Attached files
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EXCEL - IDEA: XBRL DOCUMENT - EXCALIBUR INDUSTRIES | Financial_Report.xls |
EX-32.1 - CERTIFICATION - EXCALIBUR INDUSTRIES | exc_ex321.htm |
EX-31.1 - CERTIFICATION - EXCALIBUR INDUSTRIES | exc_ex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2014
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________to ___________
Commission file number 1-7602
Excalibur Industries
(Exact name of registrant as specified in its charter)
Utah | 87-0292122 | |
State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) |
Post Office Box 650, Hibbing, Minnesota | 55746 | |
(Address or principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (218) 262-6127
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class | Name of each exchange on which registered | |
Common Stock (par value $0.01 per share) | None |
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨ NO þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: YES ¨ NO þ
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 ¨ NO þ
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ¨ NO þ
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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.þ
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated files, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o | Smaller reporting company | þ |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO þ
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. As of November 30, 2012, and as of the date of this report, there has been no bid or asked prices available, nor has there been any market for or trading of the Company’s stock for many years.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Business.
Excalibur Industries (“Excalibur”) is a Utah corporation formed by the consolidation of Tower Enterprises (formerly Moab Uranium Company) and The Thrifty Helper on June 1, 1971. In January 1972, Excalibur purchased all of the issued and outstanding shares of capital stock of Mountain West Mines, Inc. (“Mountain West”), a Nevada corporation, which is now a wholly owned subsidiary of Excalibur. Excalibur and Mountain West are hereinafter collectively referred to as Excalibur or Company.
Excalibur is a natural resource business enterprise focused on uranium, an industry that has languished for decades following the 1979 Three Mile Island power station incident, and, more recently, the 2011 earthquake and tsunami that severely damaged Japan’s Fukushima Daiichi power station. However, most industry pundits are cautiously forecasting a positive future for the industry, including an increase in pricing of yellowcake, in the long term.
Excalibur’s uranium position in the Powder River Basin is maintained by royalty agreements held by Excalibur and Mountain West with uranium producers. Uranium production on the North Butte property began in July 2013. Operations began on the Nichols Ranch property in April 2014, with uranium production expected when startup debugging is complete. Both operations are expected to provide a royalty income to Excalibur in the fourth quarter of 2014 once repayment of advance royalty is complete.
The current Excalibur officers are Jay R. Mackie, President and Chief Executive Officer; Jack D. Powers, Vice President; and Michael P. Johnson, Secretary/Treasurer. The Board of Directors is made up of Jay R. Mackie, Chairman, Howard W. Hilshorst, Michael P. Johnson, John T. Morrow, Jack D. Powers, and Alan E. Nugent.
Powder River Basin, Wyoming - History
Mountain West Mines, Inc.
Beginning in 1965, Mountain West Mines, Inc., a private corporation with extensive uranium property holdings in Utah, founded by Claude E. Nugent, Robert H. Ruggeri, and Joseph P. Hubert, operated the underground Betty Mine and the open pit Glade Mine in the Elk Ridge, Utah, uranium district. Each operation was closed upon the completion of their respective Atomic Energy Commission contracts.
Joseph P. Hubert, CPG, conducted full-time uranium exploration in the 1960s. In 1966, Mountain West Mines began its successful geologic exploration of the Powder River, Wyoming, uranium district. A large scale mineral property acquisition program was begun, along with the initiation of the district reconnaissance drill hole fence project.
In 1967, the nuclear power industry revived its interest in uranium fuels, and the Powder River Basin began to attract major corporate attention. Mountain West, in order to maintain viability, was forced to seek outside financial assistance.
Cliffs Natural Resources (formerly The Cleveland-Cliffs Iron Company)(“Cliffs”)
Mountain West and Cliffs entered into a series of contractual arrangements to provide financing for Excalibur, which included an Option and Agreement dated May 17, 1967, an Addendum dated August 29, 1968, an Addenda dated August 31, 1976, and a Deed and Agreement dated October 20, 1976 (the “Cliffs Option and Agreements”). In 1969, Mountain West deeded the majority of its mining claims to Cliffs, reserving a future royalty interest.
Excalibur retained a 4% yellowcake royalty on all production resulting from the operations of Cliffs, its assigns and/or successors in interest within an Area of Interest (AMI) defined as Townships 33 through 50 North of Ranges 69 through 79 West of the 6th Principal Meridian. The AMI was then understood to be a common business franchise restriction for protection of both principals. The Collins Draw In Situ Leaching (ISL) pilot program produced a minor royalty credit to Excalibur.
In 1986, Cliffs sold its interest in the North Bing and Four Mile properties (now part of Cameco’s Ruby Ranch project) to Central Electricity Generating Board Exploration (“CEGB”), subject to the terms and conditions of the Cliffs Option and Agreements. Cliffs retained reimbursement responsibility for the AMI royalty obligation to Excalibur payable by its successor in interest within the AMI, less subject lands. In the event of project abandonment by CEGB (et al.), the properties would be returned to Cliffs. In 1996, Power Resources, Inc., acquired these properties from CEGB.
2
In 1987, Cliffs sold its interest in the Greasewood Creek and North Butte projects to Uranerz USA, Inc, subject to the terms and conditions of the Cliffs Option and Agreements. Cliffs retained reimbursement responsibility for any AMI royalty obligations to Excalibur payable by its successor in interest within the AMI, less subject lands. In the event of project abandonment by Uranerz USA, the properties would be returned to Cliffs. In 1991, Uranerz USA assigned these properties to Pathfinder Mines Corporation. In 2001, Power Resources, Inc., acquired these properties from Pathfinder.
Cliffs subsequently sold its rights to recover Excalibur’s advance royalty credit of $1,319,268.60 to Uranerz USA. The right of recovery is now held by Pathfinder.
The Cliffs Option and Agreements have been the basis for extended litigation between Mountain West and Cliffs. Under the terms of a 2009 Settlement Agreement, Excalibur is to pay Cliffs $100,000.00 in two annual payments of $50,000.00 each from royalty proceeds from the North Butte and Ruby Ranch properties now under lease to Cameco.
Item 1A. Risk Factors.
1.
|
Unaudited Financial Statements. The financial statements of the Company for the years ended May 31, 2014, 2013, and 2012, which are contained in this Report, are unaudited compilations accompanied by Accountant’s Compilation Report, which states in part, “We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with the accounting principles generally accepted in the United States of America.” The Securities Exchange Act of 1933 regulations promulgated thereunder (collectively the “Act”) requires audited financial statements of the Company be set forth in this Report; therefore, this report is not in compliance with the Act.
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The absence of audited financial statements and an auditor’s report may affect the Company in a variety of ways: (A) the Securities and Exchange Commission may take enforcement action; and (B) the Company may find it more difficult to secure equity financing or debt financing.
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2.
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Market Effect of Fukushima Daiichi Power Station Disaster. The market for uranium may continue to be affected by the events at Japans’s Fukushima Daiichi power station, which was heavily damaged in 2011, and continues to be in the news due to radioactive leakage and containment problems.
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3.
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Future Regulations. The nuclear power industry may be subject to further regulations with respect to existing power plans and future power plants, which could result in a decommissioning of existing plants and added expense for future power plants resulting in a decision by power producers to go to alternative sources of energy.
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4.
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Delay or Interruption of Anticipated Revenue. Financing may be needed if the streams of royalty revenue anticipated by the Company from Cameco and Uranerz are delayed or interrupted, and such financing may not be available or available upon terms satisfactory to the Company.
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5.
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Environmental. Operators in the mining operations are heavily regulated and are responsible for violating their permits with respect to air and water and general operations, and enforcement of such regulations may curtail production and reduce royalties. In addition, lawsuits may be brought against the operator and/or the holder of the mineral rights by governmental agencies and/or private parties in some instances. The Company has not operated a mine for many decades and has no intention of becoming an operator of a mine at this time.
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6.
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Repayment of Advanced Royalties and Cliffs Settlement. The Company has repayment obligations totaling $875,276.77 from advance royalties received and from the Cliffs settlement (see Note 6 of the Notes to Consolidated Financial Statements) that limit its income stream from production royalty payments, further straining the Company’s already lean financial position during the repayment period, which is dependent upon production and pricing levels that are beyond the control of the Company.
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3
Item 2. Properties.
The principal assets of Excalibur are as follows:
1.
|
Mountain West holds a royalty interest in patented and unpatented mining claims held by Power Resources, Inc. (“Cameco”), including properties known as North Butte, Ruby Ranch, and Greasewood. In 2013, the Company successfully negotiated a new royalty agreement with Cameco to replace the pricing methodology of an outdated agreement. The royalty rate is 4%, and the new agreement bases the royalty calculation on Cameco’s quarterly average realized uranium price as reported in Cameco’s filings with the Securities and Exchange Commission.
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2.
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Excalibur and Uranerz Energy Corporatin (“Uranerz”) exercised an Option and Purchase Agreement on December 9, 2005, on approximately 14,000 acres of mineral rights, including properties known as Nichols Ranch, Hank, Niles Ranch, Willow Creek, Verna Ann, and Doughstick (the “Agreement”). Pursuant to the Agreement, Excalibur granted Uranerz an option on the properties, which it subsequently exercised in 2006 and paid an advance royalty to Excalibur of $250,000. Under the Agreement, Uranerz is to pay royalty to Excalibur based on the spot price of yellowcake (U3O8) as reported by Ux per calendar quarter. If the average spot price of uranium for any calendar quarter is $45.00 per pound or less, the royalty rate is 6%, and if the average sport price is $45.01 per pound or higher, the royalty rate is 8%.
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3.
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The 2,000,000 share warrants of Uranerz stock that Excalibur acquired in 2010 in exchange for its Powder River Drill Hole Library - strike price $3.00 - four-year term with schedule execution, expiring at the end of June 2014. Several unsuccessful attempts were made to extend the warrant expiration. This asset will likely be lost, largely due to the extended depressed state of the uranium industry and resultant low stock price for Uranerz, which provided no opportunity to exercise the warrants under the Company’s current administration.
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4.
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The August 22, 1973 Mining Deed (Part I and II) between Mountain West and American Nuclear Corporation (“ANC”), on mining claims reserving a 2.5% royalty interest to Mountain West. The project became part of a joint venture between ANC and the Tennessee Valley Authority (“TVA”). This project area was known as Brown-TVA. At public auction in 1991, ANC/TVA sold this project, along with their entire holdings, to General Atomic. In 1992, General Atomic sold this same project to Pathfinder. On June 11, 1999, Pathfinder (Cogema) acknowledged ownership, with 2.5% royalty obligations to Mountain West. In 2001, Pathfinder sold the Brown deposit to Power Resources. Excalibur retains a 2.5% royalty from the ANC contract. Further research is underway to determine the current status of these properties.
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In July 2013, Cameco began uranium production from the North Butte property, in which the Company holds a 4% royalty interest. Cameco produced 280,873 pounds of yellowcake from the North Butte property in 2013 and 133,974.2 pounds in the first quarter of 2014. Cameco expects to increase the North Butte production to 700,000 pounds annually by 2015. Again, the timing and amount of production reported by Cameco are subject to change and are beyond the control of the Company. Cameco’s production from the North Butte for the period 3Q 2013-2Q 2014 resulted in a royalty credit of $795,009.83 applied to the Company’s advance royalty repayment obligation, reducing the balance to $525,276.77, and a payment of $9,549.68 for Excalibur’s share of the 2013 severance taxes.
Uranerz received final approval from the Nuclear Regulatory Commission (NRC) to begin operating its newly constructed Nichols Ranch facility on April 15, 2014. The Company holds a 6% or 8% (depending on the spot price of uranium) royalty interest in the Nichols Ranch property. After startup debugging, Uranerz will begin uranium production from the Nichols Range, with a goal to produce between 350,000 and 500,000 pounds of yellowcake annually. The timing and amount of production by Uranez are subject to change and beyond the control of the Company. The Company has an advance royalty repayment obligation of $250,000.00 to Uranerz once production commences.
The total advance royalty repayment obligation for both Uranerz and Cameco is now $775,276.77. In addition, the Company has a payment obligation of $100,000.00 to Cliffs from the 2009 Settlement Agreement.
Company representatives have visited the properties in 2013 and 2014.
4
Item 3. Legal Proceedings.
None
Item 4. Mine Safety Disclosures.
Not applicable
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a)
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Lack of Market: The stock of Excalibur was formerly traded on the Intermountain Stock Exchange in Salt Lake City, Utah, until October 31, 1986, when it was delisted. Since such date, there has been no established public trading market for Excalibur securities.
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(b)
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Securities Issued During the Last Three Years: Securities were issued to directors and officers in consideration for services performed and to be performed (see Item 11, Executive Compensation). The securities issued were common stock and warrants to purchase common stock. The shares issued and the warrants issued were non-transferrable except pursuant to registration or exemption from registration under the Securities Act of 1933 and applicable state security laws and shares issuable upon the exercise of the warrants were also non-transferable except for registration or exemption from registration under the Securities Act of 1933 and applicable state security laws. All shares and warrants to purchase shares and shares issuable upon exercise of a warrant bear a restrictive legend restricting transfer except upon registration or exemption from registration and require a reasoned opinion of the record owner’s legal counsel and the consent of the Company to transfer. Each of the officers and directors being issued shares has signed a letter of investment intent stating that they are acquiring the shares and/or warrants as an investment and not with a view for resale. The exemption claimed for the issuance of the warrants and the shares to the officers and directors is pursuant to an exemption claimed under Section 4(2) of the Securities Act of 1933 for the issuance of securities not involving a public offering. See Item 11, Executive Compensation, for further details regarding the issuance of such securities.
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The Company has not repurchased any of its securities.
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5
Item 6. Selected Unaudited Financial Data.
2014
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2013
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2012
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||||||||||
Total Revenues
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$ | 0 | $ | 0 | $ | 0 | ||||||
Total Operating Expenses
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326,665 | 105,938 | 22,113 | |||||||||
Income/(Loss) from Operations
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(326,665 | ) | (105,938 | ) | (22,113 | ) | ||||||
Other Income (Expense)
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3,465 | 8,259 | 15,454 | |||||||||
Income/(Loss) Before Income Taxes
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(323,200 | ) | (97,679 | ) | (6,659 | ) | ||||||
Provision for Income Taxes
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444 | 133 | 128 | |||||||||
Net Income/(Loss) Before Extraordinary Gain
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(323,644 | ) | (97,812 | ) | (6,787 | ) | ||||||
Extraordinary Gain
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0 | 0 | 0 | |||||||||
Net Income/(Loss)
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(323,644 | ) | (97,812 | ) | (6,787 | ) | ||||||
Retained Earnings/Deficit) Beginning of Year
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$ | 12,019 | $ | 109,831 | $ | 116,618 | ||||||
Retained Earnings/(Deficit) End of Year
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$ | (311,625 | ) | $ | 12,019 | $ | 109,831 | |||||
Average Shares of Common Stock Outstanding
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6,012,361 | 6,012,361 | 5,997,361 | |||||||||
Net Income/(Loss) Per Share of Common Stock
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$ | (.0538 | ) | $ | (0.0163 | ) | $ | ( 0.0011 | ) | |||
Total Assets - End of Year
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$ | 192,852 | $ | 249,211 | $ | 273,574 | ||||||
Long-Term Obligations
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$ | 0 | $ | 0 | $ | 0 | ||||||
Cash Dividends Declared Per Share of Common Stock
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$ | 0 | $ | 0 | $ | 0 |
6
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Excalibur, for approximately the past approximately 20 years, has adopted a policy designed to husband the Company’s assets and retain as much of its mineral interests as possible taking into account the depressed market for uranium and Excalibur’s limited resources. The Company recognized that it would have to rely on royalty income from its most promising properties and that it had little if any control over when uranium producers with which it had royalty agreements would commence mining. The records show that during the period of 1993 to May 31, 2014, with exception of 2006, the Company had zero royalty income. Form 10-K of the Company for 2006 indicates that the Company received advanced royalty from Uranerz Energy Corporation of $250,000. The lack of royalties was noted in Excalibur’s 10-K Annual Report for 1998, wherein it is stated that “…advanced payments ended in May 1992 after which time no additional payments will be received until production commences. Other than interest income, no other continuing material cash inflows are known to management or anticipated at this time based on current agreements.” The husbanding policy of the Company was and is a survival policy which may have worked. However, one consequence is that the Company has not had audited financial statements since 1988 and cannot have a market for its shares without first attaining necessary financial audits for multiple years and compliance with all reporting standards of the Securities and Exchange Commission at considerable expense.
The Company’s administrative and leasehold affairs are managed by Meriden Engineering LLC, a Minnesota limited liability company, situated in Hibbing, Minnesota (“Meriden”). Meriden is required by contract to submit an annual budget to the Company for approval. Compensation is earned by Meriden on an hourly basis for services performed at a rate of $175 per hour. While Meriden will issue monthly invoices for services rendered, payment is not due until royalty payments commence and are received. After commencement of royalty payments occurs, Meriden will prepare an annual budget for periods after the commencement of royalty payments and Meriden’s compensation will be a management fee equal to 5% of the gross royalty revenue received by the Company. Extraordinary events or issues beyond the scope of the budget will be negotiated between Meriden and the Company as additional compensation. In addition, as an incentive, 5% of actual gross increase in the Company’s consolidated revenues during each calendar year from all sources other than royalties shall be paid to Meriden. In the event the Company is sold, all deferred compensation will be paid in full, and in addition, a one-time termination fee in the amount of $250,000 will be paid to Meriden.
Uranium production began at the North Butte property in 2013 and the Nichols Ranch is expected to be in production in the second half of 2014. Royalty income is expected to be received by the Company in the fourth quarter of 2014.
In light of these recent developments, management has a reasonable expectation that there will be an income stream to the Company to provide liquidity. In the event the stream of revenue does not occur, the Company will, if necessary, attempt to secure loans or sell assets.
7
Item 8. Financial Statements and Supplementary Data.
Accountant’s Compilation Report
To the Board of Directors and Stockholders
Excalibur Industries
We have compiled the accompanying consolidated balance sheets of Excalibur Industries (Corporation) and its wholly owned subsidiary, Mountain West Mines, Inc. as of May 31, 2014, 2013, and 2012, and the related consolidated statements of income, retained earnings, and cash flows for the year then ended. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America.
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.
Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.
The companying financial statements do not meet requirements of Article 8 of Regulation S-X.
Maxfield Peterson, P.C.
Grand Junction, Colorado
July 22, 2014
8
CONSOLIDATED BALANCE SHEETS
MAY 31, 2014, 2013, 2012
(Unaudited)
ASSETS
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For the Period Ended:
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|||||||||||
CURRENT ASSETS
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2014
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2013
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2012
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Cash and Cash Equivalents
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$ | 7,417 | $ | 17,120 | $ | 11,903 | ||||||
Marketable Securities
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68,875 | 115,791 | 161,571 | |||||||||
Total Prepaid Insurance
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16,500 | 16,240 | 0 | |||||||||
Total Current Assets
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92,792 | 149,151 | 173,474 | |||||||||
Fixed Assets
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||||||||||||
Interest in Mining Properties
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100,000 | 100,000 | 100,040 | |||||||||
Deposits
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60 | 60 | 60 | |||||||||
TOTAL ASSETS
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$ | 192,852 | $ | 249,211 | $ | 273,574 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES
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Accounts Payable
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$ | 325,263 | $ | 68,844 | $ | 0 | ||||||
TOTAL LIABILITIES
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$ | 325,263 | $ | 68,844 | $ | 100 | ||||||
STOCKHOLDERS’ EQUITY
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||||||||||||
Common Stock $.01 Par Value, Authorized 10,000,000 Shares 6,012,361 Shares issued including shares in Treasury
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$ | 60,124 | $ | 60,124 | $ | 59,974 | ||||||
Paid-In Capital in excess of Par
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83,810 | 83,810 | 83,810 | |||||||||
Retained Earnings
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(311,625 | ) | 12,019 | 109,831 | ||||||||
Accumulated Other Comprehensive Income
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35,385 | 24,519 | 19,964 | |||||||||
Treasury Stock
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(105 | ) | (105 | ) | (105 | ) | ||||||
TOTAL SHAREHOLDERS’ EQUITY
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$ | (132,411 | ) | $ | 180,367 | $ | 273,474 | |||||
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY
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$ | 192,852 | $ | 249,211 | $ | 273,574 |
See accompanying Notes and Accountant’s Compilation Report.
9
CONSOLIDATED SATEMENTS OF INCOME, EXPENSE
AND RETAINED EARNINGS
FOR THE FISCAL YEARS ENDED MAY 31, 2014, 2013, 2012
(Unaudited)
INCOME
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2014
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2013
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2012
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|||||||||
Royalty Income
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$ | 0 | $ | 0 | $ | 0 | ||||||
TOTAL INCOME
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$ | 0 | $ | 0 | $ | 0 | ||||||
OPERATING EXPENSES
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General and Administrative
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$ | 173,479 | $ | 34,631 | $ | 78 | ||||||
Professional Services
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153,186 | 71,307 | 22,035 | |||||||||
TOTAL OPERATING EXPENSES
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$ | 326,665 | $ | 105,938 | $ | 22,113 | ||||||
OTHER INCOME (EXPENSE)
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||||||||||||
Interest Expense
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0 | 0 | 0 | |||||||||
Interest and Dividend Income
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7,408 | 4,865 | 12,293 | |||||||||
Gain (Loss) on Sale of Marketable Securities
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(3,943 | ) | 3,394 | 3,161 | ||||||||
TOTAL OTHER INCOME
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3,465 | 8,259 | 15,454 | |||||||||
INCOME /(LOSS) BEFORE INCOME TAXES
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$ | (323,200 | ) | $ | (97,679 | ) | $ | (6,659 | ) | |||
Provision for Income Taxes
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444 | 133 | 128 | |||||||||
NET INCOME (LOSS)
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$ | (323,644 | ) | (97,812 | ) | (6,787 | ) | |||||
Retained Earnings Beginning of Year
|
$ | 12,019 | $ | 109,831 | $ | 116,618 | ||||||
Retained Earnings End of Year
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$ | (311,625 | ) | $ | 12,019 | $ | 109,831 | |||||
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Average Shares Outstanding During Period
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6,012,361 | 6,012,361 | 5,997,361 | |||||||||
NET GAIN (LOSS) PER SHARE
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$ | (.0518 | ) | $ | (.0163 | ) | $ | (.0011 | ) |
See accompanying Notes and Accountant’s Compilation Report.
10
CONSOLIDATED SATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED MAY 31, 2014, 2013, 2012
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
|
2014
|
2013
|
2012
|
|||||||||
Net Income/(Loss)
|
$ | (323,644 | ) | $ | (97,812 | ) | $ | ( 6,787 | ) | |||
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:
|
||||||||||||
Decrease in Interest Receivable | - | - | - | |||||||||
(Increase) in Prepaid Insurance
|
(260 | ) | (16,240 | ) | - | |||||||
Increase in Accounts Payable
|
256,419 | 68,844 | - | |||||||||
Other
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- | ( 1,464 | ) | - | ||||||||
(Gain)/Loss on Other Equity Investments
|
3,943 | ( 3,394 | ) | ( 3,161 | ) | |||||||
Net Cash Provided/ (Used) by Operating Activities
|
(63,542 | ) | (50,066 | ) | ( 9,948 | ) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Purchase of Investment Securities
|
- | - | ||||||||||
Proceeds from Sale of Investment Securities
|
53,839 | 55,283 | 14,049 | |||||||||
Net Cash Provided/(Used) by Financing Activities
|
53,839 | 55,283 | 14,049 | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Net Cash Provided/(Used) by Financing Activities
|
- | - | - | |||||||||
Net Increase/(Decrease) in Cash
|
(9,703 | ) | 5,217 | 4,101 | ||||||||
CASH - BEGINNING OF YEAR
|
$ | 17,120 | 11,903 | 7,802 | ||||||||
CASH - END OF YEAR
|
$ | 7,417 | $ | 17,120 | $ | 11,903 | ||||||
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SUPPLEMENTAL DISCLOSURES
|
||||||||||||
Income Taxes Paid
|
444 | 133 | 128 | |||||||||
Interest Paid
|
- | - | - |
See accompanying Notes and Accountant’s Compilation Report.
11
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Summary of Significant Accounting Policies Consolidation
The consolidation financial statements presented herein include the accounts of Excalibur Industries (“Excalibur”) and its wholly owned subsidiary, Mountain West Mines, Inc. (“Mountain West”), a Nevada corporation, qualified to do business in the state of Wyoming. All significant intercompany transactions have been eliminated from these statements.
Cash and Cash Equivalents
For the purposes of the consolidated statement of cash flows, Excalibur considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents.
Marketable Securities
Excalibur classifies its marketable equity securities as available for sales and are carried in the financial statements at fair market value. Recognized gains and losses are included in earnings as determined by the first-in, first-out method. Unrealized holding gains and losses are reported in other comprehensive income.
Mining Properties and Interests
Mining claims, leases, and royalty interests are stated at cost, unless in the judgment of the Directors a lesser amount is felt to be more appropriate due to a permanent decline in value. No depletion has been charged against income for financial statement purposes, but is deducted for federal income tax purposes when allowable. The full carrying value is charged against income at the time of sale or disposition of an asset. If a perpetual overriding royalty is retained, the recorded costs of the asset are treated the same for financial statement purposes as for income tax purposes and are not reduced in value until production royalties are received.
Depreciable Property and Equipment
Depreciable property and equipment are stated at cost. Depreciation for income tax purposes is consistent with that used for financial statement purposes and has been computed using the straight-line method.
Deferred Income Taxes
Deferred income taxes are provided as a result of timing differences in reporting income for financial statement and tax purposes. Currently no deferred income taxes payable (or receivable) are recognized.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Earnings per Share
Earnings per share of common stock are computed using the weighted average number of common shares outstanding during the period. Primary and fully diluted earnings per share are shown as the same figure if the dilutive effect of any common stock equivalents or convertible securities is less than three percent. Excalibur currently has no dilutive equivalents against income for financial statement purposes.
12
Note 2 - Marketable Securities
Cost and fair value of marketable securities at May 31, are as follows:
2014
|
2013
|
2012
|
||||||||||
Cost
|
$ | 33,490 | $ | 91,272 | $ | 141,607 | ||||||
Fair Value
|
68,875 | 115,791 | 161,571 | |||||||||
Total Gains in Accumulated Other Comprehensive Income
|
$ | 35,385 | $ | 24,519 | $ | 19,964 |
Note 3 - Mining Properties and Interests
Uranium
Excalibur owns various royalty and other interests in patented and unpatented lode mining claims and mineral leased acreage located in the Powder River Basin, Johnson and Campbell Counties, Wyoming. Future earned royalties are subject to offset by the amount of certain advance minimum royalty revenues. These properties were assigned a value of $347,032 following the acquisition of Mountain West by Excalibur. Various acreages have been dropped during the past years as such acreage was determined to be of no value. The capitalized costs of these properties have been reallocated to the remaining acreage still retained by Excalibur. The Board of Directors determined that a more realistic value should be placed on the books and elected to reduce the reporting value for financial statement purposes by $247,032.
A summary of capitalized costs of the above properties as of May 31, 2014, 2013, and 2012 follows:
2014
|
2013
|
2012
|
||||||||||
Uranium
|
$ | 100,000 | $ | 100,000 | $ | 100,000 |
Note 4 - General and Administrative Expense
General and administrative expenses for the years ended May 31, 2013, 2012, and 2011 follows:
2014
|
2013
|
2012
|
||||||||||
Reports and Publications
|
$ | 4,707 | $ | 555 | $ | 9,035 | ||||||
Professional
|
70,873 | 24,728 | 4,082 | |||||||||
Office Expense and Travel
|
97,899 | 9,348 | 8,996 | |||||||||
Total
|
$ | 173,479 | $ | 34,631 | $ | 22,113 |
Note 5 - Income Taxes
Currently, no deferred income taxes payable (or receivable) are recognized as a result of timing differences; in reporting income for financial accounting and tax purposes.
As of May 31, 2014, Excalibur has loss carry forwards of approximately $599,000 for federal tax and state purposes and that may be offset against future taxable income (expiring on various dates through 2027). A deferred tax benefit has not been recognized in the accompanying balance sheet due to the uncertainty of any future taxable income. In addition, deferred income taxes are not affected as a result of statutory depletion deductions taken for tax purposes.
Note 6 – Litigation and Contingencies
Contingency liabilities include:
(A)
|
$525,276.77 advance royalty from Cliffs, with the recoupment rights now owned by Pathfinder.
|
13
(B)
|
$250,000 advance royalty owed to Uranerz Energy Corporation from production royalty due Excalibur from any of the following ore deposits: Verna Ann, Niles Ranch, Hank, Willow Creek, Doughstick, and Nichols Ranch
|
(C)
|
$100,000 in two payments of $50,000 each owed to Cliffs from production royalty on North Butte and Ruby Ranch properties under the December 2009 Joint Directive to Power Resources, Inc.
|
(D)
|
$300,000 and $100,000 severance payments owed to former officers Joseph P. Hubert and Marguerite H. Emanuel, respectively.
|
Note 7 - Operating Funds
Management has developed a plan to reduce or delay administrative costs to insure that Excalibur will continue to meet its obligations during the coming year.
In 2012, Excalibur entered in to a Management Services Agreement with Meriden Engineering LLC (Meriden) to perform certain management and consulting services with respect to mine performance and progress and royalty payment determinations, among others. Meriden has agreed to defer payments under this agreement until such a time that Excalibur has adequate funds. At May 31, 2014, Meriden was owed $216,579.
In December, 2013, Excalibur entered in to Employment Agreements with its President/CEO and Secretary/Treasurer (the Officers) for base salaries totaling $12,250 per month. At May 31, 2014, the Officers were owed $61,250.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None
Item 9A. Controls and Procedures
The Chief Executive Officer and Chief Financial Officer, in consultation with its administrative support company, Meriden Engineering LLC, evaluated its financial controls in fiscal year ending May 31, 2014, and made certain adjustments which are appropriate for a business the size of the Company.
The Chief Executive Officer and Chief Financial Officer recognize that the Company must improve its financial controls due to management’s expectation that during fiscal year 2015 and 2016, the Company will receive significant royalty income.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
(a)(b) & (e)
Name
|
Age
|
Position
|
||
Jay R. Mackie
|
71
|
President, Chief Executive Officer, and Chairman of Board of Directors
|
||
Jack D. Powers
|
89
|
Vice President and Director
|
||
Michael P. Johnson
|
58
|
Secretary, Treasurer, and Director
|
||
Alan E. Nugent
|
69
|
Director
|
||
John T. Morrow
|
71
|
Director
|
||
Howard W. Hilshorst
|
67
|
Director
|
Jay R. Mackie,President and Chief Executive Officer, Chairman of the Board of Directors
Mr. Mackie was elected to the Board of Directors and appointed to these positions in 2012. He graduated from St. Olaf College (B.A., 1964) and has 50 years of mining related experience in areas of exploration, mine engineering, mine operations, automated mine and maintenance systems, IT systems, marketing and greenfield project development. Employed by Reserve Mining Company in engineering and operations departments (1964-1986), Caterpillar Venture Corp. 1987 as a field engineer in area of automated mining and maintenance management systems, self-employed mining/management consultant 1988 to present, Cyprus Northshore Mining as Mine Manager (1989-1994), Cliffs Northshore Mining (1994-1997) as Mine Manager, Cleveland-Cliffs (1997-2002) as Manager of Special Projects and market development, Bending Lake Iron Corp. (2006-2009) as Project Manager, and Bending Lake Iron Group Ltd. (2009-present) as Chief Operating Officer and Director. Jay is a member of the Society for Mining, Metallurgy and Exploration (SME) and Canadian Institute of Mining (CIM).
14
Jack D. Powers, Vice President, Director
Mr. Powers obtained a B.A. Degree in Business and Accounting from the University of Minnesota and a B.S. in Mechanical Engineering from Michigan Technological University. He worked as a manager for Longyear Drilling Company, Boyles Brothers, and Joy for many years and as a self-employed drilling consultant.
Michael P. Johnson, Secretary and Treasurer, Director
Mr. Johnson was elected to serve in these positions in 2012. He graduated with a B.S. in Electrical Engineering from Lehigh University and was granted his Professional Engineers License in 1981. He has worked in the natural resource industry for 36 years; 25 years with Pickands Mather and Cleveland-Cliffs and 11 years for various engineering firms and junior miners as an independent consultant. Mr. Johnson is a long standing member of the Society for Mining, Metallurgy and Exploration (SME) and a member of the Canadian Institute of Mining (CIM).
Alan E. Nugent, Director
Mr. Nugent is a partner and founder of the Salt Lake City based The Foresight Group LLC. He has been actively engaged in the financial services industry for 37 years, licensed and doing business in eight states. Mr. Nugent obtained his B.S. Degree in Geography from the University of Utah in 1968.
John T. Morrow, Director
Mr. Morrow is a CPA and private investor. He served at the Chicago office of the Securities and Exchange Commission from 1987 through 2006. Mr. Morrow attended Loyola University Chicago to obtain an Accounting degree and has worked for Arthur Anderson, American Cyanamid, Touche Ross, a Wall Street bank subsidiary of CIT, and was Audit Manager of an industrial gas subsidiary of Houston Natural Gas. He also served 27 years in the Navy/Army Reserves.
Howard W. Hilshorst, Director
Mr. Hilshorst has Bachelor (1970) and Master (1972) Degrees in Metallurgical Engineering from Michigan Technological University, and has more than 36 years of leadership experience in the mining industry. Most recently he served as President and CEO of Superior Mineral Resources LLC (“SMR”). On October 1, 2012, Mr. Hilshorst retired from SMR becoming an independent management consultant. Formerly he served as Executive Vice President of Minnesota Steel Industries LLC and as President and CEO of EVTAC Mining, a 5 million ton iron ore mining and pellet plant operation in northeastern Minnesota. Mr. Hilshorst has also held various management positions at three other iron ore mines in northeastern Minnesota, as well as copper producing mines in Michigan and Arizona. He is a member of the Society for Mining, Metallurgy and Exploration (SME).
(c)
|
Excalibur has two employees, Jay R. Mackie and Michael P. Johnson.
|
(d)
|
There are no family relationships between any Excalibur Director and Executive Officer or nominee for Director.
|
(f)
|
No Officer, Director, or nominee for Director has been involved in any legal proceedings involving federal bankruptcy laws, or any state insolvency laws, or has been convicted or named in a criminal proceeding, or is the subject of any order, judgment, or decree limiting him in any activity, or from engaging in any type of business practice, or from engaging in any activity in connection with the purchase or sale of any security, or in connection with any violation of federal or state security laws.
|
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Item 11. Executive Compensation.
The Company has two employees.
Directors and Officers Compensation Summary
|
|||||||||||||||||
Name and Principal Position
|
Year
|
Stock Awards
(no market value, value established at par of $0.01)
|
Warrant Awards1
(no market value, value established at par $0.01 per share)
|
All Other Compensation
|
Total
|
||||||||||||
Jay R. Mackie, CEO, Director
|
2012
|
10,000 |
100,000 @ strike price $1.00 per share
|
- | $ | 1,100 | |||||||||||
2013
|
2,500 |
25,000 @ strike price $1.00 per share
|
- | $ | 275 | ||||||||||||
2014
|
- | - | $ |
11,000/month
|
2 | $ |
132,000/year
|
||||||||||
Jack D. Powers, Vice President, Director
|
2013
|
2,500 | - | - | $ | 25 | |||||||||||
Michael P. Johnson, Secretary/Treasurer, Director
|
2013
|
2,500 |
25,000 @ strike price $1.00 per share
|
- | $ | 275 | |||||||||||
2014
|
- | - | $ |
1,250/month
|
2 | $ |
15,000/year
|
||||||||||
John T. Morrow, Director
|
2013
|
2,500 |
25,000 @ strike price $1.00 per share
|
- | $ | 275 | |||||||||||
Alan E. Nugent, Director
|
2013
|
2,500 |
25,000 @ strike price $1.00 per share
|
- | $ | 275 | |||||||||||
Howard W. Hilshorst, Director
|
2013
|
2,500 |
25,000 @ strike price $1.00 per share
|
- | $ | 275 |
Notes:
1
|
May not be exercised until Excalibur stock is tradable in a broker transaction. |
2
|
The Company’s Board of Directors at their December 30, 2013, meeting approved executive compensation for Jay R. Mackie and Michael P. Johnson effective January 1, 2014, in the amount of $11,000.00 per month for Mr. Mackie and $1,250.00 per month for Mr. Johnson with all 2014 compensation payable on May 15, 2015. The May 15, 2015 payment date was selected due to the anticipation of receipt of sufficient royalty income to make payments of such compensation by such date. The employment agreement of each of Mr. Mackie and Mr. Johnson provides that the amount of compensation earned is not payable on or before May 15, 2015, notwithstanding the occurrence of the following events prior to the distribution date: officers separation from service, officers death, officers disability, a change in control, and an unforeseeable emergency or any other event or reason. The amounts earned are not maintained in a separate account for the benefit of Mr. Mackie and Mr. Johnson and the obligation is not secured and is subject to the claims of the creditors of the Company. As of May 31, 2014, $55,000 and $5,250 of compensation has been earned by Mr. Mackie and Mr. Johnson respectively.
|
3
|
Jay R. Mackie and Michael P. Johnson each are entitled to severance payments under their December 31, 2013 Employment Agreements in the event they are terminated by the Company without cause or by death or disability which include unpaid base salary through the date of termination provided if such base salary is deferred, such base salary shall remain payable only upon the authorized date of payment under the deferral. The severance shall be equal to 80% of their respective base salary for the preceding year payable in three equal annual installments commencing on the next anniversary date of their respective Employment Agreements following the date of termination provided such termination date shall be no earlier than the third anniversary date of their respective Employment Agreements provided any rights the executive may have to severance payments shall be in accordance with their respective December 31, 2013 Employment Agreement and not on the severance policy then in effect. Severance benefits are conditioned upon executive signing and not revoking a separation agreement that includes a general release and that complies with state and federal law releasing the Company and its subsidiaries and their respective successors and assigns, officers, managers, employees, agents, attorneys and representatives of any claims relating to executives employment or termination thereof.
|
16
Severance Pay. At the Company’s October 16, 2013 meeting, the Board approved a severance payment of $100,000 for former Company Secretary/Treasurer Marguerite H. Emanuel, and $300,000 for the Company’s long standing President & CEO Joseph P. Hubert. Ms. Emanuel served as Secretary/Treasurer of the Company from 2001 to 2012, without monetary compensation. Mr. Hubert was elected President & CEO in 1982 and received no monetary compensation from 1999 to his retirement in 2012. These severance payments are deferred until the Company’s financial position allows payment.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
(a) Security Ownership of Certain Beneficial Owners:
Title of class
|
Name and address of beneficial owner
|
Amount and nature of beneficial ownership1
|
Percent of class
|
|||||
Common
|
Joseph P. Hubert
|
1,179,000 Direct
|
19.61 | |||||
1800 Lakeview Drive | ||||||||
Duluth, MN 55803 | ||||||||
Common
|
Alan E. Nugent
|
1,447,328 Direct
|
3 | 24.07 | ||||
1900 E 5685 S | ||||||||
Salt Lake City, UT 84121 | ||||||||
Common
|
Service Credit Corporation
|
300,000 Direct
|
4.99 | |||||
377 North Main Street | ||||||||
Layton, UT 84041 |
(b) Security Ownership of Management
Title of class
|
Name and address of beneficial owner
|
Amount and nature of beneficial ownership1,2
|
Percent of class
|
|||||
Common
|
Jay R. Mackie
|
12,500 Direct
|
0.21 | |||||
Common
|
Jack D. Powers
|
2,500 Direct
|
0.04 | |||||
Common
|
Michael P. Johnson
|
2, 500 Direct
|
0.04 | |||||
Common
|
Alan E. Nugent
|
1,447,328 Direct
|
3 | 24.07 | ||||
Common
|
John T. Morrow
|
2,500 Direct
|
0.04 | |||||
Common
|
Howard W. Hilshorst
|
2,500 Direct
|
0.04 |
1
|
Information as to beneficial ownership is based upon statements furnished by each Director. Information with such ownership rests peculiarly within their knowledge and the registrant disclaims responsibility for the accuracy and completeness thereof.
|
2
|
Does not include warrants to purchase common stock of the Company as shown in Item 11, Executive Compensation, and the grant by Excalibur to John T. Morrow, CPA, dated March 15, 2011, of a warrant to purchase 25,000 shares of common stock of Excalibur at a strike price of $1.00 per share for professional services rendered.
|
3
|
Includes 24,000 shares held by Alan E. Nugent’s wife.
|
(c) Changes in Control:
|
No arrangements are known to registrant which may at a subsequent date result in a change in control of the registrant.
|
17
Item 13. Certain Relationships and Related Transactions, and Director Independence.
(a)
|
Transactions with Management and Others:
|
|
None except as reported in Item 11. Executive Compensation
|
(b)
|
Certain Business Relationships:
|
|
In February 2010 Excalibur initiated management discussions with Superior Mineral Resources LLC (“SMR”) and its wholly owned subsidiary, Meriden Engineering LLC, of Hibbing, Minnesota. SMR has over a century of mineral resource management experience, largely positioned in the historic Lake Superior iron ore region. In February 2012, Excalibur contracted with SMR to manage Excalibur’s mineral lease and administrative affairs. Director Howard Hilshorst was employed by SMR until October 1, 2012, when he retired, and thereafter he engaged in the business of being an independent management consultant.
|
Item 14. Principal Accounting Fees and Services.
Audit/Audit-Related Fees
There were no audit or audit-related fees as the Company does not have audited financial statements for all of the years shown.
Tax Fees
Annual tax return preparation:
2013 - $1,208.50
2012 - $940.00
All Other Fees
Financial statement compilation:
2013 - $2,577.75
2012 - $2,237.60
Excalibur does not have an audit committee, and the Company has not adopted policies related to an audit due to the fact that the Company has not had the finances available to secure audit services. It is uncertain when the Company will have finances necessary to engage an independent audit firm. However, the Board believes that in 2015 it may be possible based on anticipated royalty income. Prior to the engagement of an independent audit firm, the Board intends to create an Audit Committee and separately designate a Nominating Committee and Compensation Committee.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
|
1.
|
Unaudited Consolidated Financial Statements for the fiscal years ended May 31, 2014, 2013, and 2012, including:
|
Accountant’s Compilation Report
Consolidated Balance Sheets
Consolidated Statements of Income, Expense, and Retained Earnings
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
(b)
|
(31)(1)
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
(32)(1)
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (contains exception for lack of audited financial statements)
|
(c)
|
Not applicable
|
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Excalibur Industries
|
|||
July 31, 2014
|
By:
|
/s/ Jay R. Mackie | |
Jay R. Mackie
|
|||
President, Chief Executive Officer (Principal Executive Officer)
|
|||
/s/ Michael P. Johnson | |||
Michael P. Johnson | |||
Secretary and Treasurer (Principal Financial Officer)
|
|||
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 on the dates indicated.
/s/ Jay R. Mackie
|
|
July 31, 2014
|
||
Jay R. Mackie, Director
|
||||
/s/ Michael P. Johnson
|
|
July 31, 2014
|
||
Michael P. Johnson, Director
|
||||
/s/ John T. Morrow
|
|
July 31, 2014
|
||
John T. Morrow, Director
|
||||
/s/ Alan E. Nugent
|
July 31, 2014
|
|||
Alan E. Nugent, Director
|
The above signatures constitute a majority of the Board members.
19
Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants
Which Have Not Registered Securities Pursuant to Section 12 of the Act
(a) Not applicable
(b) Not applicable
(c)
|
No such annual report or proxy material has been sent to security holders. If such report or proxy material is to be furnished to security holders subsequent to the filing of the annual report of this Form, the registrant shall furnish copies of such material to the Commission when it is sent to security holders.
|
20