U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark one)
[ X ] Annual report under section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] for the fiscal year ended
June 30, 1995 or
[ ] Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
________ to _________
Commission file number 0-13933
THERMAL EXPLORATION COMPANY
(Name of small business issuer in its charter)
California
(State or other jurisdiction of incorporation or organization)
94-2185688
(I.R.S. Employer Identification No.)
11525 Caroline Lane, Nevada City, California
(Address of Principal Executive Offices)
95959
(Zip Code)
Issuer's Telephone No. (916) 265-0653
Securities to be registered under Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
None None
Securities to be registered under Section 12(g) of the Act.
Common Stock, No Par Value
Title of Class
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB [ ]
Issuer's revenues for its most recent fiscal year: NIL
The aggregate market value of the voting stock held by non-affiliates
based on the last trade on the Alberta Stock Exchange as of
September 22, 1995 is $1,922,168
The number of Common Shares outstanding as of September 30, 1995 is
16,415,528
Documents incorporated by reference: None
<PAGE>
PART I
ITEM 1. Description of Business
A. General Development of Business
Thermal Exploration Company ("Thermal" or the "Company") was
incorporated in the State of California on February 18, 1972. Since
that date the Company has been engaged in the exploration and
development of natural resources. Until July, 1991 the Company was
primarily engaged in the geothermal energy industry, through its
ownership of a 7.5% working interest in the 21.4 megawatt power plant
at the Roosevelt Geothermal Unit located near Milford, Utah
("Roosevelt"). Previously, the Company also participated in
petroleum and natural gas exploration, through the acquisition and
interpretation of seismic data in Western Canada and the drilling of
natural gas wells. Recently, the primary focus of the Company has
been toward the exploration and development of the Carmacks Copper
Project (formerly referred to as "Williams Creek copper-gold
deposit") in the Yukon Territory of Canada. (Unless indicated
otherwise, all reference to amounts are in Canadian dollars)
As of August 1, 1991 the Company sold its interest in geothermal
leases, field facilities for the production of geothermal steam,
contract rights, and related rights and assets at Roosevelt for
$450,000 in cash, certain geothermal data, the forgiveness of
approximately $2.3 million in debt, and the release of the Company
from all of its obligations and liabilities with respect to
Roosevelt, resulting in a gain of $810,386. The Company retained a
small royalty interest at Roosevelt which it subsequently sold in
mid-January, 1993 for $50,000 to the Company's President, resulting
in a gain of $50,000, thus ending royalty income from Roosevelt as of
that date. During the year ended June 30, 1992 the Company also sold
its royalty interest in steam sales at the Fish Lake Unit for
$112,500, resulting in a gain of $112,500. On December 21, 1992 the
Company sold its proprietary rights to seismic data for $50,648
resulting in a loss of $155,222. On June 30, 1995 the Company sold
its land in Utah resulting in a gain of $30,644. See "Item 6.
Management Discussion and Analysis of Financial Condition and
Operations - Liquidity."
In September, 1989, the Company entered into an agreement with
Western Copper Holdings Limited ("Western Copper") of Vancouver,
British Columbia, an associated company of Teck Corporation (a major
Canadian mining and holding company) to jointly explore and develop
on a 50-50 basis the Carmacks Copper Project. See "Item 2.
Description of Properties." To date, approximately $3.5 million
(Cdn) has been spent on the project by both parties. A feasibility
study by Kilborn Engineering Pacific Ltd., Vancouver, British
Columbia ("Kilborn") concluded that the project is economically
viable at current copper prices. No assurances can be given,
however, that the Company will be able to raise the necessary capital
to develop the property through the joint venture, or that the
project will reach production.
<PAGE>
B. Business of Issuer
As of June 30, 1994 the Company's principal asset was its
investment in the Carmacks Copper Project. In this regard, the
Company and Western Copper optioned the Carmacks Copper Project
copper property from Archer, Cathro & Associates (1981) Limited. The
terms of the option were satisfied in December of 1992 when the
companies spent the required $2 million (Cdn) on the property.
Metallurgical test work on the deposit, consisting of bottle roll and
column leach tests, indicate that 80-85% of the contained copper can
be extracted with dilute sulfuric acid. An independent feasibility
study by Kilborn Engineering Pacific Ltd. indicates that the property
can be economically developed at $1.05 U.S. per pound. The current
copper price is $1.28 U.S. per pound. Work consisting of core
drilling to better define the reserves, metallurgical testing and
environmental base line studies was conducted during 1991 and 1992.
In 1993 an ore reserve calculation was conducted by the operator of
the property (Western Copper Holdings) using both polygonal sections
and a computer generated 30 foot block model using PC Mine Software.
A 250 ton pilot heap leach test was conducted in Carmacks, Yukon to
gain cold weather leaching data. To date, in excess of $3.5 million
(Cdn) in total has been spent on the Carmacks Copper Project by the
Company and Western Copper. See "ITEM 2, C. (1) Carmacks Copper
Project."
The Company and Western Copper plan to produce copper cathode by
Solvent Extraction and Electro-Winning (SX-EW) at a rate of
approximately 30 million pounds per annum once mining and production
are fully underway. Because of the high purity of copper cathodes,
the product is readily marketable through metal dealers to copper
fabricators.
The mining and production of refined copper is a very
competitive business and conventionally undertaken by companies
having much larger capital resources and technical expertise than
that of the Company. Based on preliminary cash cost estimates,
however, it is estimated that copper produced from the Carmacks
Copper Project will be competitive with other producers. The
anticipated (approximately) 15,000 tons of annual copper production
is insignificant in terms of world copper production and is unlikely
to have an impact on overall supply and demand.
Prior to production, operating and land use permits will be
required from both the Yukon territorial and Canadian federal
governments. Background environmental studies have been on-going for
the past three years and the Company believes it has sufficient data
to meet these requirements. The engineering firm of Knight and
Piesold Ltd. of Vancouver, B.C. has been engaged to prepare the
necessary documents for presentation to the various government
agencies.
The mineral industry in Canada has historically been the subject
of significant regulation and control by various levels of
government. Generally, metal prices are negotiated directly between
purchasers and sellers. Drilling and production operations, however,
are subject to provincial and Canadian federal laws and regulations
governing environmental quality and pollution control. Should the
project reach production, the Company believes that it will be able
to comply with all applicable regulations.
<PAGE>
Canadian mineral exploration is highly competitive, particularly
with respect to location, acquisition and exploration of drilling
prospects. The Company competes with other corporations having
substantially greater financial resources and larger technical
staffs.
The Company faces the risks that are inherent in the production
of mineral products, which include unpredictable price changes and
changing environmental and regulatory rules associated with
production of these products, and other risks inherent to conducting
mining operations.
On April 24, 1995 Western Copper and the Company announced that
an agreement in principle had been reached to amalgamate the two
companies or enter into some type of amalgamation on the basis of one
share of Western Copper for each five shares of Thermal Exploration.
Shareholders of Thermal will receive one share of Western Copper for
each five Thermal shares held. Thermal's assets, other than its
interest in the Carmacks Copper Project will be vended to a new
subsidiary of Thermal ("Newco") and distributed to existing
Thermal shareholders. Western Copper currently holds 5.83 million
shares of Thermal (36%). After the amalgamation, Western Copper's
shares in Newco will be canceled. No assurance can be given that
the proposed amalgamation or reorganization will occur in the manner
described. The amalgamation is subject to a definitive agreement and
will require Toronto Stock Exchange, Alberta Stock Exchange and other
regulatory and shareholder approvals.
The Company currently does not have any full-time employees.
The Company has one part-time secretary and two part-time executive
officers, who work on a consulting basis.
ITEM 2. Description of Properties
A. Headquarters
The Company's headquarters are located at 11525 Caroline Lane,
Nevada City, California 95959. The headquarters consist of
approximately 800 square feet of office space which is rented on a
month to month basis from the Company's President, at rental payments
of $500.00 per month.
B. Mineral Properties
(1) Carmacks Copper Project
The Carmacks Copper Project, which consists of 232 contiguous
and partial unpatented mining claims, is located approximately 43
kilometers northwest of Carmacks, Yukon, Canada. The property is
accessible by an all-weather road from Skagway, Alaska to within
seven miles of the property. A secondary road to the property is
sufficient for seasonal travel by two and four-wheel drive vehicles.
Copper was first discovered at Williams Creek during a regional
exploration program for porphyry copper deposits in 1970. Follow-up
work in the early 1970's located several zones of copper mineralization.
The No. 1 Zone, which appears to hold the most promise, was diamond
drilled and trenched. The results indicated a mineralized zone 100 - 150
feet wide, 2,000 feet long and at least 1,500 feet deep. A major decline
<PAGE>
in the price of copper in the mid-1970's resulted in a cessation of
exploration and no further meaningful work was done until 1989, when
the property was optioned by the Company and Western Copper from Archer,
Cathro and Associates (1981) Ltd. The option to purchase agreement
contained provisions for the payment of 15% of net profits or a 3% gross
royalty to a total of $2.5 million in Canadian funds. Since 1989 Thermal
and Western Copper have spent approximately $3.5 million (Cdn) in total
on an intensive mine evaluation program, including diamond drilling,
metallurgical and environmental studies.
In September 1993 Kilborn was retained to complete a feasibility
study on the Carmacks Copper Project of sufficient detail to be used
for raising financing and finalizing permits.
Based on both the Kilborn feasibility study and subsequent
modifications, the Carmacks Copper Project is projected to produce an
average of 45 tons of copper per day over the estimated 8.5 year mine
life by way of solvent extraction-electrowinning (SX-EW). Capital
costs for the plant and equipment are currently estimated at $48.6
million (U.S.$ 35.4 million), with $9.7 million (U.S.$ 7.1 million)
for indirect costs and $5.1 million (U.S.$ 3.7 million) for
contingency, for a total of $63.4 million (U.S.$ 46.3 million).
Working capital requirements are estimated at $4 million (U.S.$ 2.9
million). Operating costs over the life of the project are estimated
at $0.88 per pound of copper (U.S.$0.64). The current copper price is
$1.28 U.S. per pound. No assurance can be given that the Carmacks
Project can be developed and operated at budgeted amounts and that
the price of copper will remain at current levels.
There are fourteen mineralized zones on the property of which
the No. 1 is the most important and the subject of the feasibility
study. The No. 1 Zone strikes north/south over 2,300 feet and has an
average width of 112 feet. A geological reserve (proven and
probable) to a depth of 1,500 feet has been calculated at 22,051,665
tons grading 1.06% copper and 0.013 ounces of gold per ton, for total
contained metals of 460 million pounds of copper and 286,000 ounces
of gold.
A diluted open pittable oxide reserve of 15,550,000 tons grading
1.01% copper and 0.015 ounces of gold per ton has been outlined to a
depth of 600 feet below surface. The strip ratio will average 4:1
waste/ore over the life of the mine. There are at least three (3)
other surface zones which could augment ore from the No. 1 Zone.
It is estimated that the No. 1 Zone will be mined at a rate of
1.94 million tons per year. Ore will be mined 200 days per year at a
rate of 9600 tons per day, crushed to 3/4" and delivered via
conveyers to a leach pad. Leaching will occur year round. Employees
on site are estimated to number 105 at the start of operations,
increasing in later years as the mine fleet is expanded to
accommodate the increased stripping.
Copper recoveries of 80% have been determined from a
comprehensive, 3-year metallurgical program. Acid consumption is
estimated at 50 pounds per ton of ore. Test procedures and analyses
were prepared in consultation with Brown and Root, Inc., of Houston,
Texas. This acid consumption is similar to that of existing copper
operations.
<PAGE>
Acid, for utilization in the Carmacks Project, will be shipped
to a bulk storage facility in Skagway, Alaska. Annually, 50,000 tons
of acid will be trucked 245 miles (400 kilometers) from the port to
the mine and these trucks will be used to back-haul copper.
Power will be supplied by either on-site oil-fired turbine
generators or by a transmission line installed by Yukon Electric
Corp. The transmission line (if constructed) will be an extension of
the main grid system which terminates at Carmacks. Access to the
property is via 33 kilometers on the government-maintained Freegold
Road and then 13 kilometers along the existing property road. The
property access road will be upgraded during the construction phase.
Government incentive programs are available to assist with the
financing of infrastructure in the Yukon.
Water for the leaching operation will be supplied from drilled
wells and a small reservoir constructed on Williams Creek downstream
of the operation. This reservoir will act as a secondary catchment
for the operation. Much of the water required for the operation will
be recycled.
Environmental surveys were completed between 1991 and 1993. The
results of these surveys were submitted for regulatory review in
February, 1994. The environmental impact statement (IEE) and
feasibility study were submitted for review in early 1995. Land-use
permits and a water license for the project are anticipated to be
issued late in 1995. Negotiations with the Little Salmon First
Nation are continuing with the expectation of finalizing an Economic
Development Agreement this fall.
Western Copper and Thermal Exploration are now entering a phase
which is expected to lead to detailed engineering. Preliminary talks
with marketing groups and financial institutions have been positive.
With the completion of the feasibility study, in-depth negotiations
will begin which are expected to lead to further development of the
Carmacks Project.
Under the terms of the joint venture, Western Copper and Thermal
Exploration each have a 50% interest in the Carmacks Project, and
each is required to provide capital to maintain their 50% interest.
Historically, the Company has sold its equity securities to meet its
capital requirements. Recently, Western Copper has advanced expenses
on behalf of the Company in exchange for the Company's common stock.
If the proposed amalgamation is approved and completed, Western
Copper will own 100% of the project.
No assurances can be given that the Company will be successful
in its efforts to raise the necessary capital to maintain its
interest or that the amalgamation will be completed or that the
project will reach production.
(2) Lac de Gras Diamond Property
On May 7, 1992 the Company entered into an agreement to acquire
a 70% interest in mineral leases of approximately 94,519 acres
located in the Lac de Gras area of the Northwest Territories of
Canada. The claims are located on the Archean geological trend in
which BHP Corporation ("BHP") and Kennecott Canada Limited
("Kennecott") have announced the discovery of kimberlite pipes
containing gem quality diamonds. The BHP and Kennecott discoveries
were the focus of international attention and have resulted in a
large staking rush. The Company's property is located approximately
40 miles north and east of the BHP discovery.
The Company paid a total of $47,259 (Cdn) and 200,000 common
stock shares for its interest. The Company concurrently entered into
an agreement with Kennecott, a wholly-owned subsidiary of Kennecott
Inc. of Salt Lake City, Utah, whereby Kennecott reimbursed the
Company $47,259 (Cdn) to earn up to a 70% interest in the Company's
project by providing all exploration costs through to a production
decision. As of August 9, 1993 Kennecott, after completing an
airborne magnetometer and resistivity survey and limited soil
sampling, discontinued exploration on the property and has
relinquished all rights to the property. Kennecott, during the
course of its exploration, spent approximately $197,000 (Cdn), an
amount sufficient to keep approximately 38,000 acres in good
standing until March, 1996. Based on its estimate of recoverability
of its acquisition and exploration costs for the property, the
Company wrote off all of its capitalized costs. The Company is
currently seeking another senior mining company as a joint venture
partner to conduct further exploration on the property. No assurance
can be given that the Company will be successful in this effort.
No assurance can be given that diamonds will be found in the
area in which the Company has an interest or, if diamonds are found,
that they can be economically extracted.
(3) Kirkland Lake Copper-Gold Property
In March of 1994, the Company acquired by staking, two claims
(approximately 320 acres) in the Kirkland Lake area of Ontario,
Canada, at a cost of $764 (Cdn). The property was subsequently
optioned to Kalahari Resources in August, 1994 for 75,000 shares of
Kalahari common stock and a 4% net smelter return, of which Kalahari
could purchase from the Company 1 1/2% of the net smelter return for
$1,500,000 (Cdn). Kalahari failed to make a property payment which
was due in August, 1995. As a result, 100% ownership has now reverted
to the Company. No assurance can be given that economic minerals
will be found. The Kalahari shares which the Company has received
have been sold for a gain of $37,573.
ITEM 3. Legal Proceedings
There are currently no known legal proceedings involving any of
the Company's properties or to which the Company is a party.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE>
PART II
ITEM 5. Market for Common Equity and Related Stock Holder Matters
A. Market Information
The Company's shares trade on the OTC Bulletin Board in the
U.S.A. under the symbol TECC. There is no established public trading
market for the Company's common stock as that term is defined by the
regulations of the Securities and Exchange Commission. The Company
believes that the principal market maker for its Common Stock is KO
Securities, Inc., Seattle, Washington and Dakin Costigan & Welpton
Inc., San Francisco, California.
The Company's shares are also listed on the Alberta Stock
Exchange in Canada and are quoted under the symbol THR. Based on
trading volumes, the Company believes that the principal market for
the Company's shares is the Alberta Stock Exchange.
The quarterly range of high and low bids of the Company's common
stock as reported on OTC Bulletin Board and actual trades on the
Alberta Stock Exchange for the two most recent fiscal years is as
follows:
NASD Bulletin Board Alberta Stock
Exchange ($Cdn)
High Low High Low
July-September 1993 $0.25 $0.25 $0.45 $0.36
October-December 1993 $0.25 $0.25 $0.40 $0.20
January-March 1994 $0.19 $0.25 $0.37 $0.25
April-June 1994 $0.06 $0.25 $0.58 $0.28
July-September 1994 $0.50 $0.25 $0.40 $0.20
October-December 1994 $0.31 $0.19 $0.35 $0.20
January March 1995 $0.38 $0.13 $0.34 $0.20
April-June 1995 $0.30 $0.13 $0.32 $0.20
July-September 1995 $0.25 $0.13 $0.29 $0.16
The closing OTC Bulletin Board bid quotation for the Company's
common stock on October 6, 1995 was $0.19. The closing Alberta Stock
Exchange trade on October 6, 1995 was $0.27. The above over-
the-counter quotations reflect inter-dealer prices without retail
mark-up, mark-down or commission and may not necessarily represent
actual transactions. The OTC Bulletin Board quotations were obtained
from KO Securities, Inc. in Seattle. Alberta Stock Exchange
quotations were obtained from the Company's Alberta Stock Exchange
records.
<PAGE>
B. Holders
According to the records of the Company's stock transfer agent,
Continental Stock Transfer and Trust Company, there were 1,858
holders of record of the Company's Common Stock on September 30,
1995.
C. Dividends
There have been no dividends declared or paid on the Company's
common stock during the last two fiscal years and the Company does
not expect to pay dividends in the foreseeable future. Similarly,
there were no dividends declared or paid on any shares of Series A
Preferred Stock. The holder of Series A Preferred Stock shall be
entitled to receive dividends in an amount equal to the dividend
which would be payable on the Stock which the holder of such Series
A Preferred Stock would be entitled to receive, if he or she had
converted such shares into common stock, immediately prior to the
record date of such dividend. The right to such dividends on shares
of the Series A Preferred Stock shall not be cumulative, and no right
shall accrue to holders of Series A Preferred Stock by reason of the
fact that dividends on said shares are not declared in any prior
period.
ITEM 6. Management's Discussion and Analysis or Plan of Operation
A. Liquidity
The Company had no revenue for the fiscal years ending June 30,
1995 and 1994.
During the fiscal year ending June 30, 1995 the Company issued
350,000 common shares as a result of the exercising of stock options
by officers and directors of the Company. The proceeds from these
transactions, $76,500 (Cdn.) or $54,000, was used to pay general
corporate expenses. Western Copper also purchased 1,200,000 shares
of the Company's common stock at $0.30 (Cdn.) per share. In
addition, warrants (good for one year) to purchase 600,000 shares of
the Company's common stock at a price of $0.35 (Cdn.) were issued to
Western Copper. The proceeds of $360,000 (Cdn.) were applied to the
Company's share of Carmacks Copper expenditures and general corporate
purposes.
On May 25, 1995 the Company agreed to issue 500,000 shares of
its common stock to a private individual at a price of $0.30 (Cdn)
per share on the condition that the Company shares be issued on a
Flow Through Agreement basis (under Canadian tax law, buyer receives
the tax benefits of the Company's qualified exploration expenditures
in Canada). In addition, warrants for the purchase of an additional
500,000 shares of the Company's common stock were issued to the
individual, which expire in 1 year at $0.40 (Cdn.). The Company used
the proceeds of $150,000 ($109,500 US) to pay exploration
expenditures related to the Carmacks Copper Project.
<PAGE>
As of June 30, 1995 total current liabilities exceed current
assets by $21,039. The Company intends to meet its short term
obligations through the private placement of its shares or loans from
its principal shareholders. As of June 30, 1995 the Company had a
cash balance of $958, a decrease of $28,372 from the year ended
June 30, 1994. Cash in the amount of $75,497 which was held in trust
on June 30, was received in early July. The Company will be
responsible for its 50% share of exploration and capital costs for
the Carmacks Copper Project. Management anticipates that the Company
will obtain funds through the private placement of its common stock
and long term project financing. If the Company does not raise a
sufficient amount of capital to satisfy its obligations to the
Carmacks Copper Project, the Company's interest in the project may be
diluted. No assurances can be given that the Company will be able to
satisfy its obligations and maintain its interest in the Project.
The Company may also engage in limited mineral exploration if an
exceptional opportunity arises. Any such exploration would be funded
through the private placement of the Company's common stock.
Other than the obligations discussed above, management does not
anticipate any other long-term capital needs. However, if any
obligation arises, the Company may consider additional equity
financing or long-term borrowing, as may be appropriate.
B. Capital Resources
The Company's current primary commitment is for the Carmacks
Copper Project. No lease rentals were paid in the fiscal year ended
June 30, 1995, nor are any anticipated for fiscal year 1996.
The Company, based on positive geologic results, has incurred
expenses of $1,586,810 on exploration related to its interest in the
Carmacks Copper Project. These amounts were funded from the sale of
its geothermal properties, sale of seismic data and the private
placement of its securities. The Company will be required to fund
50% of the ongoing costs of the project, or its interest may be
diluted.
In general, the Company expects that its ability to maintain its
interest in the Carmacks Copper Project will depend upon its ability
to raise funds through securities offerings, limited partnership
sponsorships or negotiation of a carried interest, in which another
participant advances funds on the Company's behalf for later
recoupment (with interest) from project revenue. See "Note 3
(Management's Plan to Sustain Operations) to the Financial
Statements, included in Item 7."
C. Results of Operations
During fiscal years 1995 and 1994, the Company received no
revenues from operations. Net loss during fiscal 1995 was $178,310
compared to 167,545 for fiscal 1994. Operating loss increased to
$233,323 during fiscal 1995 from 181,911 during fiscal 1994. The
operating loss during fiscal 1995 increased primarily due to the
write-off of deferred cost related to the option on mineral claims
covering 38,000 acres in the Lac de Gras area, and the write-off of
$27,814 related to other exploration costs.
<PAGE>
Other income during fiscal 1995 consisted principally of a gain
of $30,644 on the sale of 2,057 acres of land in Utah and a gain of
$37,573 on the sale of marketable securities held by the Company.
Other income in fiscal 1994 amounted to $5,916.
D. Future Operations
The Company intends to pursue the exploration and development of
the Carmacks Copper Project. in the event that the proposed merger
with Western Copper does not occur. In addition to the foregoing, the
Company is considering raising additional equity capital privately in
order to improve its cash position.
ITEM 7. Financial Statements
Report of Independent Public Accountants F-1
Balance Sheet as of June 30, 1995 F-2
Statements of Operations for the Years Ended F-3
June 30, 1995 & 1994
Statements of Changes in Stockholders' Equity for F-4
the Years Ended June 30, 1995 and 1994
Statements of Cash Flows for the Years Ended F-5
June 30, 1995 & 1994
Notes to Financial Statements F-6
ITEM 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
Not Applicable.
<PAGE>
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act
A. Identification of Directors and Executive Officers
The following table sets forth certain information with respect
to the directors and executive officers of the Company:
PRINCIPAL
NAME AGE DIRECTOR OR POSITION WITH OCCUPATION LAST
OFFICER SINCE COMPANY FIVE YEARS
F. Dale Corman 57 1985 Director Chairman Indep. Mining
President & C.E.O. Consultant
Robert A.
Quartermain 40 Oct. 1994 Director President &
C.E.O. of
Western
Copper
William Meyer 57 Oct. 1994 Director Director of
Western
Copper
President of
Teck
Exploration,
V.P. of
Teck Corp.
Hugh M. Blair 64 Dec. 1988 Director Financial
Consultant
James E. Lanigan 49 Dec. 1988 Secretary- Business
Treasurer Consultant
Each director is elected at the Annual Meeting of the
stockholders and serves until his successor is duly elected and
qualified. The Company's last Annual Meeting was held on January 27
1995. Each executive officer serves at the discretion of the Board
of Directors. There are no arrangements or understandings between
any executive officer and any other person pursuant to which such
executive officer was or is to be selected as an executive officer of
the Company.
Based solely upon a review of Forms 3, 4 and 5, filed with the
Securities and Exchange Commission, the Company's directors, officers
and holders of 10% of common stock have complied with filing
requirements of section 16(a) of the Securities Exchange Act of
1934.
<PAGE>
ITEM 10. Executive Compensation
The following table sets forth the aggregate cash compensation
paid for the past three years to Dale Corman, the President of the
Company. No person's total compensation exceeded $100,000 during the
fiscal year 1995.
SUMMARY COMPENSATION TABLE
Long Term All Other
Annual Compensation Compensation Compensation
Name Year Salary Bonus Other Options
Dale Corman 1995 $62,762 None None 150,000 None
1994 $48,670 None None None
1993 $77,760 None None None
ITEM 11. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information, as of
October 1, 1995 with respect to (i) the beneficial owners of more
than 5% of the Company's Common and Series A Preferred Stock which is
convertible to Common Stock at the option of the holder; (ii) each
director and executive officer and (iii) all officers and directors
as a group:
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership Percent of Class
Western Copper Holdings 5,830,000 36%
F. Dale Corman 2,370,101 <F1> 14%
Director, Chairman
& President
Hugh M. Blair
Director 700,101 <F2> 4%
Robert A. Quartermain
Director 100,000 *
William Meyer
Director 100,000 *
James E. Lanigan
Secretary-Treasurer 180,000 <F3> 1%
All Officers & Directors 3,420,202 19%
<PAGE>
[FN]
<F1> Includes 90,000 shares held by Caroline Corman, the wife of
Mr. Corman. Mr. Corman disclaims beneficial ownership to Mrs.
Corman's common stock. Also includes 200,000 shares subject to stock
options. The exercise price of these options are 50,000 at $0.21
and 150,000 at $0.35(Cdn.) per share
<F2> Mr. Blair holds directly 75,000 shares in his Registered
Retirement Savings Plan, and indirectly 350,101 shares through
MacLean Blair & Co. Limited. His wife holds 75,000 shares. 200,000
shares are subject to stock options. The exercise price of these
options are 100,000 at $0.35 and 100,000 at $0.73 (Cdn.).
<FN3> 150,000 shares are subject to stock options. The exercise
prices of these options are; 50,000 at $0.22 (Cdn) per share and
100,000 at $0.35 (Cdn) per share.
* Less than 1%
ITEM 12. Certain Relationships and Related Transactions
From July 1, 1994 through June 30, 1995 and July 1, 1993 through
June 30, 1994 there have been no transactions between the Company,
any executive officer, director, or 5% beneficial owner of the
Company in which one of the foregoing individuals or entities had an
interest and the transaction exceeded $60,000. The Company leases
office space from Mr. Dale Corman, the Company's President on a
month-to-month basis for $500.00 per month.
ITEM 13. Exhibits and Reports on Form 8-K
Exhibits
Except as noted, the following exhibits are attached hereto and
filed herewith, and those exhibits which are not attached hereto were
previously filed with the Securities and Exchange Commission, as
indicated by footnote, and are incorporated herein by reference:
EXHIBIT NO. DESCRIPTION
2.1 Agreement and Plan of Reorganization (including
Agreement of Merger) dated as of October 31,
1984 *
3.1 Restated Articles of Incorporation of Thermal
Exploration Company dated March 13, 1985 *
3.2 Bylaws of Thermal Exploration Company *
4.1 Article Four of the Restated Articles of
Incorporation of Thermal Exploration Company *
10.1 Stock Agreement between O'Brien Resources
Corporation and F. Dale Corman *
<PAGE>
10.5 Preferred Stock Purchase Agreement dated as of
December 31, 1984 between O'Brien Energy &
Resources Limited and Thermal Exploration
Company *
10.10 Joint Operating Agreement dated as of January 8,
1979 among AMAX Exploration Inc., Thermal Power
Company and O'Brien Resources Corporation (with
exhibits) *
10.11 Unit Agreement for the Development and Operation of
the Roosevelt Hot Springs Unit Area dated as of
August 6, 1975 *
10.12 Unit Operating Agreement for the Roosevelt Hot
Springs Unit Area dated as of August 6, 1975 *
10.13 Agreement dated as of August 16, 1979 among AMAX
Exploration Inc., O'Brien Resources Corporation
and Thermal Power Corporation *
10.14 NIM Resources - 1989 and Company Limited
Partnership **
10.15 NIM and Company, Limited Partnership**
10.16 Agreement dated August 18, 1989, between Western
Copper Holdings Limited and the Company **
10.17 Sales Agreement - American Eagle Petroleum **
10.18 Assignment of Convertible Overriding Royalty
Interest in Fish Lake Geothermal Leases **
10.19 Assignment, Conveyance, and Bill of Sale - Unit
Agreement and Unit Operating Agreement **
* Filed as an exhibit to the Company's Registration
Statement on Form 10 under the Securities Exchange
Act of 1934 (File No. 0-13933), filed October 28,
1985.
** Filed as an exhibit to the Company's 10-K for the fiscal year
ended June 30, 1989.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
THERMAL EXPLORATION COMPANY
(Company)
October 10, 1995 By /s/ F. Dale Corman
F. Dale Corman, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the capacities and on the
dates indicated:
/s/F. Dale Corman Chairman, President, October 10, 1995
F. Dale Corman Chief Executive
(Principal Executive and
Financial Officer)
/s/Hugh M. Blair Director October 10, 1995
Hugh M. Blair
/s/Robert A. Quartermain Director October 10, 1995
Robert A. Quartermain
/s/William Meyer Director October 10, 1995
William Meyer
/s/James E. Lanigan Secretary- October 10, 1995
James E. Lanigan Treasurer
<PAGE>
THERMAL EXPLORATION COMPANY
Financial Statements for the Years Ended June 30, 1995
and 1994 and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
Board of Directors
Thermal Exploration Company
We have audited the accompanying balance sheets of Thermal Exploration Company
(Company) as of June 30, 1995 and 1994, and the related statements of
operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Thermal Exploration Company as of June 30,
1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the balance sheets include
$1,591,095 and $1,405,304 in deferred exploration costs and mineral claims at
June 30, 1995 and 1994, respectively. As emphasized in Note 2, the recovery of
these costs is dependent upon the future development of economically
recoverable mineral reserves, the Company's ability to obtain the necessary
permits and financing to successfully place the properties into production, and
upon future profitable operations.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company's recurring losses from operations and
working capital deficiency raise substantial doubt about its ability to
continue as a going concern. Management's plans concerning these matters are
also discussed in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Deloitte & Touche LLP
Sacramento, California
August 21, 1995
<PAGE>
<TABLE>
THERMAL EXPLORATION COMPANY
BALANCE SHEETS
JUNE 30, 1995 AND 1994
<CAPTION>
ASSETS NOTES 1995 1994
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 958 $ 29,330
Account receivables ($8,000 from related
parties at June 30, 1995 and 1994) 5 75,497 8,800
___________ _____________
Total current assets 76,455 38,130
DEFERRED EXPLORATION COSTS AND
MINERAL CLAIMS 4 1,591,095 1,405,304
LAND HELD FOR SALE 5 40,007
OTHER 630 29,837
___________ _____________
TOTAL ASSETS $ 1,668,180 $ 1,513,278
___________ _____________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 97,494 $ 178,832
___________ _____________
Total current liabilities 97,494 178,832
ACCOUNTS PAYABLE TO BE REFINANCED 6 108,000 71,000
___________ _____________
TOTAL LIABILITIES 205,494 249,832
___________ _____________
STOCKHOLDERS' EQUITY: 6
Convertible Series A preferred stock, 5,000,000
shares authorized; 155,000 shares issued and
outstanding; $3.00 per share liquidation preference 465,000 465,000
Common stock, 100,000,000 shares authorized, no par;
16,415,528 and 14,532,193 outstanding
at June 30, 1995 and 1994, respectively 6,730,910 6,353,360
Accumulated deficit (5,733,224) (5,554,914)
___________ _____________
Stockholders' equity 1,462,686 1,263,446
___________ _____________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,668,180 $ 1,513,278
___________ _____________
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
THERMAL EXPLORATION COMPANY
STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995 AND 1994
<CAPTION>
NOTES 1995 1994
<S> <C> <C> <C>
COSTS AND EXPENSES:
General and administrative $ 150,587 $ 172,161
Writeoff of deferred exploration costs and
mineral claims 4 54,922 9,750
Writeoff of other assets 27,814
___________ _____________
OPERATING LOSS (233,323) (181,911)
OTHER INCOME:
Gain on sale of land 5 30,664
Gain on sale of marketable securities 4 37,573
Other 1,121 5,916
___________ _____________
69,358 5,916
___________ _____________
OTHER EXPENSES:
Other 20,929 8,379
___________ _____________
20,929 8,379
___________ _____________
LOSS BEFORE INCOME TAXES (184,894) (184,374)
INCOME TAX BENEFIT 8 (6,584) (16,829)
___________ _____________
NET LOSS $ (178,310) $ (167,545)
___________ _____________
NET LOSS PER COMMON SHARE $(.01) $(.01)
___________ _____________
SHARES USED IN COMPUTATION 15,144,694 13,272,150
___________ _____________
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
THERMAL EXPLORATION COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995 AND 1994
<CAPTION>
Convertible Series A
--Preferred Stock--- --Common Stock--- Accumulated
Shares Amount Shares Amount Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Balance,
June 30, 1993 155,000 $465,000 12,320,945 $5,849,500 $(5,387,369) $927,131
Net loss (167,545) (167,545)
Sale of common
shares 1,944,583 453,450 453,450
Exercise of warrants 166,665 35,500 35,500
Stock options
exercised 100,000 14,910 14,910
_________ _________ __________ _________ __________ _________
Balance,
June 30, 1994 155,000 465,000 14,532,193 6,353,360 (5,554,914) 1,263,446
Net loss (178,310) (178,310)
Sale of common
shares 1,533,335 324,000 324,000
Stock options
exercised 350,000 53,550 53,550
_________ _________ __________ _________ __________ _________
Balance,
June 30, 1995 155,000 $465,000 16,415,528 $6,730,910 $(5,733,224) $1,462,686
_________ _________ __________ _________ __________ _________
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
THERMAL EXPLORATION COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (178,310) $ (167,545)
Adjustments to reconcile to net cash used by
operating activities:
Depreciation and amortization 1,394 1,760
Gain on sale of land (30,664)
Gain on sale of marketable securities (37,573)
Writeoff of deferred exploration costs
and mineral claims 54,922 9,750
Writeoff of other assets 27,814
Other (623)
Effect of changes in:
Account receivables 16,444
Other assets (3,869)
Accounts payable and accrued expenses (81,338) 50,372
Accounts payable to be refinanced 37,000
___________ _____________
Net cash used by operating activities (207,378) (93,088)
___________ _____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to deferred exploration
costs and mineral claims (30,058) (274,256)
Proceeds from sale of marketable securities 40,855
___________ _____________
Net cash provided (used) by investing activities 10,797 (274,256)
___________ _____________
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock for cash 168,209 345,065
___________ _____________
Net decrease in cash and equivalents (28,372) (22,279)
Cash and equivalents at beginning of year 29,330 51,609
___________ _____________
Cash and equivalents at end of year $ 958 $ 29,330
___________ _____________
</TABLE>
See notes to financial statements.
<PAGE>
THERMAL EXPLORATION COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995 AND 1994
1. GENERAL INFORMATION
Business - Thermal Exploration Company (TEC, or the Company) is engaged in a
single business segment, the exploration and development of extractive
resources. The Company has no full-time employees. The Company's president
works on a consulting basis. Other services required by the Company are
contracted for as necessary. The Company's principal business operations
involve: pursuit of equity capital and financing for the development of its
Carmacks Copper Project and on-going exploration and evaluation of natural
resource properties for potential investment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying financial statements have been
prepared in accordance with U.S. generally accepted accounting principles.
The Company's functional currency is the U.S. dollar. Gains and losses from
foreign currency transactions are included in other income.
Certain reclassifications to the 1994 financial statements were made to conform
to the classifications used in the 1995 financial statements.
Deferred exploration costs and mineral claims - The balance sheets at June 30,
1995 and 1994 include deferred exploration costs and mineral claims of
$1,591,095 and $1,405,304, respectively. The recovery of these costs is
dependent on the development of economically recoverable mineral reserves,
the ability of the Company or its partners to obtain necessary permits and
financing to successfully place the properties into production and upon
future profitable production, or upon the sale of the Company's interest at a
sufficient price. Based on exploration results to date, management of the
Company believes that the pursuit of additional exploration or development
programs on its mineral interests is justified and will ultimately lead to the
recovery of the amounts carried on the books as deferred exploration costs and
mineral claims. Costs relating to the acquisition of mineral claims and
exploration and development costs relating to such claims are deferred until
the properties are brought into commercial production. The costs are then
amortized on a unit of production basis. If the properties are abandoned, the
costs are charged to operating expense in the period the properties are
abandoned. If the Company determines that a property has been impaired, a
portion of the costs, representing such impairment, are charged to operating
expense in the period such a determination is made.
The Company has a working capital deficiency at June 30, 1995 and accordingly,
will have to obtain significant additional funds to finance the cost of
implementing these programs and, if successful, to place properties into
production. However, management of the Company believes that additional funds
may be obtained from future debt or equity financing. There can be no assurance
that additional required funds will be obtained through debt or equity
financing or that the exploration and development of the Company's mineral
interests will ultimately prove to be economically viable or that the amounts
carried on the books as mineral claims and deferred exploration costs will be
recovered.
<PAGE>
Loss Per Common Share - Loss per common share is based on the weighted average
number of common shares outstanding during each period. Common stock
equivalents (convertible preferred stock and incentive stock options) have been
excluded from the per share computation as their effect is antidilutive.
Cash and equivalents - For the purposes of the statement of cash flows, the
Company defines cash and equivalents to be all highly liquid investments with
an original maturity of three months or less.
Supplemental Statement of Cash Flow Information - During the years ended June
30, 1995 and 1994, the Company made interest payments of $0 and $401,
respectively, and income tax payments of $900 and $800, respectively. The
Company was also involved in the following noncash financing activities:
- - During the years ended June 30, 1995 and 1994, common stock in the amount
of $209,341 and $158,975 was issued to settle accounts payable and accrued
costs.
- - Land held by the Company was sold for a net sales price of $66,697 during
the year ended June 30, 1995. At June 30, 1995, the sales proceeds were
held in trust for the Company.
- - Income Taxes - Income taxes reported in the statements of income are
computed at current tax rates for the current liability and at expected
future tax rates for the deferred liability. Deferred taxes are provided
for temporary differences between the recognition of items for tax and
financial reporting purposes (Note 9).
3. MANAGEMENT'S PLAN TO SUSTAIN OPERATIONS
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, during the years ended June 30, 1995 and 1994 the Company incurred
net losses of $178,310 and $167,545, and as of June 30, 1995, the Company's
current liabilities exceeded its current assets by $21,039. The Company
currently has no source of operating revenues. These factors and others may
indicate that the Company will be unable to continue as a going concern for a
reasonable period of time. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
In April 1995, the Company entered into an agreement in principal with Western
Copper Holdings Ltd. (Western), its joint venture partner in the Carmacks
Copper Project to a merger in which Western would be the continuing company.
As of August 21, 1995, the formal plan has yet to be approved by TEC's
shareholders or regulatory authorities and accordingly, no assurances can be
given that the merger will be consummated. Should the merger with Western not
be completed, management believes the Company will be able to continue in
existence during the fiscal year ending June 30, 1996 for the following
reasons. The Company has a minimal amount of fixed costs and overhead. All
management and staff positions are filled by personnel who bill the Company on
an hourly basis and who are also stockholders in the Company. The Company has
been successful in the past in raising funds through private placements and
capital infusions or loans from stockholders and believes that it will continue
to be successful in raising funds in this manner.
<PAGE>
4. DEFERRED EXPLORATION COSTS AND MINERAL CLAIMS
Carmacks - The Company is a 50% partner with Western (Note 3) in a joint
venture to develop the Carmacks Copper Project in the Yukon of Western Canada.
The Company had capitalized $1,586,810 and $1,354,134, respectively, in
exploration expenditures related to this project at June 30, 1995 and 1994,
respectively. Exploration costs are to be funded equally by both parties.
Failure by TEC to fund its share of future costs would result in the dilution
of its interest. Ultimately, recovery of TEC's exploration costs is dependent
upon the joint venture's ability to develop the mine and achieve successful
operations.
Lac de Gras - In April 1992, the Company obtained an option from the Heard
Syndicate (Heard) on mineral claims covering 94,519 acres in the Lac de Gras
area of the Northwest Territories in exchange for 200,000 shares of the
Company's common stock valued at $95,200. During the year ended June 30, 1993,
the Company wrote off $50,000 of its deferred exploration costs based on its
estimate of the recoverability of such costs for this project. During the year
ended June 30, 1995, management concluded that this project was not
economically feasible and the Company wrote off the remaining balance of the
project's deferred exploration costs.
Imagine - In April 1993, the Company entered into an agreement with Imagine
Holding (Imagine), to jointly explore an area in Northwestern Quebec for base
and precious metals. The Company had capitalized exploration costs of $9,750
at June 30, 1993 relating to this project. Although the Company and Imagine
both retain the right to perform additional exploration activities, the Company
does not expect to perform such activities in the foreseeable future. As a
result, during the year ended June 30, 1994, the Company wrote off such
capitalized exploration costs of $9,750.
Current - In March 1995, the Company capitalized $4,285 in conjunction with its
acquisition of seven contiguous mineral claims in Nevada.
Other - On August 9, 1994, the Company entered into an agreement with
Kalahari Resources (Kalahari) to sell the Company's interest in two mineral
claims in Ontario in exchange for 75,000 shares of Kalahari stock with a market
value of approximately $40,855. The Company's book value of the mineral claims
sold was nominal. During the year ended June 30, 1995, the Company sold the
75,000 shares and realized a net gain of $37,573.
5. SALE OF LAND
In June 1995, the Company sold 2,057 acres of land in Utah recording a gain of
$30,664. At June 30, 1995, account receivables included $66,697 relating to
sale proceeds which were held in trust for the Company. Such funds were
received in July 1995.
<PAGE>
6. STOCKHOLDERS' EQUITY
Series A nonvoting preferred stock is convertible into common stock at the
election of the holder, at the rate of one share of common stock for each
share of preferred stock. No dividend or distribution may be declared or paid
on any shares of common stock or Series A preferred stock unless at the same
time an equivalent dividend or distribution is declared or paid on all
outstanding shares of common stock and Series A preferred stock. Any dividend
on Series A preferred stock shall be payable in an amount equal to the
dividends payable on the common stock which the Series A preferred stockholders
would be entitled to receive if the preferred stock had been converted into
common stock immediately prior to the record date of such dividend. In the
event of liquidation, the holders of the preferred stock have a liquidation
preference in the amount of $3.00 per share.
On occasion, the Company has sold shares of its common stock under agreements
which allow the buyer, if eligible, to receive favorable treatment under
Canadian tax law. Under such agreements, termed Flow Through Agreements, a
buyer will commit to purchase a specified amount of the Company's common stock
at a specified price subject to the conditions that the Company agree to use
the funds for natural resource exploration in Canada; to convey the tax
benefits of such exploration expenditures to the buyer; and to flow through any
Canadian incentive payments to which the Company would otherwise be entitled.
Upon entering the agreement, the buyer places the stock purchase price, and the
Company issues its common shares, into trust. As the Company incurs qualifying
exploration costs, the cash is released from trust to the Company and the
shares are issued to the buyer.
In April 1993, the Company entered into a Flow Through Agreement with Thermal
(1993) Limited Partnership I (TLP) for the private placement of the Company's
stock. Under the agreement TLP committed to purchase 231,250 shares of the
Company's common stock at a price of $0.60 (CDN) per share. In accordance with
the agreement, TLP placed $138,750 (CDN) in cash and the Company placed 231,250
shares of its common stock in trust in June 1993 for issuance under the private
placement. During the year ended June 30, 1994, the Company issued the 231,250
shares from trust.
In November 1993, the Company issued 333,333 shares of its common stock under
the terms of an October 31, 1993 agreement with a private individual (Buyer)
for the private placement of the Company's stock. Under the agreement, the
Buyer committed to purchase 333,333 shares of the Company's common stock at a
price of $.30 (CDN) per share. In addition, warrants for the purchase of an
additional 333,334 shares of the Company's common stock were issued to the
Buyer. The warrants expire two years after the date of the original agreement
and are exercisable at $.30 (CDN) per share if exercised within one year from
the date of the original agreement and $.35 (CDN) per share thereafter until
expiration. As of June 30, 1995, 333,334 warrants remained outstanding.
On December 20, 1993, the Company entered into a private placement agreement
with a significant shareholder (shareholder). Under the terms of the agreement
the Company issued 880,000 shares of its common stock at .25 (CDN) per share
primarily to settle amounts owed by the Company to the shareholder.
In January 1994, the Company issued 500,000 shares of its common stock to a
private party (Party) at a price of $.30 (CDN) per share. The Company issued
333,333 of the shares subject to the conditions of a Flow Through Agreement
with the Party.
<PAGE>
In addition, warrants for the purchase of an additional 500,000 shares of the
Company's common stock were issued to the Party. In June 1994, the Party
exercised the related warrants at a price of $.30 (CDN) per share. The Company
issued 166,665 shares of its common stock in June 1994 to the Party. The
remaining 333,335 shares were placed into trust in June 1994 subject to the
conditions of its Flow Through Agreement with the Party. Accordingly, $71,000
of accounts payable were classified as noncurrent liabilities in the
accompanying balance sheet as of June 30, 1994. In December 1994, the Company
issued the remaining 333,335 shares and received proceeds of $72,000, which it
used to pay accounts payable relating to exploration activities at the Carmacks
Copper Project and which had been classified as noncurrent liabilities at June
30, 1994.
In January 1995, the shareholders of the Company voted to increase authorized
common shares from 25,000,000 to 100,000,000.
In January 1995, the Company entered into a private placement agreement with
Western. Under terms of the agreement, the Company issued 1,200,000 shares of
its common stock at $.30 (CDN) per share in settlement of amounts owed by the
Company for accounts payable and accrued costs relating to the Carmacks Copper
Project.
In addition, warrants for the purchase of an additional 600,000 shares of the
Company's common stock were issued to Western. The warrants expire one year
after the date of the original agreement and are exercisable at $.35 (CDN) per
share. As of June 30, 1995, 600,000 warrants remained outstanding.
In May 1995, the Company entered into a Flow Through Agreement with an investor
for the private placement of the Company's stock. Under the agreement, the
investor committed to purchase 500,000 shares of the Company's common stock at
a price of $.30 (CDN) per share. In addition, warrants for the purchase of an
additional 500,000 shares of the Company's common stock were issued to the
investor. The warrants expire 12 months after issuance and are exercisable
at $.40 (CDN) per share. As of June 30, 1995, 500,000 warrants remained
outstanding.
The 500,000 shares of common stock were placed into trust in May 1995, subject
to the conditions of the Flow Through Agreement with the investor. Accordingly
$108,000 of accounts payable were classified as noncurrent liabilities in the
accompanying balance sheet as of June 30, 1995. No shares had been issued from
trust as of August 21, 1995.
7. STOCK OPTION PLAN
In October 1989, the Company reserved 1,000,000 shares of common stock for
issuance under a stock option plan for directors, officers, and employees. An
additional 500,000 shares of common stock were reserved during the year ended
June 30, 1992. Under the plan, options are to be granted and priced as
determined by the board of directors. Vesting under the plan occurs
immediately upon the granting of the options.
<PAGE>
The following is a summary of stock option activity for the years ended June
30, 1995 and 1994.
Options --Options Outstanding----
Available Number of Price per
For Grant Shares Share (CDN)
Balance, June 30, 1993 890,000 1,100,000 $.20-.73
Options granted (150,000) 150,000 0.22
Options expired 100,000 (100,000) .73
Options exercised (100,000) 0.21
_______ _________ ________
Balance, June 30, 1994 840,000 1,050,000 .20-.73
Options granted (550,000) 550,000 .35
Options expired 400,000 (400,000) .21-.73
Options exercised (350,000) .21-.24
_______ _________ ________
Balance, June 30, 1995 690,000 850,000 $.20-.54
_______ _________ ________
In addition, the Company has issued warrants to purchase 1,433,334 shares of
common stock at prices ranging from $.35 (CDN) to $.40 (CDN) per share as
described in Note 6.
8. INCOME TAXES
At June 30, 1995, the Company's net operating loss carryforwards (NOLs) for
Federal income tax purposes expire as follow:
1996 $ 321,525
1997 923,076
1998 701,616
1999 1,116,625
2000 234,868
Thereafter 2,514,534
_______________
Total NOLs available for carryforward $ 5,812,244
_______________
Federal and state tax laws impose substantial restrictions on the use of NOLs
under many circumstances including Internal Revenue Code (IRC) Section 382,
which restricts the use of NOLs in the event of significant changes in
ownership interests of individual shareholders and defined shareholder groups.
As a result of such changes in the Company's ownership interests the Company is
limited in the use of its NOLs to reduce future taxable income. The annual
limitation may be increased to the extent of any applicable "built-in gains" as
defined by IRC Section 382. Subsequent ownership changes could further
restrict NOLs.
<PAGE>
Effective July 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109, Accounting for Income Taxes (FAS 109). The Company
had no recorded deferred taxes before or after implementation of FAS 109 and,
accordingly, there was no cumulative or current period effect from the adoption
of FAS 109.
Deferred income taxes reflect the impact of temporary differences between the
amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes and the impact of net operating
loss carryforwards. The components of the Company's deferred tax assets as of
June 30, 1995 and 1994 were as follows:
1995 1994
Benefit from net operating losses $ 1,915,365 $ 1,941,469
Other 41,714 17,000
___________ _____________
Total 1,957,079 1,958,469
Valuation allowance (1,957,079) (1,958,469)
___________ _____________
Net $ - $ -
___________ _____________
During the year ended June 30, 1995, the Company's valuation allowance
decreased by $1,390.
The Company's tax benefit for income tax for the years ended June 30, 1995 and
1994 are composed of the following current taxes:
1995 1994
Canadian $ - $ (17,000)
California 800 800
Utah (7,384) (629)
$ (6,584) $ (16,829)
The Utah tax credit in 1995 and the Canadian tax credit in 1994 results
primarily from the reversal of previously accrued taxes.
9. RELATED PARTY TRANSACTIONS
TEC's president is retained on a consulting basis. Total consulting fees and
payments to the president for the years ended June 30, 1995 and 1994 were
$62,762 and $48,670. During the years ended June 30, 1995 and 1994, the spouse
of the Company's president charged the Company $9,600 annually for secretarial
services. At June 30, 1995 and 1994, $23,872 and $14,771 was owed to these
parties.
During the year ended June 30, 1995, the Company issued 1,200,000 shares of
common stock valued at $252,000 to Western, a significant shareholder in
settlement of accounts payable and accrued costs related to the Carmacks Copper
Project. During the year ended June 30, 1994, the Company issued 271,733
shares of common stock valued at $56,045 to a significant shareholder as
payment to the shareholder for managing the Carmacks Copper Project.
<PAGE>
The Company rents office space from its president on a month-to-month basis.
Rental payments were $6,000 for each of the years ended June 30, 1995 and 1994.
At June 30, 1995 and 1994, the Company was owed $8,000 by a director of the
Company.
At June 30, 1995 and 1994, the Company owed $16,561 and $10,199 to a Company
that was a significant shareholder during the period the borrowings occurred.
The amount is payable on demand and accrues interest at a rate of 6% annually.
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<NAME> THERMAL EXPLORATION COMPANY
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