175)
Net Income 1,288,775 (1,018,403)
------------ ------------
Total Capital 10,913,540 9,284,804
TOTAL LIABILITIES AND CAPITAL $ 15,048,249 $ 15,021,162
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STANSBURY HOLDINGS CORPORATION
STATEMENT OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1998* DECEMBER 31, 1998*
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Revenues $ -- $ --
Cost of Sales -- --
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Gross Profit -- --
Expenses
Consulting Fees $ 33,376 $ 77,212
Legal 53,724 83,311
Accounting 28,060 48,764
Office Supplies 3,260 4,550
Other Office Expense 567 1,910
Mining Leases -- 17,400
Advertising and Promotion 34,888 74,963
Interest 429,226 417,146
License and Permits 517 1,257
Professional Fees 3,059 2,118
Depreciation Expense Building 1,087 1,087
Utilities 683 2,185
Transfer Agent Fees 1,129 1,629
Travel 15,909 34,166
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Total Expenses 605,485 767,699
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Operating Income (Loss) (605,485) (767,699)
Other Income
Cancellation of Debt 2,056,474 2,056,474
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NET INCOME (LOSS) $ 1,450,989 $ 1,288,775
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* Comparable figures for the corresponding period in 1997 are unavailable.
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STANSBURY HOLDINGS CORPORATION
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998
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Cash Flows From Operating Activiities
Net Income(Loss) $ 1,450,988 $ 1,288,775
Depreciation 1,087 1,087
Stock Issued for services and Interest 214,961 214,961
Increase (Decrease) in Short-Term Debt 206,437 285,000
Increase (Decrease) in Accounts Payable (4,293) 70,761
Increase (Decrease) in Accrued Interest (1,451,248) (1,446,448)
----------- -----------
Total Adjustments From Operating Activities (1,033,056) (874,639)
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Net Cash Provided by Operations 417,932 414,136
Cash Flow From Investing Activities
Decrease (Increase) in Development Costs -- --
Decrease (Increase) in Other Receivables (22,283) (22,283)
Decrease (Increase) in Other Assets (4,500) (4,500)
----------- -----------
Net Cash Used in Investing Activities (26,783) (26,783)
Cash Flow From Financing Activiities
Increase(Decrease) in Notes Payable, Non-Current (515,961) (510,962)
Increase(Decrease) in Common Stock 125,000 125,000
----------- -----------
Net Cash Used in Financing Activities (390,961) (385,962)
Net Increase(Decrease) in Cash $ 187 $ 1,391
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Summary
Cash Balance End of Period 3,076 3,076
Cash Balance Beginning of Period 2,889 1,685
----------- -----------
Net Increase(Decrease) in Cash $ 187 $ 1,391
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STANSBURY HOLDINGS CORPORATION
Notes to Financial Statements
December 31, 1998 and June 30, 1998
Note 1: Summary of Significant Accounting Policies
Organization:
Stansbury Holdings Corporation (the "Company") was chartered as a business
corporation by the State of Utah on May 7, 1969, under the name Stansbury Mining
Corporation. The corporate name was changed to Stansbury Holdings Corporation by
a filing in the office of the Secretary of State of Utah on March 22, 1990.
In June 10, 1985, as part of an approved Plan of Reorganization under a Chapter
11 proceeding pursuant to the Federal Bankruptcy Act, the authorized capital of
the Company was changed, by an Amendment of its Articles of Incorporation, to
$6,250,000, being 25,000,000 shares of one class having a par value of $0.25 per
share.
The principal business activity of the Company, since its reorganization under
Chapter 11 of the Federal Bankruptcy Code in 1985, has been vermiculite mineral
exploration and development. The principal project of the Company is the
Hamilton Vermiculite Project in Ravalli County, Montana, as to which the Company
commenced acquisition shortly prior to the Reorganization in 1985.
Basis of Presentation:
In management's opinion, the accompanying unaudited financial statements of
Stansbury Holdings Corporation contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the Company's
financial position and the results of its operations. (The results of operations
or cash flows which may be reported for the remainder of 1999.)
The accompanying unaudited interim condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission for the reporting on Form 10-Q. Pursuant to such rules and
regulations, certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The condensed financial
statements should be read in conjunction with the Audited Financial Statements
and the Notes to the Audited Financial Statements included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1998. With the exception
of the gain from extinguishment on debt discussed below and in Note 3, no
material events, changes in operation or changes in accounting principles or
practices have occurred since the close of the Company's fiscal year ended June
30, 1998. All amounts included in these financial statements are expressed in
United States Dollars.
4
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Note 1: Summary of Significant Accounting Policies (Continued)
In the past, the Company has issued financial statements showing the Hamilton
Vermiculite Project at the value established for it in the Chapter 11
proceedings in 1985, which was based upon an evaluation of the projects value by
an appraisal. The significant difference between those past financial statements
(1991 to 1996) and these financial statements is the restatement of the value of
the Hamilton Vermiculite Project in terms of historic costs of the project's
acquisition and development funds expended on the project subsequent to its
acquisition (see further this Note and Notes 6 & 12).
Principles of Consolidation:
In the past, the financial statements of the Company have been consolidated with
subsidiaries and affiliates. However, at the present the Company has no
subsidiaries and is involved with no affiliates. Therefore, all assets material
to this financial statement are held by the Company.
Cash and Cash Equivalents:
The Company considers highly liquid investments with original maturities of
three months or less to be cash equivalents.
Undeveloped Vermiculite Mineral Projects:
The Company uses the full cost method of accounting for undeveloped mineral
projects. Accordingly, all costs associated with the acquisition of undeveloped
projects, including directly related overhead costs, are capitalized. Once
projects are developed, the capitalized costs will be amortized on the unit-of-
production method using estimates of proven reserves (See Notes 6 and 12).
In addition, the costs are separated into cost centers on a state-by-state
basis. The capitalized costs for each cost center are subject to "ceiling test",
which limits such costs to the lower of (I) cost, or (ii) estimated fair market
value, of the projects (see Note 6).
In cases where the exploration and production activities of the Company are
conducted jointly with others, the financial statements reflect only the
Company's and its consolidated subsidiaries' proportionate interest in such
activities.
Other Assets, Stock Listing and Issuance Costs:
Costs associated with stock issuance and the listing of the Company's common
stock on the NASDAQ Bulletin Board are charged against the proceeds derived from
the issuance of shares in the year of issuance (see Note 7)
5
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Note 1: Summary of Significant Accounting Policies (Continued)
Income Taxes:
The Company has adopted the provisions of Statement of Accounting Standards No.
109, "Accounting for Income Taxes" which incorporates the use of asset and
liability approach of accounting for income taxes. The asset and liability
approach requires the recognition of deferred tax assets and liabilities for
future consequences of temporary differences between the financial reporting
basis and tax basis of assets and liabilities. Because the question as to going
concern as discussed in Note 2 and subsequent events as discussed in Note 12 and
the explanation in the next paragraph, no value of a possible net operating loss
is recognized on the financial statements.
No income tax returns have been filed since June 30, 1991. Federal income taxes
generally do not allow deductions of expenses not paid within 12 months. Most
debt has not been paid year after year. Most cash paid out has been for
capitalized development costs. Even though the majority of expenses are accrued
interest on notes, management is of the opinion that forgiveness of debt and
interest has been so frequent and of a nature that precludes most expenses and
interest from tax deduction. Consequently, management is of the opinion that the
probable net operating loss is under $2,000,000, expiring at various dates
through 2012.
Depreciation:
Depreciation of real estate improvements is calculated using the straight-line
method over the useful lives of the related assets. For the building at Victor
Siding, Montana, that is part of the Hamilton Vermiculite Project, a 20 year
useful life is used.
Net Income (Loss) Per Common Share:
Net Income (Loss) Per Common Share is based upon the fully diluted 24,899,585 at
December 31, 1998 and 24,039,290 at June 30, 1998, the number of common shares
as of the last business day of the financial statement period, assuming
conversion of all outstanding options and warrants (see Note 4). The Company had
no revenues from operations. Operating income (loss) from operations for the six
months ended December 31, 1998 was ($767,699), or ($0.03) per share. After other
income of $2,056,474 from gain on forgiveness of debt, book income (loss) was
$1,288,775, or $0.05 per share.
Gain on Forgiveness of Debt:
Due to the cash flow shortages the Company has faced over the past several
fiscal periods, large portions of the accounts and notes payable have been
satisfied by negotiation at less than the face value and/or an issuance of the
Company's common stock. As the Company has employed this strategy on a recurring
basis, and the gain from the forgiveness of debt arising from these negotiated
settlements has not been characterized as extraordinary in the accompanying
financial statements. However, the Company has negotiated a settlement with its
largest creditor in November, 1998 through an Accord and Satisfaction with
Merwin U. Steward as Liquidator of Southern American Insurance Company and
Commercial Surety and Insurance Corporation ("Liquidator")(See Note 3). As a
result of this settlement, the Company recorded gain from the forgiveness of
debt of $2,056,474. This is recorded as such in the unaudited financial
statements, however due to significance of the settlement amount, the gain may
be
6
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Note 1: Summary of Significant Accounting Policies (Continued)
reclassified as an extraordinary event in the audited financial statements at
June 30, 1999.
Reclassifications:
The asset value of the Hamilton Vermiculite Project has been reclassified to
reflect its cost basis and capitalized development costs (See Note 6).
Certain Accounts Payable in the amount of $75,892, which had been carried on the
financial statements since 1991 without backup data, were accordingly written
off at June 30, 1997. Of that amount, 25% ($18,992), was established as an
Accounts Payable reserve and added back to Accounts Payable in the event any of
those creditors should make valid claims. The reserve will be written down in
two installments over the next two fiscal years. Accordingly, one half, or
$9,496, was written off June 30, 1998 and the remaining portion will be written
at June 30, 1999. The Company had no data to establish or verify the propriety
of the claims eliminated, and determined that many of the listed claimants were
no longer de jure entities.
See also Note 11, Correction in accounting errors and prior period adjustments.
Note 2: Going Concern Statement
The Company has been inactive and non-operating for years; consequently, it is
questionable as to whether or not it can remain a going concern. The primary
activity in the past few years has been to preserve and maintain mineral leases
and claims. No actual mining has occurred since the Company acquired such
properties in 1984. Also, refer to Note 6 regarding the Hamilton Vermiculite
Project. Recovery of the carrying amount on the financial statements of
$14,972,460 as of June 30, 1997, of the mineral property and related development
costs is dependent upon the success of the future operations and the Company's
ability to obtain financing through borrowing and capital stock sales.
The Company has had no income since 1991, and has utilized proceeds of loans
from shareholders and the issuance of capital stock for meeting its operating
capital commitments.
In June of 1996, the Company's Board of Directors and management were changed
(Note 5 and Note 12). New management has recognized the need to place mineral
properties into production, in order to generate revenues, and is actively
seeking to acquire mineral properties that are either (I) in active production,
or (ii) permitted to the extent that active production can immediately commence.
Such a plan has lead to the identification of several properties for which
active negotiations for acquisition or participation by joint venture, are
currently being conducted (Note 12).
The Company continues to evaluate the production potential of its mineral
property (the "Hamilton Vermiculite Project"), but has determined that certain
limitations imposed by the Environmental Impact Statement as approved and issued
for that project (Notes 6 and 10) limiting production to a six month season per
year, will sufficiently impact the profitability of such an operation that other
alternatives must be reviewed. Accordingly, the Company has considered dropping
certain mining claims and the costs
7
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Note 2: Going Concern Statement (Continued)
associated with the maintenance thereof, while preserving the core of the
project as permitted by the EIS (Note 12). The Hamilton Vermiculite Project is
currently pledged as collateral for a number of mortgages (Notes 8 and 12). 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, or other mineral properties.
The Company has not obtained the necessary financing to meet it working capital
requirements 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 in is negotiations with a financially able entity as a prospective
joint venture partner for the development of the Company's vermiculite projects,
but if this joint venture is not consummated the Company will need to obtain
capital from other sources.
Note 3: Related Party Transactions
The New Management Team (see Note 5) was established during June of 1997, the
last month of the fiscal year ending June 30, 1997. No charges were made by the
New Management Team to the Company for services provided the Company for the
fiscal year ending June 30, 1997. See Note 12 with respect to the financial
arrangements with the New Management Team.
On August 25, 1998, the Company entered into an Accord and Satisfaction with
Merwin U. Steward as Liquidator of Southern American Insurance Company and
Commercial Surety and Insurance Corporation ("Liquidator"). At that time the two
companies in liquidation held interest in a first mortgage on the properties of
the Hamilton Vermiculite Project (fee lands and mining claims), with an amount
due in excess of $2,056,474 principal and interest inclusive.
Under the terms of the Accord and Satisfaction, the Company was to pay the sum
of $130,000 to the liquidator, in consideration of the Liquidator releasing all
claims against the Company, including security interests in properties of the
Company.
In October, 1999, the Company raised the required $130,000 through a convertible
debenture issued to Nevada Vermiculite L.L.C., (See Item II Development Stage
Activities) which debenture, among other provisions, allowed Nevada Vermiculite
to substitute of record for the Liquidator with respect to certain security
interests, as collateral for the $130,000. This collateral included 500,000
shares and an option, subject to shareholder approval, of an additional 5
million shares at par.
The $130,000 was paid into an escrow pending closing on the Accord and
Satisfaction in October, 1999, and funds were distributed to the Liquidator in
Closing on the Accord and Satisfaction in December, 1999, upon the Liquidator's
providing the Closing Agent all requisite documentation described in the Accord
and Satisfaction.
8
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Note 3: Related Party Transactions (Continued)
As a result of the closing on the Accord and Satisfaction, the Company was able
to discharge debts of $2,056,474, principal and interest inclusive, for the
payment of $130,000. This discharged amount of $2,056,474 is included in the
gain on forgiveness of debt on the accompanying financial statements on The
Statement of Operations, and the $130,000 is included as a long- term note
payable on the Balance Sheet.
The Company remains liable to Nevada Vermiculite L.L.C. for the sum of $130,000,
plus interest accruing thereon from October 24, 1998, at 12% per annum, due July
5, 2000, as provided by the terms of the debenture issued to Nevada Vermiculite
L.L.C., by the Company. As mentioned above, the Debenture contains other terms
of inducement, and conversion rights of principal and accrued interest at par.
Mr. Aldine J. Coffman and Dr. James Hindman, directors and officers of the
Company, each have 12.5% interest in Nevada Vermiculite L.L.C.
Note 4: Stockholders' Equity
The Company was organized by the issuance of its common stock. Over the prior
years including 1998, stock is issued for cash and non-cash consideration.
Non-cash consideration includes debt discharge and debt assumption.
Common Stock
As of June 30, 1998, common stock consisted of authorized capital of 25,000,000
shares having a par value of US$0.25. Share issued and outstanding were
24,899,585 and 24,039,290 on December 31, 1998 and June 30, 1998, respectively.
An analysis of common stock issued during fiscal years ending June 30, 1998 and
1997 follows:
Year Shares Value
1998
Issued for cash - $ -
Issued for property - -
Issued for debt 2,560,478 640,120
1997
Issued for cash - $ -
Issued for property - -
Issued for debt 1,193,764 298,441
9
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Note 5: Change in Management and Management Plans for the Company
In June, 1997, a group of investors and shareholders, generally denoted as the
"Committee for New Management", arranged a funding mechanism for the Management
of the Company to be directed by Edward J. Stanojev, Jr., and others associated
with him.
A new Board of Directors, comprising Mr. Stanojev, Dr. James R. Hindman, Jeffrey
L. Wertz, as new members, and Mr. Martin J. Peskin, as a continuing member, was
established.
This new Board of Directors appointed a "New Management Team", comprised of Mr.
Stanojev as Chairman, Chief Executive Officer, and President; James R. Hindman,
Ph.D., and a recognized expert in vermiculite exploration, mining and milling,
as Vice President and Chief Operating Officer; and Mr. Wertz, as Vice-President
and Chief Financial Officer. (see Note 12 for Compensation for the New
Management Team).
Certain secured creditors have agreed to subordinate their secured positions in
the Hamilton Project up to an amount equal to $1,000,000 of working capital
infusion. As of June 30, 1998, the funding through this facility had not been
drawn upon.
This New Management Team has sought to move the Company forward into the
production and marketing of vermiculite and its products (see Note 2).
Note 6: Undeveloped Mineral Projects
The Company has, since 1984, been focused upon the acquisition and development
of vermiculite ore reserves in mineral properties located primarily in the
western United States.
The Hamilton Vermiculite Project:
As of June 30, 1998, the Hamilton Vermiculite Project consisted of 64 owned
unpatented lode mining claims, 11 owned mill site claims, and a parcel of fee
land with improvements. The Mining Claims are located in the Gird's Creek
unorganized Mining District, Ravalli County, Montana. In the fall of 1998, the
Company located an additional 22 unpatented lode mining claims in Ravalli
County, Montana, resulting in the Company obtaining control of all of the
surface vermiculite exposures and proven reserves associated with the Hamilton
Project.
The fee land (1.24 acres) and improvements are located at Victor Siding, Ravalli
County, Montana. The mining claims are administered by the Bureau of Land
Management, of the Department of the Interior, for the United States Forest
Service, of the Department of Agriculture. Surface matters are administered by
the US Forest Service.
10
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Note 6: Undeveloped Mineral Projects (Continued)
In 1993, a final Environmental Impact Statement was issued to the Company under
its then trade name of Western Vermiculite Company in connection with the
Company's application for an operating permit for the Hamilton Vermiculite
Project. The costs of the EIS approached several million dollars of expenditures
from 1985 to 1991.
The project has been extensively drilled and assayed and two ore bodies, the ABM
Ridge Ore Body (defined in 41 drill holes) and the Horse Ridge Ore Body (defined
in 43 drill holes), have been delineated. Combined, the proven minable
vermiculite reserves in these two ore bodies is 6.5 million tons at a grade of
10.09% vermiculite.
The Hamilton Vermiculite Project was appraised in 1985 at $34,577,270 (and
again, in 1992, at $35,000,000). Through June 30, 1996, the value of $34,577,270
has been reflected on the Company's financial statements as the original asset
value of the Hamilton Vermiculite Project (in lieu of acquisition costs). In
1997, the Hamilton Vermiculite Project was appraised at $51,000,000, largely
reflecting the increase in market value of vermiculite concentrate from 1985 to
1997. From the foregoing, the Company has determined that the cost basis
accounting for the project (see below) does not exceed its estimated fair market
value of the Project.
Management is attempting to raise financing for the development of the Hamilton
Vermiculite Project, and is in discussions with several potential joint venture
development partners who would contribute the financing required.
At present, the Company has not obtained the necessary financing to meet its
working capital requirements and to operate the Hamilton Vermiculite Project,
which is the Company's major asset. There can be no assurance that the Company
will be successful in obtaining the necessary financing. Also, as discussed in
Note 12, the United States Forest Service required that an Environmental Impact
Statement ("EIS") be issued for the Hamilton Vermiculite Project prior to
granting an operating permit 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 Hamilton Vermiculite Project and continue as a going
concern.
Note 7: Other Assets
The Company has on deposit with the Montana Department of Lands a refundable
balance of $20,000, in connection with its operating permit application for the
Hamilton Vermiculite Project.
11
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Note 8: Notes Payable, Long Term Debts, and Accounts Payable
Certain unidentified obligations of the Company have been carried forward year
after year since before 1991, and are believed by the New Management of the
Company to have been, in fact, satisfied or otherwise no longer owing (in some
cases being barred by the statute of limitations). Management is investigating
the circumstances of these payables and other liabilities in order to take such
action in the future to delete such items where appropriate from the liabilities
of the Company. Of such amounts $75,892 of Accounts Payable were identified by
management as unlikely to be due and payable. At June 30, 1997, New Management
wrote off 75% of such amount, or $56,900, with the remaining 25%, or $18,992,
left in Accounts Payable as a reserve against any payables so written off to be
determined to be valid. Of that amount, one half, or $9,496 was written off at
June 30, 1998, with the remaining half to be written off $9,496 at June 30,
1999.
Notes Payable and Long Term Debts
Notes payable and long term debts are summarized as follows:
(a) Mortgages Payable: December 31, 1998 June 30, 1998
Mortgages payable to life insurance
company in liquidation, bearing
interest at 10% per annum,
past due and in default (Note 11) $ - $ 550,000
Mortgages payable to shareholders
of Company, interest in part prepaid,
past due and in default (Note 11) 449,000 449,000
---------- ----------
Total Mortgages Payable $ 449,000 $ 999,000
========== ==========
(b) Unsecured Notes Payable:
Notes payable to life insurance
company in liquidation (Note 11) $ - $
95,961
Notes payable to corporations 434,968 304,968
Notes payable to shareholders
including former officers
(Note 11) 1,751,711 1,291,848
---------- ----------
Total Notes Payable $2,186,679 $1,692,777
========== ==========
Total term debt $2,635,679 $2,861,640
========== ==========
12
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Note 8: Notes Payable, Long Term Debts, and Accounts Payable (Continued)
Summary Notes & Term Debt
Notes payable $ - $ 169,863
Current portion-long-term debt 1,605,100 1,605,100
Long term portion-long-term debt 1,030,579 1,086,677
----------- ----------
Total $ 2,635,679 $2,861,640
=========== ==========
Accrued Interest Payable,
Accrued interest payable, all current, is for:
December 31, 1998 June 30, 1998
Mortgage payable $ - $1,562,253
Unsecured notes payable 1,151,372 1,035,567
---------- ----------
Total 1,151,372 $2,597,820
========== ==========
Note 9: Claims, Litigation and Judgments
Claims and Possible Claims:
(b) With respect to the EIS (see also notes 5 and 9), over 100 administrative
appeals were filed in opposition to the approval of the Final Draft of the EIS,
all of which were rejected by the Regional Office of the US Forest Service,
which decision of rejection further was upheld on appeal to the Chief Forester
of the US Forest Service. The time for administrative appeal of the EIS, or
further challenge to it, has expired.
Litigation:
The only pending litigation against the Company is by Ellsworth, Wiles &
Chalphin, P.C., filed in the Court of Common Pleas, Bucks County, Pennsylvania,
on September 14, 1998. James G. Wiles ("Wiles) acted as former counsel to the
Company through as a partner in Ellsworth, Wiles & Chalphin, P.C. The complaint
alleges $69,654.95 is due for legal services rendered by Wiles on behalf of the
Company. This amount has been recorded as a liability of the Company in its
balance sheet, with an additional $4,408 allowed for litigation costs for a
total amount of $74,063 being recorded in the financial statements as a note
payable. However, a counter claim has been filed against Wiles alleging that no
amount is due, and furthermore that Wiles failed to protect the best interest of
the Company by failure to have required tax returns filed timely.
13
<PAGE>
Note 9: Claims, Litigation and Judgments (Continued)
Judgments of Record affecting Title to Hamilton Project:
A claim of lien filed by the State of Montana in January, 1993 for $658 is
reflected on the financial statements as an account payable.
A judgment obtained by Dorsey & Whitney, a general partnership, in December,
1994 for $52,683 is reflected on the financial statements as a note payable.
A judgment obtained by Southampton Metals Ltd. ("Simon Grant-Rennick"), under a
settlement with Company, upon which a current unpaid balance exists of $5,600 is
included on the financial statements as a note payable.
Other Judgments: (All included in the financial statements as accounts payable)
A Judgment obtained by Mike Bauernfiend, obtained in Bergen County, N.J. for
$7000.
A Judgement obtained by Martineau & Co., in Salt Lake County, Utah, for $8000.
A Judgment obtained by Bruce Blessington, in Salt Lake County, Utah for $26,293.
Note 10: Other Income
Cancellation of Debt: From 1985 (year the Company filed Bankruptcy) to the
present, the Company continues efforts to raise sufficient funds to develop the
Hamilton Vermiculite Project. Creditors frequently were not paid off, or would
settle for smaller amounts or no payment at all. Or, a debt may ultimately be
canceled because of the statute of limitations. The amounts reported on the
statements of operations as "Other Income - cancellation of debt" arise for
these reasons. New Management is of the opinion there remain debts as of
December 31, 1998 that may later on be identified as cancellation of debt (See
Notes 1 and 3).
Note 11: Corrections in Accounting Errors & Prior Period Adjustments
New Management identified three significant accounting errors in the financial
statements. These require prior period adjustments including fiscal year ending
June 30, 1997.
In 1989 the Company had a $447,000 offering of long-term debt due December, 1992
and secured with a second position in the mineral rights. Interest on the debt
was prepaid in full by issuing stock for interest. The financial statements,
however, accounted for the debt at $496,000 not $447,000. In addition, the
financial statements over the years reported the long-term debt as bearing
interest at 23% cumulative instead of non-interest bearing.
14
<PAGE>
Note 11: Corrections in Accounting Errors & Prior Period Adjustments (Continued)
From 1988 forward, the company continues borrowing funds. New Management has
determined the accrued interest on these loans should be computed on the basis
of simple interest. However, the Company had been compounding the interest
(interest on interest). The total impact on the financial statements, which are
restated are:
Current Portion Accrued Interest Interest Expense
Long-term Payable (Accumulated
Debt Deficit)
June 30, 1997 $ 0 $ 696,085 $ 696,085
Prior to June 30, 1997 49,000 791,376 791,376
Total Overstatement $ 49,000 $1,487,461 $1,487,461
========= =========== ==========
Note 12: Commitments and Contingencies
Royalty and Lease Agreements: 22 of the unpatented lode mining claims are leased
to the Company under a lease assigned to the Company during June, 1986 (the
"Chamberlain Lease") in connection with the settlement of obligations owed to
the Green International, Inc., Shareholders Liquidation Trust. The lease
contains an option to purchase the claims at a purchase price of $1,000,000
during the term of the lease and any extension. The current lease expires on
November 15, 1997, and is renewable for an additional consecutive ten year term
upon five days' notice. The lease provides for a royalty payment to the Lessors
of $2.00 per ton of vermiculite concentrate, or 3 1/3 percent of the selling
price, whichever is greater, of vermiculite ore mined from the 22 claims. An
addendum to the lease extends this royalty to another 18 claims held by the
Company. A minimum royalty of $1,500 per quarter is provided for in the lease.
All royalty payments attributable to the 22 claims are to be a credit on the
purchase price of the option to purchase the claims [See note 11(a)].
Annual Claim Maintenance Fees: In 1993, the federal government substituted a fee
of $100 per claim in lieu of the former requirement for labor assessments, to
maintain title to the claims. Responsible for the maintenance of 96 claims, the
Company has an annual obligation of $9,600 in order to preserve its title to the
claims.
Environmental Impact Statement: In May of 1993, the US Forest Service and the
Montana Department of State Lands issued a Final Environmental Impact Statement
for the Western Vermiculite Project (the "Hamilton Property"). The EIS was
required in response to the Company's application for an operator's permit to
develop the Hamilton Vermiculite Project. To date, no evaluation of the cost
required to effect the implementation of the Plan of Operations, from an
administrative and permitting perspective has been undertaken by the Company,
and no reserve of funds has been allocated for that purpose.
Insurance: The Company discontinued its insurance coverages during fiscal 1991
and has been uninsured since that time.
15
<PAGE>
Note 12: Commitments and Contingencies (Continued)
Income Tax: The company has not filed any federal or state income tax returns
since June 30, 1990. The total amount due is estimated to be under $3,000. This
is not reflected on the financial statements.
Securities Matters: The Company's Common Shares were delisted from NASDAQ
National Market System on January 21, 1992. The Company shares currently trade
on the NASDAQ Electronic Bulletin Board.
Note 13: Subsequent Events
(a) In November, 1997, the Chamberlain Lease of 22 unpatented lode mining claims
in Hamilton Vermiculite Project expired, and was not renewed; the Company holds
the remaining claims (numbering 75 claims, of which 64 are mining claims and 11
are mill site claims). In the opinion of New Management, the claims no longer
leased by the Company, while containing a large quantity of low grade ore (at or
below the cut-off grade for current vermiculite operations), do not impact the
Company's financials, since the bulk of this ore was not within the bounds of
the mining operation permitted by the EIS, and had no present commercial value.
In September, 1998, the 22 claims were abandoned by the previous owners. The
Company subsequently located 22 claims covering the same area and is now the
owner of the entire claim group.
(b) In July, 1998, the Liquidator of the first mortgagee insurance company
holding a lien upon the Hamilton Vermiculite Project has made an offer in
settlement of all claims, for $130,000, which offer the Company has accepted,
and on October 28, 1998 it was fully funded and closed (See Note 1). Certain
other mortgagors and note holders (holding in the aggregate principal balances
of $496,000) have agreed to accept common stock of the Company for accrued
interest on their notes through February 1, 2001, and to extend the maturity
until February 1, 2001.
16
<PAGE>
PART II
ITEM 1
DESCRIPTION OF BUSINESS
Business Development
Stansbury Holdings Corporation ("Stansbury" or "the Company") is a
development stage mining company incorporated in the State of Utah on May 7,
1969, under the name Stansbury Mining Corporation. On June 10, 1985, the Company
was reorganized as part of an approved Plan of Reorganization under a Chapter 11
proceeding pursuant to the Federal Bankruptcy Act. At that time, the authorized
capital of the Company was also changed to 25,000,000 shares of common stock,
par value $.25 per share. The corporate name was changed to Stansbury Holdings
Corporation in March, 1990.
Since December 12, 1994, the Company has obtained approximately $1,500,000
in loans from shareholders of the Company. Of this amount, approximately
$400,000 has been obtained since June 30, 1998. Such loan proceeds have been
used for developmental costs, operating expenses, taxes and fees, and to reduce
preexisting debts.
In the fiscal year ended June 30, 1997, the Company decided to reclassify
its assets using, according to generally accepted accounting principles, the
"cost basis" of accounting for its assets that had been previously reported on
the basis of "fair market value." The Company made this change to be effective
as of June 30, 1996 so that the Company could restate its asset value as of that
date. As a result of this reclassification, the assets of the Company previously
stated as $36,811,743 as of June 30, 1996 under the former accounting practice,
were reclassified and restated to be $14,814,215 as of June 30, 1996. See
Footnote 6 to the financial statements, set forth below, for further discussion
of the reclassification and appraised value of the asset.
The Company has also considered the carrying value of its assets in light
of Financial Accounting Standards No. 121 ("SFAS 121"). SFAS 121 establishes
accounting standards for the impairment of longlived assets when events or
changes in circumstances indicate that the value of the asset as held by the
reporting entity may be lower than its fair market value. If the expected cash
flow to the reporting entity from the asset is less than the fair market value
of the asset, an impairment loss would be recognized. After reviewing its
longlived assets, the Company believes that there were no material adverse
changes that would cause an impairment in value. The Company has also classified
its asset at cost rather at appraised value, and the Company has no intention to
dispose of the asset.
In addition, the Company elected to write down, as of June 30, 1997,
certain accounts payable totaling $75,892 to 30 different vendors which had been
carried on the financial statements since 1991 for which the Company could
determine no documentary justification. Of that amount, 25% ($18,992) was
established as an accounts payable reserve and added back to accounts payable in
the event any of those creditors should make a valid claim. It is expected that
this reserve will be written off in two equal installments in fiscal years 1998
and 1999, thereby allowing a contingency should further due diligence indicate
any error in such writedowns. Accordingly, onehalf, or $9,496, was written off
June 30, 1998,
17
<PAGE>
Business Development (Continued)
and the remaining portion will be written off at June 30, 1999. The Company
believes that some of the accounts payable eliminated by the procedure were or
to defunct entities, and that other payables were paid, but were erroneously
continued to be reported as accounts payable. Due to prior changes in
management, accountants and physical file locations, these errors had gone
undetected. The age of the payables caused current management to question their
validity. The Company's due diligence procedures, corroborated by its
independent auditors, indicated that these payables should no longer be carried
on the Company's balance sheet. The Company believes that none of the entities
whose balances were so adjusted was affiliated with the Company, or any of its
present or past officers, directors, employees, consultants or affiliates.
On December 12, 1994, an election was held as a result of a proxy contest
by shareholders' committee. As a result of that election, management of the
Company was transferred to a new management group.
Other than the previously mentioned 1985 "Reorganization," the
reclassification of assets effective as of June 30, 1996, and the June 30, 1997,
1998 and the 1999 write off of accounts payable, the Company has not been
involved in any bankruptcy, receivership, or similar proceeding, or in any other
material reclassification, merger, consolidation, purchase or sale of any
significant amount of assets. The Company is planning to enter into negotiations
for additional vermiculite projects, and has in fact done so since the end of
the last reporting period. The Company has also entered into negotiations for
the formation of a joint venture (described below); if successfully consummated
the Company believes that this joint venture will provide adequate working and
investment capital would be assured to commence certain vermiculite operations
through the joint venture.
Business of Issuer
The principal business activity of the Company since its reorganization
has been vermiculite mineral exploration and development. The principal project
of the Company has been the Hamilton Vermiculite Project. Since 1985, the
Company has spent in excess of $2 million to establish the viability of the
proposed vermiculite mine near Hamilton, Montana. The Company intends to develop
and operate an open pit vermiculite mine and mill on 96 unpatented mineral
claims owned by the Company in Montana. The property consists of mineral mining
claims covering 1,750 acres, 10 air miles east of Hamilton, on the western flank
of Skalkaho Mountain within the Bitterroot National Forest. The Company is of
the opinion that the Hamilton site represents the largest known vermiculite
deposit available for development in the western United States, and believes
that there is sufficient proven ore reserves to support a mining and milling
operation for a minimum of 12 years.
The proposed mining operation has been approved by the U.S. Forest Service
based on an Environmental Impact Statement (EIS) prepared in 1994. Samples of
the vermiculite ore at the Hamilton mining site indicate that the vermiculite is
asbestosfree and that there will be substantial amounts of recoverable
vermiculite concentrates.
Since the construction of the proposed mine and mill has not yet
commenced, the Company has not engaged in operations nor has it derived revenue
from any source during fiscal years ended June 30,
18
<PAGE>
Business of Issuer (Continued)
1996, June 30, 1997, June 30, 1998, or yet during the current fiscal year. At
the present time the Company does not have any principal products or services.
The Company anticipates building and operating a vermiculite mine in calendar
year 1999 if project financing and additional equity capital can be obtained.
The Company anticipates that sufficient funding will be available, but there is
no assurance that such capital will be obtained.
Vermiculite is a micalike mineral which exfoliates (expands upon rapid
heating) to produce an inert, lowdensity material with significant thermal
qualities it does not burn and provides excellent heat resistance. Untreated
vermiculite is commonly used as an active component of wall plasterboard. The
exfoliated product is used extensively as a lightweight aggregate in
fireproofing, thermal insulation, acoustical plasters, horticultural growth
media, and as a fertilizer carrier. Another major use is in cementitious
coatings used to protect structural steel in commercial buildings. Ground
vermiculite is also used as a filler for brake linings. New uses for vermiculite
include high performance automotive seals and catalytic converter mats, and high
temperature coatings for woven glass and ceramic fiber products.
The United States represents the world's largest vermiculite market. The
United States and the Republic of South Africa each produce approximately
200,000 tons of vermiculite concentrate per year. Approximately 5% of the
domestic production is exported as concentrate and manufactured products.
Consumption exceeds production and approximately 25% of the domestic consumption
of vermiculite is supplied by imports from the Republic of South Africa and the
Peoples Republic of China.
The Board of Directors of the Company has examined the factors that have
contributed to the Company's inability to place its Hamilton Vermiculite Project
into production. The Board has determined that it is in the best interest of the
Company to enter into a cooperative joint venture with an entity which can
provide adequate and timely working and investment capital for the mining and
milling project. To this end, the Company has entered into negotiations to form
a joint venture with Nevada Vermiculite LLC ("Nevada Vermiculite") for all
vermiculite undertakings. Nevada Vermiculite is a Nevada limited liability
company engaged in the exploration and development of vermiculite resources.
Nevada Vermiculite LLC was formed on May 4, 1998, primarily for the purpose of
the expected joint venture with the Company, and has no reported earnings to
date. The Company anticipates that Nevada Vermiculite will provide the bulk of
the working capital arrangements for the mining and milling operations of the
joint venture, while the Company would acquire for the joint venture additional
vermiculite ore properties in the United States and abroad.
Negotiations with Nevada Vermiculite are ongoing with respect to two
specific acquisitions, one domestic and one foreign. Additionally, Nevada
Vermiculite is negotiating to acquire a domestic vermiculite resource for
development by the joint venture. At present, all of the forgoing are under
negotiation; however, no binding contract between the Company and Nevada
Vermiculite has been reached.
19
<PAGE>
Governmental Regulation
Final approval of the Company's Environmental Impact Statement (EIS) was
obtained on January 3, 1994. An operating permit is available dependent on the
Company posting a reclamation bond. The amount of the bond needed depends upon
the extent of the mining operation, and may be offset to some extent by a
development bond currently posted by the Company. The Company's mining experts
have recommended an initial mining and milling operation to commence in calendar
year 1999 which is significantly less in scale and cost than originally proposed
in the EIS. The bonding requirement for this new mining operation has not yet
been determined.
The Company plans to develop the Hamilton vermiculite project on a joint
venture basis and, if commenced, will be subject to regulation by the United
States Forest Service, the United States Environmental Protection Agency, the
Montana Department of Environmental Quality (formerly Department of State
Lands), and the Mines Safety and Health Administration (MSHA). Pursuant to the
EIS, the Company is subject to certain limitations and conditions as to the time
of operation and the method of operation (e.g. the operation of the initially
proposed mine is limited to a 150 day operating cycle from May through October
15).
The Company expects that the Hamilton mining operation, if commenced, will
continue to be subject to regulation by federal and state environmental, land,
mining, and safety agencies. Changes in any or all of laws and regulations
affecting these agencies could have a material, and possibly adverse impact on
the Company's prospects and future operations.
Competition
For a discussion of competition, please see Item 6 - Plan of Operations
"Current Market and Competition" of this Form 10-KSB.
Employees
The Company has its corporate offices at 676 Louis Drive, Warminster,
Pennsylvania 18974. The Company also maintains a field office in Victor
Crossing, Montana. From time to time, the Company has employed technical
specialists on an "as needed" basis. All services to the Company were performed
on an independent contractor basis, and the Company had no full time employees
as of December 31, 1998 (See Item 9).
20
<PAGE>
ITEM 2
DESCRIPTION OF PROPERTY
The Company has no mining operations or processing plants at any location
at the present time; however the Company does maintain a small field office and
mining claims.
Field Office
The Company owns a small office building and surrounding land (1.25 acres)
at Victor, Montana (southwestern Montana), which can be used for a field office
(the "Field Office Property"). The Field Office Property is owned in fee simple.
The Company believes that the condition of the Field Office Property is
acceptable for its purpose should the Company be able to commence construction
activities.
The Company has no liability insurance on the field office, but is
currently seeking such insurance.
Vermiculite Claims
Prior to November 1997, the Company leased 22 unpatented mining claims in
Ravalli County, Montana, which were a part of its 96 claim group that was
managed and developed under the name of "Western Vermiculite". Of the 96 claims,
the Company held 74 directly as the party of record staking the claim or as the
successor to the interest of the party of record.
In November 1997, the lessors of the 22 "leased claims" notified the
Company that the lease would not be renewed for a third ten-year term (the lease
having commenced in 1977). As a result, from November 1997 to September 1998,
the Western Vermiculite Project of the Company consisted of only the 74 claims
of which the Company was the locator.
In September 1998, the original lessors of the 22 "leased" claims
abandoned those claims, and the Company located 22 new claims covering the same
ground and mineral resource as formerly embraced under the expired lease. The
net result of these events is that the Company is now the holder of all 96
claims free of all former royalty obligations. This new set of claims and the
development of a mining and milling project to exploit the Skalkaho Mountain
vermiculite deposit covered by these claims is referred to as the "Hamilton
Vermiculite Project".
Under the original Western Vermiculite Project, the Company proposed to
build an open pit vermiculite mine, haul road, ore beneficiation plant, host
rock waste stockpile, water storage tanks, sedimentation ponds and
administrative and maintenance buildings. The Company has commenced construction
on this original project proposed as part of the Environmental Impact Statement
study. At this current point in time, the Company's mining experts have
recommended that, as part of the new Hamilton Vermiculite Project, mining and
processing on the vermiculite property be commenced with a small mill designed
to produce the larger sized vermiculite concentrates (Sizes 0, 1, and 2).
21
<PAGE>
Vermiculite Claims (Continued)
The Company believes that the smaller scale of the Hamilton Vermiculite
Project's initial phase will allow for a more cost effective means to develop
the initial market for Hamilton vermiculite concentrates as well as to gather
critical data for the design of a larger mill. It possible that the Hamilton
Vermiculite Project will be expanded in a stepwise manner until it eventually
achieves the overall size and production capacity originally proposed. It is
expected that the smaller initial development of the property will fall within
the scope of the Environmental Impact Statement.
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. 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, Montana, at Victor Crossing, Montana.
The mining and mill site claims lie near the crest of the south end of the
Sapphire Mountains at an elevation of approximately 7,000 feet. The area is part
of the Bitterroot National Forest. The claims are also found within the Skalkaho
igneous complex on the western flank of Skalkaho Mountain 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 and 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 is a sheet silicate
mineral that alters to vermiculite during the geologic weathering process. The
altered mineral, vermiculite, has desirable properties of ion exchange and
thermal exfoliation which are not present in the original biotite mineral.
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 areas of the
deposit and have outcrops of ore which were first studied. The average depth of
the vermiculite deposit thus far evaluated by drilling is 42 feet on the ABM
Ridge and 62 feet on the Horse Ridge.
The maps on the following pages give the location of the property as
follows:
Map A, entitled "Project Location", indicates the geographical location of the
proposed mine and mill in relation to Victor Crossing 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.
The proposed mine would be located on ABM Ridge (see Map "B") and would
involve disturbance of up to approximately 77 acres as described in the
Environmental Impact Statement. 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 operations are evident on the site. At the request of the US Forest
Service, the Company performed reclamation work at the proposed mine site in
September 1995.
22
<PAGE>
Vermiculite Claims (Continued)
Elevations for the mine site and vicinity range from about 6,600 feet to
7,200 feet. Most of the surrounding area is forest. Ground water is likely to be
encountered midway through the mining operation.
The Company believes that its Hamilton vermiculite deposit has a
significant advantage in that the risk of producing vermiculite concentrates
containing fibrous asbestiform minerals is extremely small to non-existent. To
date, periodic testing of drill hole samples and airborne dust samples had
failed to identify any fibrous, asbestiform mineral particles as being present
in the ore body. Asbestiform silicate minerals, which are generally referred to
as Asbestos, can produce sever health effects when trapped in the lungs or
ingested. Consequently, the Company's vermiculite deposit, if exploited, should
offer a significant safety and marketing advantage over other domestic and
foreign sources which may contain asbestos contamination.
Reserves
The Company's vermiculite deposit near Hamilton, Montana, was first
identified as a potential resource in the 1930s. Sporadic attempts have been
made to develop a mine at the property, with the most recent prior to the
Company's involvement being in the late 1970s. Over the years, it has been
referred to as the Mt. Skalaho deposit, the Western Vermiculite deposit, the
Grid Creek deposit and, most recently, as the Stansbury Hamilton Vermiculite
deposit.
Since its discovery, a number of estimates have been made as to the
mineral resource inventory in the deposit; but until 1986, estimates were based
on visual observation of surface characteristics and the areal extent of the
mineralization, limited trenching and some rotary drilling performed in the late
1970s. None of these estimates quantified the amount and grade of the
vermiculite mineralization accurately.
During the summer of 1986 the Company conducted a drilling program on the
Hamilton vermiculite deposit. The drilling was performed by Boyles Brothers
Drilling Company of Spokane, Washington, and consisted of 90 diamond core drill
holes covering the ABM Ridge and Horse Ridge areas. The drilling program
produced over 9,500 feet of core. The core was split and representative samples
of each fivefoot section of core were analyzed by an independent laboratory for
vermiculite content.
Two estimates of the contained vermiculite resource in the Company's
Hamilton property have been made based on the analyses of the drilling program
samples. The first was made in 1987 by Western Resources Company and indicated
proven and probable ore reserves of 6.3 million tons of ore containing 628,000
tons of vermiculite. The second estimate of vermiculite reserves based on the
same drill hole and analytical data was made by Dr. James R. Hindman, a Director
of the Company, in 1992. This estimate indicated proven and probable reserves of
6.5 million tons of ore containing 656,000 tons of vermiculite. The Company
considers these two independent calculations to be essentially identical.
23
<PAGE>
Reserves
The Company is aware that there are a number of variables and assumptions
that enter into the calculation of proven (verified by drilling) and probable
(extrapolated from nearby drilling) ore reserves. These include assumptions of
inground ore density and the limitation of an acceptable ore grade cutoff. There
are other exposures of vermiculite ore outside ABM Ridge and Horse Ridge and the
Company notes that the area covered by the 1986 drilling program was only 33
acres compared to a total 1,750 acres currently under claim. The Company assumes
that additional drilling will verify additional reserves within the ore body.
Investment Policies
The Company has no investments.
Description of Real Estate and Operating Data
The Company has received various inquires from realtors regarding the
possible sale of the Field Office Property; however, the Company has declined to
list such property for sale.
The Company's properties are not insured; however, the Company anticipates
that it will obtain the necessary liability insurance prior to its commencement
of construction.
Governmental 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 Item 1, "DESCRIPTION OF THE BUSINESS -- Governmental Regulation."
24
<PAGE>
MAP A INSERT
25
<PAGE>
MAP B INSERT
26
<PAGE>
ITEM 3
LEGAL PROCEEDINGS
The only pending action against the Company is by Ellsworth, Wiles &
Chalphin, P.C., filed in the Court of Common Pleas, Bucks County, Pennsylvania,
on September 14, 1998. James G. Wiles ("Wiles") acted as former counsel to the
Company as partner in Ellsworth, Wiles & Chalphin, P.C. The complaint alleges
$69,654.95 is due for legal services rendered by Wiles on behalf of the Company.
However, a counterclaim has been filed against Wiles alleging that no amount is
due, and furthermore that Wiles failed to protect the best interest of the
Company by failure to have required tax returns filed timely.
Judgments of record affecting title to the Hamilton Project include: a
claim of lien filed by the State of Montana in January, 1993, for $658,
reflected on the financial statements as an account payable, and a judgment
obtained by Dorsey & Whitney, a general partnership, in December, 1994, for
$52,683 in principal, along with prejudgment interest of $32,527, the total
amount of which is $85,210 is accruing at 12% interest from December 1994; at
June 30, 1998 principal and accrued interest totaled $121,977.
A judgment was obtained by Southampton Metals Ltd. ("Simon
Grant-Rennick"), under a settlement with the Company, upon which remains a
current unpaid balance of $5,600, which balance is included on the financial
statements as a note payable.
Other judgments against the Company, which appear in the financial
statements as accounts payable, include a judgment obtained by Mike Bauernfiend,
in Bergen County, New Jersey for $7,000, a judgment obtained by Martineau & Co.,
in Salt Lake City, Utah, for $8,000, and a judgment obtained by Bruce
Blessington, in Salt Lake County, Utah, for $26,293. These judgments remain due
and payable by the Company as of June 30, 1998.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company conducted no annual or special meeting if its shareholders in
fiscal years ended June 30, 1997 and 1998, and, therefore, there were no matters
submitted to a vote of security holders during those fiscal years ended June 30,
1997 and 1998.
27
<PAGE>
ITEM 5
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is quoted on the Nasdaq Electronic Bulletin
Board under the symbol "STBY". The following table sets forth the "high" and
"low" price of the Company's Common Stock for the periods indicated in 1996,
1997 and 1998.
<TABLE>
<CAPTION>
CALENDAR OPEN HIGH LOW CLOSE
-------- ---- ---- --- ----
<S> <C> <C> <C> <C>
7/1/95-9/30/95 (1st Qtr) .1875 .4375 .06 .487
10/1/95-12/31/95 (2nd Qtr) .31 .40 .06 .18
1/1/96-3/31/96 (3rd Qtr) .147 .312 .05 .312
4/1/96-5/30/96 (4th Qtr) .375 .50 .05 .437
7/1/96-9/30/96 (1st Qtr) .125 .3125 .0625 .19
10/1/96-12/31/96 (2nd Qtr) .15 .18 .11 .11
1/1/97-3/31/97 (3rd Qtr) .11 .14 .10 .10
4/1/97-6/30/97(4th Qtr) .10 .105 .015 .06
7/1/97-9/30/97 (1st Qtr) .065 .09 .0525 .07
10/1/97-12/31/97 (2nd Qtr) .07 .22 .0625 .14
1/1/98-3/31/98 (3rd Qtr) .14 .15 .07 .07
4/1/98-6/30/98 (4th Qtr) .07 .39 .05 .36
7/1/98-9/30/98 (1st Qtr) .13 .15 .055 .085
10/1/98-12/31/98 (2nd Qtr) .08 .39 .05 .06
</TABLE>
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.
On December 5, 1998, the last reported sale price of the Common Stock was
$.29 per share. As of December 5, 1998, there were 3,695 holders of record of
the Common Stock.
The Company has not paid any dividends on its Common Stock. The Company
intends to retain any earnings for use in its operations and to finance the
development and the expansion of its business, and does not anticipate paying
any dividends on the Common Stock in the foreseeable future. The payment of
dividends is within the discretion of the Company's Board of Directors. Any
future decision with respect to dividends will depend on future earnings, future
capital needs and the Company's operating and financial condition, among other
factors. See "Plan of Operations."
28
<PAGE>
ITEM 6
PLAN OF OPERATIONS
General
The Company is currently directing its efforts to (1) initiate a mining
and milling operation at its Hamilton Vermiculite property and (2) acquire of
other vermiculite resources and related businesses that will provide a
significant market presence in the vermiculite industry. Situations that are
currently being investigated include the acquisition of an inactive vermiculite
mine and mill in southern Montana and the acquisition of an active mine and mill
in Brazil. It is the intent of the Company to engage in the exfoliation of
vermiculite concentrates and the preparation and marketing of vermiculite
products. To this end the Company is engaging in discussions with potential
joint venture partners to construct and operate one or more exfoliation
facilities.
The Company's mining experts have recommended that mining and milling
operations at the Hamilton property be incrementally phased in with the first
stage being a small pilot plant designed to produce up to 1,000 tons per month
of coarsesized vermiculite concentrates. The Company believes that this will
allow for a much more rapid and cost effective way to begin producing
vermiculite concentrates to market and to use as feed material at such time as
the Company becomes involved in the processing of vermiculite into end user
products.
It will be the Company's intent to perform additional drilling programs on
the claims on the Hamilton property as part of the joint venture. Current ore
reserve estimates are based solely on the results of a drilling program
performed in 1986. Although the results of this program are considered valid,
the area covered by the drilling program was only a fraction of the mapped and
inferred vermiculite deposit.
Current Market and Competition
All of the vermiculite that is now being mined in the United States comes
from mines in Virginia and South Carolina. W.R. Grace & Company has a large
vermiculite operation near Enoree, South Carolina, which is capable of producing
approximately 100,000 short tons of vermiculite concentrate per year. Virginia
Vermiculite Ltd. produces vermiculite from a mine near Woodruff, South Carolina,
and from a mine near Louisa, Virginia. The Company believes that the combined
output of Virginia Vermiculite Ltd. is approximately 90,000 tons per year. Both
Grace and Virginia Vermiculite consider their reserve and production data to be
confidential so the Company's estimates of their production are approximations.
There is one other small mining operation in South Carolina. This
operation was for many years known and Patterson Vermiculite and was recently
sold to Palmetto Vermiculite. This operation has historically produced
vermiculite at the rate of 15,000 tons per year. The sum total of all three
companies is an estimated maximum production capacity of 205,000 short tons per
year.
29
<PAGE>
Current Market and Competition (Continued)
The Company believes that vermiculite produced from the Hamilton property
will be competitive with South Carolina and Virginia sources throughout the
western United States and Canada. There is no vermiculite mine currently active
in the western United States. One small operation near Dillon, Montana has
produced approximately 4,000 tons of concentrate during short periods of
operation in recent years. This operation has a production capacity estimated to
be only 6,000 short tons per year and it is currently inactive.
At one time, Grace also operated a mine and mill near Libby, Montana. The
Libby operation was the largest vermiculite mine and mill in the history of
commercial vermiculite and had annual production exceeding 225,000 tons of
concentrate. The Libby operation was terminated and the land reclaimed over 10
years ago.
Currently, substantially all of the vermiculite imported into the United
States and Canada comes from either the Peoples Republic of China or the
Republic of South Africa. The amount of vermiculite arriving at ports in
California and Washington is quite small and relatively high priced. Although
the possibility of larger and lower cost shipments of imported vermiculite
landing on the Pacific Coast is possible, the Company believes that the
information available at this time is insufficient to allow it to reasonably
predict its potential impact on the marketability of Hamilton vermiculite.
Acquisitions
On December 30, 1998, Stansbury announced that it has had discussions with
the principal owner and operator of a mining and milling operation in Brazil,
with a goal to conclude the proposed acquisition in March 1999, and a general
term sheet has been exchanged.
While at the present stage of negotiations, the terms remain nonbinding on
the parties; the understanding contemplates that the Company will provide an
initial mill expansion to increase the production of vermiculite concentrate to
50,000 tons per year. The Company believes that the reserves of the project are
in the range of 10 million tons of ore.
Development Stage Activities
In October of 1998, Nevada Vermiculite provided the funding to Stansbury
to discharge the debt to its largest creditor, Southern American Insurance
Corporation in Liquidation. The creditor Southern American Insurance Company had
been in liquidation under the supervision of the Utah State Insurance Commission
since 1991. The liability to this creditor from principal and accrued interest
were in excess of $2,056,474. This liability, which dates back to the late
1980s, had been secured by a first mortgage on the vermiculite claims at the
Hamilton site, the Company's major asset. The liability has been settled, and
released of record. The amount of the settlement was $130,000, which the Company
raised through the issuance of a convertible note in that amount to Nevada
Vermiculite.
30
<PAGE>
Development Stage Activities (Continued)
In December of 1998, the Company entered into negotiations to form a joint
venture with Nevada Vermiculite. The purpose of the joint venture is to commence
mining and milling operations of worldwide vermiculite concentrates during 1999.
The intended joint venture will be known as International Vermiculite L.L.C., a
Delaware limited liability company.
Nevada Vermiculite, of whom Stansbury directors Aldine J. Coffman and
James R. Hindman, are minority shareholders, is owned by Messrs. Coffman and
Hindman and the principals of Channel and Basin Reclamation, Inc. ("Channel &
Basin"). Channel & Basin owns and operates three largescale sand and gravel
operations with revenues of approximately $12 million per year. The Company
believes that Nevada Vermiculite will bring the capital, equipment and
operational expertise to contribute to the mining and milling efforts of the
joint venture.
Liquidity
The Company has been inactive and nonoperating for years; consequently, it
is questionable as to whether or not it can remain a going concern. The primary
activity in the past few years has been to preserve and maintain mineral leases
and claims. No actual mining has occurred since the Company acquired such
properties in 1984. The Company has had no income since 1991, and has utilized
proceeds of loans from shareholders and the issuance of capital stock for
meeting its operating capital commitments. The Company has not obtained the
necessary financing to meet its working capital requirements 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 plans to enter into a joint venture to facilitate the
development of its assets, but if this joint venture does not occur, the Company
will be required to seek capital from other sources.
ITEM 7
FINANCIAL STATEMENTS
The financial statements are included herein beginning at page 1.
31
<PAGE>
ITEM 8
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
The Company's Board of Directors appointed Dr. Martin J. Peskin, who also
serves as an outside director, to serve as Chairman of the Audit Committee. Dr.
Peskin, after having consulted with the Board, will be recommending to
shareholders at the next shareholders' meeting, scheduled for March, 1999, to
approve changing the Company's Auditors to Haugen, Springer and Company,
Certified Public Accountants, Denver, Colorado ("Haugen") to replace Sellers and
Associates of Ogden, Utah ("Sellers"). Sellers will continue to perform federal
and state tax filing services for the Company. Haugen has expertise in the
Company's industry, and will be able to provide additional consultation services
to management. Haugen is conveniently located to Mr. Aldine J. Coffman, Chief
Administrative Officer.
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 set forth next to their respective names:
Edward C. Stanojev, Jr., age 45, has served as a Director and President of
the Company since May 1997. He is also the President of Auction Television
Network, Inc., an Arizona corporation located in Warminster, Pennsylvania,
specializing in Internet software technology, a position which he has held since
May 1997. Mr. Stanojev also served as President of AHS, Inc., a Pennsylvania
corporation, located in Warminster, Pennsylvania, specializing in debt
restructuring, a position which he has held since August 1994. From August 1980
until August 1994, Mr. Stanojev served as President of Accu-Weld, Inc., a
Pennsylvania corporation, located in Philadelphia, Pennsylvania, specializing in
window manufacturing and sales.
Jeffery L. Wertz, age 41, has served as a Director, Secretary, Treasurer
and Chief Financial Officer of the Company since June 1997, where he has
provided all aspects of accounting and compliance reporting services to the
Company. From January 1998 until December 1998, Mr. Wertz served as the Chief
Financial Officer of Auction Television Network, Inc., an Arizona corporation
located in Warminster, Pennsylvania, and its wholly owned subsidiary, Single
Source Technology, Inc. He served as the Corporate Accountant, providing
accounting and reporting services, for Penn Independent, an insurance company,
located in Hatboro, Pennsylvania from June 1995 to December 1997. Mr. Wertz also
served as the Property Management Accountant for Pacific Southwest Mortgage, a
property management company, located in San Diego, California, from December
1992 until May 1995, where he provided property accounting services for
professional Southern California offices and medical complexes. Mr. Wertz
received his Masters Degree in Accounting in, specializing in taxation, from San
Diego State University in 1991, where he also received his Bachelor's Degree in
Finance, Summa Cum Laude in 1989.
32
<PAGE>
ITEM 9 Directors (Continued)
James R. Hindman, Ph.D., age 52, has served as a Director and Vice
President, in charge of operations of the Company, since June 1997. Since 1985,
Dr. Hindman has had his own consulting firm, Vermiculite Technologies, out of
Dillon, Montana. From 1978 to 1985 Dr. Hindman was employed as the Senior
Metallurgist by W.R. Grace & Company, at their Libby, Montana vermiculite
operation. Dr. Hindman received a Bachelor of Science degree in Geological
Sciences from the University of Southern California, and a Ph.D. in Geological
Sciences from the University of Utah.
Dr. Martin J. Peskin, age 61, has served as a Director of the Company
since February 1995, and as an outside Director of the Company since July 1997.
Prior to 1996 he served in various executive officer capacities of the Company.
Mr. Peskin retired from his dentistry practice in 1991 and since that time has
been managing his private investment portfolio.
Aldine J. Coffman, Jr., age 58, has served as Executive Vice President and
Chief Administrative Officer and as a Director of the Company since October
1998. He served as the Chief Financial Officer of International Methane
Corporation, LTD., a Belize company, specializing in energy, with offices in
Denver, Colorado, from September 1993 to June 1995, and as such company's Chief
Executive Officer from June 1995 to March 1997. Mr. Coffman also served as a
Director of such company from September 1993 to the present. Mr. Coffman has
owned his own management services company, Far Country Services, Inc., located
in Cherry Hills, Colorado, since 1992, for which he serves as Chief Executive
Officer.
ITEM 10
EXECUTIVE COMPENSATION
Edward C. Stanojev, Jr. A sign-on bonus of 500,000 shares of common stock, no
compensation for services prior to July 1, 1997, and a monthly compensation
thereafter as an independent contractor, of $6,000 per month, payable when
available .
Jeffrey L. Wertz A sign-on bonus of 200,000 shares, and a monthly compensation
thereafter as an independent contractor, for services as an officer and
director, of $2,000 per month, payable when available .
James R. Hindman, Ph.D. A sign-on bonus of 500,000 shares of common stock, and a
monthly compensation thereafter as an independent contractor, for services as an
officer and director, of $3,000 per month.
Dr. Martin J. Peskin continued to serve as a director without pay, but with
expenses incurred in serving as a director to be reimbursed.
33
<PAGE>
ITEM 10 Executive Compensation (Continued)
On October 24, 1998, Aldine J. Coffman, Jr., whom had been providing certain
legal services to the Company, was appointed a Director, and Chief
Administrative Officer and Executive Vice President of the Company, at a
compensation from his appointment through the end of 1998, of $35,000.
Commencing January 1, 1999, Mr. Coffman will be receiving a salary of $12,500
per month.
Directors are entitled to receive reimbursement of their reasonable and
necessary out-of- pocket expenses, as documented and submitted.
There was no executive officer whose salary was in excess of $100,000 for any
period in fiscal 1998.
ITEM 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the shares of the Company's Common Stock
beneficially owned at February 1, 1999, by (i) each person known to management
of the Company to be the beneficial owner of more than 5% of the outstanding
shares of the Company's Common Stock, (ii) each Director of the Company, (iii)
each executive officer of the Company named under "Executive Remuneration," and
(iv) all executive officers and Directors of the Company as a group.
ITEM 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 25, 1998, the Company entered into an Accord and Satisfaction
with Merwin U. Steward as Liquidator of Southern American Insurance Company and
Commercial Surety and Insurance Corporation ("Liquidator"). At that time the two
companies in liquidation held interest in a first mortgage on the properties of
the Hamilton Vermiculite Project (fee lands and mining claims), with an amount
due in excess of $2,056,474 principal and interest inclusive.
Under the terms of the Accord and Satisfaction, the Company was to pay the
sum of $130,000 to the Liquidator, in consideration of the Liquidator releasing
all claims against the Company, including security interests in properties of
the Company.
In October, 1998, the Company raised the required $130,000 through a
convertible debenture issued to Nevada Vermiculite L.L.C., (See Item II -
Development Stage Activities) which debenture, among other provisions, allowed
Nevada Vermiculite to substitute of record for the Liquidator with respect to
certain security interests, as collateral for the $130,000. The debenture also
offered Nevada Vermiculite the additional inducements of 500,000 common shares,
and an option for an additional 5 million shares exercisable at par, subject to
shareholder approval of an option plan.
34
<PAGE>
ITEM 12 Cetain Relationships and Related Transactions (Continued)
The $130,000 was paid into an escrow pending closing on the Accord and
Satisfaction in October, 1998, and funds were distributed to the Liquidator in
Closing on the Accord and Satisfaction in December, 1998, upon the Liquidator's
providing the Closing Agent all requisite documentation described in the Accord
and Satisfaction.
As a result of the closing on the Accord and Satisfaction, the Company was
able to discharge debts of $2,056,474, principal and interest inclusive, for the
payment of $130,000. This discharged amount of $2,056,474 is included in the
gain on forgiveness of debt on the accompanying financial statements on The
Statement of Operations, and the $130,000 is included as a longterm note payable
on the Balance Sheet.
The Company remains liable to Nevada Vermiculite L.L.C. for the sum of
$130,000, plus interest accruing thereon from October 24, 1998, at 12% per
annum, due July 5, 2000, as provided by the terms of the debenture issued to
Nevada Vermiculite L.L.C., by the Company. As mentioned above, the Debenture
contains other terms of inducement, and conversion rights of principal and
accrued interest at par. Mr. Aldine J. Coffman and Dr. James Hindman, directors
and officers of the Company, each have 12.5% interest in Nevada Vermiculite
L.L.C.
The Company and Nevada Vermiculite L.L.C. plan to enter into a joint
venture, the purpose of which is to develop the Company's asset at Hamilton, as
well as to locate and develop other profitable vermiculiterelated projects. This
joint venture will result in the formation of International Vermiculite L.L.C.
The Company expects that the Company and Nevada Vermiculite will each be 50%
participants in International Vermiculite.
ITEM 13
EXHIBITS AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
The consolidated financial statements of the Company and its subsidiaries filed
as part of this Annual Report on Form 10-QSB are listed at Page 1 of this Annual
Report on Form 10-QSB, which listing is hereby incorporated by reference.
REPORTS ON FORM 8 - K
There were no reports on Form 8 - K filed during the six months ended June 30,
1998.
35
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: February 9, 1999 STANSBURY HOLDINGS CORPORATION
By: /s/ EDWARD C. STANOJEV, JR.
---------------------------
Edward C. Stanojev, Jr.
Chief Executive Officer
and President
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.
SIGNATURES TITLE DATE
- ---------- ----- -----
/s/ EDWARD C. STANOJEV, JR. President and Chief Executive February 9, 1999
------------------------- Officer (principal executive
Edward C. Stanojev, Jr. officer)
/s/ JAMES R. HINDMAN, PH.D. Vice President, Chief February 9, 1999
------------------------- Operating Officer and
James R. Hindman, Ph.D. Director
/s/ JEFFREY L. WERTZ Vice President, Chief February 9, 1999
------------------------- Financial Officer
Jeffrey L. Wertz (principal financial
officer) and Director
/s/ MARTIN J. PESKIN Director February 9, 1999
-------------------------
Martin J. Peskin
/s/ ALDINE J. COFFMAN, JR. Director February 9, 1999
-------------------------
Aldine J. Coffman, Jr.
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,076
<SECURITIES> 0
<RECEIVABLES> 46,783
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 49,859
<PP&E> 14,999,477
<DEPRECIATION> (1,087)
<TOTAL-ASSETS> 15,048,249
<CURRENT-LIABILITIES> 3,558,994
<BONDS> 575,716
0
0
<COMMON> 6,224,784
<OTHER-SE> 4,688,756
<TOTAL-LIABILITY-AND-EQUITY> 15,048,249
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 176,259
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 429,226
<INCOME-PRETAX> (605,485)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 2,056,474
<CHANGES> 0
<NET-INCOME> 1,450,989
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
