Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2016
or
☐ 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) |
Registrantís 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 ☑
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 ☑
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 ☐
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 ☑
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.☒
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 ☐ Accelerated
filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company) 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 ☑
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 May 31, 2016, 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 and on the Nichols Ranch property in June 2014. Excalibur is receiving royalty income from both operations.
The current Excalibur officers are Jay R. Mackie, President and Chief Executive Officer; 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, Alan E. Nugent, Zachary A. Nugent, and Bruce H. Sederberg.
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.
2
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.
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 $1,319,286.60 to Uranerz USA. The right of recovery was acquired by Pathfinder and was repaid in 1Q 2015 via recovery of royalty from North Butte production.
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. The first installment is was paid in December
2015 and the second is planned for December 2016.
Item 1A. Risk Factors.
1.
Market Effect of Fukushima Daiichi Power Station Disaster. The market for uranium may continue to be affected by the events at Japan’s Fukushima Daiichi power station, which was heavily damaged in 2011.
2.
Future Regulations. The nuclear power industry may be subject to further regulations with respect to existing 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.
3.
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.
4.
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.
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.
2.
Excalibur holds a royalty interest in approximately 14,000 acres of mineral properties held by Uranerz Energy Corporation (“Uranerz”), including properties known as Nichols Ranch, Hank, Niles Ranch, Willow Creek, Verna Ann, and Doughstick under a 2005 agreement. Under the agreement, Excalibur will receive royalty payments 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%. Energy Fuels acquired Uranerz in July 2015 and Uranerz is now a wholly owned subsidiary of Energy Fuels.
3.
Mountain West holds a royalty interest in mining claims from an August 22, 1973 Mining Deed (Part I and II) between Mountain West and American Nuclear Corporation (“ANC”), which reserved 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 obligation to Mountain West. In 2001, Pathfinder sold the Brown deposit to Power Resources (Cameco). Excalibur retains a 2.5% royalty from the ANC contract.
Cameco produced 404,782.9 pounds of yellowcake from the North Butte property in calendar year 2015 and 93,312.5 pounds in the first quarter of 2016. In April 2016, Cameco announced that it would be curtailing production at its U.S. uranium operations in response to market conditions. Future production is difficult to estimate. The timing and amount
of production reported by Cameco are subject to change and are beyond the control of the Company. Excalibur received royalty payments from Cameco totaling $728,375.78 for calendar year 2015 and $157,586.15 for the first quarter of 2016.
Uranerz produced 278,710.0 pounds of yellowcake from the Nichols Ranch property in calendar year 2015 and 42,352.0 pounds in the first calendar quarter of 2016. Future production is difficult to estimate. The timing and amount of production reported by Uranerz are subject to change and are beyond the control of the Company. Excalibur received royalty payments from Uranerz
totaling $614,480.10 for calendar year 2015 and $ 99,996.53 for the first quarter of 2016.
Item 3. Legal Proceedings.
None
Item 4. Mine Safety Disclosures.
Not applicable
4
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a)
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.
(b)
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.
The Company has not repurchased any of its securities.
Item 6. Selected Audited Financial Data.
|
2016 |
2015 |
2014 |
Total Revenues |
$1,252,755 |
$1,433,761 |
$949,025 |
|
|
|
|
Total Operating Expenses |
505,331 |
350,702 |
723,405 |
Income/(Loss) from Operations |
747,424 |
1,083,059 |
225,620 |
|
|
|
|
Other Income (Expense) |
(536) |
7,985 |
3,465 |
Income/(Loss) Before Income Taxes |
746,888 |
1,091,044 |
229,085 |
|
|
|
|
Provision for Income Taxes |
- |
100 |
444 |
|
|
|
|
Net Income/(Loss) Before Extraordinary Gain |
746,888 |
1,090,944 |
228,641 |
|
|
|
|
Extraordinary Gain |
0 |
0 |
0 |
|
|
|
|
Net Income/(Loss) |
746,888 |
1,090,944 |
228,641 |
|
|
|
|
Retained Earnings/Deficit) Beginning of Year |
$(398,743) |
$(1,489,687) |
$(1,718,328) |
|
|
|
|
Retained Earnings/(Deficit) End of Year |
348,145 |
$(398,743) |
$(1,489,687) |
|
|
|
|
Average Shares of Common Stock Outstanding |
6,012,361 |
6,012,361 |
6,012,361 |
|
|
|
|
Net Income/(Loss) Per Share of Common Stock |
$0.12423 |
$0.18145 |
$0.03803 |
|
|
|
|
Total Assets - End of Year |
$604,613 |
$619,630 |
$184,145 |
|
|
|
|
Long-Term Obligations |
$0 |
$0 |
$0 |
|
|
|
|
Cash Dividends Declared Per Share of Common Stock |
$0 |
$0 |
$0 |
5
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The Company’s administrative and leasehold affairs are managed by Meriden Engineering LLC, a Minnesota limited liability company, situated in Hibbing, Minnesota (“Meriden”). Meriden’s management fee is 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, Meriden shall be paid 5% of actual gross increase in the Company’s consolidated revenues during each calendar year from all sources other than royalties. In the event the Company is sold, Meriden will receive a one-time termination fee of $250,000.
Uranium production began at the North Butte property (Cameco) in 2013 and at the Nichols Ranch (Uranerz) in 2014. The Company received its first royalty payment in January 2015 after repaying over $1.6 million in advance royalty, most of which dated back to the 1960s.
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.
Item 8. Financial Statements and Supplementary Data.
Accounting Report
To the Board of Directors and Stockholders
Excalibur Industries
Included in this report are the consolidated balance sheets of Excalibur Industries (Corporation) and its wholly owned subsidiary, Mountain West Mines, Inc., as of May 31, 2016, 2015, and 2014, and the related consolidated statements of income, retained earnings, and cash flows for the year then ended. The accompanying 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.
The accompanying financial statements do not meet requirements of Article 8 of Regulation S-X.
6
CONSOLIDATED BALANCE SHEETS
MAY 31, 2016, 2015, 2014
(Audited)
ASSETS |
For the Period Ended: | ||
CURRENT ASSETS |
2016 |
2015 |
2014 |
Cash and Cash Equivalents |
$276,094 |
$288,880 |
$7,417 |
Marketable Securities |
13,663 |
22,263 |
68,875 |
Total Prepaid Insurance |
13,397 |
13,398 |
16,500 |
Prepaid Taxes |
63,500 |
0 |
0 |
Accounts Receivable |
171,147 |
216,720 |
0 |
Total Current Assets |
537,801 |
541,261 |
92,792 |
|
|
|
|
Fixed Assets |
|
|
|
Interest in Mining Properties |
66,752 |
78,309 |
91,293 |
|
|
|
|
Deposits |
60 |
60 |
60 |
|
|
|
|
TOTAL ASSETS |
$604,613 |
$619,630 |
$184,145 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
Accounts Payable |
$64,530 |
$820,059 |
$1,456,553 |
|
|
|
|
TOTAL LIABILITIES |
$64,530 |
$820,059 |
$1,456,553 |
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
Common Stock $.01 Par Value, Authorized 10,000,000 Shares 6,012,361 Shares issued including shares in Treasury |
$60,124 |
$60,124 |
$60,124 |
Paid-In Capital in excess of Par |
121,875 |
121,875 |
121,875 |
Retained Earnings |
348,145 |
(398,743) |
(1,489,687) |
Accumulated Other Comprehensive Income |
10,044 |
16,420 |
35,385 |
Treasury Stock |
(105) |
(105) |
(105) |
|
|
|
|
TOTAL SHAREHOLDERS’ EQUITY |
$540,083 |
$(200,429) |
$(1,272,408) |
|
|
|
|
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY |
$604,613 |
$619,630 |
$184,145 |
See accompanying Notes.
7
CONSOLIDATED SATEMENTS OF INCOME, EXPENSE
AND RETAINED EARNINGS
FOR THE FISCAL YEARS ENDED MAY 31, 2016, 2015, 2014
(Audited)
INCOME |
2016 |
2015 |
2014 |
Royalty Income |
$1,252,755 |
$1,433,761 |
$949,025 |
|
|
|
|
TOTAL INCOME |
$1,252,755 |
$1,433,761 |
$949,025 |
|
|
|
|
OPERATING EXPENSES |
|
|
|
General and Administrative |
$317,831 |
$303,999 |
$620,715 |
Professional Services |
187,500 |
46,703 |
102,690 |
TOTAL OPERATING EXPENSES |
$505,331 |
$350,702 |
$723,405 |
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
Interest Expense |
0 |
0 |
0 |
Interest and Dividend Income |
966 |
3,080 |
7,408 |
Gain (Loss) on Sale of Marketable Securities |
(1,502) |
4,905 |
(3,943) |
TOTAL OTHER INCOME |
(536) |
7,985 |
3,465 |
|
|
|
|
INCOME /(LOSS) BEFORE INCOME TAXES |
$746,888 |
$1,091,044 |
$229,085 |
|
|
|
|
Provision for Income Taxes |
- |
100 |
444 |
|
|
|
|
NET INCOME (LOSS) |
$746,888 |
$1,090,944 |
$228,641 |
|
|
|
|
Retained Earnings Beginning of Year |
$(398,743) |
$(1,489,687) |
$(1,718,328) |
|
|
|
|
Retained Earnings End of Year |
$348,145 |
$(398,743) |
$(1,489,687) |
|
|
|
|
Average Shares Outstanding During Period |
6,012,361 |
6,012,361 |
6,012,361 |
|
|
|
|
NET GAIN (LOSS) PER SHARE |
$0.12423 |
$0.18145 |
$0.03803 |
See accompanying Notes.
8
CONSOLIDATED SATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED MAY 31, 2016, 2015, 2014
(Audited)
CASH FLOWS FROM OPERATING ACTIVITIES |
2016 |
2015 |
2014 |
Net Income/(Loss) |
$746,888 |
$1,090,944 |
$228,641 |
Operating Activity Adjustments: |
|
|
|
Change in Depletion |
11,556 |
12,983 |
8,708 |
Prepaid Insurance |
0 |
3,102 |
(260) |
Prepaid Taxes |
(63,500) |
0 |
0 |
(Increase)/Decrease in Accounts Receivable |
45,573 |
(216,720) |
0 |
(Gain)/Loss in Equity Investments |
2,223 |
(4,905) |
3,944 |
Increase/(Decrease) in Accounts Payable |
(755,526) |
(636,494) |
(304,574) |
|
|
|
|
Net Cash Provided by/(Used in) Operating Activities |
(12,786) |
248,910 |
(63,541) |
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
Purchase of Investment Securities |
- |
- |
- |
Proceeds from Sale of Investment Securities |
0 |
32,553 |
53,839 |
Stock Issuance |
- |
- |
- |
|
|
|
|
Net Cash (Used in)/Provided by Financing Activities |
0 |
32,553 |
53,839 |
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
Net Cash Provided by/(Used in) Financing Activities |
0 |
0 |
0 |
|
|
|
|
Net Increase/(Decrease) in Cash |
(12,786) |
281,463 |
(9,702) |
|
|
|
|
CASH - BEGINNING OF YEAR |
$288,880 |
$7,417 |
$17,119 |
|
|
|
|
CASH - END OF YEAR |
$276,094 |
$288,880 |
$7,417 |
|
|
|
|
SUPPLEMENTAL DISCLOSURES |
|
|
|
Income Taxes Paid |
- |
100 |
444 |
Interest Paid |
- |
- |
- |
See accompanying Notes.
9
Notes to Consolidated Financial Statements
(Audited)
Note 1 - Summary of Significant Accounting Policies Consolidation
The consolidated 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. Depletion has been charged against income for financial statement purposes and 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.
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.
Note 2 - Marketable Securities
Cost and fair value of marketable securities at May 31, are as follows:
|
2016 |
2015 |
2014 |
Cost |
$3,619 |
$5,843 |
$33,490 |
Fair Value |
13,663 |
22,263 |
68,875 |
Total Gains in Accumulated Other Comprehensive Income |
$10,044 |
$16,420 |
$35,385 |
10
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. These properties were assigned a value of $347,032 following the acquisition of Mountain West by Excalibur. Various acreages have been dropped during
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, 2016, 2015, and 2014 follows:
|
2016 |
2015 |
2014 |
Uranium Interests |
$100,000 |
$100,000 |
$100,000 |
Accumulated Depreciation |
(33,248) |
(21,691) |
(8,708) |
Net Uranium Interests |
$66,752 |
$78,309 |
$91,292 |
Note 4 - General and Administrative Expense
General and administrative expenses for the years ended May 31, 2016, 2015, and 2014 follows:
|
2016 |
2015 |
2014 |
Reports and Publications |
$663 |
$152 |
$4,707 |
Professional |
187,500 |
46,703 |
102,690 |
Office Expense and Travel |
149,922 |
154,206 |
69,606 |
Total |
$338,085 |
$201,061 |
$177,003 |
Note 5 - Income Taxes
As of May 31, 2016, Excalibur has loss carry forwards of approximately $233,000 for federal tax and state purposes and that may be offset against future taxable income (expiring on various dates through 2027). Deferred income taxes are not affected as a result of statutory percentage depletion deductions taken for tax purposes.
Note 6 – Litigation and Contingencies
Contingency liabilities include:
(A) The final installment of $50,000 owed to Cliffs from production royalty on North Butte and Ruby Ranch properties under the 2009 Settlement Agreement, with payment to be made in December 2016.
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, 2016, and made certain adjustments which are appropriate for a business the size of the Company.
11
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
(a)(b) & (e)
Name |
|
Age |
|
Position |
Jay R. Mackie |
|
73 |
|
President, Chief Executive Officer, and Chairman of Board of Directors |
Michael P. Johnson |
|
60 |
|
Secretary, Treasurer, and Director |
Alan E. Nugent |
|
71 |
|
Director |
John T. Morrow |
|
73 |
|
Director |
Howard W. Hilshorst |
|
69 |
|
Director |
Zachary A. Nugent |
|
34 |
|
Director |
Bruce H. Sederberg |
|
61 |
|
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 over 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. (2009-2012) 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).
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 38 years; initially in coal and iron ore and most recently 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).
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 42 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 was elected to the Board in 2010. He 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 was elected to the Board in 2013. He has Bachelor (1970) and Master (1972) Degrees in Metallurgical Engineering from Michigan Technological University, and has more than 40 years of leadership experience in the mining industry. Most recently he served as President and CEO of Encore Natural Resources from 2012 to May 1, 2015. From 2009 to 2012, he served as President
and CEO of Superior Mineral Resources. His past positions include Executive Vice President of Minnesota Steel Industries LLC and 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).
12
Zachary A. Nugent, Director
Zachary (Zak) Nugent was elected to the Board in 2015. He is the Chief Executive Officer of Scalar Group, Inc., where he manages the day-to-day operations of the firm. Zak has been involved in all phases of the firm’s development since joining in 2009. He has overseen more than 2,000 valuation engagements for tax, financial reporting, transaction advisory, and litigation
consulting purposes. Zak has provided valuation consulting to management teams and boards of directors for deferred compensation, purchase price accounting, mergers and acquisitions, capital fund raising, secondary transactions, equity buybacks, shareholder disputes, and succession planning. Zak received his B.S. in Economics from the Utah.
Bruce H. Sederberg, Director
Mr. Sederberg has a B.A. in Business from the University of Minnesota and has owned/operated H. Christiansen Co. since 1978.
(c) Excalibur has two employees, Jay R. Mackie and Michael P. Johnson.
(d) Director Zachary A. Nugent is the son of Director Alan E. Nugent.
(f) We are not aware of any of our executive officers or directors being involved in any legal proceedings in the past ten years relating to any matters in bankruptcy, insolvency, criminal proceedings (other than traffic and other minor offenses) or being subject to any of the items set forth under Item 401 of Regulation S-A with the exception of the following matter:
● Jay R. Mackie was a Director and Chief Operating Officer of Bending Lake Iron Group Ltd., an Ontario, Canada, corporation (“Bending Lake Iron”), during 2009 and until his resignation on December 20, 2012. Bending Lake Iron was engaged in the development of an iron mine in Ontario, Canada. A request for the appointment of a receiver was brought
by 2430177 Ontario Inc. which holds a mortgage and security interest upon certain of the assets of Bending Lake Iron and on September 11, 2014, a receiver was appointed for Bending Lake Iron by the Ontario Superior Court of Justice appointing A. Farber & Partners Inc., a receiver of all of the assets, undertakings and properties of Bending Lake Iron Group Ltd. in accordance with Section 243(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended in Section 101 of the Courts of Justice Act,
R.S.O. 1990, c. C.43 as amended.
Item 11. Executive Compensation.
The Company has two employees.
Directors and Officers Compensation Summary | ||||||||
Name and Principal Position |
|
Calendar Year |
|
Stock Awards |
|
Warrant Awards |
|
Cash Compensation |
Jay R. Mackie, CEO, Director |
|
2015 |
|
- |
|
- |
|
$132,000 |
|
|
20161 |
|
$40,375 |
|
- |
|
$103,625 |
Michael P. Johnson, Secretary/Treasurer, Director |
|
2015 |
|
- |
|
- |
|
$15,000 |
|
|
20161 |
|
$375 |
|
- |
|
$18,625 |
John T. Morrow, Director |
|
2015 |
|
- |
|
- |
|
- |
|
|
20161 |
|
$375 |
|
- |
|
$3,625 |
Alan E. Nugent, Director |
|
2015 |
|
- |
|
- |
|
- |
|
|
20161 |
|
$375 |
|
- |
|
$3,625 |
Howard W. Hilshorst, Director |
|
2015 |
|
- |
|
- |
|
- |
|
|
20161 |
|
$375 |
|
- |
|
$3,625 |
Zachary A. Nugent, Director |
|
2015 |
|
- |
|
25,000 @ strike price $0.72 per share |
|
- |
|
|
20161 |
|
$375 |
|
- |
|
$3,625 |
Bruce H. Sederberg, Director |
|
2015 |
|
- |
|
25,000 @ strike price $0.72 per share |
|
- |
|
|
20161 |
|
$375 |
|
- |
|
$3,625 |
1Projected for the full calendar year
13
Notes:
Jay R. Mackie is entitled to the following payments under his November 30, 2015, Employment Agreement, as amended, in the event he is terminated by the Company without cause or by death or disability which includes (i) 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, (ii) as severance, $24,000, payable in three equal monthly installments of $8,000 each, with the first of such payments being paid in the month immediately following the event of termination, and (iii) any unpaid reimbursable expenses outstanding as of the date of termination. The severance payments and benefits are conditioned upon the Executive signing and not revoking a separation agreement that includes a general release that complies with state and federal law releasing
the Company and its subsidiary and their respective successors and assigns, officers, managers, employees, agents, attorneys and representatives of any claims relating to the Executives employment or the termination thereof.
Michael P. Johnson is entitled to the following payments under his December 23, 2015 Employment Agreement, as amended, in the event he is terminated by the Company for any reason, which includes (i) 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, and (ii) any unpaid reimbursable expenses outstanding as of the date of termination.
Severance Pay. The severance payments approved by the Board in 2013 of $300,000 to Joseph P. Hubert and $100,000 to Marguerite H. Emanuel have been paid in full.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
(a) Security Ownership of Certain Beneficial Owners as of May 31, 2016:
Title of class |
|
Name and address of beneficial owner |
|
Amount and nature of beneficial ownership1 |
|
Percent of class |
Common |
|
Joseph P. Hubert
1800 Lakeview Drive
Duluth, MN 55803 |
|
1,179,000 Direct |
|
19.61 |
Common |
|
Alan E. Nugent
1900 E 5685 S
Salt Lake City, UT 84121 |
|
1,447,328 Direct3 |
|
24.07 |
Common |
|
Service Credit Corporation
377 North Main Street
Layton, UT 84041 |
|
300,000 Direct |
|
4.99 |
(b) Security Ownership of Management as of May 31, 2016:
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 |
|
Michael P. Johnson |
|
2, 500 Direct |
|
0.04 |
Common |
|
Alan E. Nugent |
|
1,447,328 Direct3 |
|
24.07 |
Common |
|
John T. Morrow |
|
2,500 Direct |
|
0.04 |
Common |
|
Howard W. Hilshorst |
|
2,500 Direct |
|
0.04 |
Common |
|
Zachary A. Nugent |
|
- |
|
- |
Common |
|
Bruce H. Sederberg |
|
- |
|
- |
1Information 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.
14
2Does not include warrants to purchase common stock of the Company as shown in Item 11, Executive Compensation.
3Includes 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. |
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 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 left SMR and became an independent management consultant. |
Item 14. Principal Accounting Fees and Services.
Audit/Audit-Related Fees
2015 - $35,000.00
2014 - $35,000.00
Tax Fees
Annual tax return preparation:
2015 - $4,625.00
2014 - $1,347.05
All Other Fees
Financial statement compilation:
2015 - $2,045.00
2014 - $1,923.25
In 2016, Excalibur has a designated Audit Committee, Nominating Committee and Compensation Committee.
15
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) |
1. |
AICPA Audited Consolidated Financial Statements for the fiscal years ended May 31, 2016, 2015, and 2014, including: | |
|
|
|
|
(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 | |
|
|
|
|
(c) |
Not applicable |
|
16
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.
|
Registrant: Excalibur Industries
|
| |
|
|
|
|
Date: August 17, 2016
|
By: |
/s/ Jay R. Mackie |
|
|
|
Jay R. Mackie |
|
|
|
President, Chief Executive Officer (Principal Executive Officer) |
|
|
|
| |
|
|
| |
Date: August 17, 2016 | By: |
/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.
|
|
|
|
Date: August 17, 2016
|
By: |
/s/ Jay R. Mackie |
|
|
|
Jay R. Mackie |
|
|
|
Director |
|
|
|
|
|
|
|
|
|
Date: August 17, 2016 |
By: |
/s/ Michael P. Johnson
|
|
|
|
Michael P. Johnson
|
|
|
|
Director |
|
|
|
|
|
|
|
|
|
Date: August 17, 2016
|
By: | /s/ John T. Morrow
|
|
|
|
John T. Morrow
|
|
|
|
Director |
|
|
|
|
|
|
|
|
|
Date: August 17, 2016
|
By: | /s/ Alan E.Nugent |
|
|
|
Alan E.Nugent |
|
|
|
Director |
|
The above signatures constitute a majority of the Board members.
17
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.
18