UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Quarterly Period ended September 30, 2000
Commission File Number: 0-6034
STANSBURY HOLDINGS CORPORATION
--------------------------------------------------
(Exact Name of Issuer as Specified in its Charter)
UTAH 87-0281239
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
8801 East Hampden Avenue, Suite 200, Denver, CO 80231
-----------------------------------------------------
(Address of Principal Executive Offices)
(720) 748-1407
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
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 [ X ] NO [ ]
Indicate the number of shares outstanding of the issuer's classes of common
stock as of the latest practicable date.
At September 30, 2000, there were 94,748,901 common shares issued and
outstanding, $.001 par value.
<PAGE>
PART 1 - FINANCIAL STATEMENTS
STANSBURY HOLDINGS CORPORATION AND SUBISIDARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000
2000
------------
Assets
Current Assets:
Inventory $ 64,848
Prepaid expenses $ 43,982
Other $ 9,916
-------------
Total Current Assets $ 118,746
Land $ 120,000
Property and Equipment, at cost:
Undeveloped mineral claims and
projects, using full-cost method $ 23,328,237
Los Banos exfoliation plant $ 569,102
Buildings $ 850,000
Other property and equipment $ 6,219
-------------
$ 24,753,558
Less: accumulated depreciation $ (35,233)
-------------
Net Property and Equipment $ 24,718,325
Other Assets:
Reclamation bonds $ 45,100
Investment in Resource Vermiculite LLC $ 126,088
Deposits $ -
-------------
Total Other Assets $ 171,188
Total Assets $ 25,128,258
-------------
Liabilities and Stockholders' Equity
Current Liabilities:
Bank overdrafts $ 62,159
Elk Creek acquisition obligations $ 1,072,500
Los Banos acquisition obligation $ 350,000
Sweetwater acquisition obligation $ 663,000
Current installments of long-term debt $ 820,718
Convertible notes payable to officers
and shareholders $ 194,724
Convertible note payable to related party $ 130,000
Accrued interest $ 695,309
Trade accounts payable $ 809,980
-------------
Total Current Liabilities $ 4,798,390
Long-Term Debt $ -
-------------
Total Liabilities $ 4,798,390
-------------
Stockholders' Equity:
Common stock, par value $0.001,
authorized 100,000,000, issued
and outstanding 94,748,901 and
48,159,234 at September 30, 2000 and
1999, respectively $ 94,749
Paid-in capital $ 31,998,150
Deferred interest $ (88,691)
Accumulated deficit $(11,674,340)
-------------
Total Stockholders' Equity $ 20,329,868
-------------
Total Liabilities and Stockholders' Equity $ 25,128,258
-------------
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
STANSBURY HOLDINGS CORPORATION AND SUBISIDARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH'S ENDING SEPTEMBER 30, 2000 AND 1999
2000 1999
-------------- -------------
Sales $ 9,756 0
Cost of sales $ - 0
Gross profit $ 9,756 $ -
Expenses:
Operating $ 156,889 0
General and administrative $ 686,314 $ 352,809
Interest, conversion premiums,
and equity inducements $ 435,884 $ 593,428
-------------- -------------
Total Expenses $ 1,279,087 $ 946,237
Loss from operations $ (1,269,331) $ (946,237)
Other income $ - $ 65
Loss before extraordinary item $ - $ -
Extraordinary gain from debt restructuring $ - $ -
Net Loss $ (1,269,331) $ (946,172)
Basic and diluted earnings per share:
Loss from continuing operations $ (0.02) $ (0.02)
Extraordinary gain $ - $ -
Net Loss $ (0.02) $ (0.02)
Basic and diluted weighted average
shares outstanding 69,914,869 47,203,585
<PAGE>
STANSBURY HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 30
2000 1999
------------ ------------
OPERATING ACTIVITIES
Net Income (Loss) $(1,269,331) $ (946,172)
Adjustments to reconcile
Net Income (loss) to net cash provided
by operations:
Stock issued for interest,Debt inducement and $ 661,974
compensation $ 711,854
Depreciation $ 670
Prepaid Expenses $ (32,342) $ 4,823
Inventory $ (45,888)
Accounts Payable $ 179,376 $ 44,289
Other Assets $ (3,500)
Accrued Interest Payable $ 592
Other Current Liabilities $ 2,688 $ (6,353)
Net cash provided by (used in)
Operating Activities $ (502,931) $ (194,389)
INVESTING ACTIVITIES
Mineral property $(2,211,263) $ 25,833
Land $ (120,000)
Other Property and Equipment $(2,503,143) $ 2,307
Development Costs $ (14,632) $ 53,854
Net cash provided by (used in)
Investing Activities $(4,849,038) $ (81,994)
FINANCING ACTIVITIES
Bank Overdraft
Payments on Elk Creek obligations $ (67,000)
Payments on Sweetwater obligations
Payments on convertible notes $ 311,680
Satisfaction on convertible notes to shareholders $ (432,945)
Increase in Accrued Interest on Convertible notes
and Notes payable $ 40,649
Stock Issued for conversion of Term Debt $ 5,342,037 $ 440,035
Net cash provided by (used in) $ 5,342,037 $ 292,419
Financing Activities
Net cash increase for period $ (9,932) $ 16,036
Cash at beginning of period $ 52,228 $ (7,648)
Cash at end of period $ (62,160) $ 8,388
<PAGE>
STANSBURY HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stansbury Holdings Corporation ("Stansbury") was incorporated in 1969 under the
name Stansbury Mining Corporation. In 1985, Stansbury changed its name to
Stansbury Holdings Corporation. During June 1999, Stansbury acquired Elk Creek
Vermiculite, Inc. ("Elk Creek"), and its wholly owned subsidiary, Dillon
Vermiculite, LLC ("Dillon"), as well as formed International Vermiculite
Montana), Inc., as a wholly owned subsidiary. In May 2000, Stansbury acquired
the Los Banos Exfoliation Plant through the company's wholly owned California
subsidiary, International Vermiculite (California), Inc. In July, 2000,
Stansbury acquired Sweetwater Garnet, Inc., as a wholly owned subsidiary;
Sweetwater Garnet, Inc., owns the Sweetwater Garnet Mine and concentration mill
in Madison County, Montana, and the Sweetwater Garnet Finishing Mill in near
Dillon, in Beaverhead County, Montana.
Stansbury, Elk Creek, Dillon, International Vermiculite (Montana), Inc.,
International Vermiculite (California), Inc., and Sweetwater Garnet, Inc., are
referred to collectively herein as the "Company." The Company's business is the
acquisition, exploration, and development of industrial mineral properties,
particularly vermiculite and garnet mineral sites.
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. These statements do
not include any adjustments that might result from the outcome of this
uncertainty. These financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, such interim statements reflect all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial position and the results of operations and cash flows for the interim
periods presented. The results of operations for these interim periods are not
necessarily indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the audited consolidated
financial statements and footnotes for the year ended June 30, 2000, filed with
the Company's Form 10-KSB.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All intercompany balances
and transactions are eliminated in consolidation.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
<PAGE>
Inventory
---------
Inventory is stated at the lower of cost or market.
Undeveloped Mineral Claims and Projects
---------------------------------------
The Company follows the full-cost method of accounting for its mineral
claims and projects. Accordingly, all costs associated with the
acquisition, exploration, and development of mineral properties,
including directly related overhead costs, are capitalized. Once these
properties are developed, the capitalized costs will be amortized on
the unit-of-production method using estimates of proved reserves.
In addition, the capitalized costs are separated into cost centers on a
state-by-state basis. The capitalized costs for each cost center are
subject to a "ceiling test", which limits such costs to the aggregate
of the estimated present value of future net revenues from proved
reserves, plus the lower of cost or fair market value of undeveloped
and unproved properties.
Other Plant, Property, and Equipment
------------------------------------
Other plant, property and equipment, consisting of the Los Banos
exfoliation plant, two buildings, and office equipment, are recorded at
cost. Depreciation is calculated using the straight-line method over
the estimated useful lives of the assets, which are 20 years for the
plant and buildings, and 5 years for the office equipment.
Revenue Recognition
-------------------
Revenue is recognized when products are shipped to customers.
Income Taxes
------------
The Company uses the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. This method also requires the recognition of
future tax benefits such as net operating loss carryforwards, to the
extent that realization of such benefits is more likely than not.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
Earnings (Loss) Per Share
-------------------------
Basic earnings (loss) per share are based on the weighted average
shares outstanding. Outstanding stock options and convertible debt
obligations are generally treated as common stock equivalents for
purposes of computing diluted earnings per share. However, since the
Company reported net losses for the years ended June 30, 2000 and 1999,
these common stock equivalents are excluded from the computation of
diluted earnings per share because their effect on net loss per share
would be anti-dilutive.
<PAGE>
Use of Estimates
----------------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 2 - GOING CONCERN STATEMENT
The Company emerged from Chapter 11 bankruptcy proceedings during 1985, and
has been non-operating since that time until June, 2000. At September 30, 2000,
its negative working capital was approximately $4,798,390 and accumulated
deficit was approximately $11,674,340.
During 1999, the Company hired a new president who also now serves as chairman
of the Board of Directors and chief executive officer. Eldon W. Brickle, Chief
Operating Officer and Executive Vice-President, was elected to the Board on
August 18, 2000. James R. Hindman, Martin J. Peskin, Edward C. Stanojev, Jr.,
and Jeff Wertz each resigned from the Board on August 18, 2000, in order to
exempt themselves from certain common stock lock-up agreements being required by
an underwriter who has agreed on a best efforts basis to raise a private
placement of $2.5 million for the company.
There can be no assurances that the Company or its joint venture partner will be
successful in obtaining the financing necessary to develop its mineral reserves.
Nor can there be any assurances that other sources of funds can be obtained to
cover general and administrative costs.
The Company's independent public accountants have included a "going concern"
emphasis paragraph in their audit report accompanying the June 30, 2000,
consolidated financial statements reported in the Company's 10K-SB for that
reporting period. The paragraph states that the Company's recurring losses and
negative working capital raise substantial doubt about the Company's ability to
continue as a going concern and cautions that the financial statements do not
include adjustments that might result from the outcome of this uncertainty.
Management believes that, despite the financial and funding difficulties going
forward, it now has a business plan that, if successfully funded and executed,
will result in the development of its mining claims thereby improving operating
results.
NOTE 3 ACQUSISITION OF SWEETWATER GARNET
During July 2000, Stansbury acquired all of the outstanding shares of Sweetwater
Garnet, Inc., a Nevada corporation qualified to do business in Montana. The
acquisition was accounted for as a purchase and the results of Sweetwater
Garnet's operations were included in the Company's 2000 consolidated statements
of operations from the date of acquisition.
<PAGE>
Total consideration included the issuance of 15,560,000 common shares valued at
$4,140,000, the assumption of $480,000 in debt, and payment of legal fees of
$7,500.
The assets of Sweetwater Garnet represent various developed and undeveloped
mining interests, and an office and mill building, located in the state of
Montana. The total consideration of $4,627,500 was allocated as follows:
Land $ 120,000
Equipment 1,750,000
Building 750,000
Mineral Property 2,007,500
Debt obligations assumed by Stansbury included a $330,000 note payable due to a
creditor of Sweetwater Garnet (paid in full at closing), and a $1,000,000
debenture satisfied at closing by the issuance of 3,000,000 commons shares of
Stansbury and the grant of a royalty interest, and a $150,000 debt obligation to
the parent of Sweetwater Garnet of which $25,000 was paid at closing, with a
note and mortgage on the Sweetwater Garnet assets given in favor of the
parent/Seller.
NOTE 5 - SWEETWATER GARNET, INC., ACQUISITION OBLIGATIONS
--------------------------------------
Obligations resulting from the Sweetwater Garnet acquisition (see Note 4) at
September 30, 2000, consisted of the following:
One promissory note payable $ 38,000
One promissory note payable,
2nd mortgage to Tanqueray 125,000
Promissory Note and Mortgage payable
To source of funds for closing 500,000
----------
$ 663,000
==========
The promissory note for $38,000 bears interest at the rate of 12%, and is due
currently.
The promissory note for $125,000 bears interest at the rate of 12%, and is due
as follows: $25,000 plus accrued interest on August 28, 2000; $50,000 plus
accrued interest on September 28, 2000; and $50,000 plus accrued interest on
October 28, 2000. The entire amount is currently due and payable.
The Promissory note payable to the source of funding for the $500,000 utilized
to effect the closing on the acquisition is payable interest monthly, beginning
August 28, 2000, and on the same day of each month thereafter, at the rate of
12% per annum. Principal is payable quarterly at 30% of the profit margin of
each ton of vermiculite concentrate produced and sold by the Dillon Project,
with a balloon payment of any unpaid principal and interest due 36 months
following the date of acquisition. The note payments are current.
<PAGE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Effective June 1, 1999, the Company entered into a 37-month lease agreement for
office space in Denver, Colorado. Rent is payable in advance in six-month
increments. Rent expense for the year ended June 30, 1999 was $2,000. Minimum
future annual rent payments are $24,000 for each of the years ending June 30,
2000 and 2001, and $22,000 for the year ending June 30, 2002.
The Company is obligated to the federal government for approximately $24,100
per year to maintain the ownership of its mineral claims. These funds are due
and payable by noon, on September 1, each year, and have been aid through August
31, 2001.
Various legal proceedings and claims are pending against the Company. Some of
the plaintiffs in these matters are certain of the Company's shareholders and
former officers, and others are trade creditors.
Actions brought by shareholders and former officers generally pertain to default
in the repayment terms of amounts loaned to the Company. The Company is accruing
interest on these amounts pursuant to the terms of the underlying obligations.
At September 30, 2000, the principal amount of these obligations is included in
long-term debt under the caption "officers, directors and shareholders."
Actions brought by certain trade creditors and others have resulted in the
Company issuing promissory notes payable to those creditors. The Company is
accruing interest on these amounts pursuant to the terms of the promissory
notes. At September 30, 2000, the principal amount of these promissory notes is
included in long-term debt under the caption "other".
Amounts due other trade creditors who have brought action against the Company
are included in trade accounts payable. The total of these amounts included in
the balance of accounts payable at September 30, 2000, was approximately
$170,000.
An action has also been brought by the Company with respect to the debt
obligation that resulted from the Elk Creek acquisition. Management believes
that the matter will be settled for an amount not greater than the recorded
amount of that obligation at September 30, 2000 of $772,500.
<PAGE>
ITEM 2 - PLAN OF OPERATIONS
GENERAL
The Company is currently directing its efforts to:
(1) Bringing into production the Dillon (Montana)Vermiculite Mine and
Concentration Mill, by assuming operational control of the project.
(2) Bringing into production the Los Banos (California) Exfoliation Plant,
which the Company acquired in May of 2000.
(3) Acquiring, and preparing for operation, the Sweetwater Garnet (Montana)
Mine and concentration Mill
The summer quarter (July 1-September 30, 2000), was significantly
impacted by the forest fires which ravaged southwestern Montana. The United
States Bureau of Land Management and United States Forest Service effectively
shut down mining and milling operations at the company's facilities on the
public domain in Ravalli, Beaverhead and Madison Counties. The State of Montana
took similar action, which supplemented the shutdown on State lands. Through
repeated efforts, the Company was able to obtain exemptions from complete
closure, in order to continue rehabilitation and reconstruction of the Dillon
Vermiculite Mill in Beaverhead County, albeit with greatly reduced hours of
operation and considerable expense in installing and maintaining additional fire
suppression capability.
The inability to operate the Dillon Mine and Mill for much of the
summer impacted the ability to deliver product to the Los Banos Exfoliation
Plant, and had a negative impact on both production of exfoliated product, and
the resulting inability to build inventory for sale, although the Company did
have occasional sales from inventory on hand at the time of acquisition.
Production at Dillon resumed slowly during October, and product shipments to Los
Banos are expected to be adequate to meet customer demand in the fourth calendar
quarter, 2000.
In July, 2000, the Company acquired Sweetwater Garnet, Inc.(a Nevada
corporation qualified to do business in Montana), from Absolute Resources Corp.,
an Alberta, Canada, publicly traded company. Sweetwater Garnet, Inc., now a
wholly owned subsidiary of the Company, is the owner of (1) an 1860 acre mineral
lease in Madison County, Montana, upon which a garnet concentrating mine and
mill are located, and (2) the owner in fee of a finishing mill located on four
acres in Beaverhead County, Montana, about six miles south of the town of
Dillon, Montana, adjacent to Interstate 15 and a rail siding. The Company is
currently adding minor improvements to the finishing mill, and purchasing garnet
ore concentrate from an independent miner. The Company plans to start-up the
finishing mill, to commence mining on its mineral lease, and to begin shipping
garnet product in the fourth quarter, 2000.
DESCRIPTION OF PROPERTIES AND OPERATIONS
A. VERMICUILTE PROPERTIES AND OPERATIONS
(1) THE DILLON VERMICULITE PROJECT MINE AND MILL
(a) UNPATENTED LODE MINING CLAIMS:
<PAGE>
The mining property consists of 95 unpatented lode-mining claims of
approximately 20 acres each, or a total of 1300 acres (slightly over two square
miles). Prior owner's exploration indicated that drilling had confirmed
sufficient ore at a 25% grade to support the mill at 30,000 tons of concentrate
output a year for a period of twenty years.
(b) MINE AND CONCENTRATION MILL:
The concentration mill consist of a building of approximately 60 by 40
feet, with a thirty-foot ceiling. Outside the building, the mill "front-end"
consists of certain gross screening processes to remove large waste rock, a
dryer to remove moisture, and a pre-feed storage bin. Inside the mill are four
double-screened shaker screens feeding up to twelve winnowing boxes.
Concentrated product from the winnowers is stored in three silos adjacent to the
mill. Fuel tanks and a power plant are located outside the mill building. As
designed, the mill is expected to be able to take up to 35 tons an hour of ore
feed, and yield 4 to 5 tons per hour of concentrate. Tailings are returned to
the open pit from whence the ore is mined, and reclaimed in place by contouring
and seeding the surface.
(2) THE HAMILTON VERMICULITE PROJECT
(a) FEE LAND AND IMPROVEMENTS: The Company owns a small office
building and surrounding land (1.25 acres) at Victor Siding, Montana
(southwestern Montana), which can be used for a field office (the "Field Office
Property"), and which building is adequate to use presently to expand
exploration activities.
(b) UNPATENTED LODE MINING CLAIMS AND MILL SITE CLAIMS: The
Company is the holder of 96 unpatented lode-mining claims in Ravalli County,
Montana, which were formerly managed and developed under the name of "Western
Vermiculite". These 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". A "mineral deposit" or
"mineralized material" is a mineralized body which has been delineated by
appropriately spaced drilling and/or underground sampling to support a
sufficient tonnage and average grade of metal(s). Such a deposit does not
qualify as a reserve, until a comprehensive evaluation based upon unit cost,
grade, recoveries, and other material factors conclude legal and economic
feasibility.
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).
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.
<PAGE>
The mine proposed in the Environmental Impact Statement
("EIS") would be located on ABM Ridge and would involve disturbance of up to
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
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.
The Company's vermiculite deposit near Hamilton, Montana was first
identified as a potential deposit in the 1930s. 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 five-foot section of core
were analyzed by an independent laboratory for vermiculite content.
An estimate of the contained vermiculite deposit in the
Company's Hamilton property was made based on the analyses of the drilling
program samples. An estimate 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 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 deposits. These include
assumptions of in-ground 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 deposits
within the ore body.
(3) THE LOS BANOS EXFOLIATION PLANT:
The Los Banos Exfoliation Plant, located in the San Joaquin valley of
central California, was acquired by the Company in May, 2000. The facility
consists of two rotary furnaces for the exfoliation of vermiculite, and certain
ancillary equipment. The Plant is capable of processing 5000 tons of product per
year. All exfoliate product processed by the plant has been sold to customers in
the San Joaquin Valley.
The Company, subsequent to this reporting period, has entered into a
contract to purchase a larger facility in which to relocate the equipment, and
in which it may expand production facilities to up to 20000 tons per year.
Additionally, the company owns perlite furnaces which it intends to install in
the new facility, with a capacity of 10000 tons per year of expanded perlite.
(4) CURRENT VERMICULITE 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.
<PAGE>
There is one other small mining operation in South Carolina. This operation
was for many years known as Patterson Vermiculite and was recently sold to
Palmetto Vermiculite (now Virginia 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.
The Company believes that vermiculite produced from its Dillon 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.
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 its vermiculite ores.
B. GARNET PROPERTIES AND OPERATIONS
On July 28, 2000, the Company acquired Sweetwater Garnet, Inc.(a Nevada
corporation qualified to do business in Montana), from Absolute Resources Corp.,
an Alberta, Canada, publicly traded company. Sweetwater Garnet, Inc., now a
wholly owned subsidiary of the Company, is the owner of the Sweetwater Garnet
Mine and Mill Project.
The Sweetwater Garnet Mine and Mill Project consists of 1860 acre lease in
Madison County, Montana, upon which a garnet concentrating mine and mill are
located, and a finishing mill located on four acres of fee land in Beaverhead
County, Montana, about six miles south of the town of Dillon, Montana, adjacent
to Interstate15 and a rail siding. The acquisition was completed on July 28,
2000.
The garnet facilities have a fully permitted capacity of at least 12,000
tons per year of finished garnet, which in the past has been sold to the
abrasives and water treatment industries. With modest expenditures, the mine and
two mills can be increased to 20,000 tons per year output, which represents 20%
of current United States demand. The Plant building can house further capacity
increase up to 50,000 tons per year. Industrial grade garnet, used in the
abrasives industry, and in water-jet cutting and water treatment facilities,
sells generally for $180 to $225 per ton, depending on size. The facilities of
Sweetwater Garnet, Inc., produce the full suite of sizes used in the industry.
The known ore body covers an extensive area from the surface to an average depth
of nine feet, with an estimated resource able to supply 16 years of ore to the
mills at a production rate of 20,000 tons of finished garnet per year.
<PAGE>
C. LIQUIDITY AND FINANCE
Prior to 1999, the Company had 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, other than the operations commenced in
December, 1999. Other than the revenues from recent production, 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.
Funding for Company general and administrative expenses is not expected to be
satisfied by this source, and further funding from shareholders is expected to
be required in the 2000-2001 fiscal year.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
LEGAL PROCEEDINGS
Pending actions against the Company, as of November 10, 2000, include the
following:
(1) An action against the Company 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. The matter has been
settled for $60,000, to be paid on a scheduled pay-out.
(2) The Montana Department of Environmental Quality issued two Notices of
Noncompliance regarding disturbances at the Dillon Vermiculite Property and the
Hamilton Property with Civil penalties totaling $42,950. With respect to Dillon
Project, the Company is currently negotiating with the Department of
Environmental Quality to pay $20,000 and to complete $20,000 in reclamation work
on various abandoned mine sites around the State. With respect to the Hamilton
Project, the proposed penalty is $500.
(3) A Notice of default on the note with Nevada Vermiculite ,L.L.C. that the
Company has failed to make a $130,000 payment plus interest due October 28,1999.
Management is diligently pursuing financing to cure the default. No action as
been filed by the claiming party.
(4) An agreement between the Company and four other co-plaintiffs against
Resource Vermiculite, L.L.C.. The court has ordered that the Company be
substituted as plaintiff in place of all other plaintiffs as a result of that
agreement. The Company is currently in the process of seeking settlements with
the defendant.
(5) 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 and is accruing interest at an annual rate of
12% from December 1994; at June 30, 2000 a proposed settlement of $90,000 was
negotiated with agreement received subsequent to fiscal year end.
(6) A judgment obtained by Martineau & Co. in Salt Lake City, Utah, for $12,587,
(7) A judgment obtained by Bruce Blessington, in Salt Lake County, Utah, for
$14,674. These judgments remain due and payable by the Company as of June 30,
2000.
<PAGE>
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) 27.1 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the three months ended
September 30, 2000.
<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: November 13, 2000 STANSBURY HOLDINGS CORPORATION
By:/s/ Aldine J. Coffman, Jr.
ALDINE J. COFFMAN, JR.,
Chief Executive Officer and
President
By:/s/ Dennis R. Staal
DENNIS R. STAAL, Chief Financial
Officer and Treasurer
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- -----------------------------
27. FINANCIAL DATA SCHEDULE Filed herewith electronically
