U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1996
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 0-17386
FISCHER-WATT GOLD COMPANY, INC.
--------------------------------------
(Exact name of small business issuer as
specified in its charter)
NEVADA 88-0227654
--------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1621 North 3rd Street, Suite 1000, Coeur d'Alene, ID 83814
----------------------------------------------------------
(Address of principal executive offices)
(208) 664-6757
-------------------------
(Issuer's telephone number)
Check whether the issuer (l) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
[X]
The number of shares of Common Stock, $0.001 par value, outstanding as of
September 30, 1996 was 31,196,760. Transition Small Business Disclosure
Format (check one): Yes [ ] No [X]
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
FISCHER-WATT GOLD COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
July 31,
ASSETS 1996
(Unaudited)
<S> <C>
CURRENT ASSETS:
Cash ................................................... 2,222,000
Certificate of Deposit ................................. 500,000
Accounts receivable .................................... 504,000
Due from related parties ............................... 455,000
Inventories ............................................ 620,000
Prepaid Expenses ....................................... 24,000
------------
Total current assets ................................. 4,325,000
MINERAL INTERESTS, net ................................... 3,118,000
PLANT, PROPERTY, AND EQUIPMENT ........................... 1,822,000
LESS ACCUMULATED DEPRECIATION ............................ (169,000)
------------
1,653,000
FOREIGN TAX REFUNDS ...................................... 647,000
OTHER ASSETS ............................................. 50,000
------------
Total assets ......................................... 9,793,000
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
and accrued expenses ................................. 1,794,000
Notes payable to others ................................ 400,000
Notes payable to banks ................................. 285,000
Income taxes payable ................................... 91,000
------------
Total liabilities ...................................... 2,570,000
COMMITMENTS AND CONTINGENCIES,
Notes 1,3
SHAREHOLDERS' EQUITY:
Preferred Stock, non-voting,
convertible, $2.00 par value,
250,000 shares authorized;
0 shares outstanding.
Common stock, $0.001 par value,
50,000,000 shares authorized;
31,196,760 shares outstanding
at July 1996 ......................................... 31,000
Additional paid-in capital ............................. 12,722,000
Foreign Currency translation
adjustments .......................................... 465,000
Deficit ................................................ (5,995,000)
------------
Total shareholders' (deficit) equity ..................... 7,223,000
------------
Total liabilities and
shareholders' equity ................................... $ 9,793,000
------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
<TABLE>
<CAPTION>
FISCHER-WATT GOLD COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
July 31, July 31,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SALES OF PRECIOUS METALS ....................................... $ 913,000 -0- $ 1,969,000 4 -0-
COSTS APPLICABLE TO SALES ...................................... (626,000) -0- 2,001,000 -0-
------------ ------------ ------------ ------------
PROFIT (LOSS) FROM MINING ...................................... 287,000 -0- (32,000) -0-
GAIN ON SALE OF MINERAL INTEREST ............................... -0- 641,000 -0- 641,000
LOSS ON SALE OF ASSETS ......................................... -0- -0- -0- -0-
COSTS AND EXPENSES:
Abandoned and impaired
mineral interests .......................................... -0- 157,000 3,000 179,000
Selling, general and administrative .......................... 565,000 94,000 834,000 163,000
Exploration .................................................. 150,000 -0- 216,000 3,000
------------ ------------ ------------ ------------
715,000 251,000 1,053,000 345,000
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income (expense) .................................... 33,000 (2,000) 59,000 (24,000)
Unrealized gain on trading securities ........................ -0- 156,000 -0- 206,000
Other (expense) income ....................................... 16,000 35,000 11,000 24,000
Currency exchange losses, net ................................ (190,000) -0- (300,000) -0-
------------ ------------ ------------ ------------
(141,000) 189,000 (230,000) 206,000
------------ ------------ ------------ ------------
Net (loss) income before income taxes .......................... (569,000) 579,000 (1,315,000) 502,000
TAX PROVISION .................................................. -0- (10,000) -0- (11,000)
------------ ------------ ------------ ------------
NET (LOSS) INCOME .............................................. $ (569,000) $ 569,000 $ (1,315,000) $ 491,000
------------ ------------ ------------ ------------
(LOSS) INCOME PER SHARE AND
COMMON EQUIVALENT .............................................. $ (.02) $ .05 $ (.05) $ .04
------------ ------------ ------------ ------------
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING .............................. 31,190,360 12,588,000 28,305,427 12,588,000
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
<TABLE>
<CAPTION>
FISCHER-WATT GOLD COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
July 31,
1996 1995
------- ------
<S> <C> <C>
Net cash provided by (used in)
operating activities .............. $(2,308,000) $ 48,000
----------- -----------
Net cash (used in) provided by
investing activities .............. (354,000) 61,000
----------- -----------
Net cash provided by
financing activities .............. 4,618,000 9,000
----------- -----------
NET INCREASE IN CASH .................... 1,956,000 118,000
CASH, at beginning of period ............ 266,000 6,000
CASH, at end of period .................. $ 2,222,000 $ 124,000
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period
for interest ...................... $ 24,000 $ 2,000
Cash paid during the period for taxes 50,000 -0-
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT
NONCASH ACTIVITIES:
Application of bonus on unproven
property to offset accrued
interest expense .................. $ -0- $ 25,000
Cost basis of trading securities
sold in connection with loss on
trading securities ................ $ -0- $ 218,000
Short-term debt eliminated in
connection with sale of
mineral interest .................. $ -0- $ 500,000
Cost basis in mineral interest
sold in connection with short-
term debt eliminated .............. $ -0- $ 51,000
Common stock issued in exchange for
professional services rendered .... $ 21,000 $ -0-
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
FISCHER-WATT GOLD COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Financial Condition and Liquidity
The accompanying financial statements are unaudited; however, in the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation have been made. These financial statements and
notes thereto should be read in conjunction with financial statements and
related notes included in Fischer-Watt Gold Company, Inc.'s ("Fischer- Watt" or
the "Company") Annual Report on Form 10-KSB for the year ended January 31, 1996
("Form 10-KSB").
Future Financing and Realization
While Fischer-Watt reported net income in fiscal 1996 principally as a result of
realizing gains on the sale of exchange of non-producing mineral properties, it
has an accumulated deficit of $5,995,000 and has continued to experience
negative cash flow from operations and incur losses from mining for the six
months ended July 31, 1996. Management believes that as the recently acquired
producing gold mine property is further developed and production levels
increase, sufficient cash flows will exist to fund the Company's continuing
mining operations and exploration and development efforts in other areas.
Management anticipates achieving levels of production sufficient to fund the
Company's operating needs by the end of fiscal 1998 and until then will fund
operations with the cash raised in its March 1996 offering (see Note 7). The
ability of the Company to achieve its operating goals and thus positive cash
flows from operations is dependent upon the future market price of gold, and the
ability to achieve future operating efficiencies anticipated with increased
production levels and cost cutting measures to be implemented. Management's
plans may require additional financing or disposition of some of the Company's
non-producing assets. While the Company has been successful in raising cash from
these sources in the past, there can be no assurance that its future cash
raising efforts and anticipated operating improvements will be successful.
2. Unaudited Pro Forma Information
The following unaudited pro forma information has been prepared on the basis
that the acquisitions of Greenstone Resources of Columbia Ltd. ("GRC") and Great
Basin Management Co. Inc., ("GBM") had both occurred at the beginning of fiscal
1995. The unaudited pro forma information includes adjustments to depreciation
and depletion expense based on the allocation of the purchase price to the
property, plant, equipment and mineral interests acquired.
5
<PAGE>
Quarter ended July 31,1995:
Sales of precious metals $ 695,000
Net loss $ (374,000)
Net earnings (loss)per common share $ (.02)
3. Accounts Receivable
Accounts receivable at July 31, 1996 consist of:
Trade $ 437,000
Other 67,000
--------
Total accounts receivable $ 504,000
4. Inventories
Inventories at July 31, 1996 consist of:
Finished products and products in process $ 159,000
Supplies, materials and spare parts 461,000
--------
Total inventories $ 620,000
5. Mineral Interests
Capitalized costs for mineral interests at July 31, 1996 consist of:
Operating mining property:
El Limon Mine, Oronorte District $ 758,000
Less accumulated depletion 197,000
-------
561,000
Non-operating properties,
net of reserves:
El Carmen, Colombia 772,000
La Aurora, Colombia 72,000
Juan Vara, Colombia 31,000
Afghan-Kobeh, Nevada 647,000
Coal Canyon, Nevada 568,000
Red Canyon, Nevada 334,000
Tempo, Nevada 50,000
Oatman, Arizona 10,000
Modoc, California 73,000
---------
Total mineral interests $3,118,000
6
<PAGE>
6. Notes Payable
The Company has a $500,000 line of credit with a bank. Advances under the line,
which totaled $267,000 at July 31, 1996, accrue interest at rates from 26% to
39% and are collateralized by $500,000 placed into a certificate of deposit
which bears interest at 3.9%. The Company also has various other vehicle loans.
7. Equity and Common Stock
In November 1995, the Company completed a private placement of 6,067,500 common
shares and 3,033,750 warrants to purchase common shares. The net proceeds from
this private placement of $816,000 are to be used to finance the expansion and
operation of the Company's El Limon gold mine in Colombia. Each warrant can be
exercised to purchase a common share for $0.30 through August 1997. Costs of
issuing these common shares and stock warrants totaled $94,000 and were
subtracted from the gross proceeds in determining the amount of additional paid
in capital.
The Company issued 4,125,660 common shares on January 29, 1996 in exchange for
all of the issued and outstanding common shares of GBM. The shares had an
estimated fair market value of $1,234,000 and the costs of the issuance of
$21,000 were subtracted from the proceeds in determining the amount of
additional paid in capital.
On March 12, 1996, the Company sold 9,960,000 common shares and 4,980,000
warrants to purchase common shares to investors located outside of the United
States pursuant to a Regulation S offering. The net proceeds from this offering
of $4,930,000 are to finance the Company's capital equipment and working capital
needs related to the further development and expansion of the Colombian gold
mining operation and the Company's exploration and development activities in
Colombia and Nevada.
Each of these warrants issued entitles the holder to purchase one additional
share of Fischer-Watt common stock at an exercise price of $.75 through February
28, 1998. These securities were not registered under the Securities Act of 1933
and may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements. Costs of issuing these
common shares and warrants totaled $348,000 and will be subtracted from the
gross proceeds in determining the amount of additional paid in capital.
In March 1996, the Company issued 50,000 common shares in exchange for
professional services rendered. The shares had an estimated fair market value of
$17,762.
7
<PAGE>
In June 1996, the Company issued 9,600 common shares in exchange for
professional services rendered. The shares had an estimated fair market value of
$3,000.
Item 2. Management's Discussion and Analysis or Plan of
Operation
The following is a discussion of Fischer-Watt Gold Company, Inc.'s (the
"Company") current financial condition as well as its operations for the three
months and six months ended July 31, 1996 (fiscal 1997) and July 31, 1995
(fiscal 1996). This discussion should be read in conjunction with the Financial
Statements in Item 1 of this report as well as the Financial Statements in Form
10-KSB for the fiscal year ended January 31, 1996 on file with the Securities
and Exchange Commission, as the discussion set forth below is qualified in its
entirety by reference thereto.
Liquidity and Capital Resources
Short-Term Liquidity
As of August 31, 1996, the Company had $2,061,000 in cash and accounts payable
of $333,000. While Fischer-Watt reported net income in fiscal 1996 principally
as a result of realizing gains on the sale or exchange of non-producing mineral
properties, it has an accumulated deficit of $5,995,000 and has continued to
experience negative cash flow from operations and incur losses from mining
during the six months ended July 31,1996. Management believes that as the
recently acquired producing gold mine property is further developed and
production levels increase, sufficient cash flows will exist to fund the
Company's continuing mining operations and exploration and development efforts
in other areas. Management anticipates achieving levels of production sufficient
to fund the Company's operating needs by the end of fiscal 1998 and until then
will fund operations with the cash raised in its March 1996 offering(see Note
7). The ability of the Company to achieve its operating goals and thus positive
cash flows from operations is dependent upon the future market price of gold,
and the ability to achieve future operating efficiencies anticipated with
increased production levels and cost cutting measures to be implemented.
Management's plans may require additional financing or disposition of some of
the Company's non-producing assets. While the Company has been successful in
raising cash from these sources in the past, there can be no assurance that its
future cash raising efforts and anticipated operating improvements will be
successful.
On July 31, 1996, the Company's current ratio was 1.7:1 based on current assets
of $4,325,000 and current liabilities of $2,570,000. On July 31, 1995,
8
<PAGE>
Fischer-Watt's current ratio was 2.9:1 based on current assets of $477,000 and
current liabilities of $162,000. The reduction in the current ratio at July 31,
1996 is primarily related to the receipt of funds from the November and March
stock offerings, and the addition of accounts receivable and inventory balances
associated with the operating mine, all of which are partially offset by the
sale of trading securities and the addition of accounts payable associated with
the operating mine, and the addition of notes payable incurred with the
acquisitions of GRC and GBM (see discussions below).
Pursuant to agreements among Greenstone Resources Ltd. ("Greenstone"), Dual
Resources Ltd. ("Dual"), and the Company, Greenstone made a payment of $300,000
to Dual to acquire 2,800,000 shares of Oronorte common stock for the benefit of
the Company. The Company's obligation to repay Greenstone this $300,000 is
evidenced by a note payable which bears interest at the rate of 10% per annum.
This note became payable, in full, on June 20, 1996 at which time the Company
withheld payment while negotiating the settlement of amounts owed to the Company
by Greenstone. In October 1996, the Company filed suit against Greenstone
seeking payment of these excess Oronorte liabilities.
(See Part II-Item 1. Legal Proceedings)
Prior to its acquisition by the Company, GBEM, borrowed funds from Serem Gatro
Canada Inc. This loan was evidenced by a note. The note payable is for monies
lent and advanced to GBEM by SGC during the period April 1, 1995, to May 31,
1995, as provided under the share purchase agreement among Serem Gatro, GBEM and
GBM made as of May 31, 1995. The note was to be repaid not later than September
30, 1995. and bears interest at 8%. Repayment of this note payable and related
interest is currently being negotiated with SGC.
The Company has a $500,000 line of credit with a bank. Advances under the line,
which totaled $267,000 at July 31, 1996, accrue interest at rates from 26% to
39% and are collateralized by $500,000 placed into a certificate of deposit
which bears interest at 3.9%. The Company also has various other vehicle loans.
Management believes that the Company has adequately reserved its reclamation
commitments.
Long-Term Liquidity
Cash flows from operations during fiscal 1998 are expected to be sufficient to
fund operating and administrative expenses and exploration expenses. The Company
does not anticipate needing additional funding from equity or borrowings unless
a major expansion at its Oronorte property is necessary and cost justified or an
9
<PAGE>
acquisition opportunity arises. At July 31, 1996 the Company had no long term
debt compared to $100,000 at July 31, 1995. The $100,000 consisted solely of a
nonrecourse note payable to Greenstone Resources Canada issued for the loan of
funds to purchase shares in Compania Minerales de Copan S. A. de C. V. Repayment
was due in 1999 and the Copan shares were the sole security for the loan. This
debt was settled in conjunction with the sale of the Copan shares.
As of September 30, 1996, the Company purchased certain unpatented mining claims
located in Esmeralda County, Nevada (the "Property"), from Kennecott Exploration
Company. At closing, the Company delivered to Kennecott Exploration Company a
promissory note in the amount of $700,000, due September 30, 1998, as the
purchase price for the Property, which is payable under certain conditions, at
the option of the Company, by the issuance of 1,000,000 (one million) shares of
the Company's stock.
Results of Operations
Three months ended July 31, 1996 compared with three months ended July 31, 1995.
The Company had net loss of $569,000 ($.02 per share) compared to net income of
$569,000 ($.05 per share) in the quarter ended July 31,1996 and 1995,
respectively. The primary reasons for the change relates to the recognition of a
gain on sale of mineral interest of $641,000 in the quarter ended July 31, 1995,
for which no comparable gain was recognized in the quarter ended July 31, 1996.
Additionally, the acquisition of the Oronorte project, which reported an income
from mining of $287,000, offset by general and administrative expenses
associated with mining operations of $366,000 and a loss from currency exchange
of $190,000 in the quarter ended July 31, 1996 (there were no mining operations
in fiscal 1995), and the acquisition of GBM resulted in an increase in
exploration expenses of $150,000 in the quarter ended July 31, 1996, as compared
to the quarter ended July 31, 1995.
Revenues
The Company had sales of precious metals of $913,000 representing 2,739 ounces
of gold and 2,601 ounces of silver in the quarter ended July 31, 1996.
Production costs totaled $626,000 for the three month period. There were no
comparable sales or costs in fiscal 1995. The Company does not presently employ
forward sales contracts or engage in any hedging activities.
10
<PAGE>
Costs and Expenses
The cost of abandoned mineral interests decreased from $157,000 to $-0- in
quarters ended July 31, 1995 and 1996, respectively. In the quarter ended July
31, 1995 the Oatman property in Arizona was partially abandoned in the amount of
$125,000, and the Tuscarora was partially abandoned in the amount of $32,000.
Abandonments are a natural result of the Company's ongoing program of
acquisition, exploration and evaluation of mineral properties. When the Company
determines that a property lacks continuing economic value, it is abandoned. It
cannot be determined at this time when or if any of the Company's current
property interests will be abandoned.
Selling, general and administrative costs increased from $94,000 to $565,000 in
quarters ended July 31, 1995 and 1996, respectively. The increase of $471,000
primarily relates to an increase in general and administrative expenses
associated with mining operations of $366,000, coupled with an increase in legal
and corporate relations expenses associated with the acquisitions of GRC and
GBM. Additionally, the positions of a Vice President and Chief Financial Officer
were added during the quarter ended July 31, 1996.
Exploration expense increased $150,000 in the second quarter of fiscal 1997 from
$-0- in the second quarter of fiscal 1996. This increase is due to the
acquisition of GBM.
Net interest income (expense) increased from $(2,000) in the second quarter of
1995 to $33,000 in the second quarter of 1996. This increase is due to the
elimination of interest accrued on the $500,000 note to Kennecott offset by
interest earned in the proceeds from the November and March stock offerings.
Six months ended July 31, 1996 compared with six months ended July 31, 1995.
The Company had net loss of $1,315,000 ($.05 per share) compared to net income
of $491,000 ($.04 per share) in the six months ended July 31, 1996 and 1995,
respectively. The primary reasons for the change relates to the recognition of a
gain on sale of mineral interest of $641,000 and an unrealized gain on trading
securities of $206,000 in the six months ended July 31, 1995, for which no
comparable gains were recorded in the six months ended July 31, 1996.
Additionally, the acquisition of the Oronorte project, which reported a loss
from mining of $32,000, coupled with general and administrative expenses
associated with mining operations of $502,000 and a loss from currency exchange
of $300,000 in the six months ended July 31, 1996 (there were no mining
operations in fiscal 1995), and the acquisition of GBM resulted in an increase
in exploration expenses of $213,000 in the six months ended July 31, 1996, as
compared to the six months ended July 31, 1995.
11
<PAGE>
Revenues
The Company had sales of precious metals of $1,969,000 representing 5,342 ounces
of gold and 5,065 ounces of silver in the six months ended July 31, 1996.
Production costs totaled $2,001,000 for the six month period. There were no
comparable sales or costs in fiscal 1995. The Company does not presently employ
forward sales contracts or engage in any hedging activities.
Cost and Expenses
The cost of abandoned mineral interests decreased from $179,000 to $3,000 in the
six months ended July 31, 1995 and 1996, respectively. During the six months
ended July 31, 1996, the La Victoria was abandoned in the amount of $3,000. In
the six months ended July 31, 1995 the Oatman property in Arizona was partially
abandoned in the amount of $125,000, the Tuscara was partially abandoned in the
amount of $32,000, and the Rio Tinto was abandoned in the amount of $22,000.
Abandonments are a natural result of the Company's ongoing program of
acquisition, exploration and evaluation of mineral properties. When the Company
determines that a property lacks continuing economic value, it is abandoned. It
cannot be determined at this time when or if any of the Company's current
property interests will be abandoned.
Selling, general and administrative costs increased from $163,000 to $834,000 in
the six months ended July 31, 1995 and 1996, respectively. The increase of
$671,000 primarily relates to an increase in general and administrative expenses
associated with mining operations of $502,000, coupled with an increase in SEC
accounting, legal and corporate relations expenses. Additionally, the positions
of a Vice President and Chief Financial Officer were added during the six months
ended July 31, 1996.
Exploration expense increased $213,000 in the first six months of fiscal 1997
from $3,000 in the first six months of fiscal 1996. This increase is primarily
due to the acquisition of GBM.
Net interest income (expense) increased from $(24,000) in the first six months
of fiscal 1996 to $59,000 in the first six months of fiscal 1997. This increase
is primarily due to the elimination of interest accrued on the $500,000 note to
12
<PAGE>
Kennecott offset by the interest earned in the proceeds from the November and
March stock offerings.
The Company accounts for foreign currency translation in accordance with the
provisions of Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation" ("SFAS No.52"). The assets and liabilities of the
Colombian unit are translated at the rate of exchange in effect at the balance
sheet date. Income and expenses are translated using the weighted average rates
of exchange prevailing during the period. The related translation adjustments
are reflected in the accumulated translation adjustment section of shareholders'
equity. The Company recognized a currency exchange loss of $300,000 in the six
months ended July 31, 1996. There was no comparable gain or loss in the quarter
ended July 31, 1995.
Commitments and Contingencies
Upon the purchase of GRC, the Company assumed GRC's liabilities related to
transactions governed by Colombian law concerning the movement of foreign
currency into and out of Colombia. The Colombian government has the right to
request an audit of foreign currency movement within a two year time frame. No
request of notice of an audit has been received from the Colombian government to
date. Therefore, the likelihood of a loss resulting from the actions of GRC
prior to the Company's purchase cannot presently be determined.
Oronorte is currently the defendant in several claims relating to labor
contracts and employee terminations which occurred during a labor strike. This
strike and the resulting terminations took place during the former ownership of
Oronorte. The estimated amount of the claims against Oronorte totals
approximately $200,000. In the event of an unfavorable outcome from Oronorte's
perspective, there is a likelihood that the Company would have the right to
claim indemnity from Greenstone Resources Canada Ltd. pursuant to the terms of
the agreements related to the acquisition of Oronorte.
In connection with the purchase of GRC, Greenstone agreed to reimburse the
Company for certain liabilities existing at the date of purchase in excess of
$1,000,000. At the present time, the Company has paid or identified as current
payables approximately $309,000 in excess of the $1,000,000. Management is
seeking to recover these excess liabilities in accordance with the terms of the
purchase agreement and accordingly has not recorded a receivable from Greenstone
as of July 31, 1996. (See Part II-Item 1. Legal Proceedings)
Statements which are not historical facts contained herein are forward looking
statements that involve risks and uncertainties that could cause actual results
to differ from projected results. Such forward-looking statements include
13
<PAGE>
statements regarding expected commencement dates of mining or mineral production
operations, projected quantities of future mining or mineral production, and
anticipated production rates, costs and expenditures, as well as projected
demand or supply for the products that FWG and/or FWG Subsidiaries produce,
which will affect both sales levels and prices realized by such parties. Factors
that could cause actual results to differ materially include, among others,
risks and uncertainties relating to general domestic and international economic
and political risks associated with foreign operations, unanticipated ground and
water conditions, unanticipated grade and geological problems, metallurgical and
other processing problems, availability of materials and equipment, the timing
of receipt of necessary governmental permits, the occurrence of unusual weather
or operating conditions, force majeure events, lower than expected ore grades
and higher than expected stripping ratios, the failure of equipment or processes
to operate in accordance with specifications and expectations, labor relations,
accidents, delays in anticipated start-up dates, environmental costs and risks,
the results of financing efforts and financial market conditions, and other
factors described herein and in FWG's annual report on Form 10-KSB. Many of such
factors are beyond the Company's ability to control or predict. Actual results
may differ materially from those projected. Readers are cautioned not to put
undue reliance on forward-looking statements. The Company disclaims any intent
or obligation to update publicly these forward-looking statements, whether as a
result of new information, future events or otherwise, except as required by
applicable laws.
Part II - Other Information
Item 1. Legal Proceedings
On October 18, 1996, Fischer-Watt Gold Company, Inc. commenced a legal
proceeding against Greenstone Resources Canada Ltd. and Greenstone Resources
Ltd. in Ontario Court (General Division) seeking payment of the sum of
$1,508,544 (U.S.) pursuant to Article 8.4 of an Agreement dated October 20, 1995
between the plaintiff and the defendants. Pursuant to Article 8.4 of the
Agreement dated October 20, 1995, liabilities of GRC and its subsidiaries,
including contingent liabilities, that exceeded $1,000,000 (U.S.) shall be
reimbursed by the defendants. The payment sought includes liquidated liabilities
in the amount of $308,544 (U.S.), and contingent unliquidated liabilities in the
amount of $1,200,000 (U.S.).
Item 5. Other Information
The Company obtained exploration rights with respect to unpatented mining claims
from an individual by entering into a letter agreement on October 14, 1996 for a
$10,000 cash payment and issuance of 100,000 shares of FWG stock. These payments
14
<PAGE>
grant the Company a two year period to explore claims before any other payments
to Lessor apply. An advanced royalty payment of $50,000 is due on the second
anniversary of signing to continue the lease into a third year if the Company so
desires. Annual payments escalate to $75,000 on the third anniversary and then
to a maximum of $100,000 for all subsequent years, adjusted for inflation. The
Company must drill one hole in a specified location within two years to satisfy
the initial work commitment, and must maintain the claims by way of paying
annual Federal maintenance fees as long as the lease is in effect. The terms of
the lease also apply to any other claims acquired within a six township area
surrounding the core claims.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit Item 601
No. Category Exhibit
- --- -------- -------
1 2 Letter of Intent dated August 28, 1995 whereby
Fischer-Watt Gold Company, Inc., and Great Basin
Management Company, Inc., agree to form a business
combination and filed as Exhibit 1.2 to Form
10-QSB filed December 20, 1995 and incorporated
herein by reference.
2 2 August 28, 1995 agreement between Fischer-Watt
Gold Company, Inc., and Greenstone Resources Ltd.,
whereby Fischer-Watt agrees to purchase 100% of
Greenstone Resources Ltd.'s wholly-owned Colombian
branch, Greenstone of Colombia ("GOC") and filed
as Exhibit 2.2 to Form 10-QSB filed December 20,
1995 and incorporated herein by reference.
3 2 Closing Agreement dated October 20, 1995 among
Fischer-Watt Gold Company, Inc., and Greenstone
Resources Canada Ltd., and Greenstone Resources
Ltd., and filed as Exhibit 1.2 to Form 8-K filed
November 3, 1995 and incorporated herein by
reference.
4 2 Articles of Merger Merging GBM Acquisition Corp.,
into Great Basin Management Co., Inc., dated
January 25, 1996 and filed as as Exhibit 1.2 to
Form 8-K filed as Exhibit 1.2 to Form 8-K filed
February 5, 1996 and incorporated herein by
reference.
5 2 Plan of Reorganization and Agreement among
Fischer-Watt Gold Company, Inc., GBM Acquisition
Corp., and Great Basin Management Co., Inc., dated
January 3, 1996 and filed as as Exhibit 2.2 to
Form 8-K filed as Exhibit 1.2 to Form 8-K filed
February 5, 1996 and incorporated herein by
reference.
15
<PAGE>
Exhibit Item 601
No. Category Exhibit
- --- -------- -------
6 2 Mining Property Purchase Agreement dated
September 30, 1996, between Fischer-Watt Gold
Company, Inc. and Kennecott Exploration Company
("KEC") whereby FWG purchased mining claims owned
by KEC in Esmeralda County, Nevada, and, upon
closing, delivered to KEC a Promissory Note in the
amount of $700,000.
7 2 Letter agreement dated October 14, 1996, between
Steve Van Ert and Fischer-Watt Gold Company, Inc.
known as the Sacramento Mountains property.
8 3 Articles of Incorporation. Filed as Exhibit 3.1
to Form 8 filed May 4, 1989 and incorporated
herein by reference.
9 3 By-laws of the Corporation as amended. Filed as
Exhibit 6.3 to Form 10-KSB filed September 26,
1996 and incorporated herein by reference.
10 10 Letter Agreement between BMR Gold Corporation and
Fischer-Watt Gold Company, Inc., regarding the
America Mine Property effective September 20,
1989, and filed as Exhibit 19.1 to Form 10-Q filed
November 20, 1989 and incorporated herein by
reference.
11 10 Fischer-Watt Gold Company, Inc., non-qualified
stock option plan of May 1987 and filed as Exhibit
36.10 to Form 10-K filed April 23, 1991 and
incorporated herein by reference.
12 10 First Amendment to Exploration Agreement and
Mining Venture Agreement dated March 25, 1992
between Kennecott Exploration Company and
Fischer-Watt Gold Company, Inc., and filed as
Exhibit 45.10 to Form 10-K filed April 22, 1993
and incorporated herein by reference.
13 10 Employment Agreement effective September 1,
1993 between Fischer-Watt Gold Company, Inc., and
George Beattie whereby Fischer-Watt agrees to
employ Mr. Beattie for a two-year period as Chief
Executive Officer and filed as Exhibit 20.10 to
Form 10-K filed May 11, 1994 and incorporated
herein by reference.
14 10 Option Agreement between Greenstone Resources
Ltd., and Fischer-Watt Gold Company, Inc., dated
March 24, 1994, whereby Greenstone has the right
to purchase all of Fischer-Watt's interest in the
San Andres property in Honduras and filed as
Exhibit 23.10 to Form 10-K filed May 11, 1994 and
incorporated herein by reference.
15 10 Agreement to Assign Leases dated July 7, 1994
between Fischer-Watt Gold Company, Inc., and
Kennecott Exploration Company whereby Fischer-Watt
agrees to assign its interests in the Modoc
property located in Imperial County, California to
Kennecott, reserving a Net Smelter Return royalty.
This agreement was filed as Exhibit 22.10 to Form
10-Q filed September 13, 1994 and incorporated
herein by reference.
16
<PAGE>
Exhibit Item 601
No. Category Exhibit
- --- -------- -------
16 10 Letter agreement between Fischer-Watt Gold
Company, Inc., and La Cuesta International (LCI)
dated August 11, 1994 whereby LCI agrees to lease
the Oatman property located in Mohave County,
Arizona. This agreement was filed as Exhibit 23.10
to Form 10-Q filed September 13, 1994 and
incorporated herein by reference.
17 10 Option Agreement - Lock-up Agreement between
Fischer-Watt Gold Company, Inc., and Greenstone
Resources Ltd., dated October 17, 1994 whereby the
San Andres option agreement was amended to provide
for an early advance of $50,000 as partial payment
of the option in exchange for restrictions on the
disposition of Greenstone shares. This agreement
was filed as Exhibit 22.10 to Form 10-Q filed
December 14, 1994 and incorporated herein by
reference.
18 10 English translation of an Exploration Agreement
between Fischer-Watt's Mexican subsidiary, Minera
Montoro, S.A. de C.V. and Minera Cuicuilco, S.A.
de C.V. dated October 18, 1994 whereby Minera
Cuicuilco is granted the rights to explore the
Cerrito property in Baja California, Mexico and
was filed as Exhibit 23.10 to Form 10-Q filed
December 14, 1994 and incorporated herein by
reference.
19 10 Acquisition agreement dated November 10, 1994
among Greenstone Resources Canada Ltd., Greenstone
Resources Ltd., and Fischer-Watt Gold
Company, Inc., whereby the parties finalize the
Option Agreement of March 24, 1994 to purchase the
San Andres property in Honduras and modify the
Lock-Up Agreement dated October 17, 1994. This
agreement was filed as Exhibit 29.10 to Form 10-K
filed May 15, 1995 and incorporated herein by
reference.
20 10 Letter agreement dated February 28, 1995 between
Tombstone Explorations Co. Ltd., and Fischer-Watt
Gold Company, Inc., whereby Tombstone agrees to
purchase all of Fischer-Watt's rights to the Minas
de Oro property in Honduras. This agreement was
filed as Exhibit 30.10 to Form 10-K filed May 15,
1995 and incorporated herein by reference.
17
<PAGE>
Exhibit Item 601
No. Category Exhibit
- --- -------- -------
21 10 Letter agreement dated April 13, 1995 between
Begeyge Minera Limitada and Fischer-Watt Gold
Company, Inc., whereby Fischer-Watt will acquire
rights to the La Victoria, Honduras property. This
agreement was filed as Exhibit 31.10 to Form 10-K
filed May 15, 1995 and incorporated herein by
reference.
22 10 Option whereby Fischer-Watt Gold Company, Inc.,
grants Gerald D. Helgeson an option to purchase
100,000 shares of Fischer-Watt restricted common
stock. This option was filed as Exhibit 32.10 to
Form 10-K filed May 15, 1995 and incorporated
herein by reference.
23 10 Option whereby Fischer-Watt Gold Company, Inc.,
grants Larry J. Buchanan an option to purchase
100,000 shares of Fischer-Watt restricted common
stock. This option was filed as Exhibit 33.10 to
Form 10-K filed May 15, 1995 and incorporated
herein by reference.
24 10 Amendment dated April 20, 1995 to Agreement to
Assign Leases dated July 7, 1994 between
Fischer-Watt Gold Company, Inc., and Kennecott
Exploration Company whereby Fischer-Watt agrees to
assign its interests in the Modoc property located
in Imperial County, California to Kennecott. This
Amendment was filed as Exhibit 28.10 to Form
10-QSB filed June 14, 1995 and incorporated herein
by reference.
25 10 Asset Purchase Agreement dated May 16, 1995
between Fischer-Watt Gold Company, Inc., and
Cerenex Financial A.V.V., whereby the February 28,
1995 sale of Minas de Oro is closed. This Asset
Purchase Agreement was filed as Exhibit 29.10 to
Form 10-QSB filed June 13, 1995 and incorporated
herein by reference.
26 10 Option effective June 1, 1995, whereby
Fischer-Watt Gold Company, Inc., grants Gerald D.
Helgeson an option to purchase 200,000 shares of
Fischer-Watt restricted common stock. This Option
was filed as Exhibit 31.10 to Form 10-QSB filed
September 15, 1995 and incorporated herein by
reference.
27 10 Option effective June 1 1995, whereby Fischer-Watt
Gold Company, Inc., grants Larry J. Buchanan an
option to purchase 100,000 shares of Fischer-Watt
restricted common stock. This Option was filed as
Exhibit 32.10 to Form 10-QSB filed September 15,
1995 and incorporated herein by reference.
28 10 Option effective June 1, 1995 whereby Fischer-Watt
Gold Company, Inc., grants Anthony P. Taylor an
option to purchase 100,000 shares of Fischer-Watt
restricted common stock. This Option was filed as
Exhibit 33.10 to Form 10-QSB filed September 15,
1995 and incorporated herein by reference.
18
<PAGE>
Exhibit Item 601
No. Category Exhibit
- --- -------- -------
29 10 Loan Agreement dated August 28, 1995, between
Fischer-Watt Gold Company, Inc., and Great Basin
Management Company, Inc., whereby Fischer-Watt
agrees to loan Great Basin Management Company,
Inc. up to $108,000. This Loan Agreement was filed
as Exhibit 36.10 to Form 10-QSB filed September
15, 1995 and incorporated herein by reference.
30 10 Amendment dated October 31, 1995 to Loan agreement
dated August 28, 1995, between Fischer-Watt Gold
Company, Inc. and Great Basin Management Company,
Inc., whereby Fischer-Watt changes the dates of
the loan to Great Basin Management Company, Inc.
This Amendment was filed as Exhibit 33.10 to Form
10-QSB filed December 20, 1995 and incorporated
herein by reference.
31 10 Extension of time for payment of Secured
Promissory Note dated October 31, 1995 to the Loan
agreement dated August 28, 1995, between
Fischer-Watt Gold Company, Inc. and Great Basin
Management Company, Inc. whereby Fischer-Watt
agrees to extend the time for payment of the
Secured Promissory Note. This Extension of Time
for Payment was filed as Exhibit 34.10 to Form
10-QSB filed December 20, 1995 and incorporated
herein by reference.
32 10 Second Amendment dated November 30, 1995 to Loan
agreement dated August 28, 1995 between
Fischer-Watt Gold Company, Inc. and Great Basin
Management Company, Inc. whereby Fischer-Watt
changes the dates of the loan to Great Basin
Management Company, Inc. This Second Amendment was
filed as Exhibit 35.10 to Form 10-QSB filed
December 20, 1995 and incorporated herein by
reference.
33 10 Second Extension of Time for Payment of Secured
Promissory Note dated October 31, 1995, to the
loan agreement dated August 28, 1995, between
Fischer-Watt Gold Company, Inc., and Great Basin
Management Company, Inc. whereby Fischer-Watt
agrees to extend the time for payment of the
Secured Promissory Note. This Second Extension was
filed as Exhibit 36.10 to Form 10-QSB filed
December 20, 1995 and incorporated herein by
reference.
19
<PAGE>
Exhibit Item 601
No. Category Exhibit
- --- -------- -------
34 10 Promissory Note dated October 20, 1995 whereby
Greenstone Resources of Colombia Ltd., a wholly
owned Bermuda subsidiary of Fischer-Watt Gold
Company, Inc., promises to pay $300,000 to
Greenstone Resources, Ltd. This Promissory Note
was filed as Exhibit 37.10 to Form 10-QSB filed
December 20, 1995 and incorporated herein by
reference.
35 10 Option effective June 1, 1996, whereby
Fischer-Watt Gold Company, Inc., grants Gerald D.
Helgeson an option to purchase 100,000 shares of
Fischer-Watt restricted common stock. Filed as
Exhibit 31.10 to Form 10-KSB filed September 26,
and incorporated herein by reference.
36 10 Option effective June 1, 1996 whereby
Fischer-Watt Gold Company, Inc., grants Anthony P.
Taylor an option to purchase 100,000 shares of
Fischer-Watt restricted common stock. Filed as
Exhibit 32.10 to Form 10-KSB filed September 26,
and incorporated herein by reference.
37 10 Option effective June 1, 1996 whereby
Fischer-Watt Gold Company, Inc., grants Peter
Bojtos an option to purchase 100,000 shares of
Fischer-Watt restricted common stock. Filed as
Exhibit 33.10 to Form 10-KSB filed September 26,
and incorporated herein by reference.
38 10 Purchase - Sale agreement between Compania Minera
Oronorte, S.A. and Nissho Iwai Corporation in
which Nissho Iwai Corporation agrees to buy gold
and silver concentrate produced at El Limon Mine
in Colombia. Filed as Exhibit 34.10 to Form 10-KSB
filed September 26, and incorporated herein by
reference.
39 10 Letter of Agreement dated November 13, 1995,
between Digger Resources, Inc. of Calgary,
Alberta, Canada and Great Basin Exploration and
Mining, Inc. regarding exploration and mining
joint venture of Tempo property, Lander County,
Nevada. Filed as Exhibit 35.10 to Form 10-KSB
filed September 26, and incorporated herein by
reference.
20
<PAGE>
Exhibit Item 601
No. Category Exhibit
- --- -------- -------
40 10 Joint Venture agreement dated July 25, 1996, and
Exhibit A to agreement, between Great Basin
Exploration and Mining, Inc. and Digger Resources,
Inc. regarding Tempo mineral property, Lander
County, Nevada. Filed as Exhibit 36.10 to Form
10-KSB filed September 26, and incorporated herein
by reference.
41 10 Mining Venture agreement between Great Basin
Exploration and Mining Company, Inc. and Hemlo
Gold Mines (USA), Inc. for exploration,
development and mining of property held by Great
Basin in Eureka County Nevada. Said property
described in Exhibit A to agreement. common stock.
Filed as Exhibit 371.10 to Form 10-KSB filed
September 26, and incorporated herein by
reference.
42 10 Mineral Lease Agreement and amendment thereto
between Great Basin Exploration and Mining
Company, Inc., and H. Walter Schull dated February
19, 1991 regarding the Coal Canyon property in
Eureka County, Nevada. Filed as Exhibit 38.10 to
Form 10-KSB filed September 26, and incorporated
herein by reference.
43 10 Mineral Lease Agreement between Great Basin
Exploration and Mining Company, Inc., and The Lyle
F. Campbell Trust dated October 14, 1994 regarding
the Tempo Mineral Prospect in Lander County,
Nevada. Filed as Exhibit 39.10 to Form 10-KSB
filed September 26, and incorporated herein by
reference.
44 10 Mineral Lease Agreement with amendment thereto
between Great Basin Exploration and Mining
Company, Inc., and The Lyle F. Campbell Trust
dated November 8,1993 regarding the Afgan Mineral
Prospect in Eureka County, Nevada. Filed as
Exhibit 40.10 to Form 10-KSB filed September 26,
and incorporated herein by reference.
45 10 Participation Agreement between Great Basin
Exploration and Mining Company, Inc., and Serem
Gatro Canada Inc., dated May 31, 1995 regarding
the right of Serem Gatro Canada Inc., to elect to
acquire a Participation Interest in properties in
which Great Basin Exploration and Mining Company,
Inc., has an interest. Filed as Exhibit 41.10 to
Form 10-KSB filed September 26, and incorporated
herein by reference.
46 10 Mineral Lease Agreement between Great Basin
Exploration and Mining Company, Inc., and Edward
L. Devenyns and David R. Ernst dated November 8,
1992 regarding the Red Canyon Mineral Prospect in
Eureka County, Nevada. Filed as Exhibit 42.10 to
Form 10-KSB filed September 26, and incorporated
herein by reference.
21
<PAGE>
Exhibit Item 601
No. Category Exhibit
- --- -------- -------
47 10 Joint Venture operating agreement dated January 1,
1996, between Cominco American, Inc. and Great
Basin Exploration and Mining Company, Inc. known
as the "Afgan-Kobeh Joint Venture". Property
described in Exhibit A. Filed as Exhibit 43.10 to
Form 10-KSB filed September 26, and incorporated
herein by reference.
48 10 Amendment to Mineral Lease between Walter Schull
and Mireille Schull and Great Basin Exploration
and Mining Company dated July 31, 1996. Regarding
the Coal Canyon property.
49 10 Promissory note dated September 30, 1996, whereby
Fischer-Watt Gold Company, Inc. promises to pay
$700,000 to Kennecott Exploration Company, Inc.
50 27 Financial Data Schedule for the three month period
ended July 31 ,1996.
51 99 Minutes of Special Meeting of Board of Directors
of Fischer-Watt Gold Company, Inc., dated October
19, 1994, whereby George Beattie's employment
contract dated September 1, 1993 is extended to
September 1, 1997. These minutes were filed as
Exhibit 28.99 to Form 10-K filed May 15, 1995 and
incorporated herein by reference.
(b) Reports on Form 8-K
During the quarter ended July 31, 1996, no reports on Form 8-K were filed by the
registrant.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
FISCHER-WATT GOLD COMPANY, INC.
November 15, 1996 By /s/ George Beattie
(Signature)
George Beattie, President,
Chief Executive Officer
(Principal Executive Officer),
Chairman of the Board and
Director
November 15, 1996 By /s/ Michele D. Wood
(Signature)
Michele D. Wood,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Exhibit 48-10
8 October, 1996
Mr. Steve Ert
P.O. Box 3785
Chatsworth, CA 91313
Dear Steve:
This letter will outline specific terms of a proposed mineral lease agreement
between Fischer-Watt Gold and yourself for an area in the Sacramento Mountains
in San Bernadino County California. The following points have been discussed by
the two of us in a number of telephone conversations.
The mineral lease will encompass an area in the Sacramento Mountains, including
all of T7-8N, R21-22E and those portions of T9N, R21-22E south of Interstate
I-40 (project area). The unpatented mining claims you currently own in the
project area would be included, as well as any claims which FWG or you stake
during the term of the lease within the project area.
In exchange for an initial payment to you of $10,000 in cash and 100,000 shares
of FWG stock, you give FWG a two-year period to explore within the project area
and your existing claims. At its sole option, FWG can elect at anytime during
the said two-year period to enter into a lease of the project area on the terms
described herein. FWG is further obligated during the first two years to drill
one hole in the Project Area in the vicinity of the old AMAX drill hole 86-1 in
Section 15, T9N, R21E, referred to by yourself as the "Junkyard" area. This hole
will be drilled either into the basement gneisses or to a maximum depth of 1000
feet. You have assured me that you also own the claim containing the exploratory
hole.
The lease term shall be for 25 years and so long thereafter as there is a
production from the project area. The proposed schedule for annual payments, due
on the anniversary of signing beginning in 1998, is $50,000 for Year 3, $75,000
for Year 4, $100,000 for Year 5 and all subsequent years. These numbers are all
in 1996 dollars and would include an appropriate adjustment at the time of
payment using applicable CPI. Annual cash payments in Year 3 and subsequent
years will be considered Advanced Royalty Payments toward a production royalty
of 4.0% NSR on Federal land owned by you or FWG and 1.0% NSR on any land leased
or otherwise acquired from a third party by FWG within the project area during
the lease term. Should FWG begin production within the project area, a Minimum
Annual Royalty of $100,000 (in 1996 dollars) would replace the Advanced Royalty
Schedule as long as production continued.
<PAGE>
In addition to the annual payments scheduled for years 3-5, FWG agrees to
perform $100,000 worth of work within the project area for each of those years
that the lease is in effect. Any qualified expenditure in excess of the annual
work commitment can be carried into the following year. However, if any of these
annual expenditures, including carry over of funds, is less than $100,000, the
balance for that year will be payable to you in cash. The work commitment would
only apply for those years in which the lease is in effect and does not apply
after year five.
It is FWG's intention that this letter agreement shall become binding upon FWG
and you once you have signed it. Since much of the land covering your known
mineralized areas is currently open for staking by anyone, FWG would like to
begin claim staking upon signing of this letter of intent rather than waiting
for completion and signing of a lease agreement.
I believe this letter accurately covers all the points we discussed during our
various conversations. There were a few minor matters that we did discuss, such
as inspection of data, reporting, and taking of royalties "in kind" which would
be best addressed in the lease itself.
Thank you again for the weekend you spent showing us around the Sacramento
Mountains. I am looking forward to a successful venture.
Best regards,
Fischer-Watt Gold Company, Inc.
/s/
Douglas R. Bowden
Senior Exploration Geologist
I accept and agree to the terms of this letter.
/s/ Steve Van Ert 10-14-96
------------------ ---------
Steve Van Ert Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JULY 31, 1996 CONTAINED IN FORM
10-QSB FOR THE QUARTERLY PERIOD ENDED JULY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 2,222
<SECURITIES> 0
<RECEIVABLES> 504
<ALLOWANCES> 0
<INVENTORY> 620
<CURRENT-ASSETS> 4,325
<PP&E> 1,822
<DEPRECIATION> 169
<TOTAL-ASSETS> 9,793
<CURRENT-LIABILITIES> 2,570
<BONDS> 0
0
0
<COMMON> 31
<OTHER-SE> 7,192
<TOTAL-LIABILITY-AND-EQUITY> 9,793
<SALES> 1,969
<TOTAL-REVENUES> 1,969
<CGS> 2,001
<TOTAL-COSTS> 3,054
<OTHER-EXPENSES> 300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (59)
<INCOME-PRETAX> (1,315)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,315)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,315)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
