ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation or administrative proceedings that the Company believes would have a material adverse affect on the Company's results of operations. The Company is not aware of any threat of such litigation or proceeding.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information. The Company's common stock ("Common Stock") is traded on the Nasdaq Stock Market under the symbol "ALTA." The following table sets forth the high and low closing prices of the Common Stock, as reported by the Nasdaq Stock Market, during the periods indicated.
The closing price on the Nasdaq Stock Market on March 26, 1998 was $1-27/32 per share.
Holders. As of March 26, 1998, there were approximately 7,378 holders of record of the Company's common stock, including several holders who are nominees for an undetermined number of beneficial owners.
Dividends. The Company has not declared or paid any dividends on its Common Stock since 1989, and the Board of Directors intends to retain all earnings, if any, for use in the Company's business for the foreseeable future. In addition, one of the Company's loan agreements restricts the payment of cash dividends. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - 1998 Outlook." Any future determination as to declaration and payment of dividends will be made at the discretion of the Board of Directors.
On November 11, 1997, the Company entered into an agreement (the "Master Agreement") with the holders of the 4% Convertible Debentures issued on April 14, 1997 (the "1997 Debentures"). Pursuant to the terms of the Master Agreement, the maturity date of the 1997 Debentures was extended from April 14, 1999 to April 14, 2000. In addition, the Company agreed to issue warrants in three tranches to the holders of the 1997 Debentures based upon the outstanding principal amount of the 1997 Debentures on November 15, 1997, March 31, 1998 and September 30, 1998. The exercise price for each tranche is 120% of the closing price on the respective issuance dates. The warrants are exercisable at any time after their issuance date and within a three-year period for the first tranche and a five-year period for the second and third tranches. Pursuant to the terms of the Master Agreement, the Company agreed to file a registration statement with the Securities and Exchange Commission prior to April 30, 1998 to register the common stock issuable upon an exercise of the warrants. On November 18, 1997, the Company issued warrants to purchase 232,000 shares of the Company's common stock at an exercise price of $2.18 per share. The warrants were issued pursuant to an exemption from registration as set forth in Section 4(2) and Regulation D of the Securities Act of 1993.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data with respect to the Company and should be read in conjunction with the Financial Statements and Notes thereto set forth elsewhere in this report. All amounts are stated in thousands except per share amounts.
No dividends were paid during the above five-year period.
SUPPLEMENTARY FINANCIAL INFORMATION
The following table summarizes certain selected unaudited financial data with respect to the Company and should be read in conjunction with the Financial Statements and Notes thereto set forth elsewhere in this report. All amounts are stated in thousands except per share amounts.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 provide a "safe harbor" for forward-looking statements. Certain information included herein contains statements that are forward-looking, such as statements regarding management's expectations about the Company's reserves, timing of receipt of government permits, planned dates for commencement of mining operations and gold production at the Company's mining properties, anticipated drilling and reclamation expenditures as well as other capital spending, financing sources and the effects of regulation. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include, but are not limited to, those relating to the market price of metals, production rates, production costs, the availability of financing, the ability to obtain and maintain all of the permits necessary to put and keep properties in production, development and construction activities, and issues related to the year 2000. See "Items 1 and 2. Business and Properties - Risk Factors."
RESULTS OF OPERATIONS
Comparison of the years ended December 31, 1997 and 1996
In 1997, the Company had $12.3 million in revenue from the sale of 35,990 ounces of gold at an average price of $340/oz, as compared to $19.6 million in revenue in 1996 from the sale of 49,900 ounces of gold at an average price of $392/oz. In 1997, the Company produced 38,472 ounces of gold, all from Kinsley, at an average cash cost of $206/oz. In 1996, the Company produced 49,486 ounces of gold, 44,552 ounces from Kinsley at an average cash cost of $219/oz and 4,934 ounces from Easy Junior at an average cash cost of $292/oz. The decrease in cash production costs at Kinsley from $219/oz in 1996 to $206/oz in 1997 is principally due to an increase in the grade of the ore mined. In 1997, the Company mined 1,588,000 tons of ore at Kinsley with an average grade of .037 oz/ton gold. In 1996, the Company mined 1,853,000 tons of ore with an average grade of .032 oz/ton gold.
The decrease in revenue from $19.6 million in 1996 to $12.3 million in 1997 is due to the following: (1) an unexpected diminution in the later half of 1997 of the size and the metallurgical quality of the last two remaining ore bodies to be mined at Kinsley; (2) the completion of gold production at Easy Junior in 1996; and (3) the significant decrease in the price of gold that was experienced in 1997. The decrease in direct mining, production and holding costs from $14.6 million in 1996 to $9.5 million in 1997 is directly related to the decrease in production, as well as the higher grade of ore mined at Kinsley in 1997.
General and administrative expenses were $1.6 million in both 1996 and 1997.
Exploration expenses increased from $0.1 million in 1996 to $0.3 million in 1997 as the result of exploration activities conducted in 1997 on properties acquired in the latter half of 1996.
Interest income and other increased from $0.1 million in 1996 to $0.2 million in 1997 as the result of more funds available for investment in 1997. The decrease in interest expense from $0.1 million in 1996 to zero in 1997 was due to increased capitalization of interest in 1997.
In 1997, the Company realized an extraordinary gain of $0.8 million from the early retirement of debt. There were no similar transactions in 1996.
No provision for income taxes was recognized during either 1997 or 1996 because of the generation of a tax loss in both years. As of December 31, 1997, the Company estimates that it has approximately $30.9 million in accumulated net operating loss carryforwards. These net operating loss carryforwards are scheduled to expire during the period 2005 to 2012.
Comparison of the Years Ended December 31, 1996 and 1995
In 1996, the Company had $19.6 million in revenue from the sale of 49,900 ounces of gold at an average price of $392/oz, as compared to $20.6 million in revenue in 1995 from the sale of 52,580 ounces of gold at an average price of $392/oz. In 1996, the Company produced 49,486 ounces of gold, 44,552 ounces from Kinsley at an average cash cost of $219/oz and 4,934 ounces from Easy Junior at an average cash cost of $292/oz. In 1995, the Company produced 53,063 ounces of gold, 40,667 ounces from Kinsley at an average cash cost of $184/oz and 12,396 ounces from Easy Junior at an average cash cost of $283/oz. The increase in cash production costs at Kinsley from $184/oz to $219/oz between 1995 and 1996 is principally due to a decrease in the grade of ore mined and longer hauls. In 1996, the Company mined 1,853,000 tons of ore at Kinsley with an average grade of .032 oz/ton gold, principally from the Ridge deposit. In 1995, the Company mined 1,268,000 tons of ore at Kinsley with an average grade of .052 oz/ton gold, principally from the Main deposit, which was depleted by the end of 1995.
Gold production at Kinsley began in late January 1995. Mining at Easy Junior was completed in the third quarter of 1994; however, gold production from pad rinsing continued in ever decreasing amounts until it ended in December 1996. The decrease in revenue from $20.6 million in 1995 to $19.6 million in 1996 is principally due to the winding down of gold production at Easy Junior, as partially offset by Kinsley being in production for a full year in 1996. The decrease in direct mining, production and holding costs from $15.4 million in 1995 to $14.6 million in 1996 is directly related to the decrease in production, as partially offset by the lower grade of ore mined at Kinsley in 1996.
General and administrative expenses increased from $1.4 million in 1995 to $1.6 million in 1996 due to costs incurred in 1996 associated with the Company's efforts to raise additional equity and debt capital.
Exploration expenses increased from $30,000 in 1995 to nearly $0.1 million in 1996 as the result of exploration conducted in 1996 on properties acquired late in 1996.
In 1995, the Company sold its remaining interest in the Robinson copper property for a net gain of $2.4 million; there were no similar transactions in 1996. Interest income and other decreased from nearly $0.2 million in 1995 to nearly $0.1 million in 1996 primarily as the result of lower average balances available for investment in 1996. Interest expense and other decreased from $0.6 million in 1995 to $0.1 million in 1996 principally due to increased capitalization of interest in 1996.
No provision for income taxes was recognized in 1996 because of the generation of a tax loss and in 1995 because of the utilization of net operating loss carryforwards. As of December 31, 1996, the Company estimates that it has approximately $25.0 million in accumulated net operating loss carryforwards. These net operating loss carryforwards are scheduled to expire during the period 2005 to 2011.
LIQUIDITY AND CAPITAL RESOURCES
General
As of December 31, 1997, the Company had $2.8 million in working capital, as compared to a $2.6 million working capital deficit as of December 31, 1996. The $5.4 million increase in working capital is primarily due to proceeds received from the issuance of $10.0 million in convertible debentures and funds generated from gold production at Kinsley, as partially offset by funds required (1) to put Griffon into production, (2) to continue the permitting and development of Olinghouse, and (3) to continue the permitting of Copper Flat. The Company believes that production from Griffon and Kinsley will provide adequate liquidity for the Company's operational needs during 1998. Outside financing, whether from debt or through joint ventures or similar arrangements, will be required to begin site development and construction at Olinghouse and Copper Flat.
The following table summarizes the Company's working capital (deficit) as of the dates shown (with dollars in thousands):
OPERATIONS AND CAPITAL EXPENDITURES
In 1997, 1996 and 1995, the Company spent $9.9 million, $8.8 million and $4.5 million, respectively, for the acquisition of mining claims, permitting and mine planning and the acquisition of plant and equipment, for a total of $23.2 million during the three-year period. In 1997, the Company used $1.1 million in operations and in 1996 and 1995, the Company generated from operations $5.6 million and $4.9 million, respectively, for a net total of $9.4 million during the three-year period. The resultant $13.8 million cash shortfall for the three-year period was funded with $.5 million in cash on hand at the beginning of the three-year period, the receipt of $2.6 million in proceeds from asset sales, the receipt of $0.2 million from the exercise of stock options and $13.8 million in net borrowings. The decrease in cash flow from operations from a positive $5.6 million in 1996 and a positive $4.9 million in 1995 to a negative $1.1 million in 1997 is principally due to the decrease in operating income in 1997 and the normal up-front build-up of work-in-process gold inventory at Griffon at the end of 1997. Mining began at Griffon in September 1997. Production of refined gold began in January 1998.
Financing Activities
The Company obtained $13.8 million and $3.4 million from net financing activities in 1997 and 1996, respectively, and used $3.2 million in net financing activities in 1995, for a net total of $14.0 million provided by financing activities during the three-year period. In 1997 and 1996, the Company realized $13.6 and $3.4 million, respectively, from net borrowings. In 1995, the Company reduced outstanding debt by $3.2 million.
Other
The approach of the year 2000 has become a potential problem for businesses utilizing computers in their operations since many computer programs are date sensitive and will only recognize the last two digits of the year, thereby recognizing the year 2000 as the year 1900 or not at all (the "Year 2000 Issue"). Management has made a comprehensive assessment of the Company's exposure to the Year 2000 Issue and what will be required to ensure that the Company is Year 2000 compliant. The primary computer programs utilized in the Company's operations and financial reporting systems have been acquired from independent software vendors. All of these vendors have been formally contacted to determine whether their systems are Year 2000 compliant, and, if not, timelines have been or will be established as to when the Company will receive the required upgrades that assure that these systems will be Year 2000 compliant. Maintenance or modification costs associated with the Year 2000 Issue will be expensed as incurred, while the costs of any new software will be capitalized and amortized over the software's useful life. The Company does not expect to incur costs in connection with the Year 2000 Issue that would have a material impact on operations. Although the Company presently believes that all of its software programs will be Year 2000 compliant, there can be no assurances that the Company will not be adversely affected by the Year 2000 Issue.
1998 Outlook
For 1998, the Company has budgeted cash expenditures of (1) $0.9 million for permitting and holding costs at Olinghouse and Copper Flat, (2) $8.5 million for debt repayment and associated interest, and (3) $0.1 million for reclamation. These expenditures are expected to be funded from revenues generated from gold production at Griffon and Kinsley, all of which has been hedged at a minimum price of $335/oz. An additional $18.0 million in expenditures for site development, construction, equipment and working capital for Olinghouse has been tentatively budgeted for 1998, as well as $0.7 million for drilling and related activities at Griffon, Olinghouse, Lookout Mountain and Excalibur. The timing of these additional expenditures is dependent upon the receipt of the remaining outstanding permits and the availability of outside financing. The Company is currently in the final stage of permitting Olinghouse. On March 16, 1998, the Company signed a term sheet for a $24.4 million Loan Facility. The Loan Facility is to be used for site development, construction, equipment and working capital for Olinghouse, as well as for the early repayment of an existing loan with BHF Bank in the outstanding principal amount of approximately $3.4 million. $19.4 million of the Loan Facility is subject to customary due diligence, definitive loan documentation and the receipt of the necessary permits at Olinghouse. The Company expects to obtain all of the necessary permits and financing; however, there is no assurance that the Company will be able to do so. See "- Risk Factors - Uncertainty of Funding" and "- Government Permits and Project Delays."
Under the terms of the 1997 Debentures, the Company must not issue more than a total of 5,779,695 shares of its common stock (the "Maximum Share Amount"), unless the Company has obtained stockholder approval or a waiver by the Nasdaq Stock Market. In lieu of any conversion of shares in excess of the Maximum Share Amount, the Company must pay the holders of the 1997 Debentures 111% of the outstanding principal amount plus accrued and unpaid interest. Based on a conversion price of $1.49 (90% of the average closing bid price of the Company's common stock for the five trading days preceding February 13, 1998 or $1.66), the Company would be obligated to pay holders of the 1997 Debentures a total of $1,532,000 if the holders were to convert all of the outstanding 1997 Debentures ($7,065,000 in the aggregate principal amount as of February 13, 1998). The amount payable to holders of the 1997 Debentures, if any, will increase or decrease depending on the average closing bid price of the Company's common stock. If the average closing bid price of the Company's common stock were $2.06 or above, a conversion of all the outstanding 1997 Debentures would not exceed the Maximum Share Amount and no payment to holders in lieu of a conversion of shares would be required. If all or any of the 1997 Debentures are converted within the next 12 months that would result in the issuance of shares in excess of the Maximum Share Amount, management believes that the Company will have sufficient funds to pay the holders in lieu of a conversion of such shares or it will request stockholder approval for the issuance of such shares.
As of December 31, 1997, the Company had (1) purchased put options for 84,000 ounces of gold at $335/oz, of which options for 7,000 ounces mature each month from January to December 1998, and (2) sold call options for 45,000 ounces of gold at $390/oz, of which options for 3,750 ounces mature each month from January to December 1998.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page ----
Report of Independent Public Accountants 33
Financial Statements:
- Balance Sheets as of December 31, 1997 and 1996 34
- Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 36
- Statements of Stockholders' Equity for Years Ended December 31, 1997, 1996 and 1995 37
- Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 38
- Notes to Financial Statements 40
Supplementary Financial Information is included on page 28.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------
To the Stockholders and Board of Directors of Alta Gold Co.:
We have audited the accompanying balance sheets of Alta Gold Co. (a Nevada corporation) as of December 31, 1997 and 1996, and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. 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, the financial statements referred to above present fairly, in all material respects, the financial position of Alta Gold Co. as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP Las Vegas, Nevada February 13, 1998
ALTA GOLD CO. BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996 (In thousands)
ASSETS ------
The accompanying notes to financial statements are an integral part of these statements.
ALTA GOLD CO. BALANCE SHEETS (CONTINUED) AS OF DECEMBER 31, 1997 AND 1996 (In thousands, except share and per share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------
The accompanying notes to financial statements are an integral part of these statements.
ALTA GOLD CO. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands, except share and per share amounts)
The accompanying notes to financial statements are an integral part of these statements.
ALTA GOLD CO. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands)
The accompanying notes to financial statements are an integral part of these statements.
ALTA GOLD CO. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands)
The accompanying notes to financial statements are an integral part of these statements.
ALTA GOLD CO. STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands)
The accompanying notes to financial statements are an integral part of these statements.
ALTA GOLD CO. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
(1) BASIS OF PRESENTATION AND NATURE OF OPERATIONS
Basis of Financial Statement Presentation -----------------------------------------
The accompanying financial statements include the accounts of Alta Gold Co. (the "Company"), which was incorporated in Nevada in 1962. The Company is engaged in the exploration, development, mining and production of gold on properties located in Nevada. The Company also owns three base metal properties, located in the western United States.
Kinsley -------
In 1993, the Company entered into an option agreement with Cominco American Resources Incorporated ("Cominco") and USMX, INC. ("USMX") to purchase a 100% interest in the Kinsley gold property, located near Wendover, Nevada, for a total purchase price of $3,000,000 consisting of $2,000,000 cash and shares of common stock of the Company with a market value of $1,000,000. During 1994, the Company exercised its option and acquired the Kinsley gold property. The Company made an initial cash payment of $1,000,000 (which included option payments of $50,000 made in 1993) and issued 420,683 shares of common stock which had a market value of $500,000. The Company paid the remaining $1,000,000 in cash and issued 461,095 shares of common stock of the Company with a market value of $500,000 in 1995.
Cominco and USMX have a right of first refusal with respect to future sales or transfers of Kinsley interests to third parties as well as rights to acquire a 25% working interest in the Kinsley gold property if gold production exceeds a total of 300,000 ounces and an additional 24% working interest if gold production exceeds a total of 500,000 ounces.
Copper Flat -----------
During 1994, the Company acquired a 100% interest in the Copper Flat project which is located in the Hillsboro Mining District, east of Silver City, New Mexico, from Gold Express Corporation ("Gold Express"). The purchase price for the Copper Flat property consisted of: (i) $1,400,000 in cash, (ii) a 6% convertible subordinated debenture in the principal amount of $1,500,000 due two years after the date of acquisition, (iii) a 6% convertible subordinated debenture in the principal amount of $1,500,000 due four years after the date of acquisition, and (iv) a $4,000,000 subordinated zero coupon debenture due fourteen years after the date of acquisition.
The debentures were subject to a right of offset in the event that the Company suffered any loss, cost, damage, injury or expense as a result of a breach by Gold Express of any provision of the asset purchase agreement under which the debentures were issued. The Company identified several breaches made by Gold Express and exercised its right of offset. In June 1996, the Company entered into a settlement with Gold Express' successor in interest, StarTronix International, Inc. ("StarTronix"), to convert $1,600,000 of the $3,000,000 convertible debentures into 400,000 shares of the Company's common stock and warrants to buy an additional 400,000 shares of the Company's common stock at a price of $4.00 per share. The warrants were determined to have a de minimis value. The difference was credited against the original cost of certain mining properties and claims for which the original debentures were issued.
Concurrent with the acquisition of the interest in the Copper Flat project, the Company issued 375,000 restricted common shares of the Company to the owner of a reserved interest in exchange for capping the net smelter return royalty at 2-1/2% during the life of the project. Under the terms of this agreement, the Company was obligated to pay the owner of this reserved interest the difference between $4.00 per share and the closing price, if less than $4.00 per share, of the Company's common stock as of the second anniversary date of the common stock issuance as multiplied by a maximum of 250,000 shares. In 1996, a payment of $109,000 was made to the owner of the reserved interest to satisfy this obligation.
Pursuant to the terms of the purchase agreement, the Company granted Gold Express a provisional copper production royalty, which provided for a royalty based on 50% of the quantity of copper produced from the Copper Flat property during a calendar quarter. The maximum amount of the royalty over the life of the mine was $4,000,000 and any royalty payments made by the Company was to be credited, on a dollar for dollar basis, against the principal amount owed under the $4,000,000 zero coupon debenture.
On May 12, 1997, the Company paid $750,000 in cash to the holder of the $4,000,000 zero coupon debenture in exchange for the full and complete satisfaction of the debenture and the termination of the associated agreement to receive up to $4,000,000 in royalties. As the result of the transaction, the Company retired the $4,000,000 zero coupon Debenture, which had a net book value of $1,534,000, and recorded a one-time extraordinary gain of $784,000.
The Copper Flat project is subject to a reserved interest held by Gold Express' predecessor in interest. The reserved interest required payments of a 2-1/2% net smelter return royalty. Until production commences, the Company must pay the predecessor in interest $150,000 in annual advanced royalties which will be credited against the net smelter royalty when production commences.
Olinghouse ----------
During 1994, the Company acquired a 100% interest in the Olinghouse gold property, located 30 miles east of Reno, Nevada, from the Phelps Dodge Mining Company for a total purchase price of $6,875,000 consisting of $4,625,000 in cash and a promissory note in the amount of $2,250,000 which was paid in July 1995.
Griffon -------
During 1994, the Company acquired from Griffon Resources, Inc. the Griffon gold property located near Ely, Nevada. Under the terms of the purchase agreement, the Company is required to make annual holding payments of $40,830 through 1996 and pay production royalties of $13.60 per ounce of gold for the first 50,000 ounces of production and a maximum of $10.00 per ounce of gold on any subsequent production.
The Company began construction and site development at Griffon in July 1997, commenced mining in September 1997, and began gold production in January 1998.
Easy Junior -----------
The Company owns a 100% interest in the Easy Junior mine which is located near Ely, Nevada. Mining operations were completed in the third quarter of 1994 with the exception of crushing and leaching activities. Crushing activities were completed in the first quarter of 1995 and leaching activities were completed in the fourth quarter of 1996. Reclamation activity continued during 1997.
Ward and Taylor Operations --------------------------
The Company's main base metal property in Nevada is the Ward zinc mine ("Ward"). Production mining at Ward commenced in 1989 and the Company began milling the Ward ore at the Taylor mill in 1990. The Company suspended mining operations in March 1991 as a result of declining zinc prices and higher than anticipated operating costs. The Taylor mill continued operating in 1991 until the mined ore stockpiles were processed. The net book value of property, equipment, claims and deferred mine development costs at Ward and the Taylor mill is approximately $8,369,000 at December 31, 1997.
Robinson Copper Project -----------------------
In January 1995, the Company sold its royalty interest in the Robinson project for $2,425,000 in cash. The Company had previously owned a working interest in the Robinson project through 1991. At the time of the sale, the royalty interest had no book value, and accordingly, the Company recognized a gain of $2,425,000 on the sale of assets which is included in the accompanying 1995 statement of operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Use of Estimates -----------------------------
The preparation of 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents --------------------------
For purposes of the balance sheets and statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Such investments are carried at cost which approximates fair value.
Inventories -----------
Inventories of in-process mineral products and consumable supplies are stated at the lower of cost (using the first-in, first-out method) or market value. Inventories of refined products are stated at market value.
Inventories consist of the following as of December 31, 1997 and 1996 (in thousands):
Property and Equipment ----------------------
Property and equipment are recorded at cost. Costs incurred for additions, improvements and betterments are capitalized as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives (ranging from 3 to 15 years) of the related assets. Certain processing buildings and equipment are depreciated using the units-of-production method. Costs for maintenance and repairs are charged to expense or, if the equipment is associated with a property under development, to deferred development costs, as incurred.
Exploration/Deferred Mine Development Costs -------------------------------------------
The Company expenses exploration costs incurred in finding areas of mineralization. When an area of mineralization has been approved for development, any further exploration costs are capitalized.
Deferred mine development costs are recorded at cost and amortized to operations over the expected productive lives of the properties using the units-of-production method based on estimated reserves. The recoverability of deferred mine development costs is dependent upon future metals prices. Whenever events or circumstances indicate that the carrying amount of the deferred development costs may not be recoverable, the Company analyzes the impact of these changes and their effect on the future cash flows of a property. If the sum of the undiscounted future cash flows is less than the carrying amount of a property, the Company's policy is to write the assets down to their fair value.
Capitalized Interest --------------------
The Company capitalizes interest costs associated with significant projects which have been approved for development and for which development activities are in process. Interest capitalized during the years ended December 31, 1997, 1996 and 1995 totaled $1,035,000, $384,000 and $286,000, respectively.
Reclamation Costs -----------------
Minimum standards for mine reclamation have been established by various governmental agencies which affect certain operations of the Company. The Company accrues estimated reclamation costs during the property's productive life based on estimated reserves using the units-of-production method.
Revenue Recognition -------------------
The Company recognizes revenue for all sales of mineral products at the point of transfer to the buyer. Sales of certain metal by-products are accounted for as a reduction to direct mining and production costs.
Hedging Activities ------------------
The Company has contractually agreed to sell 100% of its gold production to Gerald Metals, Inc., located in Stamford, Connecticut, through April 1999, pursuant to fixed price future sales contracts and/or at spot prices prevailing at the time of sale. As of December 31, 1997, the Company had (1) purchased put options for 84,000 ounces of gold at $335/oz., of which options for 7,000 ounces mature each month from January 1998 to December 1998, and (2) sold call options for 45,000 ounces of gold at $390/oz., of which options for 3,750 ounces mature each month from January 1998 to December 1998. Due to the fungible nature of gold, the Company believes that other buyers are readily available to purchase the Company's gold and, consequently, that its reliance on a single customer does not represent a significant risk to the Company's operations.
During the years ended December 31, 1997 and 1996, the Company sold all of its gold production to Gerald Metals, Inc. During the year ended December 31, 1995, the Company sold 86% of its gold production to Gerald Metals, Inc. and the remainder to Prudential Securities Incorporated.
Income Taxes ------------
The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes, which requires recognition of deferred income tax assets and liabilities for the consequences of temporary differences between amounts reported for financial and income tax purposes. SFAS No. 109 also requires the recognition of future tax benefits of deferred tax assets related to net operating loss carryforwards and certain other temporary differences to the extent that realization of such deferred tax assets is more likely than not; otherwise a valuation allowance is applied.
Earnings Per Share ------------------
The Company follows the provisions of SFAS No. 128, Earnings Per Share, which is required for financial statements issued for periods ending after December 15, 1997, and requires restatement of all prior-period earnings per share date presented. SFAS No. 128 replaces previously reported earnings per share with "basic" earnings per share and "diluted" earnings per share. Basic earnings per share is based on the weighted average number of shares actually outstanding during the year. Diluted earnings per share includes the potential dilution for the exercise of stock options, warrants, and debt conversions.
Reclassifications -----------------
Certain reclassifications have been made to the prior periods' financial statements to conform with the current year presentation. These reclassifications had no effect on net income.
(3) DEFERRED MINE DEVELOPMENT COSTS
Deferred mine development costs as of December 31, 1997 and 1996, are summarized as follows by mining area (in thousands):
(4) LONG-TERM DEBT
Long-term debt as of December 31, 1997 and 1996 consists of the following (in thousands):
On April 10, 1997, the Company entered into a credit facility with Gerald Metals and BHF Bank to borrow up to $8,500,000. The Company used approximately $4,700,000 of the credit facility to repay certain indebtedness due to Gerald Metals. The remaining funds were used for the construction of Griffon, working capital and the payment of certain expenses. Borrowings from the credit facility accrue interest at LIBOR plus two percent. Interest is payable monthly and principal is payable in fifteen equal monthly installments commencing on January 31, 1998. The credit facility is secured by a first priority mortgage on Kinsley and Griffon, and a first priority security interest in the Company's tangible and intangible personal property. The credit facility contains certain covenants that impose restrictions on the ability of the Company to, among other things, change the Company's corporate structure, pay dividends on or repurchase the Company's common stock, and create or suffer to exist any liens (other than permitted liens) on the Company's assets or properties. In addition, the Company is required to sell 100% of its gold production to Gerald Metals through April 1, 1999.
On April 14, 1997, the Company completed a private placement of $10,000,000 in convertible debentures (the "Debentures") to a small group of accredited investors. The Debentures accrue interest at an annual rate of four percent and mature on April 14, 2000. The Debentures may be converted into the Company's common stock at a conversion price equal to the lesser of (1) 90% of the average of the closing bid prices of the Company's common stock for the five trading days preceding a notice of conversion, or (2) $4.00. As a result of the conversion feature, the Company recorded $1,111,000 imputed interest payable and the related expense was capitalized as deferred development. Due to conversions, the imputed interest decreased to 917,000 at December 31, 1997. The Debentures contain certain covenants that impose restrictions on the ability of the Company to, among other things, pay dividends on or repurchase the Company's common stock. As of December 31, 1997, $1,750,000 of the convertible debentures have been converted into 991,630 shares of the Company's common stock. Subsequent to year- end, an additional $1,185,000 of convertible debentures converted into 976,443 shares of the Company's common stock.
Under the terms of the Debentures, the Company must not issue more than 5,779,695 shares of its common stock (the "Maximum Share Amount"), unless the Company has obtained stockholder approval or a waiver by the Nasdaq Stock Market. In lieu of any conversion of shares in excess of the Maximum Share Amount, the Company must pay the holders of the Debentures 111% of the outstanding principal amount plus accrued and unpaid interest. Based on a conversion price of $1.49 (90% of the average closing bid price of the Company's common stock for the five trading days preceding February 13, 1998 or $1.66), the Company would be obligated to pay holders of the debentures a total of $1,532,000 if the holders were to convert all of the outstanding Debentures ($7,065,000 in the aggregate principal amount as of February 13, 1998). The amount payable to holders of the Debentures, if any, will increase or decrease depending on the average closing bid price of the Company's common stock. If the average closing bid price of the Company's common stock were $2.06 or above, a conversion of all the outstanding Debentures would not exceed the Maximum Share Amount and no payment to holders in lieu of a conversion of shares would be required. To date, the Company had not requested stockholder approval for the issuance of shares in excess of the Maximum Share Amount.
On May 12, 1997, the Company paid $750,000 in cash to the holder of a $4,000,000 zero coupon debenture due in 2008 (the "Debenture") in exchange for the full and complete satisfaction of the Debenture and the termination of an associated agreement under which the holder of the Debenture had the right to receive up to $4,000,000 in royalties from future production from Copper Flat. As the result of the transaction, the Company retired the Debenture, which had a net book value of $1,534,000, and recorded a one-time extraordinary gain of $784,000.
In management's opinion, the fair market value of long-term debt approximated book value at December 31, 1997 and 1996. The fair value of long-term debt is based on the present value of expected future cash flows discounted by the Company's estimated incremental borrowing rate.
At December 31, 1997, maturities of the Company's long-term debt are as follows (in thousands):
(5) INCOME TAXES
The components of the net deferred tax asset (liability) as of December 31, 1997 and 1996, are summarized as follows (in thousands):
SFAS No. 109 requires the recognition of future tax benefits of deferred tax assets related to net operating loss carryforwards and certain temporary differences to the extent that realization of such benefit is more likely than not; otherwise, a valuation allowance is applied. At December 31, 1997 and 1996, the Company determined that $5,103,000 and $5,667,000, respectively, of previously unrecognized tax benefits did not satisfy the recognition criteria set forth in SFAS No. 109 because of the Company's history of prior operating results; therefore, a valuation allowance was recorded to reserve the applicable deferred tax assets. During the years ended December 31, 1997, 1996 and 1995, no income tax provision was recognized due to utilization of net operating loss carryforwards.
The following is a reconciliation between the "expected" provision for income taxes using the statutory Federal income tax rate (35%) and the provision for income taxes for each of the three years ended December 31, 1997 (in thousands):
As of December 31, 1997, the Company had the following income tax carryforwards available for income tax purposes (in thousands):
(6) RECLAMATION AND ENVIRONMENTAL COSTS
General -------
The Company has recorded its best estimate of future reclamation and closure costs based on currently available facts and technology and enacted laws and regulations, and has taken into consideration the Company's estimate of the likely effects of inflation and other societal and economic factors. In determining its best estimate of future reclamation and closure costs, the Company has given consideration to its prior experience and the experience of other companies in reclaiming and closing properties. The Company believes it has accrued all necessary reclamation costs and there are no additional contingent losses on unasserted claims to be disclosed or recorded in the reclamation liability. The Company has not disposed of any properties for which it has a commitment or is liable for any known environmental liabilities.
The Company's mining exploration, development and operational activities are subject to Federal, state and local laws as well as various governmental agency regulations that require the Company to protect the environment. The laws and regulations governing mining operations are continually changing and generally are becoming more restrictive. Consequently, the Company's current estimates of its reclamation obligations and its current level of expenditures to perform ongoing reclamation may change in the future. At the present time, however, the Company cannot predict the outcome of future regulation or its impact on costs. Failure to comply with applicable laws and regulations can result in delays in operations, injunctive actions and damages as well as civil and criminal penalties. To the extent that planned production on its properties is delayed, interrupted or discontinued because of regulation, future earnings of the Company would be adversely affected. The Company believes its operations are presently in substantial compliance with applicable air and water quality laws and regulations.
A portion of the Company's reclamation obligation relates to former mining properties acquired by the Company. For the obligations recorded on these properties, actual expenditures for reclamation may occur over a number of years.
For properties currently in production, the Company has taken extra precautions to minimize the possibility of chemical spills, especially in its heap leaching operations. Leak detection systems, double liner pads and soil neutralization to help prevent spills and to minimize any adverse consequences resulting from a possible spill have been installed pursuant to regulatory requirements and permits.
Restricted Reclamation Deposits -------------------------------
Certain regulatory agencies, such as the Bureau of Land Management and the Environmental Protection Agency, review the Company's reclamation and environmental obligations and require the Company to hold restricted deposits at financial institutions or with the appropriate agency to ensure that adequate funds will be available to meet estimated future reclamation costs. Such deposits, totaling $382,000 and $870,000 as of December 31, 1997 and 1996, respectively, are classified as other assets in the accompanying balance sheets. During 1997, the Company enlisted the services of a bonding company to collateralize a portion of reclamation bonds previously held in financial institutions as restrictive deposits.
Shasta Property ---------------
In January 1996, the Company entered into a settlement agreement with the California Sportfishing Protection Alliance ("CSPA") related to certain property owned by the Company in Shasta County, California. The CSPA had previously filed an action against the Company under the Clean Water Act. The Company agreed to pay the CSPA $450,000 and make certain expenditures related to reclamation and clean-up. Under the terms of the settlement, the Company paid the CSPA $200,000 in 1996, $150,000 on January 31, 1997, and must pay $100,000 before January 31, 1998. These 1997 and 1998 payment obligations have been included in reclamation liabilities in the accompanying balance sheets.
In April 1996, the Company entered into a settlement agreement with various companies which also owned property in Shasta County and which the Company alleged to have contributed to any environmental damage in the area. The Company received $380,000 from the various companies and was indemnified against present and future claims, except for costs incurred as a result of the CSPA settlement.
(7) COMMITMENTS AND CONTINGENCIES
Litigation ----------
The Company is the subject of legal proceedings in various stages, which it considers routine to its business activities. It is management's opinion that these matters will not have a material adverse effect on the Company's financial position or results of operations.
Purchase Commitment -------------------
The Company formerly rented office facilities in Ely, Nevada. In 1994, it exercised an option to purchase these facilities. The option provides for payments of $200,000 in cash, 100,000 shares of restricted common stock of the Company, and a $1,000,000 note payable, payable in six annual installments with interest at prime plus 1% (9.5% at December 31, 1997). The Company has made the initial $200,000 non-refundable payment under terms of the option. However, before the Company acquires the property, the seller is responsible for addressing certain title issues. The Company is awaiting the resolution of the title issues before completing the purchase. The $200,000 is included in other assets in the accompanying balance sheets.
Royalty Agreements, Mineral Leases and Work Commitments -------------------------------------------
Some of the Company's properties are subject to minimum royalties and production royalties ranging from 1/2% to 6% of net smelter returns or gross sales price, as defined. In addition, certain development properties are subject to work commitments. These minimum royalty payments, mineral leases and work commitments are terminable upon notice by the Company and, therefore, are not reflected as liabilities in the accompanying balance sheets.
In conjunction with the acquisition of the Olinghouse gold property, the Company assumed mineral leases for land on which most of the resource occurs. Payments of mineral leases in 1997 and 1996 totaled $478,000 and $460,000, respectively. At December 31, 1997, minimum lease payments under these leases are as follows (in thousands):
Operating Leases ----------------
The Company leases its corporate headquarters in Henderson, Nevada. Under the terms of the lease, the Company is required to make monthly rent payments which increase annually based on the increase in the consumer price index, with each annual increase to be no less than 4% and no more than 8%. Rental expense which is included in general and administrative expenses was $109,000 and $105,000 for the years ended December 31, 1997 and 1996, respectively. Minimum rental payments under the lease are approximately $114,000 and $19,000 for the years ending December 31, 1998, and 1999, respectively.
Insurance Coverage ------------------
The Company carries insurance against property damage, including boiler and machinery insurance, and also comprehensive general liability, including liability policies applicable to motor vehicles. The Company is also insured against dishonesty and gold and silver bullion losses, as well as losses of products in transit. The Company has elected not to insure against business interruption. The Company cannot economically insure for environmental pollution and has elected not to insure for mine cave-ins and other possible natural hazards consistent with industry practice.
(8) EMPLOYEE BENEFIT PLANS
401(k) Plan -----------
The Company has a deferred compensation plan pursuant to Section 401(k) of the Internal Revenue Code for all regular full-time employees who have reached the age of 21 and completed one year of service. The Company's contributions to the plan are at the discretion of the Company's Board of Directors. It has been the Company's policy to match the participant's voluntary salary deferrals at the rate of 100% to a maximum of 5% of pay. Amounts expensed under the plan for the years ended December 31, 1997, 1996 and 1995 totaled $154,000, $130,000, and $119,000, respectively.
Stock-Based Compensation Plans ------------------------------
The Company has adopted the 1994 Employee Stock Option Plan and the 1997 Employee Stock Option Plan. In addition, the Company has granted options pursuant to various employment agreements.
1994 Plan In June 1994, the Company's stockholders approved the 1994 Plan, under which all employees of the Company, as well as persons who perform substantial services for or on behalf of the Company, are eligible to receive options to purchase shares of the Company's common stock. The Company reserved 1,000,000 shares of common stock for issuance under the 1994 Plan and the Company's Board of Directors were authorized to establish a committee to administer all aspects of the 1994 Plan, including selection of people to receive options, the number of options to be granted (up to a maximum of 1,000,000) and the establishment of the general terms of each option grant. The options granted in 1994 and 1995 vest over periods ranging from two to four years and are exercisable over a period of ten years. No options were granted in 1996.
1997 Plan - In June 1997, the Company's stockholders approved the 1997 Plan, under which all employees of the Company, as well as persons who perform substantial services for or on behalf of the Company, are eligible to receive options to purchase shares of the Company's common stock. The Company reserved 1,000,000 shares of common stock for issuance under the 1997 Plan and the Company's Board of Directors were authorized to establish a committee to administer all aspects of the 1997 Plan, including selection of people to receive options, the number of options to be granted (up to a maximum of 1,000,000) and the establishment of the general terms of each option grant. The options granted in 1997 vest over periods ranging from one to four years and are exercisable over a period of ten years.
In 1991 and 1992, the Company entered into a four- year and a three-year employment agreement with its Chairman and Chief Executive Officer ("CEO") and its Chief Financial Officer ("CFO"), respectively. As an employment signing bonus, the Company granted the CEO and CFO options to purchase 500,000 and 80,000 shares of common stock, respectively, at a price of $.75 per share. The options became exercisable ratably over a four-year period and are exercisable for a period of ten years.
In 1995, the Company entered into three-year employment agreements with the CEO, CFO, and the Vice President of Engineering and Construction. Under the terms of the employment agreements, the three officers were granted options to purchase 375,000, 120,000, and 90,000 shares of common stock, respectively, at a price of $.75 per share. The options become exercisable ratably over a three-year period and are exercisable over a period of ten years.
The Company accounts for these stock options under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, under which compensation cost is determined as the difference in the fair market value of the shares on the date the options are granted and the exercise price of the options. For the years ended December 31, 1997, 1996 and 1995, had the compensation cost for these plans been determined consistent with SFAS No. 123, Accounting for Stock-Based Compensation, the Company's net income and earnings per share would have been reduced to the following pro forma amounts:
Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years.
A summary of the status of the Company's 1994 and 1997 Plans and options related to employment agreements for each of the three years in the period ended December 31, 1997, is presented in the table and narrative below (shares in thousands):
At December 31, 1997, 1,160,000 of the 2,437,000 options outstanding have a weighted average exercise price of $.75 and a weighted average remaining contractual life of 6.1 years. Of these options, 965,000 are exercisable. The remaining 1,277,000 options outstanding have exercise prices between $1.25 and $1.72, with a weighted average exercise price of $1.41 and a weighted average remaining contractual life of 8.2 years. 638,000 of these options are exercisable and their weighted average exercise price is $1.46. At December 31, 1997, 595,000 options were available for grant under the 1997 Plan.
At December 31, 1996, 1,165,000 of the 2,067,000 options outstanding have a weighted average exercise price of $.75 and a weighted average remaining contractual life of 9.1 years. 775,000 of these options are exercisable. The remaining 902,000 options outstanding have exercise prices between $1.34 and $1.72, with a weighted average exercise price of $1.48 and a weighted average remaining contractual life of 8.4 years. 457,000 of these options are exercisable and their weighted average exercise price is $1.42.
The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 6.35% percent; expected dividend yield of 0.0 percent; expected life of 3.0 to 4.0 years; expected volatility of 64 to 90 percent.
(9) STOCKHOLDERS' EQUITY
Non-Employee Director Stock Option and Stock Compensation Agreements --------------------------------------
In December 1996, the Company granted options to purchase 35,000 shares of the Company's common stock at a price of $3.53 per share to directors as directors' compensation under the 1996 Director Stock Option Plan. The options became exercisable immediately and remain exercisable for a period of ten years from the grant date and expire 90 days after a director leaves the Company's board. Compensation cost of $38,000 was recognized based on the fair value of the options. During the years ended December 31, 1997, 1996 and 1995, the Company issued 0, 50,833, and 40,834 shares, respectively, of its restricted common stock to directors as directors' compensation. During 1997 10,000 options expired.
Other Non-Employee Stock Options --------------------------------
In March 1995, the Company granted Gerald Metals an option to purchase 150,000 shares of the Company's common stock at a price of $1.03 per share in consideration for, and as part of, an agreement between the two companies for precious metal sales and hedging activities. The option became exercisable immediately and remains exercisable for a period of five years from the grant date. During 1997, Gerald Metals exercised its option for 150,000 shares.
In May 1996, the Company granted Gerald Metals an option to purchase 75,000 shares of the Company's common stock at a price of $3.75 per share in connection with a loan from Gerald Metals (see Note 4). The option became exercisable immediately and remains exercisable for a period of five years from the grant date. The Company capitalized the fair value of these options totaling $72,000 as deferred financing fees which are being amortized to interest expense over the life of the loan.
Non-Employee Stock Warrants ---------------------------
In November 1995, the Company issued 50,000 warrants to purchase shares of its common stock at an exercise price of $2.00 per share to an investment company in connection with a loan made to the Company (see Note 4). These warrants became exercisable immediately and remain exercisable for a period of three years from the grant date.
In June 1996, the Company issued 400,000 warrants with an exercise price of $4.00 per share as part of a settlement to retire subordinated debentures issued in conjunction with the acquisition of Copper Flat (see Notes 1 and 4). These warrants became exercisable immediately and remain exercisable for a period of five years from the grant date.
In November 1997, the Company issued 232,000 warrants with an exercise price of $2.18 per share as an incentive for the holders of the Debentures not to convert (see Note 4). These warrants became exercisable immediately and remain exercisable for a period of three years from the grant date. The Company capitalized the fair value of these options totaling $72,000 as deferred development for the Olinghouse mine and will amortize the costs based on the units of production method consistent with all deferred development.
(10) EARNINGS PER SHARE
Basic earnings per share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share includes the dilution for stock options and the conversion of the Debentures upon issuance on April 10, 1997.
In 1997, the Company adopted SFAS No. 128, "Earnings per Share," effective December 15, 1997. As a result, the Company's reported earnings per share for 1996 and 1995 were restated. The effect of this accounting change on previously reported earnings per share (EPS) data was as follows:
(11) RELATED PARTY TRANSACTIONS
Directors' Compensation -----------------------
At December 31, 1997 and 1996, the Company had accrued compensation totaling approximately $50,000 and $70,000, respectively, for non- mployee directors of the Company.
Employment Agreements ---------------------
The three-year employment agreements with the CEO, CFO, and Vice President of Engineering and Construction provide for an annual salary (including increases), incentive compensation, benefits and stock options (see Note 8). The agreements also include termination and anti- akeover provisions which provide for a payment to the three officers based on prior compensation, in the event of a change in control of the Company.
Contribution from Shareholder -----------------------------
During 1995, a director of the Company purchased shares of the Company's common stock on the open market and sold those shares at a profit within six months of the purchase, in violation of SEC regulations. In accordance with Section 16(b) of the Securities and Exchange Act of 1934, the profits of $14,000 were turned over to the Company and credited to additional paid-in-capital.
(12) SUBSEQUENT EVENT
On January 14, 1998, the Company acquired the Lookout Mountain gold property from Echo Bay Exporation, Inc. Lookout Mountain consists of approximately 4,500 acres of unpatented mining claims and is located eight miles south of Eureka, Nevada. The Company paid the sum of $163,000 to Echo Bay for right, title, and interest as lessee and optionee. Royalty payments will be made annually in the sum of $150,000.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is incorporated by reference from the Company's Proxy Statement to be filed with the Securities and Exchange Commission (the "Commission") in connection with the Company's Annual Meeting of Stockholders to be held on June 12, 1998.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the Company's Proxy Statement to be filed with the Commission in connection with the Company's Annual Meeting of Stockholders to be held on June 12, 1998.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference from the Company's Proxy Statement to be filed with the Commission in connection with the Company's Annual Meeting of Stockholders to be held on June 12, 1998.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the Company's Proxy Statement to be filed with the Commission in connection with the Company's Annual Meeting of Stockholders to be held on June 12, 1998.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K Page ----
(a) 1. Financial Statements:
See Index to Financial Statement 32
2. Financial Statement Schedules
None required.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
The following listed documents are included herein or have been incorporated by reference from previous reports filed with the Securities and Exchange Commission:
3.01 Restated Articles of Incorporation of Alta Gold Co.(15)
3.02 Restated Bylaws of Alta Gold Co.(15)
4.01 See Exhibit 3.01
4.02 See Exhibit 3.02
4.03 See Exhibit 10.14
4.04 See Exhibit 10.15
4.05 See Exhibit 10.24
4.06 See Exhibit 10.27
4.07 See Exhibit 10.29
4.08 See Exhibit 10.30
4.09 See Exhibit 10.40
4.10 See Exhibit 10.41
4.11 See Exhibit 10.42
4.12 See Exhibit 10.44
10.01 Exchange Agreement dated June 30, 1988, by and among Silver King Mines, Inc., Pacific Silver Corporation, Alta Gold Co. ("Alta"), NERCO Minerals Company, and Resource Associates of Alaska ("RAA") relating to the exchange of Alta's interest in the Taylor Property with RAA for an undivided one-half interest in the Shoshone Property.(1)
10.02 Master Agreement between the Company, Magma Copper Company and Magma Nevada Mining Company dated as of December 14, 1990.(2)
10.03 Consent, Lease Termination and Asset Transfer Agreement among the Echo Bay Group, Magma Copper Company, Magma Nevada Mining Company and the Company dated as of December 14, 1990.(2)
10.04 Limited Partnership Agreement among the Company, Magma Nevada Mining Company and Magma Limited Partner Co. dated as of March 13, 1991.(2)
10.05 Option Agreement between the Company and Magma Nevada Mining Company dated March 13, 1991 relating to Put and Call options on interest in the Robinson Property.(2)
10.06 Irrevocable Trust Agreement and Assignment of Partnership Units to Trustee dated March 13, 1991 between the Company and West One Trust Company.(2)
10.07 Provisional Copper Production Payment Agreement between the Company and Magma Mining Company dated December 14, 1990.(2)
10.08 Provisional Gold Production Payment Agreement between the Company and Magma Mining Company dated December 14, 1990.(2)
10.09 Letter Agreement among the Company, Kennecott, Magma and the Echo Bay Group concerning environmental liability and expenditures on the Robinson Property.(2)
10.10 Employment Agreement between Alta Gold Co. and Robert N. Pratt dated October 15, 1991.(4)
10.11 Employment Agreement between Alta Gold Co. and John A. Bielun dated October 18, 1992.(4)
10.12 Asset Purchase Agreement between Alta Gold Co. and Gold Express Corporation dated June 14, 1994.(7)
10.13 Two year 6% Subordinated Convertible Debenture due June 14, 1996 issued by Alta Gold Co. to Gold Express Corporation dated June 14, 1994.(7)
10.14 Four year 6% Subordinated Convertible Debenture due June 14, 1998 issued by Alta Gold Co. to Gold Express Corporation dated June 14, 1994.(7)
10.15 Fourteen year Subordinated Zero Coupon Debenture due June 14, 2008 issued by Alta Gold Co. to Gold Express Corporation dated June 14, 1994.(7)
10.16 Provisional Copper Production Royalty Agreement between Alta Gold Co. and Gold Express Corporation dated June 14, 1994.(7)
10.17 Agreement by and among Alta Gold Co., Cobb Resources Corporation and Hydro Resources Corporation in regard to the royalty on the Copper Flat Property effective June 14, 1994.(7)
10.18 Agreement for Purchase and Sale of Mining Claims between Alta Gold Co. and Phelps Dodge Mining Company effective July 8, 1994.(8)
10.19 Agreement for Purchase and Sale of Mining Claims between Alta Gold Co. and Cominco American Resources Incorporated and USMX, Inc., dated April 14, 1994.(11)
10.20 Agreement for Purchase and Sale of Mining Claims between Alta Gold Co. and Griffon Resources, Inc. effective October 14, 1994.(11)
10.21 Facility Agreement between Gerald Metals, Inc. and Alta Gold Co. dated March 28, 1995.(9)
10.22 Margin Agreement between Gerald Metals, Inc. and Alta Gold Co. dated March 28, 1995.(9)
10.23 Purchase/Refining Agreement between Gerald Metals, Inc. and Alta Gold Co. dated March 28, 1995.(9)
10.24 Stock Option Agreement between Gerald Metals, Inc. and Alta Gold Co. dated March 28, 1995.(9)
10.25 Employment Agreement between Alta Gold Co. and Robert N. Pratt dated June 9, 1995.(10)
10.26 Employment Agreement between Alta Gold Co. and John A. Bielun dated June 9, 1995.(10)
10.27 Promissory Note with U.S. Bank of Nevada dated September 18, 1995.(10)
10.28 Employment Agreement between Alta Gold Co. and James S. Goff dated June 9, 1995.(12)
10.29 Loan Agreement dated May 31, 1996 between Alta Gold Co. and Gerald Metals, Inc.(13)
10.30 Stock Option Agreement dated May 31, 1996 between Gerald Metals, Inc. and Alta Gold Co.(13)
10.31 Settlement Agreement dated June 28, 1996 by and between Alta Gold Co. and StarTronix International, Inc., the successor in interest to Gold Express Corporation.(14)
10.32 Warrant to purchase 400,000 shares of Alta Gold Co. common stock granted on June 28, 1996 to StarTronix International, Inc.(14)
10.33 Loan Agreement dated April 10, 1997, by and among Alta Gold Co., Gerald Metals, Inc. and BHF - Bank Aktiengesellschaft, New York Branch.(16)
10.34 Deed of Trust With Assignment of Rents and Royalties, Security Agreement and Financing Statement (Nevada) dated April 10, 1997, made by Alta Gold Co. as Trustor, to First American Title Company of Nevada as Trustee for the benefit of Gerald Metals, Inc. and BHF - Bank Aktiengesellschaft, New York Branch as beneficiaries.(16)
10.35 Security Agreement dated April 10, 1997, by and among Alta Gold Co., Gerald Metals, Inc. and BHF - Bank Aktiengesellschaft, New York Branch.(16)
10.36 Secured Promissory Note dated April 10, 1997, made by Alta Gold Co. in favor of Gerald Metals, Inc. in the principal amount of $4,250,000.(16)
10.37 Secured Promissory Note dated April 10, 1997, made by Alta Gold Co. in favor of BHF - Bank Aktiengesellschaft, New York Branch in the principal amount of $4,250,000.(16)
10.38 Agreement dated April 10, 1997, by and between Alta Gold Co. and Gerald Metals, Inc. regarding future contracts for the sale and purchase of gold and gold options.(16)
10.39 Purchase/Refining Agreement dated April 10, 1997, by and between Alta Gold Co. and Gerald Metals, Inc. regarding the sale of gold to Gerald Metals, Inc.; and Addendum 1 to Purchase/Refining Agreement dated April 10, 1997.(16)
10.40 Securities Purchase Agreement dated April 14, 1997, by and among Alta Gold Co. and RGC International Investors, LDC, The Tailwind Fund, Ltd., European American Securities Account Client, Keyway Investments Ltd., Olympus Securities, Ltd., Nelson Partners and Halifax, L.P.(17)
10.41 Form of Convertible Debentures dated April 14, 1997, issued by Alta Gold Co., contained in Exhibit 10.40.(17)
10.42 Registration Rights Agreement dated April 14, 1997, by and among Alta Gold Co. and RGC International Investors, LDC, The Tailwind Fund, Ltd., European American Securities Account Client, Keyway Investments Ltd., Olympus Securities, Ltd., Nelson Partners and Halifax, L.P., contained in Exhibit 10.40.(17)
10.43 Debenture Payoff and Royalty Termination Agreement dated May 12, 1997 between Alta Gold Co. and StarTronix International, Inc.(18)
10.44 Form of Master Agreement dated November 11, 1998, by and among Alta Gold Co. and RGC International Investors, LDC, The Tailwind Fund, Ltd., Keyway Investments Ltd., Olympus Securities, Ltd., Nelson Partners and Halifax, L.P., including form of Warrant to Purchase Shares of Common Stock and form of First Amendment to Convertible Debenture.
21.01 Subsidiaries of the Company.(5)
23.01 Consent of Arthur Andersen LLP.
23.02 Consent of Pincock, Allen & Holt.
27.01 Financial Data Schedule.
99.01 Court stipulated Escrow Agreement re: Mase Westpac litigation.(3)
99.02 Settlement Agreement and Mutual Release dated May 23, 1994 by Republic Mase Bank Limited, Republic Mase Inc. and Alta Gold Co.(6) - --------------- (1) Incorporated by reference to Form 10-K (file no. 2-2274) for the fiscal year ended March 31, 1988.
(2) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1990.
(3) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1991.
(4) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1992.
(5) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1993.
(6) Incorporated by reference to Form 8-K (file no. 2-2274) dated May 23, 1994.
(7) Incorporated by reference to Form 8-K (file no. 2-2274) dated June 14, 1994.
(8) Incorporated by reference to Form 8-K (file no. 2-2274) dated July 8, 1994.
(9) Incorporated by reference to Form 10-Q (file no. 2-2274) for the quarter ended June 30, 1995.
(10) Incorporated by reference to Form 10-Q (file no. 2-2274) for the quarter ended September 30, 1995.
(11) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1994.
(12) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1995.
(13) Incorporated by reference to Form 8-K (file no. 2-2274) dated May 31, 1996.
(14) Incorporated by reference to Form 10-Q (file no. 2-2274) for the quarter ended June 30, 1996.
(15) Incorporated by reference to Form 8-K (file no. 2-2274) dated January 20, 1997.
(16) Incorporated by reference to Form 8-K (file no. 2-2274) dated April 10, 1997.
(17) Incorporated by reference to Form 8-K (file no. 2-2274) dated April 14, 1997.
(18) Incorporated by reference to Form 10-Q (file no. 2-2274) for the quarter ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALTA GOLD CO.
By: /s/ Robert N. Pratt -------------------- Robert N. Pratt, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ----
/s/ Robert N. Pratt Chairman, March 27, 1998 - ------------------- President, Robert N. Pratt Chief Executive Officer and Director
/s/ John A. Bielun Principal March 27, 1998 - ------------------ Financial John A. Bielun Officer and Principal Accounting Officer
/s/ Ralph N. Gilges Director March 27, 1998 - ------------------- Ralph N. Gilges
/s/ Thomas A. Henrie Director March 27, 1998 - -------------------- Thomas A. Henrie
/s/ John A. Keily Director March 27, 1998 - ------------------ John A. Keily
/s/ Jack W. Kendrick Director March 27, 1998 - -------------------- Jack W. Kendrick
/s/ Thomas D. Mueller Director March 27, 1998 - --------------------- Thomas D. Mueller
EXHIBIT INDEX
Exhibit Page No. Description No. - ------- ----------- ----
3.01 Restated Articles of Incorporation of Alta Gold Co.(15)
3.02 Restated Bylaws of Alta Gold Co.(15)
4.01 See Exhibit 3.01
4.02 See Exhibit 3.02
4.03 See Exhibit 10.14
4.04 See Exhibit 10.15
4.05 See Exhibit 10.24
4.06 See Exhibit 10.27
4.07 See Exhibit 10.29
4.08 See Exhibit 10.30
4.09 See Exhibit 10.40
4.10 See Exhibit 10.41
4.11 See Exhibit 10.42
4.12 See Exhibit 10.44
10.01 Exchange Agreement dated June 30, 1988,by and among Silver King Mines, Inc., Pacific Silver Corporation, Alta Gold Co. ("Alta"), NERCO Minerals Company, and Resource Associates of Alaska ("RAA") relating to the exchange of Alta's interest in the Taylor Property with RAA for an undivided one-half interest in the Shoshone Property.(1)
10.02 Master Agreement between the Company, Magma Copper Company and Magma Nevada Mining Company dated as of December 14, 1990.(2)
10.03 Consent, Lease Termination and Asset Transfer Agreement among the Echo Bay Group, Magma Copper Company, Magma Nevada Mining Company and the Company dated as of December 14, 1990.(2)
10.04 Limited Partnership Agreement among the Company, Magma Nevada Mining Company and Magma Limited Partner Co. dated as of March 13, 1991.(2)
10.05 Option Agreement between the Company and Magma Nevada Mining Company dated March 13, 1991 relating to Put and Call options on interest in the Robinson Property.(2)
10.06 Irrevocable Trust Agreement and Assignment of Partnership Units to Trustee dated March 13, 1991 between the Company and West One Trust Company.(2)
10.07 Provisional Copper Production Payment Agreement between the Company and Magma Mining Company dated December 14, 1990.(2)
10.08 Provisional Gold Production Payment Agreement between the Company and Magma Mining Company dated December 14, 1990.(2)
10.09 Letter Agreement among the Company, Kennecott, Magma and the Echo Bay Group concerning environmental liability and expenditures on the Robinson Property.(2)
10.10 Employment Agreement between Alta Gold Co. and Robert N. Pratt dated October 15, 1991.(4)
10.11 Employment Agreement between Alta Gold Co. and John A. Bielun dated October 18, 1992.(4)
10.12 Asset Purchase Agreement between Alta Gold Co. and Gold Express Corporation dated June 14, 1994.(7)
10.13 Two year 6% Subordinated Convertible Debenture due June 14, 1996 issued by Alta Gold Co. to Gold Express Corporation dated June 14, 1994.(7)
10.14 Four year 6% Subordinated Convertible Debenture due June 14, 1998 issued by Alta Gold Co. to Gold Express Corporation dated June 14, 1994.(7)
10.15 Fourteen year Subordinated Zero Coupon Debenture due June 14, 2008 issued by Alta Gold Co. to Gold Express Corporation dated June 14, 1994.(7)
10.16 Provisional Copper Production Royalty Agreement between Alta Gold Co. and Gold Express Corporation dated June 14, 1994.(7)
10.17 Agreement by and among Alta Gold Co., Cobb Resources Corporation and Hydro Resources Corporation in regard to the royalty on the Copper Flat Property effective June 14, 1994.(7)
10.18 Agreement for Purchase and Sale of Mining Claims between Alta Gold Co. and Phelps Dodge Mining Company effective July 8, 1994.(8)
10.19 Agreement for Purchase and Sale of Mining Claims between Alta Gold Co. and Cominco American Resources Incorporated and USMX, INC, dated April 14, 1994.(11)
10.20 Agreement for Purchase and Sale of Mining Claims between Alta Gold Co. and Griffon Resources, Inc. effective October 14, 1994.(11)
10.21 Facility Agreement between Gerald Metals, Inc. and Alta Gold Co. dated March 28, 1995.(9)
10.22 Margin Agreement between Gerald Metals, Inc. and Alta Gold Co. dated March 28, 1995.(9)
10.23 Purchase/Refining Agreement between Gerald Metals, Inc. and Alta Gold Co. dated March 28, 1995.(9)
10.24 Stock Option Agreement between Gerald Metals, Inc. and Alta Gold Co. dated March 28, 1995.(9)
10.25 Employment Agreement between Alta Gold Co. and Robert N. Pratt dated June 9, 1995.(10)
10.26 Employment Agreement between Alta Gold Co. and John A. Bielun dated June 9, 1995.(10)
10.27 Promissory Note with U.S. Bank of Nevada dated September 18, 1995.(10)
10.28 Employment Agreement between Alta Gold Co. and James S. Goff dated June 9, 1995.(12)
10.29 Loan Agreement dated May 31, 1996 between Alta Gold Co. and Gerald Metals, Inc.(13)
10.30 Stock Option Agreement dated May 31, 1996 between Gerald Metals, Inc. and Alta Gold Co.(13)
10.31 Settlement Agreement dated June 28, 1996 by and between Alta Gold Co. and StarTronix International, Inc., the successor in interest to Gold Express Corporation.(14)
10.32 Warrant to purchase 400,000 shares of Alta Gold Co. common stock granted on June 28, 1996 to StarTronix International, Inc.(14)
10.33 Loan Agreement dated April 10, 1997, by and among Alta Gold Co., Gerald Metals, Inc. and BHF - Bank Aktiengesellschaft, New York Branch.(16)
10.34 Deed of Trust With Assignment of Rents and Royalties, Security Agreement and Financing Statement (Nevada) dated April 10, 1997, made by Alta Gold Co. as Trustor, to First American Title Company of Nevada as Trustee for the benefit of Gerald Metals, Inc. and BHF - Bank Aktiengesellschaft, New York Branch as beneficiaries.(16)
10.35 Security Agreement dated April 10, 1997, by and among Alta Gold Co., Gerald Metals, Inc. and BHF - Bank Aktiengesellschaft, New York Branch.(16)
10.36 Secured Promissory Note dated April 10, 1997, made by Alta Gold Co. in favor of Gerald Metals, Inc. in the principal amount of $4,250,000.(16)
10.37 Secured Promissory Note dated April 10, 1997, made by Alta Gold Co. in favor of BHF - Bank Aktiengesellschaft, New York Branch in the principal amount of $4,250,000.(16)
10.38 Agreement dated April 10, 1997, by and between Alta Gold Co. and Gerald Metals, Inc. regarding future contracts for the sale and purchase of gold and gold options.(16)
10.39 Purchase/Refining Agreement dated April 10, 1997, by and between Alta Gold Co. and Gerald Metals, Inc. regarding the sale of gold to Gerald Metals, Inc.; and Addendum 1 to Purchase/Refining Agreement dated April 10, 1997.(16)
10.40 Securities Purchase Agreement dated April 14, 1997, by and among Alta Gold Co. and RGC International Investors, LDC, The Tailwind Fund, Ltd., European American Securities Account Client, Keyway Investments Ltd., Olympus Securities, Ltd., Nelson Partners and Halifax, L.P.(17)
10.41 Form of Convertible Debentures dated April 14, 1997, issued by Alta Gold Co., contained in Exhibit 10.40.(17)
10.42 Registration Rights Agreement dated April 14, 1997, by and among Alta Gold Co. and RGC International Investors, LDC, The Tailwind Fund, Ltd., European American Securities Account Client, Keyway Investments Ltd.,Olympus Securities, Ltd., Nelson Partners and Halifax, L.P., contained in Exhibit 10.40.(17)
10.43 Debenture Payoff and Royalty Termination Agreement dated May 12, 1997 between Alta Gold Co. and StarTronix International, Inc.(18)
10.44 Form of Master Agreement dated November 11, 1998, by and among Alta Gold Co. and RGC International Investors, LDC, The Tailwind Fund, Ltd., Keyway Investments Ltd., Olympus Securities, Ltd., Nelson Partners and Halifax, L.P., including form of Warrant to Purchase Shares of Common Stock and form of First Amendment to Convertible Debenture. 69
21.01 Subsidiaries of the Company.(5)
23.01 Consent of Arthur Andersen LLP. 91
23.02 Consent of Pincock, Allen & Holt. 93
27.01 Financial Data Schedule. 95
99.01 Court stipulated Escrow Agreement re: Mase Westpac litigation.(3)
99.02 Settlement Agreement and Mutual Release dated May 23, 1994 by Republic Mase Bank Limited, Republic Mase Inc. and Alta Gold Co.(6) - --------------- (1) Incorporated by reference to Form 10-K (file no. 2-2274) for the fiscal year ended March 31, 1988.
(2) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1990.
(3) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1991.
(4) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1992.
(5) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1993.
(6) Incorporated by reference to Form 8-K (file no. 2-2274) dated May 23, 1994.
(7) Incorporated by reference to Form 8-K (file no. 2-2274) dated June 14, 1994.
(8) Incorporated by reference to Form 8-K (file no. 2-2274) dated July 8, 1994.
(9) Incorporated by reference to Form 10-Q (file no. 2-2274) for the quarter ended June 30, 1995.
(10) Incorporated by reference to Form 10-Q (file no. 2-2274) for the quarter ended September 30, 1995.
(11) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1994.
(12) Incorporated by reference to Form 10-K (file no. 2-2274) for the year ended December 31, 1995.
(13) Incorporated by reference to Form 8-K (file no. 2-2274) dated May 31, 1996.
(14) Incorporated by reference to Form 10-Q (file no. 2-2274) for the quarter ended June 30, 1996.
(15) Incorporated by reference to Form 8-K (file no. 2-2274) dated January 20, 1997.
(16) Incorporated by reference to Form 8-K (file no. 2-2274) dated April 10, 1997.
(17) Incorporated by reference to Form 8-K (file no. 2-2274) dated April 14, 1997.
(18) Incorporated by reference to Form 10-Q (file no. 2-2274) for the quarter ended June 30, 1997.