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March 30, 1994
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20459
RE: American Nuclear Corporation
Commission File No. 0-1764
Gentlemen:
Submitted herewith is the annual report on Form 10-K of American
Nuclear Corporation for the fiscal year ended December 31, 1993,
including all financial statements, schedules and exhibits. The $250
filing fee has been received at the lockbox depository in Pittsburgh,
Pennsylvania.
The financial statements in the report do not reflect any
changes from the proceeding years in any accounting principles or
practices, or in the method of applying any such principles or
practices, except that the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, on January
1, 1993.
American Nuclear Corporation qualifies as a small business
issuer.
Thank you for your assistance.
Very truly yours,
William C. Salisbury
President
WCS/fm
Enclosures
cc: NASDAQ (w/encl.)
Standard and Poors
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
or
/ / Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File No. 0-1764
AMERICAN NUCLEAR CORPORATION
----------------------------
(Exact Name of Registrant as Specified In Its Charter)
Colorado 83-0178547
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
550 N. Poplar Street 82601
Casper, Wyoming
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(307) 265-7912
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
None ----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, 4 cent par value
------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X. No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. /X/
Based upon the average of the high and low prices of the common stock
on March 11, 1994 of $0.16 per share, the aggregate market value of
the voting stock held on that date by non-affiliates of the
registrant was $862,834.
PAGE 2
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of December 31, 1993: 4 cent par value -
7,696,739
The information required by Part III of this report is incorporated
by reference from the Company's proxy statement to be filed with the
Securities and Exchange Commission by April 30, 1994 except that the
report of the board of directors compensation committee on executive
compensation, the stock performance graph, and report on option/SAR
repricing, if any, are not incorporated.
This report consists of 45 pages, including two pages constituting
the coverage page.
PAGE 3
PART I
------
Item 1. Business.
- ------- ---------
Development of Business
American Nuclear Corporation, the Company, was incorporated in
1955 as one of the first uranium exploration companies formed after
the commercial importance of uranium as a source of energy and fuel
was realized. The Company acquired uranium mining properties by
locating mining claims and purchasing other mining claims.
Uranium Mining for Atomic Energy Commission and Others
Starting in 1959 the Company was engaged, with its partner,
Federal Resources Corporation, in mining and milling uranium
concentrates in the Gas Hills area in central Wyoming for sale to the
U.S. Atomic Energy Commission and various utilities that supply
electricity. The mining was conducted by open pit surface mining, a
method of mining that is subsequently described in this report under
Item 2, Properties. The mill was also operated on a custom basis to
mill uranium ores for other uranium producers. The Atomic Energy
Commission discontinued purchases in 1971 when its inventory goals
and strategic plans were met and a United States uranium industry had
been created. The partnership continued to operate its mill for
producing its own properties and custom milling of uranium ores for
other producers for sales to commercial users.
Expansion of Uranium Industry in the 1970's
The modern uranium industry was shaped in the 1970s in response
to growth in nuclear power generation by utilities. The embargoes of
imports of foreign oil in the early 1970s caused an energy crisis in
the United States and resulted in increased construction of nuclear
power plants and plans for more plants. Demand for uranium increased
significantly from spot prices for short-term deliveries of less than
$10 per pound of uranium concentrate in 1971 to more than $40 per
pound by 1978.
Tennessee Valley Authority Agreements
In 1972 the Company entered into an arrangement with the
Tennessee Valley Authority (TVA), an agency wholly owned by the
United States, for the joint acquisition of uranium properties to be
produced for use by TVA to fuel its nuclear power plants. In 1973
Federal American Partners leased its mining properties to TVA. From
1979 through 1982, the partnership mined its properties and milled
its ores for TVA. In the late 1970's annual production reached a
level of 1.2 million pounds of uranium concentrates per year. TVA
discontinued the operations in 1982 because world-wide production of
uranium concentrates exceeded demand and it cost less to purchase
from inventoried uranium stocks than to mine and mill. A total of
14.5 million pounds of uranium concentrates had been produced through
the mill over its operating life.
PAGE 4
Termination of Tennessee Valley Authority Agreements
In 1984 the Company acquired the uranium mill and associated
lands from the partnership, and it also acquired approximately one-
half of the uranium lands it had jointly held and explored with TVA.
Today these lands remain the base of the Company's approximately
14,800 acres of uranium properties that are being offered for sale.
Please see Item 7, "Liquidity and Capital Resources" section of this
report for more detail.
In 1984 TVA also placed approximately $3.8 million cash in a
$4.1 million reclamation bond fund with the Wyoming Department of
Environmental Quality (DEQ) to assure the DEQ and the U.S. Nuclear
Regulatory Commission (NRC) that the reclamation obligations of TVA,
the Company and the partnership for the mill site would ultimately be
performed. The fund is the property of the Company, but withdrawal
remains subject to the surety provisions for the benefit of the state
of Wyoming. Starting in 1984, the Company received the interest
earnings and capital gains from the reclamation fund. The Company
began reclamation of the land at the mill site in 1984. TVA also
entered into a management agreement with the Company under which, in
exchange for management fees, the Company closed the mining
operations, returned leased mining equipment, and sold the other
mining equipment for TVA's account. The Company's entire financial
obligation to TVA for the Company's cost of acquiring and exploring
its interests in the uranium properties was eliminated.
Status of Uranium Business
Since the Tennessee Valley Authority terminated its mining
activities in 1982 that were conducted through the Company's
partnership called Federal American Partners, the Company has not
been engaged in mining or milling uranium. The Company has
identified significant quantities of uranium resources in the ground
among its uranium properties that may be amenable to mining by in
situ mining methods. In situ mining is less expensive than the open
pit mining methods previously employed. The market for uranium
remains depressed, however, and it would not be economically feasible
to mine the Company's uranium properties at current prices. Imports
of foreign uranium at low prices, especially from Russia and Canada,
have continued to dampen prices. In 1993, spot prices for short-term
deliveries of uranium were approximately $9.50 per pound. For a more
complete discussion of the uranium properties, see Item 2,
Properties.
Reclamation of Mill Site and Tailings Ponds
Based upon the Company's determination that use in the future of
its uranium processing mill would not comply with the revised
licensing requirements of the NRC, the Company began demolition of
the mill in 1988 and completed that work in 1989. Since then the
Company has undertaken substantial reclamation work on the mill site
as required by the NRC and the DEQ. The mill and associated
buildings have been dismantled and the building materials buried in
one of the two adjacent tailings ponds where the processed ores
produced by the mill (mill tailings) were impounded after milling.
The mill tailings in the two impoundments have been graded by earth
moving equipment into mounds covering approximately 40 and 80 acres
PAGE 5
respectively. A cover of native earth has been placed over the
mounds of mill tailings, and the tailings piles are being allowed to
settle and compact naturally. The remaining reclamation work
consists of filling and shaping the side slopes of the tailings piles
to such a grade as to preclude soil erosion and exposure of the
tailings, placing a final cover of earth over the tailings to limit
emission of radon gas into the atmosphere to meet Environmental
Protection Agency (EPA) standards, and revegetating and fencing the
site. In 1992 the Company submitted to the NRC an alternate design
to its original reclamation plan in order to meet new NRC criteria
for long term stability of the tailings impoundments. The principal
modification the Company has proposed to the NRC utilizes a rock
mulch for erosion protection instead of native vegetation. Due to
delay by the NRC in responding to the proposed reclamation design,
the Company has requested the NRC to extend by one year the
requirement for placing radon barrier material on tailings
impoundment number 2 by December 31, 1994. The NRC is not expected
to respond to the Company's request until mid 1994. If the NRC does
not grant the requested extension, the Company may be unable to
complete the required work in the limited time remaining after the
NRC approves the reclamation design.
Reclamation work will continue at minimal levels until the NRC
approves a new design. At that time the Company expects the
reclamation process to continue at an active level until
approximately 1997. Thereafter environmental monitoring and ongoing
reclamation obligations at reduced levels of activity are expected to
continue for at least five additional years until the reclamation
requirements for stabilization of the tailings are deemed satisfied
by the NRC, DEQ and EPA. At that time the site will be transferred
to the Department of Energy or State of Wyoming as required by law.
Byproduct Material Disposal
Starting in 1990 the Company shifted most of its efforts to a
new, developing industry of byproduct material disposal. The
byproduct material consists of waste generated from ores processed by
others for their uranium or thorium content. Federal regulations
require the generators of these low level radioactive materials to
dispose of them in licensed depositories.
In part because the Company's mill site is undergoing
reclamation work to stabilize the mill tailings, which are low level
radioactive materials, the NRC initially granted permission in the
fall of 1990 for the Company to accept byproduct materials totaling
1,100 cubic yards from four generators under four specific waste
disposal contracts. After the NRC authorized receipt of the initial
byproduct material, the NRC amended the Company's license in
September of 1991 to authorize it to receive and dispose of an
additional 12,500 cubic yards of material from other sources.
The material terms of the disposal contracts already completed,
as well as the proposed terms of any future contracts, require the
generator of the byproduct materials to deliver them to the Company's
mill site. The contracts require the generator to pay the contract
charges for each shipment of materials, usually within thirty days
after delivery of a shipment.
PAGE 6
The byproduct material is placed on the surface of the mill
tailings impoundment number 1, compacted and covered with an interim
cover of native soils. The addition of the byproduct materials
reduces the volume of earthen fill material that must be placed on
the mill tailings to meet the reclamation design requirements.
Byproduct material is expected to originate at past and present
uranium mining and milling locations owned by others throughout the
western region of the United States. There has been no readily
available outlet for disposal of these types of waste, and the
availability of the Company's reclamation project for such disposal
is consistent with federal policy to limit proliferation of small
disposal sites.
Based upon income received on account of the initial five
contracts, the Company generated revenue of $322,624, $318,814, and
$120,352 from operations in 1993, 1992, and 1991, respectively.
Additional materials will be delivered under one of the existing
contracts during 1994 that will utilize a $16,500 prepayment already
received during January 1994.
Marketing of Disposal Contracts
The additional licensed space remaining available for disposal
of byproduct materials at December 31, 1993 could be sold and used in
a single season. That is not likely, however, because the Company
has previously experienced difficulty in obtaining disposal
contracts. While the Company has identified and solicited disposal
contracts from other parties who hold byproduct materials in
quantities that exceed its permitted volume and that must eventually
be relocated to licensed disposal sites, few of the generators face
short-term deadlines for disposing of their material. Their
reluctance to incur the costs of transportation and disposal any
earlier than necessary and the continuing lack of a federal deadline
for disposal are the primary reasons that the Company has not
obtained as many disposal contracts as expected.
The Company believes its permitted disposal space will not be
available if not utilized by the end of 1995 because the approved
reclamation plans call for work during 1996 to close the site during
that year. In order to generate revenues and to improve upon its own
marketing efforts, the Company granted exclusive marketing rights to
American Ecology Corporation (AEC) during September 1993 for 10,000
cubic yards of the Company's permitted disposal space. AEC operates
low level radioactive waste disposal facilities and is engaged in
other waste management business and services. Net profits from any
disposal contract revenues are to be shared equally by the Company
and AEC. AEC paid $202,500 when the contract was executed as an
advance to the Company against its share of potential disposal
revenues. A second advance by AEC in the same amount was not paid
when expected in February 1994. AEC's position is that the second
advance was not due then because the NRC did not by that date issue
its policy allowing for the co-disposal of byproduct materials
together with similar materials containing low level radioactive
waste. Instead the NRC plans to consider applications for disposal
of such similar materials at byproduct material sites on a case by
case basis. AEC has not procured any contracts with generators of
such materials. The Company will submit an application to the NRC
for its consent to dispose of these similar materials in the
PAGE 7
Company's permitted space after a contract is obtained. The NRC is
not expected to act on any application until at least several months
after its submittal. There are no assurances that AEC will produce
any disposal contracts or pay any additional money for disposal or
that NRC approval of disposal of any materials will be obtained. If
AEC does not recover its advance deposit of $202,500 from disposal
revenues generated through the Company's disposal services, AEC is
entitled to receive shares of the Company's common stock. The stock
would be issued at the rate of the stocks' average of the thirty day
trailing closing sales price at the time of exercise.
Abandonment of Efforts to License Commercial Byproduct Disposal
During 1993 the Company abandoned its efforts to obtain licenses
from the NRC and DEQ to establish a commercial byproduct disposal
business near its mill site that is undergoing reclamation. In order
to complete the required environmental studies, continue to pursue
its license applications, and take other steps for opening such a
business, the Company sought to raise $5 million to $8 million
through private placements of its common stock. When this effort
proved unsuccessful in mid-1993, the Company terminated further
efforts to enter the commercial byproduct disposal business.
Business Focus
The Company has not realized adequate revenues from its
byproduct disposal business to fund its operations, and since 1991
has relied for a large part on its operating capital upon loans by
Cycle Resource Investment Corporation (CRIC), holder of approximately
30 percent of the Company's outstanding stock. The Company has been
unable to obtain additional loans from CRIC or any other source. The
Company's efforts to raise capital by placement of its common stock
have not been successful. The Company has not been able to obtain
joint ventures or long term supply contracts for exploitation of its
uranium properties in the future when market prices for uranium are
expected to be higher.
In order to repay its loan to CRIC and to raise additional
capital to continue its reclamation work over the next several years
as required by law, the Company has offered its uranium properties
for sale at the highest price received. Several prospective buyers
have expressed interest in purchasing the uranium properties, but no
purchase offers have been received. The Company expects to receive
purchase offers in the spring of 1994 and to submit the best offer it
receives to a vote of its shareholders at the 1994 meeting of
shareholders. There are no assurances that the properties will be
sold during 1994 or if sold, that the purchase price or terms will be
adequate to meet the Company's needs, either short-term or long-term.
Upon a sale of its uranium properties, the Company will retain
its byproduct disposal operations through 1995 and continue to be
obligated for long-term reclamation work associated with the mill
site. Unless firm contracts for disposal made during the remainder
of 1994 and 1995 substantially increase over the past levels or the
sale of uranium properties produces more proceeds that the amount
required to repay the CRIC loans, neither of which is assured, the
Company's activities will be restricted to its limited cash, if any.
The Company intends to pursue its reclamation obligations. If the
Company is unable, for lack of funds or otherwise, to continue
PAGE 8
reclamation work on a schedule that meets the deadlines or milestones
fixed by the NRC, the agencies could take possession of the
reclamation bond fund to complete the work. If the bond fund were
inadequate to complete reclamation and to establish an additional
fund to assure long-term stabilization of the mill tailings, the
agencies could seek judgments against the Company.
Changes in Fiscal Year
Effective December 31, 1991, the Company changed its fiscal year
end from May 31 to December 31 to better match the seasonal nature of
its business operations. The byproduct disposal business involves
earth moving. Drilling for uranium and other maintenance of mining
claims also requires field work. These activities start after the
ground has thawed and dried in the spring, and they are concluded
before the harshest winter months. A fiscal year that is the same as
the calendar year, therefore, better reflects a complete business
cycle and will enable application of revenues from operations
conducted early in the year to expenses incurred that year.
Financial Information About Industry Segments
Beginning with the seven-month period from June 1 to December
31, 1991, the Company entered into the business of uranium byproduct
material disposal. Between 1982 and that time, the Company's only
business was winding down its former mining operations with the
partnership and TVA, its reclamation activities, and the maintenance
of its uranium properties with the intent of eventually producing
uranium concentrate. See Note 1 to the financial statements included
in Item 14 of this report.
The Company has no foreign operations or export sales. It has
not segregated its business activities into geographic areas within
the United States except to the extent that its operations are
located within Wyoming.
Other Business Factors
The Company's byproduct materials disposal business activities
are highly regulated. The presently licensed disposal activities are
subject to NRC and DEQ licensing authority and jurisdiction.
The Company has a restricted cash deposit of approximately $3.0
million with the Wyoming DEQ to cover the ultimate reclamation costs
of its mill site. The Company, DEQ and NRC have estimated that the
actual costs remaining for reclamation are approximately between $2.7
and $3 million. There is always some risk that the regulations may
be changed and that the amount required to perform the reclamation
under such new regulations may increase. Based upon discussions with
representatives of the agencies about potential changes and also
based on current contract prices obtained by third parties for
similar reclamation work in the area, the Company believes any
potential increases would be in the range of 10 to 15 percent and
that they could be offset by either byproduct disposal revenue or the
interest earned on the $3 million reclamation deposit.
PAGE 9
Employees
As of December 31, 1993, the Company had four full-time
employees.
Item 2. Properties
In addition to the mill site under reclamation that is also
used for uranium byproduct material disposal as previously described
in this report, the Company holds uranium properties that may be
developed for the production and sale of uranium concentrates if
justified by future price increases. The properties primarily
consist of blocks of unpatented mining claims located on the public
domain of the United States in the Gas Hills area of central Wyoming.
During 1993 the Company discontinued this business segment and began
actively marketing the properties for sale to the highest bidder.
Peach Properties
The Company's principal uranium holdings are the Peach
properties which cover approximately 2,700 acres. They are composed
of a several contiguous groups of unpatented mining claims located in
the Gas Hills area of Central Wyoming. A valuable mineral deposit
has been delineated by extensive development drilling, and both open
pit and underground mine plans have been prepared for possible future
use. The properties may also be suitable for mining by in situ
mining techniques, and the Company has previously performed
preliminary studies of the suitability of the deposit for production
by this mining method. Mining by any method requires an increase in
the price for uranium concentrates, a long term supply contract, and
financing for the project, none of which are now available to the
Company.
The Peach properties are subject to a mortgage dated May 20,
1991 by which the Company mortgaged its properties to Cycle Resource
Investment Corporation (CRIC), the mortgagee and a shareholder of the
Company. The principal balance of the CRIC mortgage as of December
31, 1993 was $2,031,200. Since cash flow was not sufficient to repay
the note on the August 31, 1993 due date, CRIC and the Company signed
a forbearance agreement extending the notes to June 30, 1994. Upon
default, CRIC could foreclose on the Peach properties if it so
decides. NUKEM, Inc. owns 100 percent of CRIC which in turn owns 30%
of the Company's common stock. NUKEM, Inc. is a New York corporation
located in Stamford, Connecticut, that is a wholly owned subsidiary
of NUKEM, GmbH, a German corporation located in Alzenau, Germany that
in turn is a wholly owned subsidiary of RWE AG, a Germany
corporation. RWE is publicly held, and is the largest electric
generating utility in Germany and the eighth largest in the world.
It is also a worldwide conglomerate active in the production and
marketing of petroleum products, coal, uranium, chemicals, and
electrical generating equipment. RWE also is active in waste
processing and environmental protection and reclamation services.
Sweetwater Properties
The Sweetwater properties cover approximately 9,700 acres of
unpatented mining claims that are located adjacent to the Peach
properties on the Sweetwater Plateau, a topographic feature in the
PAGE 10
southern Gas Hills uranium area. Wide-spaced drilling conducted on
the Sweetwater properties has disclosed uranium in numerous drill
holes. The Company has retained the Sweetwater properties in
anticipation of future favorable market conditions for uranium
concentrates from the properties.
Other Gas Hills Uranium Properties
The Company also owns varying undivided interests, ranging from
13% to 100% undivided interests as tenants in common in unpatented
mining claims covering approximately 3,100 acres in the Gas Hills
area near the Peach and Sweetwater properties. Mineralization has
been found by drilling on some of these properties. Sufficient
drilling has not been performed on these properties to assess the
extent of the mineralization, that is, evidence of uranium minerals,
or to determine if the properties can be economically produced.
Nature of Title to Mining Claims
Acquisition of mining claims on those parts of the public domain
not reserved or withdrawn by the government from location of claims
is a right granted by the federal mining law. Explorers for minerals
such as uranium are entitled to go upon the land and search for
minerals. To initiate mining claims, a locator establishes or
locates single claims as a contiguous block of claims by marking the
boundaries upon the surface, posting notices of the claims upon the
surface, and recording notices in the local county records as well as
filing them with the Bureau of Land Management office in the state in
which they are located.
Upon location, a person searching for uranium by exploratory
drilling or other geological methods is entitled to exclusive
possession of the land encompassed by the claim or block of claims.
Upon discovery of a valuable mineral deposit, the possessory right
ripens into a vested interest in real property. Mining claims are
interests in real property that may be sold and conveyed.
A rival locator is entitled by law to contest the validity of
another's claims. The rival or junior location may show it has
better possessory rights or vested property rights by proving in a
judicial proceeding that the senior claimant has not met the
requirements for establishing or maintaining the claim or block of
claims, and that the rival locator has the better right by virtue of
its own entry onto the lands, relocation of the land for its own
claims, and either continuous possession while in pursuit of
discovery or actual discovery of a valuable mineral deposit.
The Company and other owners of mining claims have no obligation
to seek a patent from the government, that is, an instrument
conveying the government's record title. Without a patent, a locator
or subsequent owner of unpatented mining claims is entitled to mine
them and remove and sell the minerals without payment of a royalty
or other charges to the government. If a patent is obtained from the
United States, the entire record and beneficial interest vests in the
patentee, and the claims are no longer subject to defeasance by
either the government or a rival locator.
PAGE 11
Some of the Company's unpatented mining claims were located by
it in the 1950s and 1960s. Other of its claims were acquired from
other locators in the 1970s. All the Company's mining claims, like
those previously mined for its benefit, are unpatented. The Company
has no intention to seek patents to its mining claims at this time.
In March 1993 the Department of the Interior placed a moratorium upon
issuance of patents pending resolution of proposed changes in the
federal mining law.
Mining Claim Rental Fees and Royalties
According to a federal law adopted in 1992, in order to maintain
title to mining claims after their location, an owner must pay annual
rental fees of $100 per claim to the Department of the Interior.
Upon failure to pay a filing fee, the Bureau of Land Management
declares the claim void and terminated.
Proposed amendments to the mining law now pending in Congress
are expected to include imposition of a royalty on production of
minerals. The royalty rates being debated in Congress range up to
eight percent of gross proceeds, a rate that would make mining
uneconomic in many cases.
Abandonment of Mining Claims
On August 31, 1993 the Company abandoned, through non-payment of
the $200 per claim annual fees due on that date for 1993 and 1994,
870 mining claims with a remaining book value of $543,826. The
claims abandoned represented approximately 54% of the Company's
mineral acreage and approximately 5% of its remaining investment.
During December 1993 a mineral property impairment of $3 million for
the remaining mining claims was recorded. This represents a 31%
reduction of the property valuation. During 1992 there were no
property abandonments or mineral property impairments, while during
1991 the Company recorded abandonments of $115,212 and mineral
property impairments of $3,180,000.
Mining Methods
A uranium deposit, once identified and developed, may be
produced and the minerals extracted by one of three mining methods.
These are surface mining, underground mining, and in situ solution
mining.
Surface mining by the open pit method is generally used for ore
bodies located within approximately 500 feet of the surface. Open
pit mining requires removal and saving of the topsoil for later
reclamation, removal of the dirt and rock overlying the mineral
deposit, digging a pit into the earth to expose the mineral deposit,
mining the ore by heavy shovels which load it into large trucks for
hauling to an uranium processing mill where the uranium concentrates
are extracted, and reclaiming the spent ores, called mill tailings,
as well as the open pit, to stabilized conditions consistent with
pre-mining uses.
PAGE 12
Mineral deposits found at depths greater than 500 feet are
traditionally mined by underground mining methods. A large shaft is
bored from the surface down to the mineral deposit. From there
tunnels are bored laterally and perhaps vertically through the
deposit. The ore is loaded onto railroad cars located underground,
hauled to the shaft, lifted by hoists to the surface, and transported
to a mill for processing.
In situ solution mining methods are often referred to as in situ
leach or ISL mining. In the ISL process, groundwater fortified with
solubilizing agents such as sodium bicarbonate (baking soda), for
example, are injected into an ore body through a series of injection
drill holes. The solutions penetrate the ore body and dissolve the
uranium. The mineralized solutions are pumped to the surface through
a recovery well for additional processing to extract the uranium
concentrates. Solution mining is less labor and capital intensive
than the traditional surface mining and underground shaft operations.
The expense of licensing, constructing and operating a large uranium
processing mill can be avoided because a less complex and less costly
precipitation unit is adequate to separate the uranium concentrates
from the solutions. ISL mining also usually requires less expense
for reclamation because no open pits or large shafts are excavated
and smaller quantities of processed waste comparable to mill tailings
are produced. ISL processes are generally suitable for
ore bodies not much deeper than 2,000 feet which are found in
permeable underground formations that the solutions can penetrate,
and that have confining layers of rock above and below the ore zone
to concentrate the solutions in the ore body.
Because of the current low market price for short-term
deliveries of uranium concentrates, approximately $9.50 a pound, the
Company has been unable to commence mining. The future demand for
uranium, and consequently the future price, is susceptible to a
number of variables. The principal factors are importation of low-
priced uranium, market requirements of nuclear power generators
located around the world, and stockpiles of uranium concentrates,
both domestic and foreign. As inventories of uranium concentrates
are depleted, the need for uranium production should increase. The
inventory of uranium available to the nuclear power industry has been
declining, and the Company anticipates an eventual increase in
uranium prices.
Market for Uranium
Most of the former uranium producers in the United States have
suspended operations because of the current low market price of
uranium. The current market for sales of uranium is being filled in
large part by inventories of domestic concentrates and imported
foreign concentrates. Some U.S. uranium producers are positioning
themselves for production because world-wide inventories of uranium
concentrates are declining. If current conditions persist, the
established consumption level of uranium will exceed the available
inventories and current annual production in several years, and
demand for uranium may increase as a result of reduced supplies. New
production typically requires three to five years of mine and mill
permitting. New production can be expected from other producers,
both domestic and foreign, to meet increases in demand.
PAGE 13
The principal market for uranium concentrates consists of
utility companies throughout the United States and other countries.
The principal market for lands containing uranium which has not been
mined, non-producing uranium properties, primarily consists of other
mining companies, foreign utilities, and to a lesser extent, utility
companies throughout the United States. Some of the utility
companies purchase non-producing properties to assure themselves of a
supply of uranium for their nuclear reactors. The Company's non-
producing uranium properties consist of mining claims that may or may
not have proven uranium deposits. Generally, the more a mineral
bearing property is developed by drilling the more defined the ore
body becomes, and in turn, the more valuable the property becomes.
Only close-spaced drilling is adequate to permit reliable
quantification of the grade and extent of uranium deposits. The
Company's drilling in many cases is not sufficiently close-spaced to
permit such quantification.
Marketing of non-producing uranium properties as well as uranium
concentrates occurs through privately negotiated contracts, by open
bid, or both. Uranium brokers may seek buyers and sellers of either
uranium properties or concentrates for a commission. There are only
a couple of brokers internationally that list uranium properties for
sale, and the Company maintains contact with them although its
properties are not currently listed through them for sale. There are
only a few sales of uranium properties every several years, and each
sale is unique.
Because of the immediate cash needs of the Company and the long
term nature of uranium production and the associated risks involved,
the Company must liquidate all or a portion of its uranium properties
to continue operations and repay its debt obligations. The Company
decided during 1993 to offer its properties for sale and hopes to
sell them by June 1994. There are no assurances as to the selling
price, terms of sale, or a sale completion date. Please see Item 7,
"Liquidity and Capital Resources," in this report for additional
details.
Item 3. Legal Proceedings.
- ------ -----------------
There are no legal proceedings pending against the Company or
its properties.
Item 4. Submission of Matters to a Vote of Security
Holders.
- ------ -------------------------------------------
No matters for decision were submitted to a vote of shareholders
during the last calendar quarter of the year ended December 31, 1993.
PAGE 14
PART II
-------
Item 5. Market For Registrant's Common Equity and Related
Stockholder Matters.
- ------ -----------------------------------------
(a) Through January 1994 the common stock of the Company was
traded over-the-counter on the NASDAQ national market system under
the symbol ANUC. Effective February 1, 1994 the Company's common
stock is being traded on the NASDAQ small cap market under the ANUC
symbol. The range of high and low sales prices of the stock for each
calendar quarter period during the past three years, as quoted by the
National Association of Securities Dealers, Inc., are given in the
following table, except that high and bid quotation prices are given
for the first and second quarters of 1992 and the four quarters for
1991. The over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down, or commission, and may not
necessarily represent actual transactions.
Price Ranges (closing bid)
For Calendar Years Ended December 31
-----------------------------------------
1993 1992 1991
------ ------ ------
Low High Low High Low High
---- ---- ---- ---- ---- ----
First Quarter ..... 0.50 1.09 2.00 3.00 1.25 2.50
Second Quarter ..... 0.50 1.00 1.69 2.00 1.75 2.38
Third Quarter ..... 0.12 0.66 1.25 2.00 2.00 3.86
Fourth Quarter ..... 0.12 0.31 .88 1.38 1.88 3.25
The low and high prices for the stock on March 11, 1994 were
$.16 and $.16.
(b) Based solely upon the number of record holders, the
approximate number of stockholders of the common stock of the Company
as of March 11, 1994 was 1734.
(c) No dividends have been declared with respect to the common
stock during the fiscal years ended December 31, 1993 and 1992, the
seven-month period ended December 31, 1991, or the previous fiscal
year ended May 31, 1991.
PAGE 15
Item 6. Selected Financial Data.
- ------ -----------------------
Seven
Year Year Months
Ended Ended Ended Fiscal year ended May 31,
December December December ----------------------------
31,1993 31,1992 31,1991 1991 1990 1989
-------- -------- -------- -------- -------- --------
($000's are omitted except per share amounts)
INCOME STATEMENT
Revenue From
Operations. $ 323 $ 319 $ 120 $ -0- $ 12 $ 35
Net Loss..... $(4,074) $ (381) $(3,595) $ (365) $ (147) $ (269)
BALANCE SHEET
Working
Capital(1). $(2,214) $(1,590) $ (739) $ (306) $ (358) $ (492)
Total Assets. $ 9,845 $13,413 $12,874 $15,784 $16,032 $17,185
Total
Liabil-
ities..... $ 5,189 $ 4,683 $ 3,784 $ 3,619 $ 3,502 $ 4,558
Long-Term
Obliga-
tions.... $ 2,786 $ 2,913 $ 2,967 $ 3,267 $ 3,118 $ 3,546
Common Stock-
holders'
Equity... $ 4,656 $ 8,730 $ 9,090 $12,166 $12,530 $12,627
LOSS PER COMMON SHARE(2)
Loss from
Operations. $(0.53) $ (0.05) $ (0.47) $ (0.05) $ (0.02) $ (0.13)
Dividends Paid
Per Common
Share..... $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
------------------------------
(1) Exclusive of assets held for sale.
(2) The weighted average number of shares of common stock outstanding during the
year ended December 31, 1993 and, 1992, and the seven months ended December 31, 1991, and
the fiscal years ended May 31, 1991, 1990, and 1989 was 7,696,622, 7,693,736, 7,573,405,
7,239,125, 7,180,495 and 4,930,917 respectively.
/TABLE
PAGE 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
- ------ -----------------------------------
(See, in addition to Selected Financial Data, the financial
statements of the Company referred to in Item 14)
Results of Operations
During the past three years the Company has shifted its efforts
away from holding of uranium properties, because of the continuing
low level of uranium spot market prices, to a newly developing market
of byproduct material disposal. It is the Company's intent to make
the byproduct disposal business its primary business segment through
1995 after which it does not expect to be permitted by the Nuclear
Regulatory Commission to continue to accept byproduct material for
disposal.
During the years ended December 31, 1993 and 1992 and the seven-
months ended December 31, 1991 the Company entered the business of
uranium byproduct material disposal and received $323,000, $319,000
and $120,000 respectively for performing on five contracts for
disposal of uranium byproduct material at its mill site. It
continues to seek other such disposal contracts. During September
1993 the Company entered into a marketing agreement with American
Ecology Corporation (AEC) by which AEC would assist the Company in
obtaining byproduct disposal contracts for the disposal of 10,000
cubic yards of material. AEC made a $202,500 advance payment to the
Company which will be recovered by it either through one-half of net
disposal revenue or the issuance of the Company's common stock. The
Company will retain 50% of the net profits generated from disposal
revenue.
General and administrative expenses decreased approximately 25
percent during the year ended December 31, 1993 compared to 1992 due
to the 1992 expenditures associated with preparing a confidential
private placement memorandum that was circulated starting in January
1993. During 1992 the general and administrative expenses increased
approximately eight percent on an annualized basis compared to the
seven month period ended December 31, 1991 due to establishment of a
money purchase pension plan for its employees and expenditures
associated with preparing the private placement memorandum. During
the seven-month period ended December 31, 1991 general and
administrative expenses increased 46 percent on an annualized basis
compared to the fiscal year ended May 31, 1991 due to an increased
level of activity, primarily costs to obtain a license amendment for
receipt of byproduct material and relocation costs associated with a
newly appointed president. General and administrative expenses for
the year ended May 31, 1991 increased by 72 percent compared to the
prior year. This sharp increase was primarily the result of
additional expense associated with a change in management of the
Company consisting of a new board of directors and the new president.
The additional expenses included a premium for a new director and
officer liability insurance policy (approximately $40,000) and
severance pay for two former officers (approximately $70,000).
Byproduct material disposal expenses of $29,000, $32,000 and
$29,000 for the years ended December 31, 1993 and 1992 and the seven-
months ended December 31, 1991 consisted of labor, rental costs and
lease payments of earth moving equipment.
PAGE 17
In December 1993, the Company determined that its decision to
sell its primary mineral properties rather that hold the properties
for future potential development required greater consideration be
given to in-ground market values and the Company's present financial
position. The Company determined its range of potential loss for the
mineral properties to be from approximately $3 million to
approximately $7 million. Because of the Company's continuing
process to solicit bids for its mineral properties, the lack of an
active market for in-ground uranium reserves, and uncertainties as to
the ultimate intent of the major shareholder, management is unable to
determine at this time whether any amount in that range provides a
better estimate than any other amount. Therefore, in accordance with
the requirements of Statement of Financial Accounting Standards No.
(Statement) 5, Accounting for Contingencies, a $3 million mineral
property impairment was recognized during 1993 which represents a 31%
reduction in the mineral property valuation at December 31, 1993.
In December 1991, after consideration of uranium market
conditions and a recent sale by a third party of a comparable uranium
property, management determined that a $3.2 million write-down in the
carrying value of the Company's uranium properties was warranted.
The asset value shown on the balance sheet for December 31, 1991 was
reduced by that amount. Write downs were not warranted during the
year ended December 31, 1992.
Abandonment of property interests occurred during the year ended
December 31, 1993 in the amount of $544,000 and during the seven-
month period ended December 31, 1991 in the amount of $115,000.
There were no property abandonments during the year ended December
31, 1992 or the fiscal year ended May 31, 1991. The Company's policy
is to abandon identified mineral properties once it has been
determined that those properties have little or no economic value
based on apparent low levels of mineralization and the carrying costs
of the properties. The evaluation is normally made based upon
results of exploration drilling intended to demonstrate whether the
properties contain enough mineralization to warrant further
expenditures. The abandonments during 1993 represented approximately
54% of the Company's mineral acreage. Approximately five percent of
the Company's carrying value of its mineral properties were expensed
during 1993.
Interest income continued to decline for the year ended December
31, 1993, as it did in all annualized periods presented. The
decreases in interest income are attributable to decreases in
interest rates paid on the Company's reclamation fund and decreases
in the Company's reclamation bond escrow accounts, the principal
source of this income, as funds were withdrawn to apply to the cost
of completed reclamation work.
Interest expense for the year ended December 31, 1993 was
$186,000 as compared to interest expense of $123,000, $36,000, and
$47,000 for the year ended December 31, 1992, for the seven months
ended December 31, 1991 and the fiscal year ended May 31, 1991.
Interest expense for the year ended December 31, 1993 increased 51%
as compared with the year ended December 31, 1992. This increase in
interest expense for the past two periods reported is primarily
attributable to the increase in average outstanding debt resulting
from increases in amounts borrowed from Cycle Resource Investment
Corporation to fund operations, particularly the costs of preparing
PAGE 18
for a commercial byproduct disposal license and the installation of
new management.
Liquidity and Capital Resources
The Company's working capital deficit at December 31, 1993 was
$2,200,000 while at December 31, 1992 it was $1,590,000, at December
31, 1991 it was $739,000, and at May 31, 1991 it was $306,000. The
increased working capital deficits at December 31, 1993, 1992 and
1991 are primarily due to the negative cash flow from operations.
The Company does not have any commitments for funding, and owes
$2,031,200 in notes due on June 30, 1994 to CRIC. The Company has no
other credit arrangements. Previous efforts to obtain funding
included the preparation of a confidential private placement
memorandum by which a California based financier began offering in
January 1993 $5 million to $8 million of ANC common stock to
potential foreign investors at $1.05 per share. This offering failed
during the summer of 1993, and the Company was forced to abandon its
efforts towards developing a commercial disposal facility.
Consequently, the Company terminated its employment agreement with
its previous president and must liquidate some or all of its mineral
properties in order to repay its debt obligations and to provide the
necessary working capital to continue operations and satisfy its
reclamation obligations.
In prior years, the Company had relied upon investment income
from the reclamation bond, release of funds from the reclamation bond
as a result of reductions in the bonding requirement and short-term
borrowings from stockholders to satisfy its working capital needs.
However, during the years ended December 31, 1993 and 1992 and the
seven-months ended December 31, 1991, the Company has received a
portion of its cash flow from disposal of third party byproduct
material. In order to expedite the September 1991 amendment to the
Company's mill site reclamation plan by which the Company was
permitted by the NRC to accept byproduct material, the Company agreed
to allow the interest earned on approximately $1.9 million of the
reclamation bond to accumulate and increase the bond fund until the
disposal space initially authorized is exhausted. The amount of
interest accumulation to the bond fund is estimated at $150,000
during 1994 and 1995.
Anticipated revenues from the American Ecology Corporation (AEC)
agreement and the Company's 50% share of the net income derived from
the disposal of third party byproduct material are expected to
provide the Company's day to day working capital needs for the near
future. AEC did not make the $202,500 prepayment expected in
February 1994 because the NRC did not issue its policy allowing for
the co-disposal of byproduct material and like-kind material but
instead will rule on such applications on an individual basis.
Therefore, in accordance with the AEC agreement, AEC can either
exchange its first $202,500 payment for ANC common stock at market
value or renegotiate the agreement. AEC has indicated that its
intent is to renegotiate the terms of the September 1993 agreement.
PAGE 19
On August 24, 1993, the Company reached an agreement with Cycle
Resource Investment Corporation (CRIC), a stockholder, for CRIC to
increase its total loans to $2,031,200. The Company was not able to
repay the notes on August 31, 1993 when due. On January 20, 1994
this $2,031,200 debt plus approximately $143,000 in accrued interest
was extended to June 30, 1994. CRIC holds a mortgage constituting a
first lien on the Company's Peach properties which represent
substantially all the values of the uranium properties. Beginning in
May 1994, the Company's anticipated byproduct disposal revenues,
which it bases upon its internal analysis of the market and its
recent activities, are expected to provide a significant portion of
the 1994 working capital requirements if the CRIC debt obligations
are deferred. The Company's ability to continue in operation during
1994 depends upon completion of a sale of its mineral properties,
realizing revenues from its byproduct disposal business or increased
borrowings and continued deferments of its notes due CRIC. It is
unlikely that any additional loans can be obtained. There are no
assurances that byproduct disposal revenues will be realized, that a
sale of the uranium properties will be achieved, that the sales price
or terms will be adequate to meet the Company's needs in either the
short term or the long term, and consequently no assurances that the
Company can remain in business. When the Company's reclamation site
is closed to the receipt of additional byproduct material, which is
expected at the end of 1995, and after the Company has sold its
uranium properties which is expected during 1994, it will have
essentially no remaining assets unless the uranium properties sell
for more than the amount of the Company's indebtedness, as to which
there are no assurances.
The Company estimates its reclamation costs for the Gas Hills
project to be $2,740,290 at December 31, 1993. The NRC has required
the Company to maintain a bond in the amount of $3,063,371 to assure
completion of future reclamation. The bond fund has increased to
$3,175,470 as of December 31, 1993. The bond consists of liquid
investments, a surety bond for $865,000, a $25,000 letter of credit,
and certificates of deposit. The excess funds, if any, will be
returned to the Company upon satisfactory completion of the
reclamation project.
Income Taxes
See Note 6 to Financial Statements included in Item 14 herein.
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
See Item 14 of this report.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
- ------ ---------------------------------------------
The Company had a change of its independent auditors during the
fiscal year ended December 31, 1992. It has not had any
disagreements with its present or previous auditors on any matter of
accounting principles or practices or financial statement disclosure.
PAGE 20
PART III
--------
Items 10, 11, 12 and 13 of this report are incorporated herein
by reference from sections of the Company's definitive proxy
statement entitled "Election of Directors," "Executive Compensation,"
"Security Ownership of Certain Beneficial Owners and Management" and
"Certain Relationships and Related Transactions." The definitive
proxy statement is to be filed with the Securities and Exchange
Commission no later than April 30, 1994. Notwithstanding such
incorporation by reference, the report of the board of directors
compensation committee on executive compensation, the stock
performance graph and report on option/SAR repricing, if any, are not
incorporated.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
- ------- --------------------------------------------
(a) The following documents are filed as a part
of this report:
1. Financial Statements:
- Independent Auditors' Report
- Balance Sheets, December 31, 1993,
December 31, 1992 and December 31, 1991
- Statements of Operations and Retained
Earnings (Accumulated Deficit) for the
years ended December 31, 1993, 1992, and
1991 (unaudited), the seven-months ended
December 31, 1991 and the year ended
May 31, 1991.
- Statements of Cash Flows for the years
ended December 31, 1993, and 1992, the
seven-months ended December 31, 1991,
and the year ended May 31, 1991.
- Notes to Financial Statements for the
years ended December 31, 1993, and 1992, the
seven-months ended December 31,
1991, and the year ended May
31, 1991.
2. Financial Statement Schedules (for the
years ended December 31, 1993 and 1992, the
seven months ended December 31, 1991 and
the fiscal year ended May 31, 1991):
- V - Property, Plant, and Equipment
-VI - Accumulated Depreciation,
Depletion, and Amortization of
Property, Plant, and Equipment
All other schedules are omitted because of the absence of the
conditions under which they are required or because the required
information is included in the financial statements or notes thereto.
PAGE 21
(b) Reports on Form 8-K.
--------------------
A report on Form 8-K was filed on January 21, 1994 reporting the
Forbearance Agreement of the amended promissory notes between Cycle
Resource Investment Corporation and American Nuclear Corporation,
dated January 20, 1994. The $2,031,200 loans plus unpaid interest
was extended from August 31, 1993 to June 30, 1994.
A report on Form 8-K was filed on January 31, 1994 reporting
that the Company's common stock will not be traded on the NASDAQ over
the counter on the national market system January 31, 1994. It is
traded on the NASDAQ small cap market effective February 1, 1994.
(c) Exhibits.
--------
Exhibit
Number Description
- ------- -----------
3.1 Restated Articles of Incorporation, dated
October 28, 1991 (incorporated herein by
reference from the exhibits to Registrant's
report filed on Form 10-Q dated September 30,
1992).
3.2 Bylaws, dated August 15, 1980 (incorporated
herein by reference from the exhibits to
Registrant's report filed on Form 10-Q dated
October 10, 1980).
10.1 Agreement and First Amendment to Loan Agreement
between Cycle Resource Investment Corporation
and American Nuclear Corporation, dated June
27, 1991 (incorporated herein by reference from
the exhibits to Registrant's report filed on
Form 8 dated September 24 1991).
10.2 Extension of Amended Promissory Note (Second)
dated December 1, 1992 (incorporated herein by
reference from the exhibits to Registrant's
report filed on Form 8 dated December 2, 1992).
10.3 Forbearance Agreement between the Company and Cycle
Resource Investment Corporation dated January 20, 1994
(incorporated herein by reference from exhibits to
Registrant's report filed on Form 8 dated January 21,
1994).
10.4 Escrow Agreement between the Company and
Uniwest Trust Company and the Tennessee Valley
Authority, dated November 28, 1984
(incorporated herein by reference from the
exhibits to Registrant's proxy material dated
January 18, 1985).
19.1 Debt Restructuring agreement between American
Nuclear Corporation, and The Wyoming National
Bank of Casper, dated November 28, 1984
(incorporated herein by reference from the
exhibits to Registrant's report filed on Form 8
dated September 24, 1991).
PAGE 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) 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.
(REGISTRANT) AMERICAN NUCLEAR CORPORATION
BY (SIGNATURE)
(NAME AND TITLE) s/WILLIAM C. SALISBURY, President
DATE March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
BY (SIGNATURE)
(NAME AND TITLE) s/WILLIAM C. SALISBURY, President, and
Director and Chief Operating Officer
DATE March 30, 1994
BY (SIGNATURE)
(NAME AND TITLE) s/DENNIS A. ECKERDT, Chief Financial
Officer and Director
DATE March 30, 1994
PAGE 23
INDEPENDENT AUDITORS' REPORT
- ----------------------------
Shareholders and Board of Directors
American Nuclear Corporation:
Casper, Wyoming
We have audited the accompanying balance sheets of American
Nuclear Corporation (the Company) as of December 31, 1993 and 1992,
and the related statements of operations and retained earnings
(accumulated deficit) and cash flows for the years then ended. Our
audit also included the financial statement schedules for the years
ended December 31, 1993 and 1992 as listed in the index at Item 14.
These financial statements and corresponding financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements
and financial statement schedules 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
the Company as of December 31, 1993 and 1992, and the results of its
operations and cash flows for the years then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the
financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present
fairly, in all material respects the information required to be
included therein.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company has
incurred significant operating losses and was unable to repay notes
payable to its major shareholder when due during 1993. The Company
and its major shareholder signed a forbearance agreement extending
the term of the notes to June 30, 1994. Substantially all of the
Company's assets are pledged as collateral for the notes payable.
These issues raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
PAGE 24
As discussed in Note 1, the Company discontinued its operations
related to the development and production of mineral properties.
Management estimates the Company's range of loss associated with its
discontinued operations to be from approximately $3 million to
approximately $7 million, of which the Company recognized a $3
million mineral property impairment for the year ended December 31,
1993. The Company is continuing efforts to sell its mineral
properties, the ultimate outcome of which cannot presently be
determined.
SIGNATURE
MITCHELL-FINLEY AND COMPANY, P.C.
Certified Public Accountants
March 9, 1994
Denver, Colorado
PAGE 25
INDEPENDENT AUDITORS' REPORT
- ----------------------------
American Nuclear Corporation:
We have audited the accompanying balance sheets of American
Nuclear Corporation as of December 31, 1991 and the related
statements of operations and retained earnings and of cash flows for
the seven-months ended December 31, 1991 and the years ended May 31,
1991. Our audits also included the financial statement schedules
listed in the Index at Item 14. These financial statements and
corresponding financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedules
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 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 American Nuclear
Corporation at December 31, 1991 and the results of its operations
and cash flows for the above stated periods, in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
SIGNATURE
DELOITTE AND TOUCHE
Denver, Colorado
March 20, 1992
PAGE 26
AMERICAN NUCLEAR CORPORATION
- ----------------------------
BALANCE SHEETS DECEMBER 31, 1993, 1992 AND 1991
- -----------------------------------------------
ASSETS
- ------
December 31, December 31, December 31,
NOTES 1993 1992 1991
----- ----------- ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 164,302 $ 118,814 $ 62,244
Reclamation deposit income
receivable 2,4 3,392 2,833 3,254
Prepaids and other 20,851 57,353 11,841
----------- ----------- -----------
Total current assets 188,545 179,000 77,339
----------- ----------- -----------
MINING PROPERTIES HELD FOR SALE 1 6,497,123
MINING PROPERTIES - Net 2,4 9,901,437 9,837,922
----------- ----------- -----------
PLANT AND EQUIPMENT - Net 3,4 91,720 111,091 43,525
----------- ----------- -----------
OTHER ASSETS:
Reclamation deposit 2,4 3,011,871 2,930,368 2,827,773
Other 55,550 290,868 87,799
----------- ----------- -----------
Total other assets 3,067,421 3,221,236 2,915,572
----------- ----------- -----------
TOTAL $ 9,844,809 $13,412,764 $12,874,358
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
CURRENT LIABILITIES:
Note payable to stockholder 4 $ 2,031,200 $ 1,619,506 $ 737,000
Accrued interest payable 142,929 93,866 8,788
Trade accounts payable 7,806 19,232 45,501
Deferred revenue 5 202,500 16,500 10,892
Other current liabilities 18,302 20,352 14,556
----------- ----------- -----------
Total current liabilities 2,402,737 1,769,456 816,737
----------- ----------- -----------
LONG TERM DEBT 8
Capitalized lease obligations 45,498 63,800
----------- ----------- -----------
Total long term debt 45,498 63,800 -0-
----------- ----------- -----------
ESTIMATED RECLAMATION COSTS 2 2,740,290 2,849,678 2,967,435
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES 1,8
REDEEMABLE PREFERRED STOCK 7
(Continued)
/TABLE
PAGE 27
AMERICAN NUCLEAR CORPORATION
- ----------------------------
BALANCE SHEETS DECEMBER 31, 1993, 1992 AND 1991
- -----------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
December 31, December 31, December 31,
NOTES 1993 1992 1991
----- ----------- ----------- -----------
STOCKHOLDERS' EQUITY: 4,7
Common stock (7,696,739 shares
outstanding) 314,080 314,080 313,704
Additional paid-in capital 13,304,849 13,304,849 13,284,104
Retained earnings (accumulated
deficit) (8,333,519) (4,259,973) (3,878,496)
Less cost of common stock
held in treasury (629,126) (629,126) (629,126)
----------- ----------- -----------
Stockholders' equity 4,656,284 8,729,830 9,090,186
----------- ----------- -----------
TOTAL $ 9,844,809 $13,412,764 $12,874,358
=========== =========== ===========
See Independent Auditors' Reports and notes to financial statements. (Concluded)
/TABLE
PAGE 28
AMERICAN NUCLEAR CORPORATION
- ----------------------------
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT) FOR THE YEARS ENDED
DECEMBER 31, 1993, 1992, AND 1991(UNAUDITED), THE SEVEN MONTHS ENDED DECEMBER 31, 1991 AND
THE YEAR ENDED MAY 31, 1991
- ------------------------------------------------------------------------------------------
SEVEN
YEAR YEAR YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER MAY 31,
NOTES 31, 1993 31, 1992 31, 1991 31, 1991 1991
(Unaudited)
----- ----------- ----------- ----------- ----------- ----------
OPERATING REVENUES:
Byproduct
material
disposal $ 322,624 $ 318,814 $ 120,352 $ 120,352 -0-
----------- ----------- ----------- ----------- ----------
Total operating
revenues 322,624 318,814 120,352 120,352 $ -0-
----------- ----------- ----------- ----------- ----------
OPERATING EXPENSES:
General and admin-
istrative 517,391 691,072 642,858 466,627 546,940
Byproduct
material
disposal 29,224 31,595 28,931 28,730
Commercial byproduct
facility 236,866
----------- ----------- ----------- ----------- ----------
Total operating
expenses 783,481 722,667 671,789 495,357 546,940
----------- ----------- ----------- ----------- ----------
Operating Loss (460,857) (403,853) (551,437) (375,005) (546,940)
OTHER INCOME (EXPENSE):
Interest income 2 117,158 145,183 241,038 111,937 229,738
Gain (loss) on
sale of invest-
ments and other 208 (977) (977)
Interest expense 4 (186,021) (123,015) (56,903) (36,092) (47,389)
----------- ----------- ----------- ----------- ----------
NET LOSS BEFORE DISCON-
TINUED OPERATIONS (529,720) (381,477) (368,279) (300,137) (364,591)
DISCONTINUED OPERATIONS
1
Impairments and
Abandonments (3,543,826) (3,295,212) (3,295,212)
----------- ----------- ----------- ----------- ----------
NET LOSS (4,073,546) (381,477) (3,663,491) (3,595,349) (364,591)
RETAINED EARNINGS
(Accumulated
Deficit):
Beginning of
period (4,259,973) (3,878,496) (215,005) (283,147) 81,444
----------- ----------- ----------- ----------- ----------
End of period $(8,333,519) $(4,259,973) $(3,878,496) $(3,878,496) $ (283,147)
=========== =========== =========== =========== ==========
(Continued)
PAGE 29
AMERICAN NUCLEAR CORPORATION
- ----------------------------
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT) FOR THE YEARS ENDED
DECEMBER 31, 1993, 1992, AND 1991(UNAUDITED), THE SEVEN MONTHS ENDED DECEMBER 31, 1991 AND
THE YEAR ENDED MAY 31, 1991
- ------------------------------------------------------------------------------------------
SEVEN
YEAR YEAR YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER MAY 31,
NOTES 31, 1993 31, 1992 31, 1991 31, 1991 1991
(Unaudited)
----- ----------- ----------- ----------- ----------- ----------
NET LOSS BEFORE
DISCONTINUED
OPERATION
PER SHARE $ (0.07) $ (0.05) $ (0.05) $ (0.04) $ (0.05)
DISCONTINUED
OPERATION PER
SHARE (0.46) $ -- $ (0.43) $ (0.43) $ --
----------- ----------- ----------- ----------- ----------
NET LOSS PER
COMMON SHARE: $ (0.53) $ (0.05) $ (0.48) $ (0.47) $ (0.05)
=========== =========== =========== =========== ==========
WEIGHTED-AVERAGE
NUMBER OF SHARES
OUT STANDING 1 7,696,622 7,693,736 7,596,866 7,573,405 7,239,125
=========== =========== =========== =========== ==========
See Independent Auditors' Reports and notes to financial statements.
(Concluded)
PAGE 30
AMERICAN NUCLEAR CORPORATION
- ---------------------------
STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1993 AND 1992, THE SEVEN MONTHS
ENDED DECEMBER 31, 1991 AND THE YEAR ENDED MAY 31, 1991
- ------------------------------------------------------------------------------------------
SEVEN
YEAR YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER MAY 31,
31, 1993 31, 1992 31, 1991 1991
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,073,546) $ (381,477) $(3,595,349) $ (364,591)
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Loss (gain) on sale of
investment securities and
plant and equipment (208) 977
Mining property impairment 3,000,000 3,180,000
Abandonment of mining property 543,826 115,212
Abandonment of commercial
byproduct project 236,866
Depreciation and amortization 19,371 17,433 7,761 6,297
Issuance of stock for ESOP
and bonus 21,121 13,701
Decrease (increase)
in Assets:
Reclamation deposit
income receivable (560) 421 11,210 (5,805)
Other assets (45,001) (43,491) (9,311) 1,458
Increase (decrease)
in Liabilities:
Accrued interest payable 49,063 85,078 (72,912) 38,710
Trade accounts payable (11,426) (26,269) (23,298) 38,259
Deferred revenue 186,000 5,608 (39,258) 50,150
Other liabilities (2,050) 5,796 14,556
Estimated reclamation costs (109,388) (117,757) 11,179 (161,758)
----------- ----------- ----------- -----------
Net cash from operating
activities (206,843) (433,745) (399,233) (383,579)
----------- ----------- ----------- -----------
(Continued)
/TABLE
PAGE 31
AMERICAN NUCLEAR CORPORATION
- ---------------------------
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992, THE SEVEN MONTHS
ENDED DECEMBER 31, 1991 AND THE YEAR ENDED MAY 31, 1991
- ------------------------------------------------------------------------------------------
SEVEN
YEAR YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER MAY 31,
31, 1993 31, 1992 31, 1991 1991
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment
securities (2,483,200) (2,287,795) (1,488,204) (3,599,560)
Proceeds from sale or
maturity of investment
securities 2,483,200 2,185,200 1,213,518 3,907,208
Additions to mining properties,
plant and equipment (139,512) (148,306) (56,893) (46,446)
Capitalized disposal costs (1,548) (205,090) (30,228)
----------- ----------- ----------- -----------
Net cash flows from
investing activities (141,060) (455,991) (361,807) 261,202
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments to/
from bank (100,000) 100,000
Borrowing from stockholder 411,694 882,506 699,300 37,700
Borrowing (payments on long-term
debt (18,303) 63,800 (310,591)
Proceeds from issuance of
common stock 506,250
----------- ----------- ----------- -----------
Net cash flows from
financing activities 393,391 946,306 794,959 137,700
----------- ----------- ----------- -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 45,488 56,570 33,919 15,323
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 118,814 62,244 28,325 13,002
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 164,302 $ 118,814 $ 62,244 $ 28,325
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Interest paid $ 129,908 $ 37,937 $ 109,004 $ 8,679
=========== =========== =========== ===========
Issuance of stock for
ESOP contribution $ -0- $ 11,863 $ -0- $ 13,701
=========== =========== =========== ===========
Issuance of stock for
stock bonus $ -0- $ 9,258 $ -0- $ -0-
=========== =========== =========== ===========
See Independent Auditors' Reports notes to financial statements.
(Concluded)
/TABLE
PAGE 32
AMERICAN NUCLEAR CORPORATION
- ----------------------------
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993
AND 1992, FOR THE SEVEN MONTHS ENDED DECEMBER 31, 1991 AND THE YEAR
ENDED MAY 31, 1991
- ---------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
Effective December 31, 1991 the Company changed its fiscal year-
end from May 31 to December 31 to better match the seasonal nature of
its business operations, which involve field work done after the
spring thaw and before the cold winter months. Accordingly, the
accompanying financial statements include the results of the Company
for years ended December 31, 1993 and 1992, the seven-months ended
December 31, 1991 and the year ended May 31, 1991. The statements of
operations and retained earnings and cash flows for the year ended
December 31, 1991 are unaudited and are presented for comparative
purposes. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included.
As of December 31, 1993 the Company's current liabilities exceed
current assets by approximately $2,200,000 and the Company has
incurred significant operating losses during recent years. As
discussed in Note 4, the Company's current liabilities are primarily
notes payable, and accrued interest due to its major shareholder
during 1994. Substantially all of the Company's assets are pledged
as collateral to these notes payable. Since cash flow was not
sufficient to repay the notes on the August 31, 1993 due date, the
major shareholder and the Company signed a forbearance agreement on
January 20, 1994 extending the notes to June 30, 1994. Upon default,
the major shareholder could foreclose on the Company's primary
mineral properties if it so decides.
The Company's ability to continue as a going concern is
dependent upon its ability to sell its primary asset, the mineral
properties, and repay the notes payable to its major shareholder.
In addition, the Company is dependent upon its ability to continue
obtaining byproduct disposal revenue contracts. The preceding
factors raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
Mining Properties
-----------------
Mining properties consist of unrecovered acquisition,
exploration and development costs which are maintained on a property-
by-property basis. Mining properties are depleted by the units-of-
production method based on estimated economic reserves. All
acquisition, exploration and development costs incurred in connection
with the various uranium properties are capitalized. Gains or losses
are recognized upon the sale of individual property interests. All
costs incurred in connection with unsuccessful exploration and
abandoned interests are charged to expense when known, and all of the
properties are evaluated at least annually on a property-by-property
basis. Mining properties in total are assessed annually for purposes
of impairment, considering, among other factors, production economics
and estimated in-ground market values. Any mineral property
impairments are charged to operations.
PAGE 33
In December 1993, the Company determined that its decision to
sell its primary mineral properties rather that hold the properties
for future potential development required greater consideration be
given to in-ground market values and the Company's present financial
position. The Company determined its range of potential loss for the
mineral properties to be from approximately $3 million to
approximately $7 million. Because of the Company's continuing
process to solicit bids for its mineral properties, the lack of an
active market for in-ground uranium reserves, and uncertainties as to
the ultimate intent of the major shareholder, management is unable to
determine at this time whether any amount in that range provides a
better estimate than any other amount. Therefore, in accordance with
the requirements of Statement of Financial Accounting Standards No.
(Statement) 5, Accounting for Contingencies, a $3 million mineral
property impairment was recognized during 1993 which represents a 31%
reduction in the mineral property valuation at December 31, 1993. In
December 1991, after consideration of uranium market conditions and
recent sales by third-parties of comparable undeveloped uranium
properties, management determined that a $3,180,000 write-down in the
carrying value of the Company's uranium properties was warranted.
Management has and will continue to monitor market conditions and
sales of comparable properties for purposes of determining whether
further mineral property impairments are necessary. No mineral
property impairments were warranted during 1992.
Mineral property abandonments of $543,826 occurred during 1993,
zero during 1992, and $115,212 during 1991.
Depreciation
------------
The Company provides for depreciation of plant and equipment on
a straight-line basis over the estimated useful lives of the assets,
which vary from 2 to 20 years.
Per Share Amounts
-----------------
Per share amounts are computed on the weighted-average number of
shares outstanding during the respective periods. Shares under
option and warrants have been disregarded because their effect is
anti-dilutive (See Note 7).
Discontinued Operations
-----------------------
The Company determined to discontinue operations related to
exploration, development and production of mining properties.
Management began seeking a purchaser for its mining properties in
October 1993 and presently anticipates completing a sale during 1994.
There were no operating revenues related to this business segment for
the years ended December 31, 1993 and 1992, the seven month period
ended December 31, 1991 and the fiscal year ended May 31, 1991.
Mining properties held for sale as of December 31, 1993 include the
remaining cost of the mining properties after reductions for
abandonments and impairments.
PAGE 34
Major Customer
----------------
The Company had one unaffiliated customer which accounted for
87% and 93% of its byproduct material disposal revenue during 1993
and 1992 respectively.
Statement of Cash Flows
-----------------------
For purposes of the Statements of Cash Flows, the Company
considers all highly liquid debt instruments purchased with an
original maturity of 3 months or less to be cash equivalents.
Reclamation of Mill Site and Tailings Ponds
-------------------------------------------
Liabilities for estimated reclamation costs are recognized and
charged to operations for remedial activities when the cleanup
becomes probable and the cost can be reasonable estimated.
Based upon the Company's determination that use in the future of
its uranium processing mill would not comply with the revised
licensing requirements of the Nuclear Regulatory Commission (NRC),
the Company began demolition of the mill in 1988 and completed that
work in 1989. Since then the Company has undertaken substantial
reclamation work on the mill site as required by the NRC and the
Wyoming Department of Environmental Quality (DEQ). The mill and
associated buildings have been dismantled and the building materials
buried in one of the two adjacent tailings ponds where the processed
ores produced by the mill (mill tailings) were impounded after
milling. The mill tailings in the two impoundments have been graded
by earth moving equipment into mounds covering approximately 40 and
80 acres respectively. A cover of native earth has been placed over
the mounds of mill tailings, and the tailings piles are being allowed
to settle and compact naturally. The remaining reclamation work
consists of filling and shaping the side slopes of the tailings piles
to such a grade as to preclude soil erosion and exposure of the
tailings, placing a final cover of earth over the tailings to limit
emission of radon gas into the atmosphere to meet Environmental
Protection Agency (EPA) standards, and revegetating and fencing the
site. In 1992 the Company submitted to the NRC an alternate design
to its original reclamation plan in order to meet new NRC criteria
for long term stability of the tailings impoundments. The principal
modification the Company has proposed to the NRC utilizes a rock
mulch for erosion protection instead of native vegetation.
Reclamation work will continue at minimal levels until the NRC
approves a new design. At that time the Company expects the
reclamation process to continue at an active level until
approximately 1997, with expenditures during this period estimated to
be approximately $2 million. Thereafter environmental monitoring and
ongoing reclamation obligations at reduced levels of activity are
expected to continue for at least five additional years until the
reclamation requirements for stabilization of the tailings are deemed
satisfied by the NRC, DEQ and EPA. At that time the site will be
transferred to the Department of Energy or State of Wyoming as
required by law.
Reclassification
----------------
Certain accounts for the year ended May 31, 1991 have been
reclassified to conform to the classifications for the years ended
December 31, 1993 and 1992 and for the seven-months ended December
31, 1991.
PAGE 35
2. CONTRACTS
The Company had contracts covering the acquisition of mineral
properties with Tennessee Valley Authority (TVA) through November 28,
1984, at which time the Company and TVA entered into an agreement
whereby all prior contractual arrangements between the Company and
TVA were terminated.
The Company assumed the responsibilities TVA had (and released
TVA of any obligation with respect to same) relating to the
reclamation of existing tailings at the Company's uranium processing
mill located in the Gas Hills Area of Wyoming, and for the future
decommissioning of the mill. In exchange for the Company's agreement
to do so, TVA deposited into an escrow account (original escrow)
$3,777,000, the principal of which is to be used only for reclamation
of such tailings and for decommissioning of the mill. The Company
deposited $304,396 into the original escrow and furnished the DEQ
with its bond in the amount of $4,081,396 to cover the estimated
costs of reclamation and mill decommissioning. Certain shareholders
of the Company had provided letters of credit to the DEQ as support
of the bond receiving in exchange warrants to purchase common stock.
One letter of credit for $25,000 remains outstanding as of December
31, 1993 (See Note 7). Each year the Company submits a plan of
reclamation and long term monitoring to the NRC and the DEQ who
reviews and approves the plan and the estimated costs.
In August of 1990, the Company entered into an agreement with an
insurance company to obtain a reclamation performance bond to replace
a portion of the funds in the original escrow. As a result, the
Company received $1,030,221 from the original escrow and deposited
$850,000 (which was subsequently reduced by the insurance company to
$721,000) in a second escrow account to serve as collateral on a
reclamation performance bond. The reclamation performance bond of
$1,030,221 has been subsequently reduced to $864,770 due to the
Company's completion of certain phases of the reclamation plan.
At December 31, 1993, 1992 and 1991, the Company has invested
the escrowed funds primarily in certificates of deposit or fixed
income government obligations (Treasury Bills). Investments are
carried at cost, which approximates market value. Through August
1991 all income earned by the escrowed funds after payment of escrow
fees was distributed 100% to the Company (subject to certain
obligations described in Note 4). In September 1991 the
Company agreed with the NRC to increase its escrowed funds by
allowing the interest to accumulate on approximately $1.9 million of
the balance in the original escrow. Upon completion of reclamation
and release by the NRC and the DEQ of the bond, any balance in the
escrow account, if any, will be distributed to the Company.
PAGE 36
3. PLANT AND EQUIPMENT
Plant and equipment is stated at cost and consisted of the
following at these specific dates:
December 31, December 31, December 31,
1993 1992 1991
----------- ----------- -----------
Buildings and equipment $ 152,403 $ 152,403 $ 77,642
Furniture and fixtures 63,168 63,168 63,168
Vehicles 38,032 38,032 38,032
----------- ----------- -----------
Total Plant & Equipment $ 253,603 $ 253,603 $ 178,842
Accumulated depreciation
and amortization 161,883 142,512 135,317
----------- ----------- -----------
Net Plant & Equipment $ 91,720 $ 111,091 $ 43,525
=========== =========== ===========
4. NOTES PAYABLE TO STOCKHOLDER
The Company has notes payable with Cycle Resource
Investment Corporation (CRIC), a major shareholder of the Company.
The notes payable are collateralized by a security interest in
substantially all of the Company's assets. The notes bear interest
at 3% over prime of a New York bank (9.5% at December 31, 1993).
Balances are as follows:
PAGE 37
December 31
-------------------------------------
1993 1992 1991
---------- ---------- ---------
Principal Outstanding:
Credit Line: Fully utilized as of
December 31, 1993;
interest and principal
due June 30, 1994 $1,383,200 $1,250,000 $ 737,000
Additional Credit Line:
Fully utilized as of
December 31, 1993;
interest and principal due
June 30, 1994 648,000 369,506
---------- ---------- ---------
Total $2,031,200 $1,619,506 $ 737,000
========== ========== =========
Accrued Interest Outstanding:
Credit Line $ 93,456 $ 90,843 $ 8,788
Additional Credit Line 49,473 3,023
---------- ---------- ---------
Total $ 142,929 $ 93,866 $ 8,788
========== ========== =========
Also see Note 1.
Average short-term borrowings were $1,871,875, $1,227,897,
$554,000 and $358,000 with weighted-average interest rates of 9.50%,
9.54%, 11.67% and 10.96% for the year ended December 31, 1993 and
1992, and for the seven months ended December 31, 1991 and the fiscal
year ended May 31, 1991. The maximum borrowed during each period was
$2,031,200, $1,619,506, $737,000 and $448,000 for the years ended
December 31, 1993 and 1992, for the seven months ended December 31,
1991 and the fiscal year ended May 31, 1991.
5. BYPRODUCT MATERIAL DISPOSAL CONTRACTS
The Company abandoned its efforts to develop a long-term
commercial disposal business and charged the associated costs of
$236,866 to expense during 1993. The Company has continued its short
term disposal operations and entered into certain byproduct material
disposal contracts and received advance payments related to the
future performance of these services. The advance payments are
recorded as deferred revenue and will be recognized as revenue when
the Company takes delivery of the byproduct material.
6. INCOME TAXES
The Company adopted Statement 109, Accounting for Income Taxes,
as of January 1, 1993. There was no cumulative effect of this change
in accounting for income taxes. Prior years' financial statements
have not been restated to apply the provisions of Statement 109.
PAGE 38
The tax effects of the temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1993 are presented below. The valuation
increased approximately $1.2 million during 1993.
Deferred tax assets:
Net operating loss carry forward $ 3,600,000
Estimated reclamation costs 400,000
Tax credit carry forwards 240,000
-----------
Total gross deferred tax assets 4,240,000
Less valuation allowance (2,710,000)
-----------
Net deferred tax assets $ 1,530,000
Deferred tax liabilities:
Mining properties $(1,530,000)
-----------
Net deferred taxes -0-
===========
At December 31, 1993 the Company had approximately $12.0 million
of net operating loss carryovers which expire during 1997 through
2008. The Company also has investment tax and new jobs credit
carryovers of approximately $40,000 and $200,000, respectively, which
are available to be offset against future income taxes through 1999.
The future utilization of both net operating loss and credit carry-
overs are subject to rules and regulations of the internal revenue
service that could be significant.
PAGE 39
7. STOCKHOLDERS' EQUITY
The Company has authorized 25,000,000 shares of $.04 par value
common stock. Changes in common stock issued and outstanding during
the fiscal year ended May 31, 1991, the seven months ended December
31, 1991 and the years ended December 31, 1992 and 1993 were as
follows:
Common Stock
-----------------------------------------
Held in
Issued Treasury (at cost) Additional
-------------------- ------------------- Paid-in
Shares Amount Shares Amount Capital
--------- -------- ------- --------- -----------
Balance,
May 31, 1990 7,394,569 $295,783 155,444 $(629,126) $12,782,074
--------- -------- ------- --------- -----------
Balance,
May 31, 1991 7,394,569 295,783 155,444 (629,126) 12,782,074
ESOP Contribution 6,851 274 13,427
Exercise of
warrants 441,176 17,647 488,603
--------- -------- ------- --------- -----------
Balance,
December 31,
1991 7,842,596 313,704 155,444 (629,126) 13,284,104
--------- -------- ------- --------- -----------
ESOP Contribution 5,272 211 11,652
Stock Bonus 4,115 165 9,093
--------- -------- ------- --------- -----------
Balance,
December 31,
1992 7,851,983 $314,080 155,444 $(629,126) $13,304,849
--------- -------- ------- --------- -----------
Stock Issuances 200 -0-
--------- -------- ------- --------- -----------
Balance,
December 31,
1993 7,852,183 $314,080 155,444 $(629,126) $13,304,849
========= ======== ======= ========= ===========
PAGE 40
Redeemable Preferred Stock
---------------
The Company has authorized 15,000,000 shares of $1 par value
Series A preferred stock with a liquidation value of $10.00 per
share. There were no outstanding preferred shares during the periods
ended December 31, 1993, 1992, 1991 or May 31, 1991.
Stock Warrants
-------------
The Company has warrants outstanding for the purchase of 49,020
shares of common stock, exercisable at $0.875 per share, expiring
August 26, 1994.
Employee Stock Ownership Plan
------------------------------
The Company had an Employee Stock Ownership Plan (ESOP) for the
benefit of its employees. Contributions to the Plan were made at the
Company's discretion. On March 6, 1992 the Board of Directors
resolved to terminate the ESOP and replace it with a money purchase
plan. The money purchase plan received approval by a vote of the
shareholders on June 17, 1992. During the years ended December 31,
1992, and May 31, 1991, the Company made contributions to the Plan of
5,272 and 6,851 shares of the Company's common stock. No provision
for contributions was made during the seven months ended December 31,
1991. At December 31, 1993 the Plan held 14,958 shares of the
Company's common stock for the account of participating employees.
Non-qualified Stock Options
--------------------------
At December 31, 1993, an option for 257,750 shares of common
stock is held by the Company's former president. This option is
exercisable in whole or in part at $1.5761 a share and expires on
September 9, 1996.
At December 31, 1993, options covering 26,546 shares of common
stock are held by current directors, officers, and key employees. An
additional 311,243 are held by former directors and officers. These
337,789 shares are exercisable in whole or in part at varying prices
from $0.5886 to $1.8834 per share with expiration dates ranging
through 1996.
There were no options exercised during the four years and seven
months ended December 31, 1993.
1992 Incentive Stock Option Plan
--------------------------------
During June 1992 the shareholders adopted a 1992 Incentive
Stock Option Plan (herein ISOP), under which up to 1,000,000 shares
of the Company's $0.04 par value common stock have been reserved for
granting to employees. The ISOP is intended to meet the requirements
of Section 422A of the Internal Revenue Code. Option prices will be
no less than the fair market value or 110 percent of fair market
value, in certain situations. The term of an option shall be for a
period of no longer than ten years from the date of the grant of the
option. The ISOP expires on its term anniversary date and will be
administered by the compensation committee of the board of directors.
During December 1993 options for 120,000 shares that were
granted during June 1992 were voluntarily forfeited by the employees.
As of December 31, 1993 there were no stock options outstanding under
this 1992 Incentive Stock Option Plan.
PAGE 41
1992 Stock Option Plan In Lieu of Directors Fees
------------------------------------------------
The 1992 Stock Option Plan In Lieu of Directors Fees was
approved by the shareholders in June 1992 and authorizes each non-
employee director to elect to receive stock options for service
during the previous year rather than to receive cash compensation.
The plan would provide each director through an option to buy such
number of shares of the Company's stock, at a discount of 37% of the
fair market price on the date of grant. The plan is administered by
the compensation committee of the Board of Directors. Directors
would be entitled to such options only after having served for a full
year as a director, and only if they are not regular, full-time
employees of the Company.
The plan required eligible directors to make an irrevocable
election in June of each year whether to receive options, and if so,
the number of shares subject to the option and the exercise price are
fixed according to the pre-established formula based upon the market
price for the stock six months later in January of the next year.
As of December 31, 1993, options for 13,546 shares were
outstanding. The options were exercisable until January 12, 1994 at
a price of $.5906 per share. These options were not exercised. This
plan was terminated by the Board of Directors on January 13, 1994
because the extremely low price of the Company's common stock
resulted in the granting options in amounts which were considered
excessive by the Board of Directors.
Money Purchase Pension Plan
---------------------------
During 1992 the Company adopted a Money Purchase Pension Plan
(herein "Plan"), with a plan year ending each December 31, whereby
the Company contributes to all participants. Generally, participants
are all full-time Company employees that are at least 21 years of age
and have one year of service. The Plan is integrated with the
Company's contributions under the Federal Social Security Act (social
security taxes). As a result, annual required Plan contributions are
between 9.5% and 15% of participants' compensation. Employer
contributions vest at the rate of 20% per year beginning at the end
of the first year of service. The Company accrued contributions of
$26,572 and $39,270 for 1993 and 1992, respectively.
Confidential Private Placement Memorandum
-----------------------------------------
The Company offered, by a private placement, on a best efforts
basis 4,761,905 shares ($5,000,000) minimum, 7,619,048 shares
($8,000,000) maximum, of its restricted $0.04 par value common stock
at a price of $1.05 per share.
The offering began on January 25, 1993 and continued through
June 25, 1993. This confidential private placement memorandum was
unsuccessful and terminated on June 25, 1993. Because of this
failure to raise additional capital the Company was forced to abandon
its efforts towards obtaining a commercial byproduct disposal
license. The employment contract between the Company and its then
President, Stephen A. Carpenter, was terminated on August 1, 1993.
PAGE 42
8. COMMITMENTS
Operating Leases
----------------
The Company leases its office space on a month to month basis
under an operating lease which expired in November of 1993. At
December 31, 1993 there were no annual lease commitments for 1994 or
beyond.
Rent expense, included in general and administrative expenses,
was $20,481, $17,046, $11,867, and $18,738 years ended December 31,
1993 and 1992, for the seven months ended December 31, 1991 and the
fiscal year ended May 31, 1991, respectively.
Capitalized Lease Obligations
-----------------------------
The Company leases one piece of dirt moving equipment and one
vehicle under noncancellable capitalized lease obligations which
expire in June 1997 and June 1994, respectively. At December 31,
1993 the Company has capitalized costs of approximately $100,000 and
recorded accumulated amortization of $31,000. The following is a
schedule of future minimum lease payments on capitalized lease
obligations as of December 31, 1993.
1994 23,324
1995 20,424
1996 20,424
1997 10,212
--------
Total minimum lease payments 74,384
Less amount representing interest 10,584
--------
Present value of minimum lease payments 63,800
Current maturities of capitalized lease
obligations 18,302
--------
Noncurrent capitalized lease obligations $ 45,498
========
Employment Agreements
---------------------
The Company had no employment contracts with any of its
employees at December 31, 1993.
9. SUBSEQUENT EVENTS
On January 28, 1994 the Company was notified by the NASDAQ
surveillance committee that effective February 1, 1994 its common
stock would no longer be traded on the National Over the Counter
exchange but would be traded on the NASDAQ small cap market.
PAGE 43
SCHEDULE V
- ----------
AMERICAN NUCLEAR CORPORATION
- ----------------------------
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT, AND EQUIPMENT
- ----------------------------------------------------
Balance At Balance
Beginning Additions Retirements at End
Classification of Year At Cost / Other of Year
- -------------- ----------- --------- ----------- -----------
FOR THE YEAR ENDED
MAY 31, 1991:
Mining properties $13,060,324 $ 36,934 $13,097,258
Plant and Equipment 163,236 9,512 172,748
----------- --------- ----------- -----------
TOTAL $13,223,560 $ 46,446 $ -0- $13,270,006
=========== ========= =========== ===========
FOR THE SEVEN
MONTHS ENDED
DECEMBER 31, 1991:
Mining Properties $13,097,258 $ 39,410 $(3,298,746) $ 9,837,922
Plant and Equipment 172,748 17,483 (11,389) 178,842
----------- --------- ----------- -----------
TOTAL $13,270,006 $ 56,893 $(3,310,135) $10,016,764
=========== ========= ============ ===========
FOR THE YEAR ENDED
DECEMBER 31, 1992:
Mining properties $ 9,837,922 $ 63,515 $ 9,901,437
Plant and Equipment 178,842 84,791 $ (10,030) 253,603
----------- --------- ------------ -----------
TOTAL $10,016,764 $ 148,306 $ (10,030) $10,155,040
=========== ========= ============ ===========
FOR THE YEAR ENDED
DECEMBER 31, 1993:
Mining properties $ 9,901,437 $ 139,512 $(3,543,826) $ 6,497,123
Plant and Equipment 253,603 253,603
----------- --------- ------------ -----------
TOTAL $10,155,040 $ 139,512 $(3,543,826) $ 6,750,726
=========== ========= ============ ===========
/TABLE
PAGE 44
SCHEDULE VI
- -----------
AMERICAN NUCLEAR CORPORATION
- ----------------------------
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT, AND EQUIPMENT
- ----------------------------------------------------
Additions
Balance At Capitalized Balance
Beginning or Retirements at End
Classification of Year Expensed / Other of Year
- -------------- ----------- --------- ----------- ---------
=========== ========== =========== =========
FOR THE YEAR ENDED
MAY 31, 1991:
Depletion and amor-
tization - Mining
properties $ 3,534 $ 3,534
Depreciation - Plant
and equipment 131,671 $ 6,297 137,968
----------- ---------- ----------- ---------
$ 135,205 $ 6,297 -0- $ 141,502
=========== ========== =========== =========
FOR THE SEVEN MONTHS
ENDED DECEMBER 31,
1991:
Depletion and amor-
tization - Mining
properties $ 3,534 $ (3,534) $ -0-
Depreciation - Plant
and equipment 137,968 $ 7,761 (10,412) 135,317
----------- ---------- ---------- ---------
TOTAL $ 141,502 $ 7,761 $ (13,946) $ 135,317
=========== ========== ========== =========
FOR THE YEAR ENDED
DECEMBER 31, 1992:
Depletion and amor-
tization - Mining
properties $ -0- $ -0-
Depreciation - Plant
and Equipment 135,317 $ 17,017 $ (9,822) 142,512
----------- ---------- ---------- ---------
TOTAL $ 135,317 $ 17,017 $ (9,822) $ 142,512
=========== ========== ========== =========
FOR THE YEAR ENDED
DECEMBER 31, 1993:
Depletion and amor-
tization - Mining
properties $ -0- -0-
Depreciation - Plant
and Equipment 142,512 $ 19,371 161,883
----------- ---------- -------- ---------
$ 142,512 $ 19,371 $ -0- $ 161,883
=========== ========== ======== =========