<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the Quarter Ended August 31, 1995
Commission File Number 0-22382
AURTEX, INC.
(Name of small business issuer in its charter)
Nevada 56-1051491
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5660 Greenwood Plaza Blvd., Englewood, CO 80111
Address of principal executive offices
(303) 850-7166
Issuer's Telephone Number
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
As of August 31, 1995 there were outstanding 22,832,540 shares of the
Registrant's Common Stock.
<PAGE>
AURTEX, INC.
REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets August 31, 1995 (unaudited) and
February 28, 1995............................................... 1
Statements of Operations for the Six Month Periods Ended
August 31, 1995 and 1994, and the Period from August 19, 1990
(inception) to August 31, 1995 (unaudited)...................... 2
Statements of Operations for the Three Month Periods Ended
August 31, 1995 and 1994 (unaudited)............................ 3
Statements of Stockholders' Equity for the Period from
March 19, 1990 (inception) to February 28, 1995 and the Six
month period ended August 31, 1995 (unaudited).................. 4
Statements of Cash Flows for the Six Month Periods ended
August 31, 1995 and 1994, and the Period from August 19, 1990,
(inception) to August 31, 1995 (unaudited)...................... 5
Notes to Unaudited Financial Statements......................... 7
Item 2. Management's Plan of Operations................................. 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders ............ 14
Item 6. Exhibits and Reports on Form 8-K ............................... 15
SIGNATURES............................................................... 15
<PAGE>
<TABLE>
<CAPTION>
AURTEX, INC.
BALANCE SHEET
August 31, February 28,
1995 1995
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 392,897 $ 1,485,239
Investments (Note 2) 684,327 509,327
Notes Receivable - Related Parties (Note 3) 39,975 663,585
Note Receivable (Note 4) 130,343 --
Deposits and Prepaid Expenses 93,763 68,684
----------- -----------
Total Current Assets 1,341,305 2,726,835
Equipment, Net of Accumulated Depreciation
of $ 83,920 and $ 56,321, respectively 179,662 221,742
Capitalized Mining Claim Costs 2,240,000 2,240,000
----------- -----------
Total Assets $ 3,760,967 $ 5,188,577
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 154,803 $ 175,630
Due to Stockholders and Affiliated Entities 108,152 109,589
----------- -----------
Total Current Liabilities 262,955 285,219
----------- -----------
Commitments and Contingencies -- --
Stockholders' Equity: (Note 5 and 6)
Preferred stock, $.001 per share par value,
5,000,000 shares authorized, no shares
issued and outstanding -- --
Common stock, $.001 per share par value,
50,000,000 shares authorized, 22,832,540
and 19,682,540 shares issued and
outstanding, respectively 22,833 19,683
Additional Paid in Capital 12,384,508 12,370,408
Accumulated Deficit (8,909,329) (7,486,733)
----------- -----------
Total Stockholders' Equity 3,498,012 4,903,358
----------- -----------
Total Liabilities and Stockholders' Equity $ 3,760,967 $ 5,188,577
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
-1-
<PAGE>
<TABLE>
<CAPTION>
AURTEX, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE SIX MONTH PERIODS ENDED AUGUST 31, 1995 AND 1994, AND THE
CUMULATIVE PERIOD FROM INCEPTION, MARCH 19, 1990 TO AUGUST 31, 1995
Cumulative
From
Six Month Six Month March 19, 1990
Period Ended Period Ended Date of
August 31, 1995 August 31, 1994 Inception
--------------- --------------- --------------
<S> <C> <C> <C>
Aurtex Gold Assay System Development Costs $ 241,212 $ 467,235 $ 2,120,986
Gold Exploration Costs 397,709 358,239 3,010,806
General and Administrative Costs 649,397 908,289 3,785,038
--------------- --------------- --------------
Total Operating Costs 1,288,318 1,733,763 8,916,830
Equity in Loss of Pangold S.A. (Note 2) -- -- 15,673
Allowance for Possible Writedown of Note Receivable (Note 3) 170,000 -- 170,000
Interest Expense, related parties 1,748 5,920 90,994
Interest Income (37,470) (79,556) (284,168)
--------------- --------------- --------------
Net Loss $ (1,422,596) $ (1,660,127) $ (8,909,329)
=============== =============== ==============
Net Loss per Share $ (0.07) (0.10) (0.79)
=============== =============== ==============
Weighted Average Common Shares Outstanding 20,257,576 17,099,755 11,237,536
=============== =============== ==============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
AURTEX, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 1995 AND 1994
Three Month Three Month
Period Ended Period Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Aurtex Gold Assay System Development Costs $ 93,692 $ 264,449
Gold Exploration Costs 235,460 332,282
General and Administrative Costs 264,221 623,563
--------------- ---------------
Total Operating Costs 593,373 1,220,294
Equity in Loss of Pangold S.A. (Note 2) -- --
Allowance for Possible Writedown of Note Receivable (Note 3) 170,000 --
Interest Expense, related parties 812 2,413
Interest Income (13,481) (52,142)
---------------- ---------------
Net Loss $ (750,704) $ (1,170,565)
================ ===============
Net Loss per Share $ (0.04) $ (0.06)
================ ===============
Weighted Average Common Shares Outstanding 20,805,156 18,076,281
=============== ===============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
-3-
<PAGE>
AURTEX, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED AUGUST 31, 1995, AND THE
CUMULATIVE PERIOD FROM INCEPTION, MARCH 19, 1990 TO FEBRUARY 28, 1995
<TABLE>
<CAPTION>
Additional Stock
Common Stock Paid In Accumulated Subscriptions
Shares Amount Capital Deficit Receivable Total
---------- ------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock on March 19, 1990. 2,000,000 $ 2,000 $ (1,000) $ $ $ 1,000
Merger with Adcom Systems, Inc. on December
4, 1992 accounted for as a recapitalization,
effective March 19, 1990, inception. 411,780 412 (84,691) (84,279)
Issuance of Preferred Stock in connection
with the transfer mining claims on August
9, 1991, and converted to common stock
simultaneous with the merger with
Adcom Systems, Inc. on December 4, 1992. 8,010,000 8,010 (7,260) 750
Sale of Preferred Stock in private offering
between January 1 and February 14, 1992,
and converted to common stock simultaneous
with the merger with Adcom Systems, Inc. 187,870 188 563,420 563,608
Sale of 327,000 Series C Warrants on
January 1, 1992. 3,270 3,270
Sale of Preferred Stock in private offering
between March 1 and September 23, 1992,
and converted to common stock simultaneous
with the merger with Adcom Systems, Inc. 516,343 516 1,548,514 1,549,030
Sale of 522,000 Series B Warrants and 3,342,000
Series C Warrants between June 12 and
September 16, 1992. 38,640 38,640
Common stock to be issued in connection
with the merger of Adcom Systems, Inc. 749,995 750 19,500 (20,250) 0
Sale of common stock in a private offering
between June 15 and August 31, 1993. 2,191,600 2,192 4,381,008 4,383,200
Exercise of Stock Options between
April 30, 1993 and January 31, 1994. 605,000 605 29,645 30,250
Exercise of Series B Warrants and Series C
Warrants between May 13, 1993 and
February 28, 1994. 1,223,281 1,223 1,652,038 1,653,261
Conversion of accrued salaries to common
stock on June 30, 1993. 62,500 63 124,937 125,000
Receipt of stock subscription 20,250 20,250
Series C Warrants issued to two directors
on November 1, 1993 43,500 43,500
Sale of common stock in a private financing
between May 10 and July 15, 1994. 1,831,623 1,831 3,266,589 3,268,420
Stock issued for services in connection with a
private financing in June 1994 42,857 43 (43) 0
Exercise of Warrants In June of 1994 739,691 740 738,951 739,691
Exercise of Stock Options In August and
December of 1994 1,090,000 1,090 53,410 54,500
Other 20,000 20 (20)
Net loss, Inception to February 28, 1995 (7,486,733) (7,486,733)
---------- ------- ----------- ----------- -------- -----------
Balances at February 28, 1995 19,682,540 19,683 12,370,408 (7,486,733) 0 4,903,358
Stock Issued to an Officer (Note 5) 150,000 150 17,100 17,250
Stock issued to BAGA as up-front
placement fee (Note 5) 3,000,000 3,000 (3,000) 0
Net loss (1,422,596) (1,422,586)
---------- ------- ----------- ----------- -------- -----------
Balances at August 31, 1995 (Unaudited) 22,832,540 $22,833 $12,384,508 $(8,908,929) $ 0 $ 3,498,012
========== ======= =========== =========== ======== ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements
-4-
<PAGE>
AURTEX, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
FOR THE SIX MONTH PERIODS ENDED AUGUST 31, 1995 AND 1994, AND THE
CUMULATIVE PERIOD FROM INCEPTION, MARCH 19, 1990 TO AUGUST 31, 1995
<TABLE>
<CAPTION>
Cumulative
From
Six Month Six Month March 19, 1990
Period Ended Period Ended Date of
August 31, 1995 August 31, 1994 Inception
--------------- --------------- --------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Loss $(1,422,596) $(1,660,127) $(8,909,329)
Adjustments to Reconcile Net Loss to
Cash Flow Used In Operations:
Depreciation 27,599 18,433 83,920
Accrued Interest Income on Restricted Marketable
Securities, Treasury Bills and Notes Receivable 23,576 (25,009) (161,797)
Equity in Loss of Pangold S.A. - - 15,673
Write Down of Prior Years Mining Claim Costs - - 913,027
Compensation Portion of Series C Warrants
Issued to Two Directors - - 43,500
Allowance for Possible Writedown of Note Receivable (Note 3) 170,000 170,000
Compensation Portion of Stock Grant to an Officer (Note 5) 17,250 - 17,250
Increase in Deposits and Prepaid Expenses (25,079) (67,044) (93,763)
Increase (Decrease) in Accounts Payable (20,827) 496,945 (101,010)
Increase (Decrease) in Due to
Shareholders and Affiliated Entities (1,437) (11,390) 151,210
----------- ----------- -----------
Cash Flows Used In Operating Activities (1,231,514) (1,248,192) (7,871,319)
----------- ----------- -----------
Cash Flows From Investing Activities:
Increase in Capitalized Mining Claim Costs (809,363) (2,534,810)
Purchase of Equipment (171,709) (278,063)
Disposal of Equipment 14,481 14,481
Increase of Note Receivable (125,000) (125,000)
Investment in Pangold S.A. (175,000) - (700,000)
Purchase of Adcom Systems, Inc. - (84,279)
----------- ----------- -----------
Cash Flows Used In Investing Activities (285,519) (981,072) (3,707,671)
----------- ----------- -----------
Cash Flows From Financing Activities:
Proceeds From Notes Payable - Stockholder 781,767
Repayment of Notes Payable - Stockholder (25,000)
Increase of Notes Receivable - Related Parties (705,000) (705,000)
Repayment of Notes Receivable - Related Parties 5,000 505,000
Proceeds From the Sale of Common Stock, Net 3,268,421 8,875,258
Proceeds From the Sale of Series B and Series C Warrants 41,910
Proceeds From the Exercise of Series B Warrants 1,433,264
Proceeds From the Exercise of Series C Warrants 320,000 539,997
Proceeds From the Exercise of Options 35,000 84,750
Receipt of Stock Subscription 419,691 439,941
----------- ----------- -----------
Cash Flows (Used In) Provided By Financing Activities 424,691 2,918,421 11,971,887
----------- ----------- -----------
(Decrease) Increase in Cash (1,092,342) 689,157 392,897
Cash, Beginning of Period 1,485,239 2,285,255 0
----------- ----------- -----------
Cash, End of Period $ 392,897 $ 2,974,412 $ 392,897
=========== =========== ===========
</TABLE>
(Continued)
-5-
<PAGE>
AURTEX, INC.
STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
FOR THE SIX MONTH PERIODS ENDED AUGUST 31, 1995 AND 1994, AND THE
CUMULATIVE PERIOD FROM INCEPTION, MARCH 19, 1990 TO AUGUST 31, 1995
<TABLE>
<CAPTION>
Cumulative
From
Six Month Six Month March 19, 1990
Period Ended Period Ended Date of
August 31, 1995 August 31, 1994 Inception
--------------- --------------- --------------
<S> <C> <C> <C>
Supplemental Cash Flow Information:
Noncash financing activities involving
the assumption of liabilities and issuance
of capital stock in connection with the
transfer of the mining claims as follows:
Issuance of capital stock $ 750
Assumption of liabilities 517,467
---------
Capitalized mining claim costs $ 518,217
=========
Receipt of marketable securities in connection
with the sale of 250,000 units $ 750,000
Transfer of marketable securities to stockholder in
satisfaction of a note payable (750,000)
---------
$ 0
=========
Issuance of capital stock in exchange for a
reduction in the amount due to a stockholder $ 140,000
=========
Issuance of common stock in receipt of
notes receivable $419,691 $ 439,941
======== =========
Issuance of 62,500 shares of common stock in
exchange for a reduction in the amount due
to individual stockholders $ 125,000
=========
Issuance of 3,000,000 shares of common stock
as up-front placement fee, recorded at par value (Note 5)
Common stock $ 3000 $ 3,000
Additional paid in capital (3,000) (3,000)
------- ---------
$ 0 0
======= =========
Cash paid for interest $ 0 $ 0 $ 5,324
======= ======== =========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
-6-
<PAGE>
AURTEX, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
August 31, 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- - ---------------------
The balance sheet of Aurtex, Inc. as of August 31, 1995; and the related
statements of operations for the three and six month periods ended August 31,
1995 and 1994, and for the period from August 19, 1990 (inception) to August 31,
1995; and the statements of cash flows and stockholders' equity for the six
month period ended August 31, 1995 are unaudited. In the opinion of management
of the Company, all adjustments necessary for a fair presentation of such
financial statements have been included.
The February 28, 1995 balance sheet was derived from the audited financial
statements. The unaudited financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in the annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations. The
Company believes that the disclosures made are adequate to make the information
presented not misleading.
The financial statements should be read in conjunction with the audited
financial statements and notes included in the Company's February 28, 1995
annual report filed on Form 10-KSB.
NOTE 2: INVESTMENTS
In May 1995, the Company increased it capital stock ownership in Pangold S.A.
to 40% for an additional investment of $ 175,000. Also in May 1995, the Company
exchanged a 32% capital stock interest it held in Pangold to Northfield
Minerals, Inc. for 2,080,000 shares of restricted Northfield common stock. The
Company continues to hold an 8% capital stock interest in Pangold S.A. The
Company accounts for the common stock of Northfield and its 8% capital interest
in Pangold using the cost method.
The Company has entered into an agreement, expiring on October 15, 1995, with
a European entity for the sale of its 2,080,000 shares of restricted Northfield
common stock and its 8% capital stock interest in Pangold S.A. for $ 700,000.
7
<PAGE>
AURTEX, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
August 31, 1995
NOTE 3: NOTES RECEIVABLE - RELATED PARTIES
Notes receivable due from related parties are as follows:
<TABLE>
<CAPTION>
August 31, February 28,
1995 1995
----------- ------------
<S> <C> <C>
Unsecured promissory note receivable
due from the Chairman of the Board
bearing interest at 8% per annum and
due on demand $ 200,000 $200,000
Unsecured promissory notes receivable
due from a shareholder, bearing
interest at 8% per annum and due
on demand - 424,691
Accrued interest 9,975 38,894
Reserve for potential uncollectability (170,000) -
--------- --------
$ 39,975 $663,585
========= ========
</TABLE>
During July 1995, the Company received payments totaling $466,130 in full
repayment of promissory notes due from a shareholder arising primarily from the
exercise of previously issued warrants for the purchase of 419,691 shares at
$1.00 per share on June 28, 1994.
Effective July 15, 1995, the Company began deducting amounts from the Chairman's
salary as repayments of the note. As of August 31, 1995, the Company has
deducted a total of $6,901 and applied this amount against the outstanding
accrued interest. In August 1995, the Company established a reserve for
potential uncollectability of this unsecured promissory note for $170,000.
This reserve represents the amount due under this note in excess of the
Chairman's annual net salary, and was established due to the Chairman's
inability to either repay the loan or provide adequate collateral.
8
<PAGE>
AURTEX, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
August 31, 1995
NOTE 4: NOTE RECEIVABLE
At August 31, 1995, the Company had an unsecured promissory note receivable for
$125,000 due from Combined Metals Reduction Company, a privately held mining
company. This note is due on 30 days demand and bears interest at 10%. On
October 12, 1995, the Company issued demand for repayment of this note.
NOTE 5: STOCKHOLDERS' EQUITY
COMMON STOCK
- - ------------
BAGA AKTIENGESELLSCHAFT ISSUANCE
On July 5, 1995, the Company entered into an equity financing agreement with
BAGA Aktiengesellschaft (a shareholder of the Company), where BAGA will provide
up to $ 14,000,000, on a best efforts basis, to the Company over a two year
period. BAGA will provide this equity financing through the purchase of
unregistered common stock, issued pursuant to Regulation S under the Securities
Act of 1933, in several tranches at terms and under conditions set by the
Company. The share price of each tranche will be discounted, up to 30%, off the
bid price of the Company's common stock when the terms of each individual
financing are agreed to.
On August 1, 1995, as a part of this financing, BAGA received up-front
renumeration of 3,000,000 shares of the Company's common stock, issued pursuant
to Regulation S under the Securities Act of 1933 and subject to additional
Company imposed restrictions. BAGA will also receive a performance incentive of
70,000 warrants for each $ 1,000,000 of net proceeds provided to the Company.
These warrants will have an exercise price of $ 0.50 per share and expire three
years after the date issuance.
RESTRICTED STOCK GRANT
During the six month period ended August 31, 1995, the Company issued
restricted stock to an officer in connection with his employment agreement in
the form of a restricted stock grant of 200,000 shares for the Company's common
stock. Such restricted stock vested 100,000 shares on May 1, 1995, 50,000
shares on July 1, 1995, 50,000 shares on September 30, 1995.
9
<PAGE>
AURTEX, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
August 31, 1995
NOTE 5: STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS
- - --------
At August 31, 1995, the Company had outstanding and exercisable warrants for
the purchase of 6,300,542 shares of common stock. On June 11, 1995, the Board
of Directors repriced the exercise price of all the outstanding warrants to $
0.50 per share.
NOTE 6: STOCK OPTION PLANS
At August 31, 1995, the Company has options outstanding for the purchase of
1,690,000 shares. Of these options, 300,000 shares are exercisable at $ 0.05
per share and 590,000 shares at $ 0.53 per share and 800,000 shares at $ 0.59
per share.
On June 1, 1995, the Company granted to the Company's new President and Chief
Executive Officer an incentive stock option for the purchase of 400,000 shares
for the Company's common stock at $ 0.53 per share under the Company's 1994
Stock Plan. Such option vested for the purchase of 150,000 shares on June 1,
1995, with the remaining shares vesting 150,000 shares on the first anniversary
of such grant and 100,000 shares on the second anniversary of such grant.
In July, the Board of Directors amended the 1994 Stock Plan increasing the
number of shares authorized for issuance under such plan by 3,000,000 to
4,000,000 shares and increased the number of shares for which options can be
granted to any one participant from 150,000 to 450,000 per year. The adoption
of both these amendments to the 1994 Stock Plan was approved by a majority of
the shareholders at the Annual Meeting held on August 7, 1995.
Also on August 7, 1995, the Board of Directors granted options to each of its
two outside directors for the purchase of 400,000 shares at an exercise price of
$ 0.59 per share. Such options vested for the purchase of 100,000 shares on
August 7, 1995, with the remaining shares vesting 300,000 shares vesting 100,000
on each of the first, second and third anniversary dates of such grants.
10
<PAGE>
ITEM 2. MANAGEMENT'S PLAN OF OPERATIONS
GENERAL
- - -------
On August 24, 1995, Dr. Heinz Schimmelbusch was appointed to Aurtex's Board of
Directors. Dr. Schimmelbusch was formerly Chairman of the Executive Board of
Metallgesellschaft AG, a founder and former Chairman of Metall Mining
Corporation, and served on the Board of Directors of Teck Corporation, Cominco
Ltd. and OK Tedi Mining Ltd. Dr. Schimmelbusch is presently a member of the
Board of Directors of Northfield Minerals Inc. and is Chairman of the Board of
Safeguard International Group Inc.
ACQUISITIONS
On September 22, 1995, the Company entered into a letter of intent agreement
with VenCan Gold Corporation (MSE:VGC) whereby the Company will be entitled to
provide exclusive funding to VenCan of up to Cnd$6,870,000 for the purposes of
exploring and developing the potentially high-grade Edwards gold project,
located near Wawa, Ontario. If the Company completes all of the private
placements and exercises all the warrants described below, the Company will own
a 43% interest in VenCan on a fully diluted basis.
The terms of the letter of intent are subject to regulatory approval and
provide for the Company to subscribe to a private placement for the purchase of
2,000,000 VenCan common shares at Cnd$0.35 per share with attached warrants for
the purchase of an additional 2,000,000 common shares at Cnd$0.46 per share.
The Company has also been granted a conditional private placement subscription,
subject to approval by VenCan's shareholders, and regulatory and exchange
approval, to purchase an additional 3,000,000 shares of VenCan common stock at
Cnd$0.75 per shares, before June 30, 1996, with attached warrants to acquire an
3,000,000 additional common shares at Cnd$1.00 per share, for one year.
VenCan has reported the present drill-indicated gold inventory on two zones
discovered to date of 434,138 tons grading 0.482 ounces per ton (uncut) for a
total gold inventory of 209,179 ounces, and has spent Cnd$3,500,000 exploring
this project. Only a small portion of the Edward gold projects land position
has been drill tested.
Upon receipt of the initial Cnd$700,000 private placement financing from the
Company, VenCan plans to commence a Cnd$450,000 drilling program on the Edwards
gold project. The objective of the drill program will be to identify additional
ore-grade zones and to increase the definition of the five zones previously
discovered. Upon completion of a successful drill program and a final
engineering study, expected to be completed in 1996, VenCan plans a Cnd
$2,200,000 underground bulk sample and metallurgical test at which time, if
successful, the underground Edward gold project could be placed into production.
VenCan does not have a proven or probable reserve at its Edwards gold project.
Furthermore, there can be no assurance that the Edwards gold project may
actually host an economically minable gold deposit, or that the necessary
funding to begin production could be obtained.
11
<PAGE>
The Company has terminated merger negotiations with Combined Metals Reduction
Company. On October 12, 1995 the Company demanded the repayment of the
$ 125,000 note receivable it previously advanced to Combined Metals Reduction
Company.
FINANCING
- - ---------
On July 5, 1995, the Company entered into an equity financing agreement with
BAGA Aktiengesellschaft where BAGA will provide up to $ 14,000,000, on a best
efforts basis, to the Company over a two year period. BAGA will provide this
equity financing through the purchase of unregistered common stock, issued
pursuant to Regulation S under the Securities Act of 1933, in several tranches
at terms and under conditions set by the Company. The share price of each
tranche will be discounted, up to 30%, off the bid price of the Company's common
stock when the terms of each individual financing are agreed to.
On August 1, 1995, as a part of this financing, BAGA received an up-front
renumeration of 3,000,000 shares of the Company's common stock, issued pursuant
to Regulation S under the Securities Act of 1933 and subject to additional
restrictions. BAGA will also receive a performance incentive of 70,000 warrants
for each $ 1,000,000 of net proceeds provided to the Company. These warrants
will have an exercise price of $ 0.50 per share and expire three years after the
date of issuance.
Also in July 1995, the Company received full repayment of notes receivable from
a related party and shareholder totaling $466,130 as outlined in Note 3 to the
financial statements.
The Company has negotiated with an offshore European investor for the sale of
the 2,080,000 restricted common shares of Northfield Minerals, Inc. and the 8%
capital stock interest in Pangold S.A. it holds for $ 700,000 on or before
October 15, 1995.
During the next year, the Company intends to raise through BAGA or others
additional capital as necessary to fund acquisitions and for working capital.
No assurance can be given that the necessary financing will be available, or if
available, that such financing can be secured on terms acceptable to the
Company. If adequate funding is not available, the Company will be required to
curtail significantly its business activities, cease operations or seek out
joint venture partners.
GOLD EXPLORATION ACTIVITIES
- - ---------------------------
In addition to the Edwards gold project described above, the Company plans to
continue to concentrate its gold exploration activities on its Vienna Property
and Ketchum Property.
Vienna Property
- - ---------------
Gold exploration activities at the Vienna Property during the 1995 exploration
season included additional geological mapping of the claim area and mechanized
trenching and sampling across areas of known mineralization. Results of the
trenching program confirmed what Aurtex's geologists believe to be the surface
extent of the mineralized zones, provided information about gold bearing rock
types and essential information concerning the location of the core drill
targets planned for the 1996 exploration season. Exploration drilling of the
Vienna property will not be conducted during
12
<PAGE>
this exploration season due to a shorter than normal exploration season
resulting from excessive snowfall and difficulty locating a qualified drilling
contractor prior to the first snowfall.
Ketchum Property
- - ----------------
In August 1995, after careful consideration and review of it's Ketchum claim
block, the Company reduced the number of unpatented claims it holds at its
Ketchum Property by 397 from 656 to 259.
The Company dropped claims on which it believed held little potential of
containing a minable gold deposit and/or was in an environmentally sensitive
area where the Company felt that it would be difficult to obtain the necessary
permits for exploration and development of the property. The reduction in the
number of unpatented claims is also consistent with the Company's cost reduction
plan since there is an annual rental payment requirement of $100 per claim on
unpatented claims. The Company does not believe that this reduction in the size
of the claim block has any impact on the capitalized amount recorded in the
financial statements.
During previous exploration seasons evidence of alteration and mineralization in
volcanic rocks was obtained at two localities in the current claim block.
Aurtex's geologists believe that this may give promise of more intense
alterations and mineralization in the underlying sandstones which are more
permeable, and hence are a more favorable host rock for gold. During the 1996
exploration season, a core drilling program is planned to test this hypothesis.
The Company plans to continue to perform the necessary tasks to ensure that
future exploration permits are granted and that good title to the unpatented
mining claims is maintained.
THE AURTEX GOLD ASSAY SYSTEM
- - ----------------------------
The Company has ceased research and development efforts related to the Gold
Assay System while a consultant has been engaged to evaluating several options
related to its future development.
The Company has the exclusive worldwide right to make, sell and use the Gold
Assay System. This System is based on technology which the Company believes may
provide cost reductions in both the exploration for, and mining of gold. The
Company utilized the Aurtex Gold Assay System during its 1994 exploration
season. Patent applications covering the proprietary Aurtex Gold Assay System
are pending with the U.S. Office of Patents and Trademarks and in selected
countries worldwide.
ADMINISTRATION
- - --------------
The Company has embarked on a cost reduction plan. Management has reviewed the
structure and operations of the Company, and is making cost saving decisions
which they feel have no significant impact on the Company's overall operations.
As a part of this plan, the Company has consolidated and relocated its San
Francisco corporate and Princeton geology offices to Denver, Colorado in July,
and closed it Ketchum, Idaho laboratory in June. The Company is currently
evaluating several options related to the future development of the Aurtex Gold
Assay System and the Palo Alto, California lab facility On October 1, 1995, the
Company subleased the remainder of its San Francisco office space to a third
party.
13
<PAGE>
PART II
Item 1. Legal Proceedings
On August 29, 1994, the Company received a complaint for breach of
contract filed in the United States District Court, Northern District
of California alleging failure to reissue stock certificates originally
issued in an offshore financing which were subject to restriction on
transfer under Regulation S of the Securities Act of 1933. The Company
believes that it has available defenses to the plaintiff's claim and
intends to vigorously defend itself in this action.
Item 4. Submission of Matters to a Vote of Security Holders
On August 9, 1995, the Company held its annual meeting of stockholders
to vote on the election of directors and to approve amendments to the
Company's 1994 Stock Plan.
At the annual meeting, Douglas Silver, S. Allan Kline, Jeff Shear and
Roger Hedin were elected to serve as directors until the next annual
meeting. These individuals constitute the entire Board of Directors
and all served as directors during the year ended February 28, 1995.
The results of the vote on the election of directors was as follows:
<TABLE>
<CAPTION>
Votes Votes
for against
election election
---------- --------
<S> <C> <C>
Douglas Silver 15,872,471 13,100
S. Allan Kline 15,722,171 163,400
Jeff Shear 15,871,471 14,100
Roger Hedin 15,872,471 13,100
</TABLE>
In addition, the shareholders approved the adoption of the amendments
to the 1994 Stock Plan. The results of the vote on the amendments to
the 1994 Stock Plan was as follows: 10,402,157 shares of common stock
voted for adoption of the amendments to the 1994 Stock Plan, 959,734
shares of common stock voted against adoption of the amendments to the
1994 Stock Plan and 4,523,678 shares of common stock abstained from
voting. There were no broker votes counted in this proposal.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2.1 Letter of Intent with VenCan Gold Company
(b) No reports on Form 8-K were filed during the six months ended
August 31, 1995.
SIGNATURES
Pursuant to the requirements 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.
Aurtex, Inc.
Date: October 12, 1995 /s/ Douglas B. Silver
_____________________________
Douglas B. Silver
President and Chief Executive
Officer
Date: October 12, 1995 /s/ James H. Stanker
_____________________________
James H. Stanker
Principal Financial and
Accounting Officer
15
<PAGE>
LETTER OF INTENT
THIS LETTER OF INTENT is made and entered into as of the 22nd day of
September, 1995, and sets forth the salient points of a subscription agreement
in principle reached by and between AURTEX, INC. ("Aurtex" herein), a Nevada
corporation, whose address is 5660 Greenwood Plaza Boulevard, Suite 450,
Englewood, CO 80111, and VenCan Gold Corporation ("VenCan" herein), an Ontario
corporation, whose address is 111 Richmond Street West, Suite 1215, Toronto, ON
M5H 2G4.
RECITALS
WHEREAS, VenCan is the owner of the Edwards gold deposit (the "Edwards
Project" herein) located near Wawa, Ontario (more particularly described on
Exhibit "A" attached hereto and made a part hereof) and holds an option to
purchase the Plowman claim block (the "Plowman Claims" herein) located in the
vicinity of the Edwards Project (more particularly described on Exhibit "B"
attached hereto and made a part hereof); and
WHEREAS, VenCan desires to obtain funds through a private placement of its
common shares in order to acquire the Plowman Claims, to conduct certain
exploration and development work on the Edwards Project and the Plowman Claims,
and to pay certain fees; and
WHEREAS, Aurtex desires to provide such funds and subscribe common shares
and warrants for common shares of VenCan on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises, the receipt and
sufficiency whereof is hereby acknowledged by each of the parties hereto, it is
agreed as follows:
1. Issue and Subscription of Common Shares. Subject to satisfaction of the
conditions precedent set forth in Section 8 below, Aurtex hereby agrees to
subscribe, and VenCan hereby agrees to issue and allot to Aurtex, for the sum of
Cdn$700,000 (the "Phase I Proceeds"), (i) 2,000,000 common shares of VenCan's
treasury stock at the price of Cdn$0.35 each and (ii) warrants to purchase up to
an additional 2,000,000 common shares of VenCan's treasury stock at the price of
Cdn$0.40 each (subject to adjustment as provided in Section 5 below), which
warrants will expire one year from the date of closing unless sooner exercised;
Aurtex shall pay the Phase I Proceeds to VenCan, and VenCan shall concurrently
deliver to Aurtex said 2,000,000 common shares and warrants for said 2,000,000
additional common shares at a mutually acceptable time and place within ten days
following execution hereof. The certificate or certificates representing such
warrants shall be in form and substance acceptable to counsel for Aurtex, acting
reasonably.
<PAGE>
2. Use of Phase I Proceeds. VenCan agres to use the Phase I Proceeds for
the following purposes (the Phase I work herein) and for no other purpose
without Aurtex' prior written consent:
a. Cdn$450,000 for systematic diamond drilling of the Edwards Project,
for option payments related to the Plowman Claims and for associated field
work; and
b. Cdn$100,000 to be used for working capital and for general
corporate purposes;
c. Cdn$150,000 to cover legal fees, a finder's fee for the account of
IBK, regulatory and miscellaneous fees for the private placement of
VenCan's common shares contemplated by this Agreement.
Prior to commencing its Phase I Work, VenCan shall obtain from Aurtex approval
of a budget for performance of the work, which approval shall not be
unreasonably withheld. VenCan shall complete the Phase I Work within 90 days
following closing of the purchase described in Section 1 hereof and upon such
completion shall give Aurtex written notice thereof, together with an accounting
of the use of the Phase I Proceeds and a report on the results of the Phase I
Work.
3. Conditional and Additional Subscription of Common Shares. Subject to
approval by its shareholders for issuance of the required additional shares,
VenCan hereby agrees to issue and allot to Aurtex, upon election by Aurtex to
subscribe, for the sum of Cdn$2,250,000 (the "Phase II Proceeds") (I) 3,000,000
common shares of VenCan's treasury stock at the price of Cdn$.75 and (II)
warrants to purchase up to an additional 3,000,000 common shares of VenCan's
treasury stock at the price of Cdn$1.00 each (subject to adjustment as provided
in Section 5 below), which warrants will expire one year from the date of
issuance of such warrant. Aurtex may elect to subscribe at any time prior to
June 30, 1996, in which event Aurtex shall pay to VenCan the Phase II Proceeds
and VenCan shall concurrently deliver to Aurtex said additional 3,000,000 common
shares of VenCan and warrants for said additional 3,000,000 common shares of
VenCan at a mutually acceptable time and place within ten days following such
election to subscribe. The certificate or certificates representing such
warrants shall be in form and substance acceptable to counsel for Aurtex, acting
reasonably.
4. Use of Phase II Proceeds. VenCan agrees to use the Phase II Proceeds for
purposes of driving an underground ramp on the Edwards Project, for obtaining an
underground bulk ore sample therefrom and for conducting metallurgical tests
and assays thereon (including reasonable overhead costs incidental to such
purposes)(the "Phase II Work") and for no other purpose without Aurtex' prior
written consent.
-2-
<PAGE>
5. Regulatory Requirements.
5.1 Aurtex hereby acknowledges that the common shares and warrants to
be issued and delivered to it pursuant to Sections 1 and 3 above are subject
to certain resale restrictions for a period of one year or more following
the date of issuance without the prior approval of the appropriate
regulatory authority. The common shares and warrants shall not be subject to
restrictions other than statutory restrictions.
5.2 It is further understood by the parties that applicable
regulations may, unless waived, require that the common shares to be issued
upon exercise of the warrants contemplated by Sections 1 and 3 above be
repriced to reflect the market price of VenCan's common shares at the time
of issuance; in that event, and if such repricing causes a substantial
change from the intent of the parties (i.e., that, if Aurtex exercises all
of its options and warrants as herein provided, it will more than 43% of the
issued and outstanding common shares of VenCan on a fully diluted basis at a
cost to it of approximately Cdn$6,870,000), both parties will use their best
efforts to obtain regulatory relief or to agree upon an amendment of this
Agreement that will give effect to such intent.
6. Future Financing. VenCan hereby grants to Aurtex a preemptive or first
right to participate in all or any portion of future debt or equity financing
VenCan desires to obtain (either directly or indirectly through a subsidiary)
for any purpose during the time any of the warrants granted hereunder remain
outstanding and in full force and effect. In the event VenCan desires to obtain
such financing, it shall give written notice to Aurtex of the terms offered by a
third party which are acceptable to it and Aurtex may within 30 days thereafter
agree to provide such financing on the stated terms, in which event Aurtex shall
provide such financing within 90 days after advising VenCan of its agreement to
do so. If Aurtex declines to participate in such financing, VenCan shall close
its financing with the third party on substantially the same terms with 90 days
thereafter; if VenCan fails to so close, it shall similarly offer future
financing first to Aurtex. Aurtex' decision not to participate in any financing
proposal will not result in termination of its preemptive or first right to
participate in a future financing proposal.
7. Representations and Warranties. VenCan hereby represents and warrants to
Aurtex that:
a. There are currently no more than 12,550,000 VenCan common shares
outstanding on a fully diluted basis and no individual or entity has any
right to purchase or otherwise acquire, directly or indirectly, any
additional common treasury shares of VenCan;
-3-
<PAGE>
b. It has good and marketable title to the Edwards Project and a
valid option to acquire the Plowman Claims for Cdn$200,000;
c. It is incorporated and in good standing in the Province of Ontario
and, subject only to shareholders ratification and approval as contemplated
herein, has all of the requisite authority to enter into this Agreement and
fulfill its obligations hereunder; and
d. The data and information it has provided Aurtex regarding (i) its
title to and the mineral character and content of the Edwards Project (ii)
its option to acquire the Plowman Claims, (iii) the material environmental
risks associated with the Edwards Project and the Plowman Claims, and (iv)
its books and records, fairly reflect its financial condition and are true
and correct.
8. Prohibited Actions. VenCan hereby covenants and agrees that so long as
any of the warrants granted pursuant to Section 1 or Section 3 hereof remain
outstanding and in full force and effect, VenCan will not:
a. Sell, lease, enter into a joint venture arrangement or otherwise
transfer, encumber or divest itself of its interest in the Edwards Project
or the Plowman Claims;
b. Issue any common shares of VenCan to any person or entity other
than Aurtex except as obligated to do so under existing options and
warrants, grant an option, warrant or other instrument creating a right to
acquire any common or preferred shares of VenCan to any person or entity,
engage in a split of issued and outstanding common shares of VenCan, incur
debt in excess of Cdn$500,000, or take any other action which has the effect
of diluting the rights of Aurtex as provided in this Agreement; or
c. Appoint an additional director or directors of VenCan, it being
the intent that the number of directors shall not be more than five until
the warrants contemplated by this Agreement have either been exercised or
expired.
9. Conditions Precedent
a. Aurtex' obligations under Section 1 hereof are subject to and
shall not become binding upon Aurtex until:
i. Aurtex shall have satisfied itself through a due diligence
investigation (which shall be completed within 21 days following
execution hereof by the parties) that (w) VenCan has good and
marketable title to the Edwards Project, (x) VenCan has a valid option
to
-4-
<PAGE>
acquire the Plowman Claims, (y) there are no material environmental risks
associated with the Edwards Project or the Plowman Claims, and (z) VenCan's
books and records fairly reflect its financial condition as confirmed by
completion of a financial due diligence investigation;
ii. Aurtex has received documentation reasonably acceptable to it that
all necessary regulatory approval for issuance of the common shares and
warrants for common shares of VenCan pursuant to Section 1 has been granted;
iii. The claim (which VenCan denies) of R.A. Hill that he has a first
right to conduct all underground mining operations at the Edwards Project
and/or the Plowman Claims has either been fully discharged and released or
it has been demonstrated to Aurtex' satisfaction that such claim is not
meritorious;
iv. Aurtex shall have received an opinion from an attorney acceptable
to it to the effect that issuance of the VenCan common shares and warrants
for VenCan common shares pursuant to Section 1 will be in compliance with
all applicable security rules and regulations of all jurisdictions affected
thereby and will be restricted only as provided in Subsection 5.1 hereof;
and
v. VenCan's Board of Directors shall have approved and ratified the
execution of this Agreement on or before the expiration of 21 days from the
date of execution of this agreement by the parties.
b. Aurtex' obligations in the event it elects to subscribe for additional
common shares and warrants under Section 3 hereof are subject to and shall not
become binding upon Aurtex until Aurtex has received documentation reasonably
acceptable to it that:
i. All necessary regulatory approvals for issuance of the common
shares and warrants for common shares of VenCan have been granted;
ii. VenCan's shareholders have approved the issuance of the additional
number of common VenCan shares necessary for VenCan to meet its obligations
under this Agreement; and
iii. Aurtex shall have received an opinion from an attorney acceptable
to it to the effect that issuance of the VenCan common shares and warrants
for VenCan common shares issued pursuant to Section 3 will be in compliance
with all applicable security rules and regulations of
-5-
<PAGE>
all jurisdictions affected thereby and will be restricted only as
provided in Section 5.1 hereof;
iv. VenCan and Aurtex shall have agreed upon a budget for
performance of the work.
c. In the event any of the conditions set forth in Subsections a. and
b. above are not met to Aurtex' satisfaction on or before the Special
Shareholders' Meeting to be called as provided in Section 11 below and are
not waived by Aurtex, or if such shareholders' meeting shall not have been
held and the approval of issuance of additional common shares by VenCan
obtained from the shareholders by January 31, 1998, Aurtex shall have the
right to terminate this Agreement and thereafter neither party shall have
any further obligation to the other. For greater certainty, in case Aurtex
terminates this Agreement by reason of any of the conditions precedent set
forth in Subsections a. and b. not being satisfied, Aurtex hereby agrees to
refrain from seeking any damages, or compensation of any nature, against
VenCan by reason of such termination and agrees to hold VenCan harmless in
that respect.
d. VenCan's obligations under this Agreement are subject to and shall
not become binding on VenCan until:
i. VenCan shall have satisfied itself through a due diligence
investigation that Aurtex is financially capable of fulfilling its
obligations under this Agreement; and
ii. Aurtex' Board of Directors shall have approved and ratified the
execution of this Agreement by the parties.
In the event either of the conditions set forth in this Subsection d. is not met
to VenCan's satisfaction on or before the expiration of 21 days following the
execution of this Agreement by the parties, VenCan shall have the right to
terminate this Agreement and thereafter neither party shall have any further
obligation to the other. For greater certainty, in case VenCan terminates this
Agreement by reason of either of the conditions precedent set forth in this
Subsection d. not being satisfied, VenCan hereby agrees to refrain from seeking
any damages, or compensation of any nature, against Aurtex by reason of such
termination and agrees to hold Aurtex harmless in that respect.
10. Shareholders' Meeting. Prior to January 31, 1996, VenCan shall convene a
validly constituted Special Shareholders' Meeting for purposes of describing the
terms of this Agreement to its shareholders and, if appropriate, obtaining their
-6-
<PAGE>
approval for the issuance of the number of additional common shares of VenCan as
are necessary for VenCan to meet its obligations under this Agreement. At least
ten days prior to mailing, VenCan shall submit its Information Circular and
Proxy to be sent to its shareholders in connection with such meeting to Aurtex
for its review and comment. VenCan hereby undertakes to cause VenCan's Board of
Directors to recommend, to VenCan's shareholders, approval of the issuance of
such additional shares. Such recommendation shall be reflected in the
Information Circular to be sent to VenCan's shareholders.
11. Directors. It is understood and agreed by the parties that Aurtex shall
be entitled to one representative on VenCan's Board of Directors for each
Cdn$700,000 that Aurtex invests in VenCan. Promptly following payment of
Cdn$700,000 as provided in Section 1 hereof, VenCan's Board of Directors shall
cause one of its members to resign and be replaced by a representative
designated by Aurtex. Promptly following payment by Aurtex of its second
incremental Cdn$700,000 investment, whether by cash payment as provided in
Section 3 hereof or by exercise of warrants issued pursuant to Section 1 or 3
hereof, VenCan's Board of Directors shall cause another of its members to resign
and be replaced by a representative designated by Aurtex. Thereafter, promptly
following payment by Aurtex of each additional incremental Cdn$700,000
investment, whether by cash payment as provided in Section 3 hereof or by
exercise of warrants issued pursuant to Section 1 or 3 hereof, VenCan's Board of
Directors shall either cause another of its members to resign and be replaced by
a representative designated by Aurtex or expand its membership to allow for the
designation of another representative by Aurtex. In making its designations,
Aurtex shall comply with the Province of Ontario's requirement that a majority
of a corporation's directors be residents of Canada.
12. Stock Exchange Listing. The parties shall use their best efforts to list
VenCan on the Toronto Stock Exchange, either in addition to its current listing
on The Montreal Exchange or in lieu thereof, as soon as possible.
13. Fiduciary Obligations. Aurtex shall at all times honor all of its
applicable fiduciary obligations to VenCan's shareholders as required by
Canadian statutory and common law and shall keep its transactions with VenCan at
arm's length.
14. Confidentiality. The data and information, including the terms of this
Agreement, coming into either party's possession by virtue of this Agreement,
shall be deemed confidential and shall not be disclosed to outside third parties
except as may be required to publicly record or protect title to the property or
to publicly announce and disclose information under applicable laws and
regulations or under the rules and regulations of any stock exchange.
15. Press Releases. In the event either party desires to issue a press
release relating in any way to this Agreement, the Edwards Project or the
Plowman Claims, a
-7-
<PAGE>
draft thereof shall be submitted to the other party a sufficient length of time
before its issuance for it to review and comment thereon; the consent of the
other party must be obtained only if such other party is mentioned in such press
release but the parties agree to give due and fair consideration to the comments
of the other party prior to issuing the press release.
16. Notices. Notices given pursuant to this Agreement shall be in writing
and may be sent (a) by personal delivery or (b) by registered or certified mail,
postage prepaid and return receipt requested, addressed to the party to be
notified at the following address or such other address as the party shall have
designated by notice to the other party. A notice so served shall be effective
on the date of receipt or five (5) days after being sent, whichever first
occurs.
If to Aurtex: Aurtex, Inc.
Attention: Douglas B. Silver
5660 Greenwood Plaza, Suite 450
Englewood, CO 80111
w/copy to: Root & Allbright
Attention: F. Alan Fletcher
410 17th Street, Suite 840
Denver, CO 80202
If to VenCan: VenCan Gold Corporation
Ken Baird, President
111 Richmond Street West, Suite 1215
Toronto, ON M5H 2G4
17. Binding Effect of Obligations. This Agreement shall be binding upon and
inure to the benefit of the respective parties hereto, and their successors and
assigns.
18. Whole Agreement. The parties hereto agree that this Agreement contains
the whole agreement between them and shall constitute the entire contract
between the parties. There are no terms or conditions, express or impelled,
other than stated in this Agreement.
19. Amendments. This Agreement may be amended or modified only by an
instrument in writing, signed by the parties with the same formality as this
Agreement.
20. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
-8-
<PAGE>
21. Multiple Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute the same Agreement.
22. Severability. If any part, term or provision of this Agreement is held
to be illegal or in conflict with any applicable law, the validity of the
remaining portions or provisions shall not be affected and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be invalid.
IN WITNESS WHEREOF, the parties hereto have made and executed this Agreement
as of the day and year first above written.
AURTEX, INC. VENCAN GOLD CORPORATION
By /s/ Douglas Silver By /s/ Kenneth Baird
------------------------------------- --------------------------------
Douglas Silver, Its President & CEO Kenneth Baird, Its President
Attest: Attest:
By /s/ James Stanker By /s/ Sandra R. Janer
------------------------------------- --------------------------------
James Stanker, Its Secretary Sandra R. Janer,
Its Administration Officer
-9-
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