U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 10-QSB/A
(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, 1997
---------------------
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 Identification No.)
of incorporation)
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 (1) 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
December 31, 1997 was 35,159,784.
Transitional 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
(UNAUDITED)
ASSETS
July 31,
1997
--------
<S> <C>
CURRENT ASSETS:
Cash ................................................................ $ 249,000
Certificate of deposit .............................................. 502,000
Accounts receivable ................................................. 645,000
Due from related parties ............................................ 3,000
Inventories ......................................................... 678,000
Prepaid expenses .................................................... 69,000
------------
Total current assets .............................................. 2,146,000
MINERAL INTERESTS, net .................................................... 4,111,000
PLANT, PROPERTY, AND EQUIPMENT ............................................ 2,516,000
LESS ACCUMULATED DEPRECIATION ............................................. (486,000)
2,030,000
FOREIGN TAX REFUNDS, net of $208,000 reserve .............................. 554,000
OTHER ASSETS .............................................................. 55,000
------------
Total assets ...................................................... $ 8,896,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ............................... $ 2,415,000
Notes payable ....................................................... 923,000
------------
Total current liabilities ......................................... 3,338,000
LONG-TERM LIABILITIES:
Convertible note payable to shareholder ............................. 719,000
------------
Total liabilities ................................................. $ 4,057,000
============
SHAREHOLDERS' EQUITY:
Preferred Stock, non-voting, convertible, $2.00 par value,
250,000 shares authorized; 0 shares outstanding .................. -0-
Common stock, $0.001 par value, 50,000,000 shares authorized;
32,800,384 shares outstanding at July 31, 1997 .................. 33,000
Additional paid-in capital .......................................... 12,738,000
Capital stock subscribed ............................................ 721,000
Foreign Currency translation adjustments ............................ 428,000
------------
Deficit ............................................................. (9,081,000)
------------
Total shareholders' equity ........................................ 4,839,000
Total liabilities and shareholders' equity ........................ $ 8,896,000
============
</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,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES OF PRECIOUS METALS .......................... $ 1,466,000 $ 913,000 $ 2,942,000 $ 1,969,000
COSTS APPLICABLE TO SALES ......................... (1,430,000) (626,000) (2,668,000) (2,001,000)
------------ ------------ ------------ ------------
GAIN (LOSS) FROM MINING ........................... 36,000 287,000 274,000 (32,000)
GAIN (LOSS) ON SALE OF ASSETS ..................... (3,000) -0- (3,000) 11,000
COSTS AND EXPENSES:
Abandoned and impaired mineral interests ..... -0- -0- -0- 3,000
Selling, general and administrative .......... 382,000 565,000 764,000 834,000
Exploration .................................. 72,000 150,000 156,000 216,000
------------ ------------ ------------ ------------
454,000 715,000 920,000 1,053,000
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income (expense) .................... (74,000) 24,000 (96,000) 39,000
Unrealized gain on trading securities ........ -0- -0- -0- -0-
Other (expense) income ....................... (7,000) 25,000 (10,000) 20,000
Currency exchange losses, net ................ (95,000) (190,000) (268,000) (300,000)
------------ ------------ ------------ ------------
(176,000) (141,000) (374,000) (241,000)
------------ ------------ ------------ ------------
Net loss before income taxes ...................... (597,000) (569,000) (1,023,000) (1,315,000)
TAX PROVISION ..................................... -0- -0- -0- -0-
------------ ------------ ------------ ------------
NET LOSS .......................................... ($ 597,000) ($ 569,000) ($ 1,023,000) ($ 1,315,000)
============ ============ ============ ============
LOSS PER SHARE .................................... ($ .02) ($ .02) ($ .03) ($ .05)
------------ ------------ ------------ ------------
WEIGHTED AVERAGE. SHARES
OUTSTANDING .................................... 32,376,635 31,190,360 32,023,031 28,305,427
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
FISCHER-WATT GOLD COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
July 31,
1997 1996
<S> <C> <C>
Net cash provided by (used in) operating activities .......... $ (695,000) $(2,308,000)
Net cash (used in) provided by investing activities .......... (127,000) (354,000)
Net cash provided by financing activities .................... 587,000 4,618,000
----------- -----------
NET (DECREASE) INCREASE IN CASH .............................. (235,000) 1,956,000
CASH, at beginning of period ................................. 484,000 266,000
----------- -----------
CASH, at end of period ....................................... $ 249,000 $ 2,222,000
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ................ $ 101,000 $ 24,000
Cash paid during the period for taxes ................... 46,000 50,000
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NONCASH
ACTIVITIES:
Common stock issued in exchange for professional services
rendered .............................................. $ 53,000 $ 21,000
Common stock issued in satisfaction of a note payable ... 110,000 -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)
SUMMARY OF ACCOUNTING POLICIES
Reclassifications Certain amounts in the 1996 (fiscal 1997) financial
statements have been reclassified to conform to the
1997 (fiscal 1998) presentation.
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/A for the year ended January 31,
1997 ("Form 10-KSB/A").
FUTURE FINANCING AND REALIZATION
Fischer-Watt incurred a net loss of $3,378,000 in fiscal 1997, has an
accumulated deficit of $9,081,000, has a net working capital deficiency of
$1,192,000 and continues to experience negative cash flow and losses from
operations. The Company did report net income in fiscal 1996, however this was
principally the result of realized gains on the sale or exchange of
non-producing mineral properties. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.
Management previously anticipated achieving levels of production sufficient to
fund the Company's operating needs by the end of fiscal 1998. The Company
exceeded targeted levels of production, however, these efforts were offset by a
sharp decline in the market price of gold that has prevented the realization of
positive cash provided from operating activities. Management believes that as
the El Limon Mine gold property held by Oronorte is further developed and
production levels increase, sufficient cash flows will exist to fund the
Company's Colombian operations. Based on an estimated sales price per ounce of
gold of $300 for the first four months of 1998, and $310 per ounce for the
remaining eight months of 1998, management anticipates the Company's Colombian
operations will generate a self-sustaining cash flow during the fiscal year
ending 1999. Expansion and or development efforts in other countries, and
administrative expenses, will need to be funded with cash raised from future
equity or debt financing, the exercise of common stock warrants (see Note 9 to
Financial Statements of Form 10-KSB/A for the fiscal year ended January 31, 1997
and related discussion in Liquidity and Capital Resources section of this
report), and disposition of or joint ventures with respect to mineral
properties. Additionally, if the market price of gold remains below the
estimated sales price of gold set forth above, the Company's Colombian
operations will likely require additional capital. Expenditures for exploration
projects have been reduced, and may be reduced further, if necessary.
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, future
capital raising efforts, and the ability to achieve future operating
efficiencies anticipated with increased production levels. Management's plans
will require additional financing, additional reductions in exploration
activity, or disposition of or joint ventures with respect to mineral
properties. While the Company has been successful in these capital raising
endeavors in the past, there can be no assurance that its future efforts, and
anticipated operating improvements will be successful. The Company does not
currently have adequate capital to continue its contemplated business plan
beyond the later part of the first quarter of fiscal 1999. The Company is
presently investigating all of the alternatives identified above to meet its
short-term liquidity needs. The Company believes that it can arrange a
transaction or transactions to meet its short-term liquidity needs, however
there can be no assurance that any such transactions will be concluded or that
if concluded they will be on terms favorable to the Company.
5
<PAGE>
2. ACCOUNTS RECEIVABLE
Accounts receivable at July 31, 1997 consist of:
Trade $519,000
Other 126,000
------------
Total accounts receivable $645,000
3. INVENTORIES
Inventories at July 31, 1997 consist of:
Finished products and products in process $202,000
Supplies, materials and spare parts 476,000
------------
Total inventories $678,000
4. MINERAL INTERESTS
Capitalized costs for mineral interests at July 31, 1997 consist of:
Operating mining property:
El Limon Mine, Oronorte District $1,456,000
Less accumulated depletion (334,000)
------------
$1,122,000
Non-operating properties, net of reserves:
El Carmen, Colombia $467,000
La Aurora, Colombia 348,000
Juan Vara, Colombia 150,000
El Viente 1,000
Kobeh, Nevada 67,000
Castle 728,000
Coal Canyon, Nevada 599,000
Red Canyon, Nevada 334,000
Tempo, Nevada 51,000
Sacramento Mountains, California 147,000
Nevada Regional 1,000
Water Canyon, Nevada 13,000
Amador, Nevada 10,000
Modoc, California 73,000
------------
Total mineral interests $4,111,000
5. NOTES PAYABLE
Pursuant to agreements among Greenstone Resources Ltd. ("Greenstone"), Dual
Resources Ltd. ("Dual"), and the Company, Greenstone made a payment of $300,000
to Dual in August 1995 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 (see Note 13 to Financial Statements of Form 10-KSB/A for
the fiscal year ended January 31, 1997).
The Company has a $500,000 line of credit with a Colombian bank. Advances under
this line, which totaled $428,000 at June 30, 1997, accrue interest at rates
from 26% to 39% and are collateralized by a $502,000 certificate of deposit
which bears interest at 3.9%.
6
<PAGE>
The Company has a $107,000 note payable to a bank at June 30, 1997. The note
bears interest at the legal Colombian rate (DTF) plus 10 points (30.25% at June
30, 1997), requires interest to be paid quarterly, and is collateralized by a
building.
The Company has an uncollateralized note payable to a Colombian labor
cooperative in the amount of $62,385, which bears interest at 29%, and requires
interest to be paid quarterly. Principal and remaining interest is due in full
on January 31, 1998.
The Company delivered to Kennecott Exploration Company, a shareholder of the
Company, a promissory note in the amount of $700,000, which bears interest at an
annual interest rate equal to the prime or base rate, or legal rate, if less.
The note was issued in connection with the acquisition of mineral interests.
Principal and interest are due in cash on September 30, 1998 or, at the option
of the Company, by issuance of 1,000,000 (one million) shares of the Company's
common stock. Accrued interest at July 31, 1997 was $19,000. The Company's
option to issue shares in satisfaction of this debt is subject to a limitation
that Kennecott's ownership of Fischer-Watt cannot exceed 10% of the outstanding
voting common stock.
6. EQUITY AND COMMON STOCK
On March 12, 1996 the Company completed a $5 million foreign offering of equity
pursuant to Regulation "S". This offering consisted of the sale of 4,980,000
units at $1.06 per unit. Each unit was composed of two shares of Fischer-Watt
common stock and one share purchase warrant. Each of these warrants entitles the
holder to purchase one additional share of Fischer-Watt common stock at the
following prices during the noted periods: 1) prior to September 30, 1997 at a
price of 22 cents per share, 2) between October 1 and November 30, 1997 at 40
cents per share, 3) between December 1, 1997 and February 28, 1998 at 60 cents
per share, and 4) between March 1, 1998 and their expiration date of February
28, 1999 at 75 cents per share. 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.
The funds raised were used to finance capital equipment and working capital
needs for further development and expansion of Fischer-Watt's gold mining
operation in Colombia and its exploration and development activities in Colombia
and Nevada. As part of this offering, 680,000 units were sold under a
subscription agreement and the collected proceeds of $721,000 are classified as
capital stock subscribed within the Company shareholders' equity accounts. As of
July 31, 1997, none of the 680,000 shares had been issued.
In March 1997, the Company issued 100,000 common shares in exchange for
professional services rendered. The shares had an estimated fair market value of
$53,000.
In April 1997, the Company completed a private placement to accredited investors
located in the United States pursuant to Rule 506 of Regulation D under the
Securities Act of 1933, as amended (the "1933 Act"). The estimated net proceeds
from this offering of $442,000 are to finance the Company's working capital
requirements and needs related to further development, expansion, and
exploration of mining properties. This Regulation D offering consisted of the
sale of 459,000 units at $1.06 per unit. Each unit was composed of two shares of
Fischer-Watt common stock and one share purchase warrant. Each of these warrants
entitles the holder to purchase one additional share of Fischer-Watt common
stock at 1) prior to September 30, 1997 at a price of 22 cents per share, 2)
between October 1 and November 30, 1997 at 40 cents per share, 3) between
December 1, 1997 and February 28, 1998 at 60 cents per share, and 4) between
March 1, 1998 and their expiration date of February 28, 1999 at 75 cents per
share. 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. In September 1997 the
Company received $46,000 which resulted from the exercise of 209,000 warrants at
an exercise price of 22 cents per share.
7
<PAGE>
On February 1, 1997, an officer was granted options to purchase 100,000 shares
of common stock at $.53 per share (fair market value at the time of grant).
These options become exercisable on March 1, 1998 and expire five years after
they become exercisable.
In June 1997, the Company issued 300,000 common shares pursuant to the exercise
of warrants issued in November 1995, which expired August 31, 1997, at an
exercise price of 30 cents per share. The shares had an estimated market value
of $90,000.
On July 23, 1997, the Company issued 185,624 common shares in satisfaction of a
note payable with principal and interest totaling $109,753, to Serem Gatro, the
previous owner of GBEM. The shares had an estimated fair market value of
$109,753 at the time the agreement was entered into.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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
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 (including the effects of
inflation and currency exchange rate fluctuations on the results of foreign
operations), the selling price of metals, 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/A. 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.
The following is a discussion of Fischer-Watt Gold Company, Inc.'s (the
"Company") current financial condition as well as its operations for the six
months ended July 31, 1997 (fiscal 1998) and July 31, 1996 (fiscal 1997). 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/A for the
fiscal year ended January 31, 1997 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 December 15, 1997 the Company had approximately $239,000 in cash, and
accounts payable of approximately $2,855,000.
8
<PAGE>
On July 31, 1997, the Company's current ratio was .6:1 based on current assets
of $2,146,000 and current liabilities of $3,338,000. 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. The decrease in the current ratio at July 31,
1997 is primarily related to a decrease in the cash balance of approximately
1,973,000 and a decrease in amounts due from related parties of approximately
$452,000, which were both utilized to finance the Company's capital equipment
and working capital needs related to further development and expansion of the
Colombian gold mining operation and the Company's exploration and development
activities in Colombia and Nevada, an increase in accounts payable and accrued
expenses of approximately $621,000 and an increase in notes payable of
approximately $238,000, both of which are related to the increased activity and
working needs of the mining operation in Colombia. The above items are partially
offset by an increase in inventories of approximately $58,000 and an increase in
prepaid expenses of approximately $45,000, both of which are related to the
increased activity associated with the mining operation in Colombia, coupled
with a decrease in income taxes payable of $91,000.
A current ratio of less than 1:1 indicates the Company does not have sufficient
cash and other current assets to pay its bills and other liabilities incurred at
the end of the its fiscal year and due and payable within the next year.
Fischer-Watt incurred a net loss of $3,378,000 in fiscal 1997, has an
accumulated deficit of $9,081,000, has a net working capital deficiency of
$1,192,000 and continues to experience negative cash flow and losses from
operations. The Company did report net income in fiscal 1996, however this was
principally the result of realized gains on the sale or exchange of
non-producing mineral properties. These conditions have caused the Company's
independent auditor to raise substantial doubt about the Company's ability to
continue as a going concern.
Management previously anticipated achieving levels of production sufficient to
fund the Company's operating needs by the end of fiscal 1998. The Company
exceeded targeted levels of production, however, these efforts were offset by a
sharp decline in the market price of gold that has prevented the realization of
positive cash provided from operating activities. Management believes that as
the El Limon Mine gold property held by Oronorte is further developed and
production levels increase, sufficient cash flows will exist to fund the
Company's Colombian operations. Based on an estimated sales price per ounce of
gold of $300 for the first four months of 1998, and $310 per ounce for the
remaining eight months of 1998, management anticipates the Company's Colombian
operations will generate a self-sustaining cash flow during the fiscal year
ending 1999. Expansion and/or development efforts in other countries, and
administrative expenses, will need to be funded with cash raised from future
equity or debt financing, the exercise of common stock warrants (see Note 9 to
Financial Statements of Form 10-KSB/A for the fiscal year ended January 31, 1997
and related discussion in Liquidity and Capital Resources section of this
report), and disposition of or joint ventures with respect to mineral
properties. Additionally, if the market price of gold remains below the
estimated sales price of gold set forth above, the Company's Colombian
operations will likely require additional capital. Expenditures for exploration
projects have been reduced, and may be reduced further, if necessary.
The selling price of gold and silver is established by the world market. This
price is determined by many factors, none of which are in the control of the
Company. The major adverse factor has been the selling of gold reserves by
various central banks. The selling price of the Company's major product, gold,
has declined approximately 12% during the year, from approximately $385 per
ounce of gold to approximately $340 per ounce of gold.
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, future
capital raising efforts, and the ability to achieve future operating
efficiencies anticipated with increased production levels. Management's plans
will require additional financing, further reductions in exploration activity,
or disposition of or joint ventures with respect to mineral properties. While
the Company has been successful in these capital raising endeavors in the past,
9
<PAGE>
there can be no assurance that its future efforts, and anticipated operating
improvements will be successful. The Company does not currently have adequate
capital to continue its contemplated business plan beyond the later part of the
first quarter of fiscal 1999. The Company is presently investigating all of the
alternatives identified above to meet its short-term liquidity needs. The
Company believes that it can arrange a transaction or transactions to meet its
short-term liquidity needs, however there can be no assurance that any such
transactions will be concluded or that if concluded they will be on terms
favorable to the Company.
As noted above, earlier in the year Management anticipated achieving levels of
production sufficient to fund the operating needs of the Colombian subsidiary by
the end of fiscal 1998. The Company has exceeded targeted levels of production,
however, these efforts were offset by a decline in the market price of gold that
has prevented the realization of positive cash provided from operating
activities. The lack of positive cash provided from operating activities has
created a weak cash position for the Company's Colombian subsidiary, which has
made timely payment to vendors and creditors difficult. As a result of the weak
cash position the Company was unable to pay it's 1995 and 1996 taxes to the
Colombian government, which led to the placement of an embargo on the bank
accounts of the Colombian subsidiary in October 1997. Management has negotiated
a five year repayment plan with the Colombian tax authorities and anticipates
that the embargo will be lifted soon.
The Company is currently focusing its efforts on diversifying its operations to
include production of copper in addition to gold. The Company is involved in the
pre-feasibility stage of a copper property located in Mexico (see related
discussion in Item 5 of this report). Management believes that this copper
property, the Los Verdes, will produce high purity copper cathodes from open pit
mining and Solvent Extraction Electrowinning (SX-EW) processing technology. In
order to complete the feasibility study, the Company needs to raise
approximately $500,000.
From March 11, 1997 through April 16, 1997, the Company conducted a private
placement in the United States. The estimated net proceeds from this offering of
$442,000 were for purposes of financing the Company's working capital
requirements and needs related to further development, expansion, and
exploration of mining properties. This offering consisted of the sale of 459,000
units at $1.06 per unit. Each unit was composed of two shares of Fischer-Watt
common stock and one share purchase warrant. Each of these warrants entitles the
holder to purchase one additional share of Fischer-Watt common stock at the
following prices during the noted periods: 1) prior to September 30, 1997 at a
price of 22 cents per share, 2) between October 1 and November 30, 1997 at 40
cents per share, 3) between December 1, 1997 and February 28, 1998 at 60 cents
per share, and 4) between March 1, 1998 and their expiration date of February
28, 1999 at 75 cents per share. 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.
In September 1997 the Company received approximately $46,000 which resulted from
the exercise of 209,000 warrants at an exercise price of 22 cents per share.
In June 1997 the Company issued 300,000 common shares pursuant to the exercise
of warrants issued in November, 1995, which expired August 31, 1997, at an
exercise price of 30 cents per share. The Company received total gross proceeds
of approximately $90,000.
In August 1997 the Company issued 2,150,400 common shares pursuant to the
exercise of warrants issued in November 1995, which expired August 31, 1997, at
an exercise price of 22 cents per share. The Company received total gross
proceeds of approximately $473,000.
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. (See Part I-Item 3. Legal Proceedings of Form 10-KSB/A for the
fiscal year ended January 31, 1997.)
10
<PAGE>
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 bore interest at 8%. On July 23, 1997, the Company issued 185,624
common shares in satisfaction of a note payable with principal and interest
totaling $109,753, to Serem Gatro, the previous owner of GBEM. The shares had an
estimated fair market value of $109,753 at the time the agreement was entered
into.
Long-term Liquidity
The Company will likely need to supplement anticipated cash from operations with
future debt or equity financings and dispositions of or joint ventures with
respect to mineral properties to fully fund its future business plan which
includes exploration projects and property development. While the Company has
been successful in capital raising endeavors in the past, there can be no
assurance that its future efforts will be successful. There can be no assurance
that the Company will be able to conclude transactions with respect to its
mineral properties or additional debt or equity financings or that such capital
raising opportunities will be available on terms acceptable to the Company, or
at all.
At July 31, 1997 the Company had long term debt of $719,000 compared to $0 at
July 31, 1996. During fiscal 1997, the Company delivered to Kennecott
Exploration Company a promissory note in the amount of $700,000, which bears
interest at an annual interest rate equal to the prime or base rate, or legal
rate, if less. Principal and interest are due on September 30, 1998 or at the
option of the Company, by issuance of 1,000,000 (one million) shares of the
Company's stock. The Company's option to issue shares in satisfaction of this
debt is subject to a limitation that Kennecott's ownership of Fischer-Watt
cannot exceed 10% of the outstanding voting common stock.
RESULTS OF OPERATIONS
Three months ended July 31, 1997 compared with three months ended July 31, 1996.
The Company had net loss of $597,000 ($ .02 per share) compared to $569,000
($.02 per share) in the quarter ended July 31,1997 and 1996, respectively. The
increase in net loss of $28,000 primarily relates to an increase in sales of
precious metals of $533,000 resulting from an increase in ounces shipped of
2,117, partly offset by a decrease in the average sales price per ounce of gold,
coupled with a decrease in selling general and administrative expenses of
$183,000 primarily related to a decrease in expenses associated with the
Colombian subsidiary resulting from reduction in legal fees and rent expense,
coupled with administrative cutbacks made in the Medellin office, a decrease in
foreign exchange losses of $95,000 and a decrease in exploration expenses of
$78,000. All of the above were offset by an increase in costs applicable to
sales of $804,000 which resulted from a $214,000 misclassification during the
quarter ended July 31, 1996, which was adjusted during the fourth quarter 1996,
which caused the costs applicable to sales to be understated during the quarter
ended July 31, 1996; an inflation adjustment of approximately $216,000 related
to the quarter ended April 30, 1997 that was posted during the quarter ended
July 31, 1997, which has caused the costs applicable to sales to be overstated
during the quarter ended July 31, 1997; the remaining increase of $375,000
relates to a decrease in inventory from the prior year, and increases in
personnel, materials and energy expenses resulting from an increase in
production of 1,454 ounces; an increase in personnel expenses resulting from
inflationary wage increases; an increase in selling expenses resulting from an
increase in ounces of gold shipped of 2,117 ounces; a decrease in the provision
for ending inventory during the prior year; all of which were partly offset by a
11
<PAGE>
reductions in contractor fee's, consulting fee's and maintenance and repair
costs; coupled with an increase in interest expense of $98,000 related to
decreased interest earnings on lower cash balances and an increase in interest
expense associated with increased debt related to the operating mine in
Colombia, and an increase in other expense of $32,000.
The cash cost per ounce of gold for the six months ended July 31, 1997 was
$299.52 as compared to $342.53 for the six months ended July 31, 1996. The
improvement relates to operational efficiencies gained with the increase in
production of 2,451 ounces from 5,343 gold ounces produced to 7,748 gold ounces
produced during the six months ended July 31, 1996 and 1997, respectively. The
increase in production resulted from further development of the El Limon mine,
coupled with an increase in ore grade, and augmented production from the La
Aurora. Additionally, the improvement in cash cost per ounce related to the
implementation of administrative cost reductions. Further reductions in the cash
cost per ounce are anticipated as a result of additional administrative
cutbacks, and continued improvement of grade and planned modifications of the
plant.
Gain (Loss) From Mining
Sales of precious metals increased $553,000, from $913,000 to $1,466,000 during
the quarters ended July 31, 1996 and 1997, respectively. The increase in sales
relates to an increase in gold ounces shipped of 2,117 ounces, from 2,160 ounces
of gold shipped to 4,278 ounces of gold shipped during the quarters ended July
31, 1996 and July 31, 1997, respectively, partly offset by a decrease in the
average sales price per ounce of gold of $80.01. The increase in gold ounces
shipped relates to an increase in ore grade, coupled with an increase in tonnes
produced, which resulted from further development of the El Limon mine and
augmented production from the La Aurora. The decrease in the average sales price
per ounce of gold is directly related to the decline in the gold market.
The Company does not presently employ forward sales contracts or engage in any
hedging activities.
Costs applicable to sales increased $804,000 from $626,000 to $1,430,000 during
the quarters ended July 31, 1996 and 1997, respectively. The increase relates to
a $214,000 misclassification during the quarter ended July 31, 1996, which was
adjusted during the fourth quarter 1996, which caused the costs applicable to
sales to be understated during the quarter ended July 31, 1996. Additionally, an
inflation adjustment of approximately $216,000 related to the quarter ended
April 30,1997 was posted during the second quarter of 1997, which has caused the
costs applicable to sales to be overstated during the quarter ended July 31,
1997. The remaining increase of $375,000 relates to a decrease in inventory of
$157,000 which resulted from a decrease in the ounces in ending inventory of
approximately 156 ounces as compared to an increase in the ounces in ending
inventory of approximately 84 ounces during the quarters ended July 31, 1997 and
1996, respectively. Additionally, gold ounces produced increased 1,454 ounces,
from 2,739 gold ounces produced to 4,193 gold ounces produced during the
quarters ended July 31, 1996 and 1997, respectively. The increase in production
contributed to an increase in personnel expenses of approximately 16% associated
with an increase in the average number of employees and hours paid, an increase
in materials of approximately 51% or $72,000, and an increase in utilities of
approximately 11.5% or $14,000. Personnel expenses increased approximately 27%
as a result of inflationary wage increases of 13% in April 1996, 9% in October
1996 and 11.5% in April 1997. Selling expenses increased approximately 76% or
$94,000 resulting from an increase in ounces of gold shipped of 2,117 ounces.
The second quarter adjustment to the ending inventory allowance in the quarter
ended July 31, 1996 totaled $247,00 as compared to an adjustment of $148,000
during the quarter ended July 31, 1997. All of the above were partly offset by a
reduction in independent contractor fee's of approximately $40,000, which
relates to the assignment of certain tasks to salaried personnel, a reduction in
fees of approximately $37,000 related to reduced consulting fees, and reductions
in repair and maintenance expense of approximately $15,000.
12
<PAGE>
Costs and Expenses
Selling, general and administrative costs decreased $183,000, from $565,000 to
$382,000 during the quarters ended July 31, 1996 and 1997, respectively. The
decrease primarily relates to a decrease in general and administrative expenses
associated with the Colombian subsidiary resulting from reductions in legal fees
associated with prior year legalization and foreign investment, a reduction in
rent expense related to the exercise of an option to purchase the office
building in December 1996, a reduction in travel expense, and other reductions
which resulted from administrative cutbacks implemented in the Medellin office.
Exploration expense decreased $78,000, from $150,000 to $72,000 during the
quarters ended July 31, 1996 and 1997, respectively. This decrease relates to
the reduction in staffing by one person, a reduction in legal fees associated
with drafting the Tempo joint venture agreement and assistance with claim
filings, a reduction in fee's associated with conferences and other office
expense reductions for the Great Basin Management office. Exploration expense
will continue to decrease in future months. The most significant decrease will
relate to the closing of the Company's Great Basin Management subsidiary office
located in Reno, effective October 31, 1997.
Net interest income (expense) increased $98,000, from income of $24,000 to
expense of $74,000 during the quarters ended July 31, 1996 and 1997,
respectively. This increase relates to decreased interest earnings on a lower
cash balance, which resulted from the financing of capital equipment and working
capital needs related to further development and expansion of the Colombian gold
mining operation, and the Company's exploration and development activities in
Colombia and Nevada, coupled with an increase in interest expense associated
with increased debt related to the operating mine in Colombia.
Six months ended July 31, 1997 compared with six months ended July 31, 1996.
The Company had net loss of $1,023,000 ($ .03 per share) compared to $1,315,000
($.05 per share in the six months ended July 31, 1997 and 1996, respectively.
The primary reasons for the change relates to the increase in sales of precious
metals of $973,000 resulting from an increase in ounces of gold shipped of 3,612
ounces, partly offset by a decrease in the average sales price per ounce,
coupled with a decrease in selling, general and administrative expenses of
$70,000 which relates to reductions in legal fees and rent expense, coupled with
administrative cutbacks implemented in Colombia, partly offset by an increase in
corporate overhead, and a decrease in exploration expenses of $60,000. All of
the above were partly offset by an increase in costs applicable to sales of
$667,000 which resulted from a $252,000 misclassification during the six months
ended July 31, 1996, which caused the costs applicable to sales to be
understated during the six months ended July 31, 1996; the remaining increase of
$415,000 relates to a decrease in ending inventory from the prior year, and
increases in personnel, materials and energy expenses associated with an
increase in gold ounces produced of 2,451 ounces; an increase in personnel
expenses resulting from inflationary wage increases; and increase in labor costs
associated with he labor cooperative resulting from a negotiated increase in the
contract; and increase in energy resulting from inflation; partly offset by
reductions in contractor fee's, consulting fee's and maintenance and repair
costs, coupled with an increase in interest expense of $135,000 related to
decreased interest earnings on lower cash balances and an increase in interest
expense associated with increased debt related to the operating mine in
Colombia, and an increase in other expense of $30,000.
Gain (Loss) From Mining
Sales of precious metals increased $973,000, from $1,969,000 to $2,942,000
during the six months ended July 31, 1996 and 1997, respectively. The increase
in sales relates to and increase in gold ounces shipped of 3,612 ounces, from
4,863 gold ounces shipped to 8,475 gold ounces shipped during the six months
ended July 31, 1996 and 1997, respectively, partly offset by a decrease in the
average sales price per ounce of $57.75. The increase in gold ounces shipped
relates to an increase in ore grade, coupled with an increase in tonnes
produced, which resulted from further development of the El Limon mine and
augmented production from the La Aurora. The decrease in the average sales price
per ounce of gold is directly related to the decline in the gold market.
13
<PAGE>
Costs applicable to sales increased $667,000, from $2,001,000 to $2,668,000
during the quarters ended July 31, 1996 and July 31, 1997, respectively. The
increase relates to a $252,000 misclassification during the six months ended
July 31, 1996, which was adjusted during the fourth quarter 1996, which caused
the costs applicable to sales to be understated during the six months ended July
31, 1996. The adjustment for the misclassification results in a remaining
increase of $415,000 which relates to a decrease in inventory of $204,000
resulting from a decrease in the ounces in ending inventory of approximately 794
ounces as compared to a decrease in the ounces in ending inventory of
approximately 126 ounces during the six months ended July 31, 1997 and 1996,
respectively. Additionally, gold ounces produced increased 2,451 ounces, from
5,343 gold ounces produced to 7,798 gold ounces produced during the six months
ended July 31, 1996 and 1997, respectively. The increase in production
contributed to an increase in personnel expenses of approximately 22.5%
associated with an increase in the average number of employees and hours paid,
an increase in materials of approximately 25% or $73,000, and an increase in
energy expense of approximately 6% or $14,000. Personnel expenses increased
approximately 37% as a result of inflationary wage increases of 13% in April
1996, 9% in October 1996 and 11.5% in April 1997. Labor costs associated with
the labor cooperative increased approximately 14% or $90,000 resulting from a
negotiated increase in the contract effective January 15, 1997. Energy expense
increased approximately 16% or $38,000 as a result of inflation. All of the
above were partly offset by a reduction in independent contractor fee's of
approximately $82,000, which relates to the assignment of certain tasks to
salaried personnel, a reduction in fees of approximately $33,000 related to
reduced consulting fees, and reductions in repair and maintenance expense of
approximately $21,000.
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 $3,000, from $3,000 to $-0-
during the six months ended July 31, 1996 and 1997, respectively. During the six
months ended July 31, 1996, the La Victoria was abandoned for an associated cost
of $3,000.
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 decreased $70,000, from $834,000 to
$764,000 during the six months ended July 31, 1996 and 1997, respectively. The
decrease primarily relates to a decrease in general and administrative expenses
associated with mining operations of $175,000 resulting from a reduction in
legal fees of approximately $158,000 resulting from prior year fees associated
with legalization and foreign investment, a decrease in rent of approximately
$58,000, related to the exercise of an option to purchase the office building in
December 1996, a reduction in travel expense of approximately $37,000, and other
reductions which resulted from administrative cutbacks implemented in the
Medellin office in Colombia. The decreases above were partly offset by an
increase in corporate overhead of $102,000 associated with the addition of two
Vice President positions and the position of Chief Financial Officer, as well as
increases in legal and corporate relations expenses.
Exploration expense decreased $60,000, from $216,000 to $156,000 during the six
months ended July 31, 1996 and 1997, respectively. This decrease is primarily
related to expense reductions during the second quarter of fiscal 1998. See
explanations above.
Net interest income (expense) increased $135,000, from income of $39,000 to
expense of $96,000 during the six months ended July 31, 1996 and 1997,
respectively. This increase relates to decreased interest earnings on a lower
cash balance, which resulted from the financing of capital equipment and working
14
<PAGE>
capital needs related to further development and expansion of the Colombian gold
mining operation, and the Company's exploration and development activities in
Colombia and Nevada, coupled with an increase in interest expense associated
with increased debt related to the operating mine in Colombia.
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 $268,000 and $300,000
in the six months ended July 31, 1997 and 1996, respectively.
COMMITMENTS AND CONTINGENCIES
Foreign companies operating in Colombia, South America, may be subject to
discretionary audit by the Colombian Government in respect of their monetary
exchange declarations. Any such audit by the Colombian Government must be
initiated within two years of filing an exchange declaration. While the Company
has not received any notice of intention from the Colombian Government to
conduct such an audit and the Company has no reason to believe that the
Colombian Government will conduct such an audit in respect of its subsidiary,
Donna Ltd., the Company has the right to claim indemnity from Greenstone
Resources Canada Limited pursuant to the terms of agreements made regarding the
acquisition of Greenstone of Colombia, Ltd. and the Oronorte properties. (See
Part I - Item 3. Legal Proceedings of Form 10-KSB/A for the fiscal year ended
January 31, 1997)
In connection with the purchase of GRC, Greenstone agreed to reimburse the
Company for certain liabilities, including contingent 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 from
Greenstone in accordance with the terms of the purchase agreement. (See Part I -
Item 3. Legal Proceedings of Form 10-KSB/A for the fiscal year ended January 31,
1997)
15
<PAGE>
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
In June 1997, the Company issued 300,000 common shares pursuant to the exercise
of warrants issued in November 1995, which expired August 31, 1997, at an
exercise price of 30 cents per share, for total gross proceeds of $90,000. The
shares were issued to the holders of such warrants pursuant to the exemption
from registration provided by Section 4(2) of the Securities Act in a private
transaction to a sophisticated purchaser and are restricted from transfer unless
such transfer is registered under the Securities Act or made pursuant to an
exemption therefrom.
On July 23, 1997, the Company issued 185,624 common shares in satisfaction of a
note payable with principal and interest totaling $109,753, to Serem Gatro, the
previous owner of the Company's subsidiary, Great Basin Exploration and Mining
Company, Inc. The shares had an estimated fair market value of $109,753 at the
time the agreement to satisfy the debt with shares (November 1, 1996) was
reached. The shares were issued pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act in a private transaction to a
sophisticated purchaser and are restricted from transfer unless such transfer is
registered under the Securities Act or made pursuant to an exemption therefrom.
Item 5. OTHER INFORMATION
The Company amended the terms of two series of share purchase warrants,
affecting most of the Company's outstanding warrants. One series, issued
pursuant to a March 1996 Regulation S offering for the purchase of 4,980,000
shares prior to February 28, 1998, has had its expiration date extended for one
year to February 28, 1999. The second series of warrants amended is for the
purchase of 459,000 shares issued in an April 1997 private offering. The
exercise price for both series of warrants has been modified so that any
outstanding warrants of the series may be exercised at the following prices
during the noted periods:
1) prior to September 30, 1997 at a price of 22 cents per share,
2) between October 1 and November 30, 1997 at 40 cents per share,
3) between December 1, 1997 and February 28, 1998 at 60 cents per
share, and
4) between March 1, 1998 and their expiration date of February 28,
1999 at the original price of 75 cents per share.
The Company's Mexican subsidiary, Minera Montoro, S.A. de C.V., has signed a
contract with Compania Minera Constelacion, S.A. de C.V., the wholly owned
Mexican subsidiary of Cominco, Ltd. of Canada, The terms of the contract define
an option agreement by which Minera Montoro may acquire the Los Verdes property
located approximately 200 kilometers east of Hermisillo, Sonora. The option
agreement provides for an exclusive four month option period for due diligence
(September 1, 1997 through December 31, 1997), with a sixty day extension period
(January 1,1998 through March 1, 1998), at the end of which Fischer-Watt may
purchase the property for U.S. $5.0 million, payable over a five year period
from production start up. The Los Verdes property on the western flank of the
Sierra Madre Mountains is an advanced stage copper exploration project which has
been thoroughly explored by previous surface drilling and underground bulk
sampling. It is anticipated that the project will be developed using
conventional open pit mining methods and solvent extraction - electrowinning
(SX-EW) technology. Current ore reserve evaluations indicate that Los Verdes
contains 5.3 million tonnes of "minable" ore averaging 0.94% copper; initial
indications are that copper recovery will average 80%. A 600,000 tonne per year
open pit operation is envisioned, producing an average of 8.8 million pounds per
year of electrolytic copper during its anticipated life of 10 years.
On August 22, 1997, the Company's stockholders ratified and approved an
amendment to the articles of incorporation to increase the number of authorized
shares of common stock from 50,000,000 to 200,000,000 and to eliminate the
previously authorized 250,000 shares of preferred stock.
16
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
Exhibit Item 601
No. Category Exhibit
- ------- -------- -------
1 2 Letter of intent dated June 3, 1997, between Minera
Constelacion, S.A. de C.V. and Minero Montoro S.A. de
C.V. regarding the Los Verdes, filed as exhibit 1-2 to
Form 10-QSB filed June 18, 1997 and incorporated herein
by reference.
2 3 Articles of Incorporation as amended, filed as
exhibit 2-3 to Form 10-QSB filed January 6, 1998 and
incorporated herein by reference.
3 27 Financial Data Schedule for the six (6) month period
ended July 31, 1997.
(b) Reports on Form 8-K
During the quarter ended July 31, 1997, no reports on Form 8-K were
filed by the Registrant.
17
<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.
February 17, 1998 By: /s/ George Beattie
------------------------------
George Beattie, President,
Chief Executive Officer
(Principal Executive Officer),
Chairman of the Board and
Director
February 17, 1998 By: /s/ Michele D. Wood
------------------------------
Michele D. Wood, Treasurer,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Item 601
No. Category Exhibit Page
- ------- -------- ------- ----
<S> <C> <C>
1 2 Letter of intent dated June 3, 1997, between Minera N/A
Constelacion, S.A. de C.V. and Minero Montoro S.A. de
C.V. regarding the Los Verdes, filed as exhibit 1-2 to
Form 10-QSB filed June 18, 1997 and incorporated herein
by reference.
2 3 Articles of Incorporation as amended, filed as exhibit N/A
2-3 to Form 10-QSB filed January 6, 1998 and
incorporated herein by reference.
3 27 Financial Data Schedule for the six (6) month period
ended July 31, 1997.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JULY 31, 1997 CONTAINED IN FORM
10-QSB FOR THE QUARTERLY PERIOD ENDED JULY 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<EXCHANGE-RATE> 1
<CASH> 249
<SECURITIES> 0
<RECEIVABLES> 645
<ALLOWANCES> 0
<INVENTORY> 678
<CURRENT-ASSETS> 2,146
<PP&E> 2,516
<DEPRECIATION> 486
<TOTAL-ASSETS> 8,896
<CURRENT-LIABILITIES> 3,338
<BONDS> 0
0
0
<COMMON> 33
<OTHER-SE> 4,806
<TOTAL-LIABILITY-AND-EQUITY> 8,896
<SALES> 2,942
<TOTAL-REVENUES> 2,942
<CGS> 2,668
<TOTAL-COSTS> 3,588
<OTHER-EXPENSES> 278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> (1,023)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,023)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,023)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
