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: October 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-17386
FISCHER-WATT GOLD COMPANY, INC.
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(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
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(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 [X] No [ ]
The number of shares of Common Stock, $0.001 par value, outstanding as of
January 15, 1998, 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
October 31, 1997
----------------
<S> <C>
CURRENT ASSETS:
Cash ................................................................ $ 373,000
Certificate of deposit .............................................. 502,000
Accounts receivable ................................................. 306,000
Due from related parties ............................................ 48,000
Inventories ......................................................... 802,000
Prepaid expenses .................................................... 38,000
------------
Total current assets .............................................. 2,069,000
MINERAL INTERESTS, net .................................................... 4,314,000
PLANT, PROPERTY, AND EQUIPMENT ............................................ 2,492,000
LESS ACCUMULATED DEPRECIATION ............................................. (555,000)
------------
1,937,000
FOREIGN TAX REFUNDS, net of $182,000 reserve .............................. 392,000
OTHER ASSETS .............................................................. 51,000
------------
Total assets ...................................................... $ 8,764,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ............................... $ 3,183,000
Notes payable ....................................................... 795,000
------------
Total current liabilities ......................................... 3,978,000
LONG-TERM LIABILITIES:
Convertible note payable to shareholder ............................. 765,000
------------
Total liabilities ................................................. $ 4,743,000
============
SHAREHOLDERS' EQUITY:
Common stock, $0.001 par value, 50,000,000 shares authorized;
35,159,784 shares outstanding at October 31, 1997 ............... 35,000
Additional paid-in capital .......................................... 13,249,000
Capital stock subscribed ............................................ 721,000
Foreign Currency translation adjustments ............................ 261,000
Deficit ............................................................. (10,245,000)
------------
Total shareholders' equity ........................................ 4,021,000
Total liabilities and shareholders' equity ........................ $ 8,764,000
============
</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 Nine Months Ended
October 31, October 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES OF PRECIOUS METALS .......................... $ 1,121,000 $ 1,243,000 $ 4,063,000 $ 3,212,000
COSTS APPLICABLE TO SALES ......................... (1,218,000) (1,014,000) (3,886,000) (3,015,000)
------------ ------------ ------------ ------------
GAIN (LOSS) FROM MINING ........................... (97,000) 229,000 177,000 197,000
GAIN (LOSS) ON SALE OF ASSETS ..................... -0- -0- (3,000) -0-
COSTS AND EXPENSES:
Abandoned and impaired mineral interests ..... -0- -0- -0- 3,000
Selling, general and administrative .......... 411,000 502,000 1,176,000 1,337,000
Exploration .................................. 67,000 117,000 223,000 333,000
------------ ------------ ------------ ------------
478,000 619,000 1,399,000 1,673,000
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income (expense) .................... (100,000) (17,000) (196,000) 23,000
Other (expense) income ....................... 12,000 (2,000) 2,000 29,000
Currency exchange losses, net ................ (500,000) 56,000 (768,000) (244,000)
------------ ------------ ------------ ------------
(588,000) 37,000 (962,000) (192,000)
------------ ------------ ------------ ------------
Net loss before income taxes ...................... (1,164,000) (353,000) (2,187,000) (1,668,000)
TAX PROVISION ..................................... -0- -0- -0- -0-
------------ ------------ ------------ ------------
NET LOSS .......................................... ($ 1,164,000) ($ 353,000) ($ 2,187,000) ($ 1,668,000)
=========== =========== =========== ===========
LOSS PER SHARE .................................... ($.03) ($.01) ($.07) ($.06)
------------ ------------ ------------- -----------
WEIGHTED AVERAGE SHARES
OUTSTANDING .................................... 35,090,117 31,213,427 33,112,060 29,274,760
------------ ------------ ------------ ------------
</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)
Nine Months Ended
October 31,
1997 1996
----------- ----------
<S> <C> <C>
Net cash used in operating activities ................................ $ (759,000) $(3,238,000)
Net cash used in investing activities ................................ (325,000) (551,000)
Net cash provided by financing activities ............................ 973,000 5,062,000
----------- -----------
NET INCREASE (DECREASE) IN CASH ...................................... (111,000) 1,273,000
CASH, at beginning of period ......................................... 484,000 266,000
----------- -----------
CASH, at end of period ............................................... $ 373,000 $ 1,539,000
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ........................ $ 209,000 $ 32,000
Cash paid during the period for taxes ........................... 71,000 164,000
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-
Common stock issued in exchange for certain unpatented
mining claims ................................................. -0- $ 50,000
Long-term debt incurred in connection with purchase of
mineral interest .............................................. -0- $ 700,000
</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 $10,245,000, has a net working capital deficiency of
$1,909,000 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 January 31, 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 October 31, 1997 consist of:
Trade ...................................................... $ 212,000
Other ...................................................... 94,000
----------
Total accounts receivable ............................. $ 306,000
3. INVENTORIES
Inventories at October 31, 1997 consist of:
Finished products and products in process ................... $ 334,000
Supplies, materials and spare parts ........................ 468,000
----------
Total inventories ...................................... $ 802,000
4. MINERAL INTERESTS
Capitalized costs for mineral interests at October 31, 1997 consist of:
Operating mining property:
El Limon Mine, Oronorte District ........................... $ 1,472,000
Less accumulated depletion ................................. (382,000)
----------
$ 1,090,000
Non-operating properties, net of reserves:
El Carmen, Colombia ........................................ $ 485,000
La Aurora, Colombia ........................................ 441,000
Juan Vara, Colombia ........................................ 151,000
El Viente, Colombia ........................................ 1,000
Los Verdes, Mexico ......................................... 28,000
Kobeh, Nevada .............................................. 84,000
Castle ..................................................... 780,000
Coal Canyon, Nevada ........................................ 608,000
Red Canyon, Nevada ......................................... 334,000
Tempo, Nevada .............................................. 51,000
Sacramento Mountains, California ........................... 154,000
Water Canyon, Nevada ....................................... 19,000
Amador, Nevada ............................................. 15,000
Modoc, California .......................................... 73,000
----------
Total mineral interests ................................ $ 4,314,000
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).
6
<PAGE>
The Company has a $500,000 line of credit with a Colombian bank. Advances under
this line, which totaled $343,000 at September 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%.
The Company has a $94,000 note payable to a bank at September 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 $55,000, which bears interest at 29%, and requires
interest to be paid quarterly. Principal and remaining interest was due in full
on January 31, 1998. The Company is currently renegotiating the repayment terms.
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 and payment in cash of accrued interest. Accrued interest at
October 31, 1997 was $65,000. The Company's option to issue shares in
satisfaction of the principal portion 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 of such units were sold in the
form of Special Warrants, convertible into 680,000 units at any time prior to
February 28, 1998, and the collected proceeds of $721,000 attributable to the
sale of those units are classified as capital stock subscribed within the
Company shareholders' equity accounts. As of October 31, 1997, none of the
680,000 units 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
7
<PAGE>
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.
On February 1, 1997, an officer was granted options to purchase 100,000 shares
of common stock at 53 cents 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.
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.
In September 1997, two consultants were each granted options to purchase a total
of 200,000 shares of common stock at 22 cents per share (fair market value at
time of grant) in consideration for investment banking and promotional services.
These options become exercisable on September 1, 1998 and expire five years
after they become exercisable.
On October 31, 1997, an officer was granted options to purchase 250,000 shares
of common stock at 16.5 cents per share (fair market value at time of grant).
These options become exercisable on October 31, 1998 and expire five years after
they become exercisable.
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.
8
<PAGE>
The following is a discussion of Fischer-Watt Gold Company, Inc.'s (the
"Company") current financial condition as well as its operations for the nine
months ended October 31, 1997 (fiscal 1998) and October 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 January 15, 1998 the Company had approximately $160,000 in cash, and
accounts payable of approximately $2,819,000.
On October 31, 1997, the Company's current ratio was .5:1 based on current
assets of $2,069,000 and current liabilities of $3,978,000. On October 31, 1996,
the Company's current ratio was 1.4:1 based on current assets of $3,235,000 and
current liabilities of $2,341,000. The decrease in the current ratio at October
31, 1997 is primarily related to a decrease in the cash balance of approximately
$666,000 and a decrease in amounts due from related parties of approximately
$448,000, 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, a decrease in inventories of approximately
$37,000, an increase in accounts payable and accrued expenses of approximately
$1,470,000 and an increase in notes payable of approximately $167,000, all 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
prepaid expenses of approximately $18,000, which relates to the increased
activity associated with the mining operation in Colombia.
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 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 $10,245,000, has a net working capital deficiency of
$1,909,000 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.
9
<PAGE>
Additionally, effective February 1, 1998, the Company's senior management
elected to defer ten percent (10%) of their gross salaries. Future repayment of
the deferred salaries will be at the discretion of the Board of Directors.
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 17% during the year, from approximately $385 per
ounce of gold to approximately $320 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,
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.
10
<PAGE>
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.
In September 1997, the Company issued 209,000 common shares pursuant to the
exercise of warrants issued in April, 1997, which expired February 28, 1999, at
an exercise price of 22 cents per share. The Company received total gross
proceeds of approximately $46,000.
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.)
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 October 31, 1997 the Company had long term debt of $765,000 compared to
$700,000 at October 31, 1996. The increase of $65,000 is solely related to the
accrual of interest on a note payable to Kennecott Exploration Company as
described below. 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 and payment in cash of accrued interest. The Company's option to
issue shares in satisfaction of the principal portion of this debt is subject to
a limitation that Kennecott's ownership of Fischer-Watt cannot exceed 10% of the
outstanding voting common stock.
11
<PAGE>
RESULTS OF OPERATIONS
Three months ended October 31, 1997 compared with three months ended October 31,
1996.
The Company had net loss of $1,164,000 ($.03 per share) compared to $353,000
($.01 per share) during the quarters ended October 31,1997 and 1996,
respectively. The increase in net loss of $811,000 primarily relates to an
increase in currency exchange loss of approximately $557,000, resulting from an
increase in the exchange rate of 11.2% during the quarter ended October 31,
1997, as compared to a decrease in the exchange rate of 2.3% during the quarter
ended October 31, 1996; an increase in costs applicable to sales of
approximately $204,000 which primarily resulted from a $268,000
misclassification during the quarter ended October 31, 1996, which was adjusted
during the fourth quarter 1996, which caused the costs applicable to sales to be
understated during the quarter ended October 31, 1996; a decrease in sales of
precious metals of $122,000 resulting from an increase in gold ounces shipped of
215, offset by a decrease in the average sales price per ounce of gold of
approximately $58. All of the above were partly offset by an increase in
interest expense of approximately $83,000 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; a decrease in selling,
general and administrative costs of approximately $91,000 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 exploration expenses of approximately $50,000 and
a decrease in other expenses of approximately $14,000.
The cash cost per ounce of gold for the nine months ended October 31, 1997 was
$292.88 as compared to $305.66 for the nine months ended October 31, 1996. The
improvement relates to operational efficiencies gained with the increase in
production of 2,710 ounces from 9,128 gold ounces produced to 11,838 gold ounces
produced during the nine months ended October 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 decreased $122,000, from $1,243,000 to $1,121,000
during the quarters ended October 31, 1996 and 1997, respectively. The decrease
in sales relates to a decrease in the average sales price per ounce of gold of
approximately $58, partly offset by an increase in gold ounces shipped of 215
ounces, from 3,290 ounces of gold shipped to 3,505 ounces of gold shipped during
the quarters ended October 31, 1996 and 1997, respectively. 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 $204,000 from $1,014,000 to $1,218,000
during the quarters ended October 31, 1996 and 1997, respectively. The increase
relates to a $268,000 misclassification during the quarter ended October 31,
1996, which was adjusted during the fourth quarter 1996, which caused the costs
applicable to sales to be understated during the quarter ended October 31, 1996.
The adjustment for the misclassification results in a remaining decrease in
costs applicable to sales of $64,000, which relates to the following: an
increase in inventory of approximately $187,000 which resulted from an increase
in the ounces in ending inventory of approximately 540 ounces as compared to an
increase in the ounces in ending inventory of approximately 496 ounces during
the quarters ended October 31, 1997 and 1996, respectively; a reduction in
12
<PAGE>
independent contractor fees of approximately $60,000, which relates to the
assignment of certain tasks to salaried personnel; a reduction in fees of
approximately $43,000, related to reduced consulting fees; reductions in energy
of approximately $15,000; and reductions in maintenance and repair of
approximately $11,000. All of the above were partly offset by the following: an
increase in the provision for ending inventory of approximately $138,000 during
the quarter ended October 31, 1997, as compared to a decrease in the provision
for ending inventory of approximately $63,000 during the quarter ended October
31, 1996; an increase in personnel expenses of approximately $30,000 primarily
resulting from inflationary wage increases of 13% in April 1996, 9% in October
1996 and 11.5% in April 1997; and an increase in selling expenses of
approximately $19,000, which is attributed to an increase in ounces sold of
approximately 215 ounces.
Costs and Expenses
Selling, general and administrative costs decreased $91,000, from $502,000 to
$411,000 during the quarters ended October 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.
The decrease in selling, general and administrative expenses associated with the
Colombian subsidiary were partly offset by an increase in Corporate selling,
general and administrative expenses. The increase in Corporate expenses is
primarily attributable in an increase in Corporate Relations expenses associated
with the Annual Shareholders Meeting held on August 22, 1997, and the write-off
of various capitalized asset balances.
Exploration expense decreased $50,000, from $117,000 to $67,000 during the
quarters ended October 31, 1996 and 1997, respectively. This decrease primarily
relates to the reduction in staffing by one person, and a reduction in fees
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 expense increased $83,000, from $17,000 to $100,000 during the
quarters ended October 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.
Nine months ended October 31, 1997, compared with nine months ended October 31,
1996.
The Company had net loss of $2,187,000 ($ .07 per share) compared to $1,668,000
($.06 per share) in the nine months ended October 31, 1997 and 1996,
respectively. The primary reasons for the change relates to the following: an
increase in sales of precious metals of $851,000 resulting from an increase in
gold ounces shipped of 3,481, partly offset by a decrease in the average sales
price per ounce of approximately $39; a decrease in selling, general and
administrative expenses of approximately $161,000 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 $110,000 which resulted in cutbacks made in the Great
Basin Management subsidiary office. All of the above were offset by the
following: an increase in costs applicable to sales of $871,000 which resulted
from a $524,000 misclassification during the nine months ended October 31, 1996,
which caused the costs applicable to sales to be understated during the nine
months ended October 31, 1996, the remaining increase in costs applicable to
sales of $347,000 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 and
energy expenses resulting from inflationary increases, and an increase in labor
13
<PAGE>
costs associated with a negotiated increase in the labor cooperative's contract,
an increase in selling expenses attributed to an increase in gold ounces sold of
3,481, partly offset by reductions in contractor fees, consulting fees and
maintenance and repair costs; coupled with an increase in currency exchange loss
of approximately $524,000 which relates to an increase in the exchange rate of
approximately 19%; an increase in interest expense of $219,000 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 $27,000.
Gain (Loss) From Mining
Sales of precious metals increased $851,000, from $3,212,000 to $4,063,000
during the nine months ended October 31, 1996 and 1997, respectively. The
increase in sales relates to an increase in gold ounces shipped of 3,481 ounces,
from 8,499 gold ounces shipped to 11,981 gold ounces shipped during the nine
months ended October 31, 1996 and 1997, respectively, partly offset by a
decrease in the average sales price per ounce of approximately $39. 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.
Costs applicable to sales increased $871,000, from $3,015,000 to $3,886,000
during the nine months ended October 31, 1996 and October 31, 1997,
respectively. The increase relates to a $524,000 misclassification during the
nine months ended October 31, 1996, which was adjusted during the fourth quarter
1996, which caused the costs applicable to sales to be understated during the
nine months ended October 31, 1996. The adjustment for the misclassification
results in a remaining increase of $347,000 which relates to the following: a
decrease in inventory of approximately $27,000 resulting from a decrease in the
ounces in ending inventory of approximately 143 ounces as compared to an
increase in the ounces in ending inventory of approximately 629 ounces during
the nine months ended October 31, 1997 and 1996, respectively; an increase in
selling expenses of approximately $132,000 which is attributed to an increase in
ounces sold of 3,481 ounces; a reduction in the provision for ending inventory
of approximately $133,000 during the nine months ended October 31, 1996, as
compared to an increase in the provision for ending inventory of approximately
$10,000 during the nine months ended October 31, 1997. Additionally, gold ounces
produced increased 2,709 ounces, from 9,129 gold ounces produced to 11,838 gold
ounces produced during the nine months ended October 31, 1996 and 1997,
respectively. The increase in production contributed to an increase in personnel
expenses of approximately $14,000 associated with an increase in the average
number of employees and hours paid, and an increase in materials of
approximately $65,000. Personnel expenses increased approximately $115,000 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 $98,000 resulting from a negotiated increase in the
contract effective January 15, 1997. Energy expense increased approximately
$36,000 as a result of inflation. All of the above were partly offset by a
reduction in independent contractor fees of approximately $142,000, which
relates to the assignment of certain tasks to salaried personnel, a reduction in
fees of approximately $76,000 related to reduced consulting fees, and reductions
in repair and maintenance expense of approximately $32,000.
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 nine months ended October 31, 1996 and 1997, respectively. During the
nine months ended October 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.
14
<PAGE>
Selling, general and administrative costs decreased $161,000, from $1,337,000 to
$1,176,000 during the nine months ended October 31, 1996 and 1997, respectively.
The decrease primarily relates to a decrease in general and administrative
expenses associated with mining operations of approximately $306,000 resulting
from a reduction in legal fees resulting from prior year fees associated with
legalization and foreign investment, a decrease in rent 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 in Colombia. The decreases above were partly
offset by an increase in corporate overhead of approximately $145,000 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 $110,000, from $333,000 to $223,000 during the
nine months ended October 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 fees 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 expense increased $219,000, from income of $23,000 to expense of
$196,000 during the nine months ended October 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.
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 $244,000 and $768,000
in the nine months ended October 31, 1996 and 1997, respectively. The increase
in the currency exchange loss of $524,000 relates to an increase in the exchange
rate, from Colombian peso to US dollar, of approximately 19% during the nine
months ended October 31, 1997, as compared to an increase in the exchange rate
of approximately 3% during the nine months ended October 31, 1996.
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 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. 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.
In September 1997, two consultants were each granted options to purchase a total
of 200,000 shares of common stock at 22 cents per share (fair market value at
time of grant) in consideration for investment banking and promotional services.
These options become exercisable on September 1, 1998 and expire five years
after they become exercisable. These securities 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.
On October 31, 1997, an officer was granted an option to purchase 250,000 shares
of common stock at 16.5 cents per share (fair market value at time of grant).
This option becomes exercisable on October 31, 1998 and expires five years after
it becomes exercisable. These securities 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 22, 1997, at the Annual Meeting of Stockholders, the Company's
stockholders voted on two proposals as follows:
1) Election of Directors - All nominees for director were elected. The votes
were cast as follows:
<TABLE>
<CAPTION>
Name For Withhold Authority Abstain Not Voted
---- --- ------------------ ------ ---------
<S> <C> <C> <C> <C>
George Beattie 21,148,795 27,500 104,500 11,205,865
Gerald D. Helgeson 21,141,795 62,000 104,500 11,205,865
Anthony P. Taylor 21,099.195 77,100 104,500 11,205,865
Peter Bojtos 21,148,795 27,500 104,500 11,205,865
James M. Seed 21,148,795 27,500 104,500 11,205,865
Jorge Ordonez 21,137,295 39,000 104,500 11,205,865
</TABLE>
2) Increase in authorized shares of common stock and elimination of preferred
stock - 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. The votes were
cast as follows:
16
<PAGE>
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes Not Voted
--- ------- ------- ---------------- ---------
<S> <C> <C> <C> <C>
16,787,097 344,160 81,488 4,068,050 11,205,865
</TABLE>
Item 5. OTHER INFORMATION
On October 28, 1997, the Company's subsidiary, Great Basin Exploration and
Mining Company, Inc. (GBEM), entered into a Letter Agreement with First Point
Minerals Corporation (First Point), wherein First Point paid $11,178 to GBEM in
consideration for an option to acquire the Amador and Water Canyon properties.
The letter Agreement requires First Point ot maintain all of the Claims in good
standing. The option may be exercised by First Point at any time on or before
August 31, 2002, to acquire all or any portion of the claims. Following exercise
of the option, First Point shall deliver to GBEM or its permitted assigns,
200,000 shares of common stock.
On January 16, 1998, the Company entered into an Option Agreement with Zephyr
Resources, Inc. (Zephyr), wherein Zephyr paid $20,000 to Fischer-Watt in
consideration for an option to receive a Lease of Mining Property covering the
Castle property. The Option Agreement grants Zephyr 150 days to exercise its
option to receive the Lease. Upon exercise of the option, Zephyr shall pay
Fischer-Watt $40,000 cash.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
Exhibit Item 601
No. Category Exhibit
- --- -------- -------
1 3(i) Articles of Incorporation as amended. Filed as exhibit
2-3 to Form 10-QSB filed January 8, 1998, and
incorporated herein by reference.
2 3(ii) By-Laws of the Corporation. Amended and restated. Filed
as exhibit 3-3 to Form 10- QSB filed December 16, 1996,
and incorporated herein by reference.
3 10 Option effective August 31, 1997, whereby Fischer-Watt
Gold Company, Inc., grants Bob Chapman an option to
purchase 50,000 shares of Fischer-Watt Gold Company,
Inc., restricted common stock.
4 10 Option effective August 31, 1997, whereby Fischer-Watt
Gold Company, Inc., grants Rick Lundgren an option to
purchase 150,000 shares of Fischer-Watt Gold Company,
Inc., restricted common stock.
5 10 English translation of contract dated September 1,
1997, between Minera Constelacion, S.A. de C.V. and
Minera Montoro S.A. de C.V. regarding an option to
acquire the Los Verdes.
6 10 English translation of addendum, dated October 1, 1997,
to Purchase-Sale Agreement between Compania Minera
Oronorte S.A. (seller) and NISSHO IWAI Corporation
(buyer) dated December 19, 1995 (filed as exhibit 34-10
to Form 10-KSB filed September 25, 1996).
17
<PAGE>
7 10 Employment agreement effective October 24, 1997,
between Fischer-Watt Gold Company, Inc., and George
Beattie whereby Fischer-Watt agrees to employ Mr.
Beattie for a two-year period as President.
8 10 Letter agreement dated October 28, 1997, between First
Point Minerals Corporation and Great Basin Exploration
and Mining Company, Inc., wherein Great Basin
Exploration and Mining Company, Inc., grants First
Point Minerals Corporation an option to acquire the
claims of the Amador and Water Canyon properties.
9 10 Option effective October 31, 1997, whereby Fischer-Watt
Gold Company, Inc., grants George Beattie an option to
purchase 250,000 shares of Fischer-Watt Gold Company,
Inc., restricted common stock.
10 27 Financial Data Schedule for the nine (9) month period
ended October 31, 1997.
(b) Reports on Form 8-K
During the quarter ended October 31, 1997, no reports on Form 8-K were
filed by the Registrant.
18
<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 11, 1998
By: /s/ George Beattie
---------------------------------
George Beattie, President,
Chief Executive Officer
(Principal Executive Officer),
Chairman of the Board and Director
February 11, 1998
By: /s/ Michele D. Wood
---------------------------------
Michele D. Wood, Treasurer,
Chief Financial Officer
(Principal Financial and Accounting Officer)
19
OPTION
THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURI TIES ACT OF 1933 (THE
"ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT
FOR CONSIDER ATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
OPTION TO PURCHASE 50,000 SHARES OF COMMON STOCK
FISCHER-WATT GOLD COMPANY, INC.
(A Nevada Corporation)
Not Transferable or Exercisable Except
upon Conditions Herein Specified
Void after 5:00 O'Clock P.M.,
Pacific Time, on August 31, 2003
Fischer-Watt Gold Company, Inc., a Nevada corporation (the "Company")
hereby certifies that Bob Chapman or his registered successors and permitted
assigns, registered on the books of the Company maintained for such purposes as
the registered holder hereof (the "Holder"), for value received, is entitled to
purchase from the Company the number of fully paid and non-assessable shares of
Common Stock of the Company, of the par value of $.001 per share (the "Shares"),
stated above at the purchase price of $.22 per Share (the "Exercise Price") (the
number of Shares and Exercise Price being subject to adjustment as hereinafter
provided) upon the terms and conditions herein provided.
1. Exercise of Option.
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Option Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company at 1621 North Third Street,
Suite 1000, Coeur d'Alene, Idaho 83814, or at such other place as the Company
may designate by notice to the Holder hereof, together with a certified or bank
cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Option may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Option Certificate or Option
Certificates of like tenor entitling the Holder to purchase the number of Shares
as to which this Option has not been exercised.
(b) This Option may be exercised in whole or in part at any time after
September 1, 1998 and prior to 5:00 o'clock P.M. Pacific Time, on August 31,
2003.
<PAGE>
2. Exchange and Transfer of Option. This Option at any time prior to the
exercise hereof, upon presentation and surrender to the Company, may be
exchanged, alone or with other Options of like tenor registered in the name of
the Holder, for another Option or other Options of like tenor in the name of
such Holder exercisable for the same aggregate number of Shares as the Option or
Options surrendered.
3. Rights and Obligations of Option Holder.
(a) The Holder of this Option Certificate shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or in
equity; provided, however, in the event that any certificate representing the
Shares is issued to the Holder hereof upon exercise of this Option, such Holder
shall, for all purposes, be deemed to have become the holder of record of such
Shares on the date on which this Option Certificate, together with a duly
executed Purchase Form, was surrendered and payment of the Exercise Price was
made, irrespective of the date of delivery of such Share certificate. The rights
of the Holder of this Option are limited to those expressed herein and the
Holder of this Option, by its acceptance hereof, consents to and agrees to be
bound by and to comply with all the provisions of this Option Certificate,
including, without limitation, all the obligations imposed upon the Holder
hereof by Section 5 hereof. In addition, the Holder of this Option Certificate,
by accepting the same, agrees that the Company may deem and treat the person in
whose name this Option Certificate is registered on the books of the Company
maintained for such purpose as the absolute, true and lawful owner for all
purposes whatsoever, notwithstanding any notation of ownership or other writing
thereon, and the Company shall not be affected by any notice to the contrary.
(b) No Holder of this Option Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Option Certificate be construed to
confer upon any Holder of this Option Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote, give or withhold consent to
any action by the Company, whether upon any recapitalization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise,
receive notice of meetings or other action affecting stockholders (except for
notices provided for herein), receive dividends, subscription rights, or
otherwise, until this Option shall have been exercised and the Shares
purchasable upon the exercise thereof shall have become deliverable as provided
herein; provided, however, that any such exercise on any date when the stock
transfer books of the Company shall be closed shall constitute the person or
persons in whose name or names the certificate or certificates for those Shares
are to be issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open, and the Option surrendered shall not be deemed to have been
exercised, in whole or in part as the case may be, until the next succeeding day
on which stock transfer books are open for the purpose of determining
entitlement to dividends on the Company's common stock.
-2-
<PAGE>
4. Shares Underlying Option. The Company covenants and agrees that all
Shares delivered upon exercise of this Option shall, upon delivery and payment
therefor, be duly and validly authorized and issued, fully paid and
non-assessable, and free from all stamp-taxes, liens, and charges with respect
to the purchase thereof. In addition, the Company agrees at all time to reserve
and keep available an authorized number of Shares sufficient to permit the
exercise in full of this Option.
5. Disposition of Option or Shares.
(a) The holder of this Option Certificate and any transferee hereof or
of the Shares issuable upon the exercise of the Option Certificate, by their
acceptance hereof, hereby understand and agree that the Option, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 (the "Act") or applicable state securities laws (the
"State Acts") and shall not be sold, pledged, hypothecated, donated, or
otherwise transferred (whether or not for consideration) except upon the
issuance to the Company of a favorable opinion of counsel or submission to the
Company of such evidence as may be satisfactory to counsel to the Company, in
each such case, to the effect that any such transfer shall not be in violation
of the Act and the State Acts. It shall be a condition to the transfer of this
Option that any transferee hereof deliver to the Company its written agreement
to accept and be bound by all of the terms and conditions of this Option
Certificate.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Option may be exercisable will
be imprinted with a conspicuous legend in substantially the following form:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") or
applicable state securities laws (the "State Acts") and shall not
be sold, pledged, hypothecated, donated or otherwise transferred
(whether or not for consideration) by the holder except upon the
issuance to the Company of a favorable opinion of its counsel or
submission to the Company of such other evidence as may be
satisfactory to counsel to the Company, in each such case, to the
effect that any such transfer shall not be in violation of the
Act and the State Acts.
The Company has not agreed to register any of the holder's shares of
Common Stock of the Company with respect to which this Option may be exercisable
for distribution in accordance with the provisions of the Act or the State Acts
and, the Company has not agreed to comply with any exemption from registration
under the Act or the State Acts for the resale of the holder's shares of Common
Stock of the Company with respect to which this Option may be exercised. Hence,
it is the understanding of the holders of this Option that by virtue of the
provisions of certain rules respecting "restricted securities" promul gated by
the SEC, the shares of Common Stock of the Company with respect to which this
Option may be exercisable may be required to be held indefinitely, unless and
until registered under the Act and the State Acts, unless an exemption from such
registration is available, in which case the holder may still be limited as to
the number of shares of Common Stock of the Company with respect to which this
Option may be exercised that may be sold.
-3-
<PAGE>
6. Adjustments. The number of Shares purchasable upon the exercise of this
Option is subject to adjustment from time to time upon the occurrence of any of
the events enumerated below.
(a) In case the Company shall: (i) pay a dividend in Shares, (ii)
subdivide its outstanding Shares into a greater number of Shares, (iii) combine
its outstanding Shares into a smaller number of Shares, or (iv) issue, by
reclassification of its Shares, any shares of its capital stock, the amount of
Shares purchasable upon the exercise of this Option immediately prior thereto
shall be adjusted so that the Holder shall be entitled to receive upon exercise
of the Option that number of Shares which such Holder would have owned or would
have been entitled to receive after the happening of such event had such Holder
exercised the Option immediately prior to the record date, in the case of such
dividend, or the effective date, in the case of any such subdivision,
combination or reclassification. An adjustment made pursuant to this subsection
(a) shall be made whenever any of such events shall occur, but shall become
effective retroactively after such record date or such effective date, as the
case may be, as to any exercise between such record date or effective date and
the date of happening of any such event.
(b) Notice to Option Holders of Adjustment. Whenever the number of
Shares purchasable hereunder is adjusted as herein provided, the Company shall
cause to be mailed to the Holder in accordance with the provisions of this
Section 6 a notice (i) stating that the number of Shares purchasable upon
exercise of this Option have been adjusted, (ii) setting forth the adjusted
number of Shares purchasable upon the exercise of this Option, and (iii) showing
in reasonable detail the computations and the facts, including the amount of
consideration received or deemed to have been received by the Company, upon
which such adjustments are based.
7. Fractional Shares. The Company shall not be required to issue any
fraction of a Share upon the exercise of this Option. If more than one Option
shall be surrendered for exercise at one time by the same Holder, the number of
full Shares which shall be issuable upon exercise thereof shall be computed on
the basis of the aggregate number of Shares with respect to which this Option is
exercised. If any fractional interest in a Share shall be deliverable upon the
exercise of this Option, the Company shall make an adjustment therefor in cash
equal to such fraction multiplied by the Exercise Price.
8. Loss or Destruction. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Option Certificate
and, in the case of any such loss, theft or destruction, upon delivery of an
indemnity agreement or bond satisfactory in form, substance and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of this Option Certificate, the Company at its expense will execute and deliver,
in lieu thereof, a new Option Certificate of like tenor.
9. Survival. The various rights and obligations of the Holder hereof as set
forth herein shall survive the exercise of the Option represented hereby and the
surrender of this Option Certificate.
-4-
<PAGE>
10. Notices. Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Option, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid, and
will be deemed to have been given or delivered on the date such notice, purchase
price or other communication is so delivered or posted, as the case may be; and,
if to the Company, it will be addressed to the address specified in Section 1
hereof, and if to the Holder, it will be addressed to the registered Holder at
its, his or her address as it appears on the books of the Company.
FISCHER-WATT GOLD COMPANY, INC.
By
----------------------------------------
George Beattie, Chief Executive Officer
Date
--------------------------------------
-5-
<PAGE>
PURCHASE FORM
----------------, ----
TO: FISCHER-WATT GOLD COMPANY, INC
The undersigned hereby irrevocably elects to exercise the attached Option
Certificate to the extent of __________ shares of the Common Stock, par value
$.001 per share, of Fischer-Watt Gold Company, Inc. and hereby makes payment of
$_____ in accordance with the provisions of Section 1 of the Option Certificate
in payment of the purchase price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
-------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
----------------------------------------------------------------------
By
-------------------------------
-6-
<PAGE>
ASSIGNMENT FORM
For value received, the undersigned hereby sells, assigns, and transfers to
Name
-------------------------------------------------------------------------
Address
-----------------------------------------------------------------------
this Option and irrevocably appoints ------------------------------- attorney
(with full power of substitution) to transfer this Option on the books of the
Company.
Date:
---------------------------- ----------------------------------------
(Please sign exactly as name
appears on Option)
Taxpayer ID No.
------------------------
-7-
OPTION
THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURI TIES ACT OF 1933 (THE
"ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT
FOR CONSIDER ATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
OPTION TO PURCHASE 150,000 SHARES OF COMMON STOCK
FISCHER-WATT GOLD COMPANY, INC.
(A Nevada Corporation)
Not Transferable or Exercisable Except
upon Conditions Herein Specified
Void after 5:00 O'Clock P.M.,
Pacific Time, on August 31, 2003
Fischer-Watt Gold Company, Inc., a Nevada corporation (the "Company")
hereby certifies that Rick Lundgren or his registered successors and permitted
assigns, registered on the books of the Company maintained for such purposes as
the registered holder hereof (the "Holder"), for value received, is entitled to
purchase from the Company the number of fully paid and non-assessable shares of
Common Stock of the Company, of the par value of $.001 per share (the "Shares"),
stated above at the purchase price of $.22 per Share (the "Exercise Price") (the
number of Shares and Exercise Price being subject to adjustment as hereinafter
provided) upon the terms and conditions herein provided.
1. Exercise of Option.
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Option Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company at 1621 North Third Street,
Suite 1000, Coeur d'Alene, Idaho 83814, or at such other place as the Company
may designate by notice to the Holder hereof, together with a certified or bank
cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Option may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Option Certificate or Option
Certificates of like tenor entitling the Holder to purchase the number of Shares
as to which this Option has not been exercised.
(b) This Option may be exercised in whole or in part at any time after
September 1, 1998 and prior to 5:00 o'clock P.M. Pacific Time, on August 31,
2003.
<PAGE>
2. Exchange and Transfer of Option. This Option at any time prior to the
exercise hereof, upon presentation and surrender to the Company, may be
exchanged, alone or with other Options of like tenor registered in the name of
the Holder, for another Option or other Options of like tenor in the name of
such Holder exercisable for the same aggregate number of Shares as the Option or
Options surrendered.
3. Rights and Obligations of Option Holder.
(a) The Holder of this Option Certificate shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or in
equity; provided, however, in the event that any certificate representing the
Shares is issued to the Holder hereof upon exercise of this Option, such Holder
shall, for all purposes, be deemed to have become the holder of record of such
Shares on the date on which this Option Certificate, together with a duly
executed Purchase Form, was surrendered and payment of the Exercise Price was
made, irrespective of the date of delivery of such Share certificate. The rights
of the Holder of this Option are limited to those expressed herein and the
Holder of this Option, by its acceptance hereof, consents to and agrees to be
bound by and to comply with all the provisions of this Option Certificate,
including, without limitation, all the obligations imposed upon the Holder
hereof by Section 5 hereof. In addition, the Holder of this Option Certificate,
by accepting the same, agrees that the Company may deem and treat the person in
whose name this Option Certificate is registered on the books of the Company
maintained for such purpose as the absolute, true and lawful owner for all
purposes whatsoever, notwithstanding any notation of ownership or other writing
thereon, and the Company shall not be affected by any notice to the contrary.
(b) No Holder of this Option Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Option Certificate be construed to
confer upon any Holder of this Option Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote, give or withhold consent to
any action by the Company, whether upon any recapitalization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise,
receive notice of meetings or other action affecting stockholders (except for
notices provided for herein), receive dividends, subscription rights, or
otherwise, until this Option shall have been exercised and the Shares
purchasable upon the exercise thereof shall have become deliverable as provided
herein; provided, however, that any such exercise on any date when the stock
transfer books of the Company shall be closed shall constitute the person or
persons in whose name or names the certificate or certificates for those Shares
are to be issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open, and the Option surrendered shall not be deemed to have been
exercised, in whole or in part as the case may be, until the next succeeding day
on which stock transfer books are open for the purpose of determining
entitlement to dividends on the Company's common stock.
-2-
<PAGE>
4. Shares Underlying Option. The Company covenants and agrees that all
Shares delivered upon exercise of this Option shall, upon delivery and payment
therefor, be duly and validly authorized and issued, fully paid and
non-assessable, and free from all stamp-taxes, liens, and charges with respect
to the purchase thereof. In addition, the Company agrees at all time to reserve
and keep available an authorized number of Shares sufficient to permit the
exercise in full of this Option.
5. Disposition of Option or Shares.
(a) The holder of this Option Certificate and any transferee hereof or
of the Shares issuable upon the exercise of the Option Certificate, by their
acceptance hereof, hereby understand and agree that the Option, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 (the "Act") or applicable state securities laws (the
"State Acts") and shall not be sold, pledged, hypothecated, donated, or
otherwise transferred (whether or not for consideration) except upon the
issuance to the Company of a favorable opinion of counsel or submission to the
Company of such evidence as may be satisfactory to counsel to the Company, in
each such case, to the effect that any such transfer shall not be in violation
of the Act and the State Acts. It shall be a condition to the transfer of this
Option that any transferee hereof deliver to the Company its written agreement
to accept and be bound by all of the terms and conditions of this Option
Certificate.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Option may be exercisable will
be imprinted with a conspicuous legend in substantially the following form:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") or
applicable state securities laws (the "State Acts") and shall not
be sold, pledged, hypothecated, donated or otherwise transferred
(whether or not for consideration) by the holder except upon the
issuance to the Company of a favorable opinion of its counsel or
submission to the Company of such other evidence as may be
satisfactory to counsel to the Company, in each such case, to the
effect that any such transfer shall not be in violation of the
Act and the State Acts.
The Company has not agreed to register any of the holder's shares of
Common Stock of the Company with respect to which this Option may be exercisable
for distribution in accordance with the provisions of the Act or the State Acts
and, the Company has not agreed to comply with any exemption from registration
under the Act or the State Acts for the resale of the holder's shares of Common
Stock of the Company with respect to which this Option may be exercised. Hence,
it is the understanding of the holders of this Option that by virtue of the
provisions of certain rules respecting "restricted securities" promul gated by
the SEC, the shares of Common Stock of the Company with respect to which this
Option may be exercisable may be required to be held indefinitely, unless and
until registered under the Act and the State Acts, unless an exemption from such
registration is available, in which case the holder may still be limited as to
the number of shares of Common Stock of the Company with respect to which this
Option may be exercised that may be sold.
-3-
<PAGE>
6. Adjustments. The number of Shares purchasable upon the exercise of this
Option is subject to adjustment from time to time upon the occurrence of any of
the events enumerated below.
(a) In case the Company shall: (i) pay a dividend in Shares, (ii)
subdivide its outstanding Shares into a greater number of Shares, (iii) combine
its outstanding Shares into a smaller number of Shares, or (iv) issue, by
reclassification of its Shares, any shares of its capital stock, the amount of
Shares purchasable upon the exercise of this Option immediately prior thereto
shall be adjusted so that the Holder shall be entitled to receive upon exercise
of the Option that number of Shares which such Holder would have owned or would
have been entitled to receive after the happening of such event had such Holder
exercised the Option immediately prior to the record date, in the case of such
dividend, or the effective date, in the case of any such subdivision,
combination or reclassification. An adjustment made pursuant to this subsection
(a) shall be made whenever any of such events shall occur, but shall become
effective retroactively after such record date or such effective date, as the
case may be, as to any exercise between such record date or effective date and
the date of happening of any such event.
(b) Notice to Option Holders of Adjustment. Whenever the number of
Shares purchasable hereunder is adjusted as herein provided, the Company shall
cause to be mailed to the Holder in accordance with the provisions of this
Section 6 a notice (i) stating that the number of Shares purchasable upon
exercise of this Option have been adjusted, (ii) setting forth the adjusted
number of Shares purchasable upon the exercise of this Option, and (iii) showing
in reasonable detail the computations and the facts, including the amount of
consideration received or deemed to have been received by the Company, upon
which such adjustments are based.
7. Fractional Shares. The Company shall not be required to issue any
fraction of a Share upon the exercise of this Option. If more than one Option
shall be surrendered for exercise at one time by the same Holder, the number of
full Shares which shall be issuable upon exercise thereof shall be computed on
the basis of the aggregate number of Shares with respect to which this Option is
exercised. If any fractional interest in a Share shall be deliverable upon the
exercise of this Option, the Company shall make an adjustment therefor in cash
equal to such fraction multiplied by the Exercise Price.
8. Loss or Destruction. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Option Certificate
and, in the case of any such loss, theft or destruction, upon delivery of an
indemnity agreement or bond satisfactory in form, substance and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of this Option Certificate, the Company at its expense will execute and deliver,
in lieu thereof, a new Option Certificate of like tenor.
9. Survival. The various rights and obligations of the Holder hereof as set
forth herein shall survive the exercise of the Option represented hereby and the
surrender of this Option Certificate.
-4-
<PAGE>
10. Notices. Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Option, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid, and
will be deemed to have been given or delivered on the date such notice, purchase
price or other communication is so delivered or posted, as the case may be; and,
if to the Company, it will be addressed to the address specified in Section 1
hereof, and if to the Holder, it will be addressed to the registered Holder at
its, his or her address as it appears on the books of the Company.
FISCHER-WATT GOLD COMPANY, INC.
By
----------------------------------------
George Beattie, Chief Executive Officer
Date
--------------------------------------
-5-
<PAGE>
PURCHASE FORM
----------------, ----
TO: FISCHER-WATT GOLD COMPANY, INC
The undersigned hereby irrevocably elects to exercise the attached Option
Certificate to the extent of __________ shares of the Common Stock, par value
$.001 per share, of Fischer-Watt Gold Company, Inc. and hereby makes payment of
$_____ in accordance with the provisions of Section 1 of the Option Certificate
in payment of the purchase price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
-------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
----------------------------------------------------------------------
By
-------------------------------
-6-
<PAGE>
ASSIGNMENT FORM
For value received, the undersigned hereby sells, assigns, and transfers to
Name
-------------------------------------------------------------------------
Address
-----------------------------------------------------------------------
this Option and irrevocably appoints ------------------------------- attorney
(with full power of substitution) to transfer this Option on the books of the
Company.
Date:
---------------------------- ----------------------------------------
(Please sign exactly as name
appears on Option)
Taxpayer ID No.
------------------------
-7-
THIS CONTRACT SIGNED ON SEPTEMBER 1, 1997
BETWEEN: MINERA MONTORO S.A. de C.V. (Hereinafter "Montoro")
AND: COMPANIA MINERA CONSTELACION, S.A. de C.V. (Hereinafter
"Constelacion).
WHEREAS:
A. Constelacion holds the Los Verdes Concession comprising 11 exploitation
mining concessions located in the municipality of Yecora, Sonora State,
which are more particularly described in Schedule "A" attached to this
Agreement and are hereinafter defined as the Concession together with
the "Ampliacion Los Verdes" exploration mining concession currently
pending registration at the Mining Ministry in Hermisillo, Sonora with
File No. 18,087 once this concession is registered in favor of
Constelacion before the Public Registry of Mining.
B. Constelacion has agreed to grant Montoro the option to acquire the
Property on the terms and conditions hereinafter set forth.
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the mutual
covenants and agreements hereinafter contained the parties agree as follows:
1. INTERPRETATION
1.01 In this Agreement the following words, phrases and expressions
shall have the following meanings:
(a) "Minerals" means any and all ores, and minerals,
precious and base, metallic or non-metallic, in, on
or under the Property which under the laws,
regulations, orders, decrees or other instruments
having the force of law may be explored for,
developed, mined, extracted, worked, treated, carried
away, sold and disposed of, and further includes all
concentrates and metals.
(b) "Exploration" means every kind of work done on or in
respect of the Concession by or under the direction
of Montoro including, without limiting generality,
investigating, prospecting, exploring and preparing a
feasibility report.
(c) "Mining Operations" means every kind of exploitation
work done on or in respect of the Concession by or
under the direction of Montoro, including without
limiting generality, development, designing,
equipping, improving, surveying, construction and
mining, and the milling concentrating, smelting,
treating, refining, transporting, handling, marketing
and selling of Minerals.
<PAGE>
(d) "Interest Rate" means the interest rate stated by the
Citibank main office in New York, as being charged by
it on US Dollar demand loans to most creditworthy
domestic Commercial customers.
(e) "Production Date" means the date upon which the first
regular commercial shipment of Minerals extracted
from the Property is made from a mine on the
Property.
(f) "Concession" means the exploitation and exploration
concessions listed in Schedule A.
(g) "Lot" means surface covered by mining concessions
referred by the Concession.
(h) "Option" means the purchase option of the Concessions
that Constelacion grants unto Montoro in the terms
mentioned in subsection 3.01, 3.02 and 3.03 below.
(i) "Purchase Price" means the total amount of
US$50,000.00 that Montoro will pay to Constelacion in
the terms mentioned in subsection 4.01 below.
(j) "Anticipated Royalties" means all advances against
royalties over the Concession production that Montoro
will pay to Constelacion in the terms and conditions
mentioned in subsection 4.02 below.
(k) "Royalties" means royalties over Concessions
production that Montoro will pay to Constelacion in
the terms and conditions mentioned in subsection 4.03
below.
(l) "Concession Assignment Date" means the date in which
Montoro and Constelacion celebrates this agreement in
which Constelacion assigns the titled of the
Concessions to Montoro.
(m) "$" means United States dollars.
2. DECLARATIONS AND WARRANTIES
2.01 Constelacion warrants and represents to Montoro that:
(a) It is the sole legal and beneficial holder of the
Property;
(b) it has the right and capacity to enter and carry out
this Agreement and to dispose of the Concession;
(c) the Concession is not encumbered, neither
Constelacion nor any of its predecessors in interest
or title has done anything whereby the Concession may
become encumbered; and
<PAGE>
(d) there is no lawsuits or arbitraments that involve or
may involve the Concession, and neither other use or
date of this agreement which in the future may bring
any lawsuit or arbitrament.
(e) it has fulfilled all its obligations as title of the
Concessions in accordance with all applicable
legislation including without limiting generality the
obligations mentioned in Article 27 of the Mining Law
and additional obligations mentioned by the same Law
and its Bylaw and the General Law of Ecological
Equilibrium and Environment Protection.
3. DUE DILIGENCE
3.01 In consideration of US$25,000 paid on signing this Agreement,
Constelacion hereby gives and grants unto Montoro the sole and
exclusive Option
3.02 Montoro shall have four months as of the signing of this
Agreement to perform due diligence on title matters and site
evaluations of the Property as well as approaching prospective
lenders regarding financing requirements of the project. If
the financial institutions request additional or confirmation
drilling on the Property, then Montoro shall request and
Constelacion shall grant an extension of an additional 60 days
for this option period.
Constelacion is compelled to give all kind of documentation
and information required by Montoro and allow Montoro free
access to the Concession to review Constelacion obligations
mentioned in the above paragraph.
3.03 If Montoro wishes to exercise the Option contemplated in
section 3.01, it will give notice to Constelacion in writing
on or before the end period of the Option or the extension
granted in subsection 3.02, and Constelacion is compelled to
execute an agreement assigning the Concession to Montoro
within the following 30 days upon Constelacion receiving such
notice. If Montoro does not give notice by that date or elects
not to proceed, this Agreement will be of no further force or
effect.
In case that in the execution of the above mentioned agreement
the "Ampliacion Los Verdes" exploration mining concession,
mentioned in Schedule A, is not assigned to Montoro,
Constelacion should assign this concession to Montoro within
the following 30 days upon Registration of this concession in
favor of Constelacion by Public Registry of Mining.
4. PURCHASE PRICE AND ROYALTIES
4.01 Purchase Price:
If Montoro elects to exercise the Option as contemplated in
subsection 3.03, Montoro shall pay to Constelacion the total
amount of US$50,000.00 as Purchase Price of the Concession
once this agreement is executed assigning Montoro the
Concession.
<PAGE>
4.02 Advanced Royalties:
Montoro shall pay yearly to Constelacion as Advanced Royalties
over Concession production the amount of US$100,000.00 no
later than each anniversary of the Assignation date of the
Concession until and including the year of the production
date.
4.03 Royalties:
Montoro will pay as royalties over Concession production as
per:
a) US$1,000,000 yearly as royalties on each anniversary
of the Production Date over the understanding that
the first and subsequent anniversary payment must be
reduced, until the paid amounts mentioned in
subsection 4.02 have been deducted, however, the
amount to be paid in each anniversary would not be
lower than US$75,000.00 understanding that such
royalties should be paid although the Concession
production in interrupted.
b) The total amount of the Royalties should be
US$4,950,000 without including the advanced payments
as "Advanced Royalties" mentioned in subsection 4.02.
If following the Production Date, Montoro wishes to delay the
payment of any amount due under paragraph 4.03, by reason of
low metal prices affecting the operations or other reasonable
cause, Montoro may request and Constelacion will grant a
90-day extension with interest charged during the extension at
Prime Rate.
4.04 If Montoro fails to make any payment due pursuant to
subsection 4.01, 4.02 or 4.03, Constelacion may give Montoro
notice in writing of the default. Montoro shall be entitled to
pay to Constelacion within 14 days of receipt of
Constelacion's notice 105 percent of the cash payment which is
overdue. Any increased payment so made within the 14-day
period shall be deemed to have been duly and properly made and
this Agreement shall remain in full force and effect.
4.05 All payments payable under this Agreement shall be paid by
Montoro in Mexican National currency using the official
exchange rate on the day before the payment is made, published
in the Official Gazette of the Federation for credit to
Constelacion at the bank as follows:
Bank: Banamex, S.A.
Branch: 274
Account No.: 5472187
<PAGE>
5. REGISTRATION IN THE "REGISTRO PUBLICO DE MINERIA"
5.01 Montoro shall pay the costs associated with the public deed
transferring of the Concession from Constelacion and its
registration at the Public Registry of Mining.
After signature of this agreement, Montoro shall present all
notices and/or notifications required by the Public Registry
of Mining in reference with this Option, and Constelacion
requested by Montoro shall sign on time, any application,
permit or acceptance and deliver to Montoro any information
required by authorities related to the presentation of such
advertisements and/or notifications.
6. AREA OF INTEREST
6.01 During the term of this Agreement that area of land which is
within 2,500 meters in radius form the existing portal of the
"Los Verdes Adit" shall be deemed to comprise the "Area of
Interest." Any exploration or exploitation concessions
acquired by either party within the Area of Interest shall be
deemed to be part of the Concession and to be subject to this
Agreement.
7. MINING OPERATIONS AND REPORTING
7.01 Constelacion grants Montoro the exclusive right to exploit and
explore the Lotes including all rights derived from its
Exploration Works and Mining Operations in the terms and
conditions of this agreement.
7.02 Until the purchase price, advance royalties and royalties have
been paid in full, Montoro shall:
(a) perform its Mining Operations in a sound and
workmanlike manner, in accordance with sound mining
and engineering practices and in compliance with all
material applicable federal, provincial and municipal
laws, by-laws, ordinances, rules and regulations and
this Agreement;
(b) not commence or continue a work program unless it has
sufficient funds secured or on hand to pay for
budgeted costs plus a reasonable allowance for
contingencies; and
(c) permit Constelacion to inspect the Property at
reasonable intervals and times, previously agreed by
both parties provided that the Inspections are at
Constelacion's sole risk and expense and Constelacion
does not disrupt Mining Operations, Montoro will not
unreasonably refuse the dates proposed by
Constelacion for these inspections.
(d) keep the title of the Property in good standing.
<PAGE>
(e) Only sell or encumber the Property in any manner
until all considerations mentioned in section 4 above
are paid, or with previous agreement with
Constelacion.
7.03 Until the purchase price, advance royalties and royalties have
been paid in full, Montoro shall provide to Constelacion:
(a) quarterly regular reports of Mining Operations of the
results obtained therefrom;
(b) copies of any news releases it proposes to make prior
to making the same.
8. PROPERTY ADMINISTRATION
8.01 During the term of this Agreement, Montoro shall pay such
taxes and other payments and file, to the maximum extent
possible, assessment credit, such work as may be required to
keep the Property in good standing. Notwithstanding the
foregoing, Montoro may abandon from any or all of the
concessions comprised in the Concession and such action shall
not after the terms of this Agreement with respect to the
remainder of the Concession. However: (a) concessions will be
abandoned only after Montoro has given notice of abandonment
to Constelacion; and
(b) all concessions proposed for abandonment shall be in
good standing for a least 90 days from the date of
Montoro's notice of abandonment and shall be
transferred to Constelacion forthwith upon request
made by Constelacion within 30 days of Montoro's
notice of abandonment.
If this Agreement were in force and effect 90 days
prior to the expiration date of a concession, Montoro
must submit the respective mineral exploitation
concession application for the mineral lots at least
30 days before the expiration date. Constelacion will
provide such reasonable assistance as Montoro may
request to this end and sign all the required
documents.
8.02 If this Agreement terminates without Montoro having paid the
purchase price and royalties in full, Montoro will:
(a) Upon request made within 30 days or termination,
deliver to Constelacion copies of all pertinent
plans, assay maps and diamond drill records relating
to the Mining Operations which have previously not
been delivered; and
(b) cause sufficient work to be recorded or money paid in
lieu thereof to maintain the concessions which then
comprise the Property in good standing for at least
one year from the date of termination contemplated in
paragraph 9.01(a); and
<PAGE>
(c) offer to transfer the Property to Constelacion as
contemplated in subsection 9.02 forthwith upon
request made by Constelacion within 30 days of
Montoro's notice of abandonment.
9. TERMINATION
9.01 This Agreement shall terminate:
(a) If any cash payment listed in subsection 4.01, 4.02,
4.03 is not paid or delivered by the due date listed
or the later date permitted in subsection 4.04; or
(b) on Montoro giving notice of termination to
Constelacion which it shall be at liberty to do at
any time after the execution of this Agreement.
9.02 If this Agreement terminates without Montoro having paid the
purchase price, Advance Royalties and Royalties in full,
Montoro shall offer to transfer the Concession to Constelacion
and any mining concessions held by Montoro or any mining claim
request by Montoro, once it is titled, within the Area of
Interest. If Constelacion accepts Montoro's offer within 30
days or if Montoro failed to make an offer and Constelacion
registered that the Concession be transferred to Constelacion,
Montoro shall transfer the Concessions to Constelacion for
US$1.00 within 14 days of Constelacion's acceptance or
request, and for that purpose Montoro is obliged to fulfill
all necessary requirements and execute whatever documents may
be required to transfer the Concession to Constelacion upon
receipt of notice from Constelacion that it is entitled to a
transfer of the Concession under this section.
9.03 Upon termination of this Agreement, Montoro shall cease to be
liable to Constelacion save for the performance of those of
its covenants which theretofore should have been performed and
its obligations under subsections 7.02, 7.03, 8.02 and 9.02.
9.04 Montoro shall vacate the Property within 180 days after
termination, but shall have the right of access to the
Property for a reasonable time thereafter to remove its
buildings, machinery, equipment and supplies.
9.05 Constelacion shall under no circumstances be obligated to
return any amounts which it may have received from Montoro.
10. INDEMNITY AND INSURANCE
10.01 Montoro shall indemnify and save Constelacion harmless from
and against any loss, liability, claim, demand, damage,
expense, injury or death (including, unless Montoro assumes
and pays the defense of legal fees and the reasonable cost of
investigating and defending against any judicial proceedings
once they are reasonable and documented) arising out of or in
<PAGE>
connection with exploration activities conducted during the
subsistence of the Option or arising out of or in connection
with the sale or attempted sale of any interest in the
Concession to a third party.
10.02 During the term of this Agreement, Montoro shall provide,
maintain and pay for the following insurance which shall be
placed with such insurance company or companies and in such
form as may be acceptable to Constelacion:
(a) Comprehensive General Liability Insurance protecting
Montoro and its employees, agents, contractors,
invitees and licensees against damages arising from
personal injury (including death) and from claims for
property damage which may arise directly or
indirectly out of the operations of Montoro and
Constelacion under this Agreement including coverage
for liability and contractual liability; and
(b) automobile insurance on Montoro's owned vehicles, if
any, protecting Montoro and its employees, agents,
contractors, invitees, and licensees against damages
arising from bodily injury (including death) and from
claims for property damage arising out of the
operations of Montoro under this Agreement.
10.03 Each policy of insurance contemplated in subsection 10.02
shall:
(a) Be in an amount acceptable to Montoro and
(b) indicate that the insurer will give Constelacion 30
days' prior written notice of cancellation or
termination of the coverage.
Montoro shall provide Constelacion with such evidence
of insurance as Constelacion may request.
10.04 Montoro will, at its expense, obtain insurance in such greater
amounts and for such greater coverage as it deems prudent to
protect itself and Constelacion hereunder.
10.05 Constelacion shall indemnify and save Montoro harmless from
and against any loss, liability, claim, demand, damage,
expense, injury or death (including, unless Constelacion
assumes and pays the defense of legal fees and the reasonable
cost of investigating and defending against any judicial
proceedings) arising out of or in connection with exploration
activities conducted before the subsistence of the Option or
arising out of or in connection with representations by
Constelacion.
11. NOTICES
11.01 All notices, demands or requests required or permitted to be
given hereunder shall be in writing and may be delivered
personally, sent by telecopier or forwarded by prepaid
registered mail. Any notice sent by telecopier or personally
delivered shall be deemed to have been given and received on
<PAGE>
the business day next following the date of sending or
delivery. Any notice mailed shall deemed to have been given
and received on the seventh day following the date of posting,
addressed as follows:
If to Constelacion:
Compania Minera Constelacion , S.A. de C.V.
Pable Neruda #2886
Col. Providencia
44639 Guadalajara, Jalisco, Mexico
Attention: Manager
Tel: 01 (3) 642-5014
Fax: 01 (3) 640-2472
Copy to:
Cominco Ltd.
500-200 Burrard Street
Vancouver, BC
V6C 3L7
Attention: General Manager, International
Exploration
If to Montoro:
MINERA MONTORO, S.A. DE C.V.
Palmas #735-205
Lomas de Chapultepec
11000 Mexico, D.F.
Attention: President
Tel: 01 (5) 520-2926
Fax: 01 (5) 520-2893
Copy to:
FISCHER-WATT GOLD COMPANY, INC.
1621 N. 3rd Street, Suite 1000
Coeur d'Alene, ID 83814-3304
Attention: President and Chief Executive Officer
Tel: 001 (208) 664-6757
Fax: 001 (208) 667-6516
or to such other address as wither party may subsequently
specify by notice to the other. However, if there is a mail
strike, slowdown or other labor dispute which might affect
delivery of the notice by mail, then the notice shall be
effective only if actually delivered.
<PAGE>
12. ASSIGNMENT
12.01 During the term of this Agreement:
(a) Montoro, previous agreement with Constelacion, could
only sell, transfer, assign or otherwise dispose this
Agreement or its right or interest in the Concession.
(b) Montoro, previous writing agreement with
Constelacion, could pledge, mortgage, charge or
otherwise encumber their beneficial interest in the
Concessions or their rights under this Agreement.
13. FURTHER ASSURANCES
13.01 Each of the parties shall do all such further acts and execute
and deliver such further deeds and documents as shall be
reasonably required in order fully to perform the terms of
this Agreement.
14. CAPTIONS
14.01 The captions in this Agreement have been inserted for
convenient reference and shall be disregarded interpreting
this Agreement.
15 ENTIRE AGREEMENT
15.01 This is the entire agreement between the parties relating to
the Concession and supersedes all previous negotiations and
communications including, without limiting generality, the
Letter of Intent signed on June 3, 1997.
16 EXPENDITURES AND TAXES
16.01 Montoro will cover all the expenditures and taxes under the
public deed, and in this case, those under the purchase and
sale of concession rights' deed.
16.02 Constelacion will cover any income or profit taxes associated
with its sale of the Property.
16.03 The Value Added Tax shall be added to all amounts agreed in
this agreement.
17. GOVERNING LAW
17.01 For any controversy that would arise between the parties in
respect to the interpretation and execution of the present
contract, the parties will abide by the laws of the courts of
Mexico, Federal District, and expressly renounce any other.
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year first above written.
MINERA MONTORO S.A. de C.V.
By: Ing. Jorge E. Ordonez Cortes
-------------------------------------
(Title)
COMPANIA MINERA CONSTELACION, S.A. de C.V.
By: Lic. Yvonne Avalos Cazares
-------------------------------------
(Title)
<PAGE>
Attachment "A" of the Minero Montoro, S.A. de C.V. and Compania Minera
Constelacion, S.A. de C.V. Agreement made as of 1st September 1997.
The Concession is composed of:
I. The exploitation mining Concessions of the following lots located
in Muncipality of Yecora, Sonora State.
Name Title Hectares
---- ----- --------
1. "Bacanora" 168,625 238.9685
2. "Bacanora Tres" 194,437 12.0000
3. "Los Verdes" 168,566 14.0000
4. "Buena Vista" 168,569 21.0000
5. "Piedras Azules" 178,925 132.7287
6. "Continuacion Buena Vista" 168,574 30.000
7. "La Nueva Cruz de San Nicolas 168,573 81.0000
8. "La Frontera" 168,575 15.0000
9. "Dos Picachos" 168,621 31.0000
10. "La Bufita" 193,491 10.0000
11. "La Verde" 168,576 9.0000
The above mentioned concessions are grouped to comply with the mining tax
obligations being head of the group the "Los Verdes" concession, Title 168,566.
II. The application for the "Ampliacion Los Verdes" exploration
mining claim its being handled under file 18,087 before the
Mining Agency in Hermosillo.
III. The mining concession requested by Montoro within the area of
interest entitled to Montoro or Constelacion or from which they
obtained contractual right to explore or exploit or an option to
acquire their ownership.
ADDENDUM NO. 1 TO PURCHASE-SALE AGREEMENT
dated December 19, 1995
COMPANIA MINERA ORONORTE S.A.("Seller") and NISSHO IWAI CORPORATION ("Buyer")
agreed to make the following amendments to the above agreement.
Clause 5. Quality
Gold and Silver Concentrate of two different types with typical assays as
follows ;
High Grade Concentrate Low Grade Concentrate
---------------------- ---------------------
(HGC) (LGC)
Au 700 - 1,500g/dmt 300 - 550g/dmt
Ag 850 - 1,300g/dmt 600 - 800g/dmt
Cu less than 0.5% same
As less than 1.0% same
Fe 25 - 30% same
S 30% same
Hg less than 125ppm same
Al2O3 less than 1% same
Bi less than 10ppm same
TiO2 less than 1% same
Pb 6 - 7% same
Zn 5 - 9% same
Sb less than 0.5% same
H2O 4 - 6% same
F less than 100 ppm same
Clause 6. Quantity
The quantity of concentrates covered by the agreement shall be the annual
production of EL Limon mine during 1997.
Clause 7. Duration
January 1, 1997 through December 31, 1997
All other terms and conditions of Purchase - Sale Agreement as of December 19,
1995 will remain unchanged.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this 24th day of October, 1997, by and
between Fischer-Watt Gold Company, Inc., a Nevada corporation (the
"Corporation"), and George Beattie (the "Employee").
1. Employment
The Corporation hereby employs the Employee as President and the
Employee hereby accepts such employment in accordance with the terms and
conditions of this Agreement.
2. Duties of Employee
The duties of the Employee are to serve as the Corporation's chief
executive officer, exercising detailed supervision over all of the Corporation's
property, operations, and business affairs, subject to the direction and control
of the Board of Directors of the Corporation. The powers and duties of the
Employee may include other duties as may be more specifically determined and
set, and may be changed, by the Board of Directors of the Corporation from time
to time. The Employee shall strictly adhere to all of the rules and regulations
of the Corporation which are presently in force or which may be established
hereafter with respect to the conduct of Employees.
3. Other Employment
The Employee is required to refrain from acting in any other work
capacity or employments without having first obtained the written consent of the
Corporation. It is the Corporation's intention that the Employee devote all of
the Employee's work effort towards the fulfillment of the Employee's obligations
under this Agreement.
4. Place of Employment
The Employee's initial place of work is the principal office of the
Corporation located at 1621 North Third Street, Suite 1000, Coeur d'Alene,
Idaho. However, the Corporation may require that the Employee work at such other
place or places as the Corporation may direct. However, if the Employee is
requested to relocate, the Corporation shall pay the Employee's reasonable
expenses in that regard.
5. Compensation of Employee
As compensation for all services rendered by the Employee under this
Agreement, the Corporation shall pay the Employee a salary of $100,000 annually,
payable not less frequently than in monthly installments.
1
<PAGE>
In addition, upon execution of this Agreement, the Employee shall
receive a stock option representing the option to purchase 250,000 shares of the
Corporation's common stock at an exercise price of $.__, exercisable at any time
after November 1, 1998 and prior to the close of business on October 31, 2003,
as evidenced by and pursuant to the terms of the option certificate attached to
this Agreement as Exhibit A.
6. Employee Benefits
The Employee shall be entitled to four weeks paid vacation per year, to
be taken as shall be reasonably consistent with the Employee's duties and
obligations to the Corporation. The Corporation shall reimburse the Employee on
an annual basis for the cost of the annual premium of a $500,000 term life
insurance policy insuring the life of the Employee, up to a maximum of $3,000
per year. The Corporation shall also provide the Employee with such other
benefits, including life and health insurance, as the Corporation generally
provides to its employees, which may be changed from time to time at the
discretion of the Corporation. Vacation and other benefits are subject to the
policies of the Corporation, as in effect from time to time.
7. Employee Expenses
The Corporation shall reimburse the Employee for all reasonable and
necessary expenses incurred by the Employee in the furtherance of or in
connection with the business of the Corporation. In order to obtain
reimbursement, the Employee shall submit to the Corporation an itemized
statement of such expenses along with copies of bills and receipts. Further
explanations may be required of the Employee. Payments shall be made within 30
days after receipt of all necessary documentation.
8. Term of Employment
The term of employment shall begin October 24, 1997 and extend to
October 31, 1999.
9. Termination of Employment
a. The Corporation may terminate the Employee's employment at will,
with or without cause and at any time, without prior notice. "Cause"
shall mean breach by the Employee of any term or provision of this
Agreement, or any other conduct or behavior by the Employee which the
Corporation reasonably believes constitutes criminal or unethical
conduct or behavior or which has a material adverse effect on the
Corporation. The Employee may terminate his employment at any time upon
30 day's notice.
2
<PAGE>
b. If the Employee shall become unable to attend to the duties of
employment as required by this Agreement and it becomes necessary for
the Corporation to replace the Employee either temporarily or
permanently, the Corporation may do so and at the same time may suspend
all further payments to the Employee for salary or bonuses and all
other related compensation. The Corporation will recommence the payment
of salaries, bonuses and other compensation at such date as the
Employee shall resume and perform the Employee's duties under this
Agreement. The right of the Corporation as set forth above is in
addition to the right of the Corporation to terminate the Employee's
employment at any time as set forth above.
c. If the Employee's employment is terminated, all salaries, bonuses,
other compensation and benefits shall accrue and be paid to the
Employee to the date of the termination. Payments will be made with
respect to each item of compensation or benefit as soon as the amount
due is determined. In addition, if the Employee's employment is
terminated by the Corporation for any reason other than for cause: (i)
the Corporation shall pay to the Employee from the date of termination,
as severance compensation, the monthly salary of the Employee at the
date of termination for a period of six months plus an additional two
months for each full year of employment since September 1, 1993; and
(ii) the Corporation shall pay on behalf of the Employee from the date
of termination the Employee's monthly health insurance premium for a
period of plus an additional two months for each full year of
employment since September 1, 1993, up to a maximum of twelve months.
In the event the Employee's employment is terminated for cause, the
Corporation shall have the right to withhold any and all monies due to
the Employee and shall apply the same as an offset against any monies
due to the Corporation from the Employee as a result of any damages
suffered by the Corporation arising from the conduct or behavior which
resulted in termination for cause.
d. If the Employee dies while employed by the Corporation, this
Agreement shall automatically terminate.
10. Arbitration of Disputes
Any controversy or claim arising out of or relating to this Agreement,
the interpretation or breach of this Agreement, the Employee's employment by the
Corporation, or the termination of the Employee's employment shall be submitted
to and settled by arbitration in accordance with the Idaho Uniform Arbitration
Act. Judgment upon the award rendered in connection with such arbitration may be
entered in any court having jurisdiction thereof.
11. Severability; Governing Law
If any clause or provision of this Agreement shall be adjudged invalid
or unenforceable, it shall not affect the validity of any other clause or
provision, which shall remain in full force and effect. In the event any
provision of this Agreement is found to be unenforceable for any reason the
3
<PAGE>
parties shall attempt to modify that portion in a manner to preserve the intent
of the parties in entering into the Agreement. The laws of Idaho shall apply to
this Agreement, except where Federal law applies. The parties consent to
jurisdiction and venue in any court of competent jurisdiction in the County of
Kootenai, Idaho, for any court proceedings which may be necessary following
arbitration or which may otherwise arise from this Agreement.
12. Complete Agreement
This Agreement supersedes all prior Agreements and understandings
between the Employee and the Corporation and may not be modified, changed or
altered by any unwritten promise or statement by whomsoever made; nor shall any
modification of it be binding upon the Corporation until such written
modification shall have been approved in writing by the President of the
Corporation.
13. Waiver of Breach
The waiver by the Corporation of a breach of any provision of this
Agreement by the Employee shall not operate or be construed as a waiver of any
other breach by the Employee.
14. Employment by Subsidiary
If the Corporation owns, acquires or forms subsidiary companies or
becomes connected with other affiliate corporations, the Employee agrees to be
employed by any of the same and in such event all of the terms and conditions
set forth herein shall bind the parties.
15. General
This Agreement shall be binding upon and benefit any heirs,
subsidiaries, affiliates, successors, or assigns of the parties. All captions
used in this Agreement are for convenience only and shall have no meaning in the
interpretation or effect of this Agreement. The provisions of Section 10 of this
Agreement will survive the termination of this Agreement and remain in full
force and effect.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on and as of the date set forth above.
THE CORPORATION:
FISCHER-WATT GOLD COMPANY, INC.,
a Nevada corporation
By:
-----------------------------------
Name:
--------------------------------
Title:
--------------------------------
THE EMPLOYEE:
GEORGE BEATTIE
-------------------------------------
George Beattie
5
GREAT BASIN EXPLORATION & MINING CO., INC.
1621 NORTH THIRD STREET, SUITE 1000
COEUR D'ALENE, IDAHO 83814
October 28, 1997
First Point Minerals Corp.
1050 W. Pender Street, #2170
Vancouver, British Columbia
Canada V6E 3S7
Re: Option to Acquire Amador and Water Canyon Properties,
Lander County, Nevada
Gentlemen:
This letter, when countersigned by you, will confirm and memorialize our
agree ment with respect to the grant by Great Basin Exploration & Mining Co.,
Inc. ("GBEM") to you of an option (the "Option") to acquire the Amador and Water
Canyon properties (comprised of the claims set forth on Exhibit A hereto; the
"Claims") held by GBEM, and the terms upon which the Option may be exercised by
you. Our agreement is on the terms, and subject to the conditions, described
below.
1. Fundamental Terms.
A. GBEM hereby grants you the Option. The terms of the Option are as
follows: (i) subject to the provisions of Items 1C and 4 hereof, the Option may
be exercised by you at any time on or before August 31, 2002 (the "Expiration
Date") to acquire all or any portion of the Claims (the "Exercised Claims");
(ii) within 90 days following exercise of the Option (in whole or in part) you
shall deliver to GBEM or its permitted assigns 200,000 shares of common stock
(the "Shares") of First Point Minerals Corp. ("First Point"); and (iii) upon
delivery of the Shares following exercise GBEM shall execute and deliver to you
a quitclaim deed conveying all of GBEM's right, title and interest in and to the
Exercised Claims.
B. The Shares to be issued upon the exercise of the Option are subject
to adjustment from time to time upon the occurrence of any of the events as
follows.
(i) In case First Point shall: (a) pay a dividend in shares of
common stock, (b) subdivide its outstanding shares of common stock into a
greater number of shares, (c) combine its outstanding shares of common stock
into a smaller number of shares, or (d) issue, by reclassification of its shares
of common stock, any shares of its capital stock, the amount of the Shares to be
issued upon the exercise of the Option immediately prior thereto shall be
adjusted so that upon the exercise of the Option there shall be issued that
number of Shares which a holder of the Shares would have owned or would have
<PAGE>
been entitled to receive after the happening of such event had the Option been
exercised immediately prior to the record date, in the case of such dividend, or
the effective date, in the case of any such subdivision, combination or
reclassification. An adjustment made pursuant to this Item 1B shall be made
whenever any of such events shall occur, but shall become effective
retroactively after such record date or such effective date, as the case may be,
as to any exercise between such record date or effective date and the date of
happening of any such event.
(ii) In case of any merger of First Point with any other
corporation (other than a merger in which First Point is the continuing
corporation), any share exchange or any sale or transfer (other than to a wholly
owned subsidiary) of all or substantially all of the assets of First Point,
either First Point, the corporation into which First Point shall have been
merged, the corporation which shall have acquired all the issued or all the
outstanding shares of common stock of First Point or the corporation which shall
have acquired such assets, as the case may be, shall make appropriate provision
so that, upon exercise of the Option, there shall be issued the kind and amount
of shares of stock and other securities and property receivable upon such
merger, share exchange, or transfer which a holder of the Shares would have
received had the Option been exercised immediately prior to such merger, share
exchange or transfer. The above provisions shall similarly apply to successive
mergers, share exchanges or transfers.
C. Upon execution of this letter agreement you shall pay GBEM the
amount of US$11,178 as reimbursement for payments made by GBEM since August 1,
1997 to governmental authorities to maintain the Claims. From the date hereof
through the Expiration Date (unless, commencing calendar year 1999, you shall
notify GBEM in writing on or before May 31st of a calendar year that you do not
intend to make those payments which may be due to governmental authorities in
August and September of such calendar year, in which case any Claims with
respect to which you have stated your intention not to make payments shall no
longer be deemed a Claim subject to the Option) you shall make, in the name of
GBEM, any and all payments to governmental authorities required to maintain all
of the Claims in good standing. In the event that you fail to make any of the
payments provided for in this Item 1C when due, you shall incur liability for
damages suffered by GBEM resulting from such failure to pay any such payment
when due (up to a maximum aggregate amount of liability for such damages of
US$35,000), the Option shall immediately terminate and become null and void and
of no further force or effect, you shall be prohibited from acquiring any of the
Claims (directly or indirectly) for a period of two years following such date of
termination of the Option.
2. Covenants. First Point covenants and agrees that the Shares delivered
upon exercise of the Option shall, upon delivery, be duly and validly authorized
and issued, fully paid and non-assessable, and free from all stamp-taxes, liens,
and charges with respect to the purchase thereof. GBEM covenants and agrees that
it shall not encumber or transfer (other than pursuant to exercise of the
Option) the Claims subject to the Option from the date hereof through the
earlier to occur of the Expiration Date or termination of the Option pursuant to
Item 1C hereof.
<PAGE>
3. Representations and Warranties. GBEM represents and warrants that, to
the best of its knowledge, other than rights of Serem Gatro Canada Inc. ("SGC")
arising pursuant to and in accordance with that certain Participation Agreement,
by and among SGC, GBEM and Great Basin Management Co., Inc., dated May 31, 1995
(the "Participation Agreement"), the Claims are unencumbered. First Point
represents and warrants that it has received and reviewed the Participation
Agreement and has been advised by GBEM to seek the advice and assistance of
counsel in connection therewith..
4. Participation Agreement Compliance. All of the applicable terms and
conditions of Section 14.01 of the Participation Agreement shall be satisfied
prior to any exercise of the Option. Each party shall cooperate with the other
and use its best efforts to comply therewith.
5. Press Releases and Disclosure. Each party agrees that it will not issue
any press release or other disclosure of this letter agreement without the prior
approval of the other, which shall not be unreasonably withheld, unless such
disclosure is required by law or the rules or practices of any stock exchange or
automated quotation system and time does not permit the obtaining of such
consent, or such consent is withheld.
6. Permitted Assigns. GBEM may assign its right to receive the Shares upon
exercise of the Option to any corporation which owns all of the outstanding
shares of capital stock of GBEM (a "Parent Corporation") or to any corporation
which owns all of the outstanding shares of capital stock of a Parent
Corporation. You may assign the Option to (i) any corporation all of the
outstanding shares of capital stock of which are owned, directly or indirectly,
by First Point or (ii) any joint venture to which First Point is a party, but
any such assignment shall not relieve First Point of the obligation to issue the
Shares following exercise of the option.
7. Entire Agreement and Governing Law. This letter agreement is the sole
and entire agreement between the parties with respect to the subject matter
hereof and shall be governed by the laws of the State of Idaho of the United
States of America.
8. Further Assurances. The parties agree to take such further action and
execute such additional documents as may be necessary to fully effectuate the
terms of this letter agreement.
Very truly yours,
GREAT BASIN EXPLORATION & MINING CO.,
INC.
By
-----------------------------------
George Beattie, President and Chief
Executive Officer
Confirmed and Agreed:
FIRST POINT MINERALS CORP.
By Date:
---------------------------------- -----------------
Peter Bradshaw, President and
Chief Executive Officer
<PAGE>
The following is a compilation of claims associated with the Amador property.
The property is located in Sections 28, 29, 30, 31, 32, and 33, T20N, R44E,
MDB&M, Lander County, Nevada
<TABLE>
<CAPTION>
Recorded in Co.
Name of claims(s) or site(s): Location Date Book Page
- --------------------------- ------------- -------------------------
BLM Serial No(s):
----------------
<S> <C> <C> <C>
49ER 425 9/22/96 436 183 757658
49ER 426 9/22/96 436 182 757659
49ER 427 9/22/96 436 181 757660
49ER 428 9/22/96 436 188 757661
49ER 429 9/22/96 436 179 757662
49ER 430 9/22/96 436 178 757663
49ER 431 9/22/96 436 177 757664
49ER 432 9/22/96 436 176 757665
49ER 433 9/22/96 436 175 757666
49ER 434 9/22/96 436 174 757667
49ER 435 9/22/96 436 173 757668
49ER 436 9/22/96 436 172 757669
49ER 525 9/22/96 436 171 757670
49ER 526 9/22/96 436 170 757671
49ER 527 9/22/96 436 169 757672
49ER 528 9/22/96 436 168 757673
49ER 529 9/22/96 436 167 757674
49ER 530 9/22/96 436 166 757675
49ER 531 9/22/96 436 165 757676
49ER 532 9/22/96 436 164 757677
49ER 533 9/22/96 436 163 757678
<PAGE>
<CAPTION>
<S> <C> <C> <C>
49ER 534 9/22/96 436 162 757679
49ER 535 9/22/96 436 161 757680
49ER 536 9/22/96 436 160 757681
49ER 625 9/22/96 436 159 757682
49ER 626 9/22/96 436 158 757683
49ER 627 9/22/96 436 157 757684
49ER 628 9/22/96 436 156 757685
49ER 629 9/22/96 436 155 757686
49ER 630 9/22/96 436 154 757687
49ER 631 9/22/96 436 153 757688
49ER 632 9/22/96 436 152 757689
49ER 633 9/22/96 436 151 757690
49ER 634 9/22/96 436 150 757691
49ER 635 9/22/96 436 149 757692
49ER 636 9/22/96 436 148 757693
49ER 725 9/22/96 436 147 757694
49ER 726 9/22/96 436 146 757695
49ER 727 9/22/96 436 145 757696
49ER 728 9/22/96 436 144 757697
49ER 729 9/22/96 436 143 757698
49ER 730 9/22/96 436 142 757699
49ER 731 9/22/96 436 141 757700
49ER 732 9/22/96 436 140 757701
49ER 733 9/22/96 436 139 757702
49ER 734 9/22/96 436 138 757703
49ER 735 9/22/96 436 137 757704
49ER 736 9/22/96 436 136 757705
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The following is a compilation of claims associated with the
Water Canyon property. The property is located in Sections
27, 28, 33, and 34, T20N, R47E, MDB&M,
Lander County, Nevada
Recorded in Co.
Name of claims(s) or site(s): Location Date Book Page
- --------------------------- ------------- ------------------------
BLMSerialNo(s):
--------------
<S> <C> <C> <C>
WC 651 9/25/96 436 244 757706
WC 652 9/25/96 436 243 757707
WC 653 9/25/96 436 242 757708
WC 654 9/25/96 436 241 757709
WC 655 9/25/96 436 240 757710
WC 656 9/25/96 436 239 757711
WC 657 9/25/96 436 238 757712
WC 658 9/25/96 436 237 757713
WC 659 9/25/96 436 236 757714
WC 660 9/25/96 436 235 757715
WC 661 9/25/96 436 234 757716
WC 662 9/25/96 436 233 757717
WC 663 9/25/96 436 232 757718
WC 664 9/25/96 436 231 757719
WC 665 9/25/96 436 230 757720
WC 751 9/25/96 436 229 757721
WC 752 9/25/96 436 228 757722
WC 753 9/25/96 436 227 757723
WC 754 9/25/96 436 226 757724
WC 755 9/25/96 436 225 757725
WC 756 9/25/96 436 224 757726
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Recorded in Co.
Name of claims(s) or site(s): Location Date Book Page
- ---------------------------- ------------- -----------------------
BLMSerialNo(s):
--------------
<S> <C> <C> <C>
WC 757 9/25/96 436 223 757727
WC 758 9/25/96 436 222 757728
WC 759 9/25/96 436 221 757729
WC 760 9/25/96 436 220 757730
WC 761 9/25/96 436 219 757731
WC 762 9/25/96 436 218 757732
WC 763 9/25/96 436 217 757733
WC 764 9/25/96 436 216 757734
WC 765 9/25/96 436 215 757735
WC 851 9/24/96 436 214 757736
WC 852 9/24/96 436 213 757737
WC 853 9/24/96 436 212 757738
WC 854 9/24/96 436 211 757739
WC 855 9/24/96 436 210 757740
WC 856 9/24/96 436 209 757741
WC 857 9/24/96 436 208 757742
WC 858 9/24/96 436 207 757743
WC 859 9/24/96 436 206 757744
WC 860 9/24/96 436 205 757745
WC 861 9/24/96 436 204 757746
WC 862 9/24/96 436 203 757747
WC 863 9/24/96 436 202 757748
WC 864 9/24/96 436 201 757749
WC 865 9/24/96 436 200 757750
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Recorded in Co.
Name of claims(s) or site(s): Location Date Book Page
- ---------------------------- ------------- ----------------------
BLMSerialNo(s):
--------------
<S> <C> <C> <C>
WC 951 9/24/96 436 199 757751
WC 952 9/24/96 436 198 757752
WC 953 9/24/96 436 197 757753
WC 954 9/24/96 436 196 757754
WC 955 9/24/96 436 195 757755
WC 956 9/24/96 436 194 757756
WC 957 9/24/96 436 193 757757
WC 958 9/24/96 436 192 757758
WC 959 9/24/96 436 191 757759
WC 960 9/24/96 436 190 757760
WC 961 9/24/96 436 189 757761
WC 962 9/24/96 436 188 757762
WC 963 9/24/96 436 187 757763
WC 964 9/24/96 436 186 757764
WC 965 9/24/96 436 185 757765
</TABLE>
OPTION
THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURI TIES ACT OF 1933 (THE
"ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT
FOR CONSIDER ATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF
FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
OPTION TO PURCHASE 250,000 SHARES OF COMMON STOCK
FISCHER-WATT GOLD COMPANY, INC.
(A Nevada Corporation)
Not Transferable or Exercisable Except
upon Conditions Herein Specified
Void after 5:00 O'Clock P.M.,
Pacific Time, on August 31, 2003
Fischer-Watt Gold Company, Inc., a Nevada corporation (the "Company")
hereby certifies that George Beattie or his registered successors and permitted
assigns, registered on the books of the Company maintained for such purposes as
the registered holder hereof (the "Holder"), for value received, is entitled to
purchase from the Company the number of fully paid and non-assessable shares of
Common Stock of the Company, of the par value of $.001 per share (the "Shares"),
stated above at the purchase price of $.22 per Share (the "Exercise Price") (the
number of Shares and Exercise Price being subject to adjustment as hereinafter
provided) upon the terms and conditions herein provided.
1. Exercise of Option.
(a) Subject to subsection (b) of this Section 1, upon presentation and
surrender of this Option Certificate, with the attached Purchase Form duly
executed, at the principal office of the Company at 1621 North Third Street,
Suite 1000, Coeur d'Alene, Idaho 83814, or at such other place as the Company
may designate by notice to the Holder hereof, together with a certified or bank
cashier's check payable to the order of the Company in the amount of the
Exercise Price times the number of Shares being purchased, the Company shall
deliver to the Holder hereof, as promptly as practicable, certificates
representing the Shares being purchased. This Option may be exercised in whole
or in part; and, in case of exercise hereof in part only, the Company, upon
surrender hereof, will deliver to the Holder a new Option Certificate or Option
Certificates of like tenor entitling the Holder to purchase the number of Shares
as to which this Option has not been exercised.
(b) This Option may be exercised in whole or in part at any time after
September 1, 1998 and prior to 5:00 o'clock P.M. Pacific Time, on August 31,
2003.
<PAGE>
2. Exchange and Transfer of Option. This Option at any time prior to the
exercise hereof, upon presentation and surrender to the Company, may be
exchanged, alone or with other Options of like tenor registered in the name of
the Holder, for another Option or other Options of like tenor in the name of
such Holder exercisable for the same aggregate number of Shares as the Option or
Options surrendered.
3. Rights and Obligations of Option Holder.
(a) The Holder of this Option Certificate shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or in
equity; provided, however, in the event that any certificate representing the
Shares is issued to the Holder hereof upon exercise of this Option, such Holder
shall, for all purposes, be deemed to have become the holder of record of such
Shares on the date on which this Option Certificate, together with a duly
executed Purchase Form, was surrendered and payment of the Exercise Price was
made, irrespective of the date of delivery of such Share certificate. The rights
of the Holder of this Option are limited to those expressed herein and the
Holder of this Option, by its acceptance hereof, consents to and agrees to be
bound by and to comply with all the provisions of this Option Certificate,
including, without limitation, all the obligations imposed upon the Holder
hereof by Section 5 hereof. In addition, the Holder of this Option Certificate,
by accepting the same, agrees that the Company may deem and treat the person in
whose name this Option Certificate is registered on the books of the Company
maintained for such purpose as the absolute, true and lawful owner for all
purposes whatsoever, notwithstanding any notation of ownership or other writing
thereon, and the Company shall not be affected by any notice to the contrary.
(b) No Holder of this Option Certificate, as such, shall be entitled
to vote or receive dividends or to be deemed the holder of Shares for any
purpose, nor shall anything contained in this Option Certificate be construed to
confer upon any Holder of this Option Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote, give or withhold consent to
any action by the Company, whether upon any recapitalization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise,
receive notice of meetings or other action affecting stockholders (except for
notices provided for herein), receive dividends, subscription rights, or
otherwise, until this Option shall have been exercised and the Shares
purchasable upon the exercise thereof shall have become deliverable as provided
herein; provided, however, that any such exercise on any date when the stock
transfer books of the Company shall be closed shall constitute the person or
persons in whose name or names the certificate or certificates for those Shares
are to be issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open, and the Option surrendered shall not be deemed to have been
exercised, in whole or in part as the case may be, until the next succeeding day
on which stock transfer books are open for the purpose of determining
entitlement to dividends on the Company's common stock.
-2-
<PAGE>
4. Shares Underlying Option. The Company covenants and agrees that all
Shares delivered upon exercise of this Option shall, upon delivery and payment
therefor, be duly and validly authorized and issued, fully paid and
non-assessable, and free from all stamp-taxes, liens, and charges with respect
to the purchase thereof. In addition, the Company agrees at all time to reserve
and keep available an authorized number of Shares sufficient to permit the
exercise in full of this Option.
5. Disposition of Option or Shares.
(a) The holder of this Option Certificate and any transferee hereof or
of the Shares issuable upon the exercise of the Option Certificate, by their
acceptance hereof, hereby understand and agree that the Option, and the Shares
issuable upon the exercise hereof, have not been registered under either the
Securities Act of 1933 (the "Act") or applicable state securities laws (the
"State Acts") and shall not be sold, pledged, hypothecated, donated, or
otherwise transferred (whether or not for consideration) except upon the
issuance to the Company of a favorable opinion of counsel or submission to the
Company of such evidence as may be satisfactory to counsel to the Company, in
each such case, to the effect that any such transfer shall not be in violation
of the Act and the State Acts. It shall be a condition to the transfer of this
Option that any transferee hereof deliver to the Company its written agreement
to accept and be bound by all of the terms and conditions of this Option
Certificate.
(b) The stock certificates of the Company that will evidence the
shares of Common Stock with respect to which this Option may be exercisable will
be imprinted with a conspicuous legend in substantially the following form:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") or
applicable state securities laws (the "State Acts") and shall not
be sold, pledged, hypothecated, donated or otherwise transferred
(whether or not for consideration) by the holder except upon the
issuance to the Company of a favorable opinion of its counsel or
submission to the Company of such other evidence as may be
satisfactory to counsel to the Company, in each such case, to the
effect that any such transfer shall not be in violation of the
Act and the State Acts.
The Company has not agreed to register any of the holder's shares of
Common Stock of the Company with respect to which this Option may be exercisable
for distribution in accordance with the provisions of the Act or the State Acts
and, the Company has not agreed to comply with any exemption from registration
under the Act or the State Acts for the resale of the holder's shares of Common
Stock of the Company with respect to which this Option may be exercised. Hence,
it is the understanding of the holders of this Option that by virtue of the
provisions of certain rules respecting "restricted securities" promul gated by
the SEC, the shares of Common Stock of the Company with respect to which this
Option may be exercisable may be required to be held indefinitely, unless and
until registered under the Act and the State Acts, unless an exemption from such
registration is available, in which case the holder may still be limited as to
the number of shares of Common Stock of the Company with respect to which this
Option may be exercised that may be sold.
-3-
<PAGE>
6. Adjustments. The number of Shares purchasable upon the exercise of this
Option is subject to adjustment from time to time upon the occurrence of any of
the events enumerated below.
(a) In case the Company shall: (i) pay a dividend in Shares, (ii)
subdivide its outstanding Shares into a greater number of Shares, (iii) combine
its outstanding Shares into a smaller number of Shares, or (iv) issue, by
reclassification of its Shares, any shares of its capital stock, the amount of
Shares purchasable upon the exercise of this Option immediately prior thereto
shall be adjusted so that the Holder shall be entitled to receive upon exercise
of the Option that number of Shares which such Holder would have owned or would
have been entitled to receive after the happening of such event had such Holder
exercised the Option immediately prior to the record date, in the case of such
dividend, or the effective date, in the case of any such subdivision,
combination or reclassification. An adjustment made pursuant to this subsection
(a) shall be made whenever any of such events shall occur, but shall become
effective retroactively after such record date or such effective date, as the
case may be, as to any exercise between such record date or effective date and
the date of happening of any such event.
(b) Notice to Option Holders of Adjustment. Whenever the number of
Shares purchasable hereunder is adjusted as herein provided, the Company shall
cause to be mailed to the Holder in accordance with the provisions of this
Section 6 a notice (i) stating that the number of Shares purchasable upon
exercise of this Option have been adjusted, (ii) setting forth the adjusted
number of Shares purchasable upon the exercise of this Option, and (iii) showing
in reasonable detail the computations and the facts, including the amount of
consideration received or deemed to have been received by the Company, upon
which such adjustments are based.
7. Fractional Shares. The Company shall not be required to issue any
fraction of a Share upon the exercise of this Option. If more than one Option
shall be surrendered for exercise at one time by the same Holder, the number of
full Shares which shall be issuable upon exercise thereof shall be computed on
the basis of the aggregate number of Shares with respect to which this Option is
exercised. If any fractional interest in a Share shall be deliverable upon the
exercise of this Option, the Company shall make an adjustment therefor in cash
equal to such fraction multiplied by the Exercise Price.
8. Loss or Destruction. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Option Certificate
and, in the case of any such loss, theft or destruction, upon delivery of an
indemnity agreement or bond satisfactory in form, substance and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of this Option Certificate, the Company at its expense will execute and deliver,
in lieu thereof, a new Option Certificate of like tenor.
9. Survival. The various rights and obligations of the Holder hereof as set
forth herein shall survive the exercise of the Option represented hereby and the
surrender of this Option Certificate.
-4-
<PAGE>
10. Notices. Whenever any notice, payment of any purchase price, or other
communication is required to be given or delivered under the terms of this
Option, it shall be in writing and delivered by hand delivery or United States
registered or certified mail, return receipt requested, postage prepaid, and
will be deemed to have been given or delivered on the date such notice, purchase
price or other communication is so delivered or posted, as the case may be; and,
if to the Company, it will be addressed to the address specified in Section 1
hereof, and if to the Holder, it will be addressed to the registered Holder at
its, his or her address as it appears on the books of the Company.
FISCHER-WATT GOLD COMPANY, INC.
By
----------------------------------------
George Beattie, Chief Executive Officer
Date
--------------------------------------
-5-
<PAGE>
PURCHASE FORM
----------------, ----
TO: FISCHER-WATT GOLD COMPANY, INC
The undersigned hereby irrevocably elects to exercise the attached Option
Certificate to the extent of __________ shares of the Common Stock, par value
$.001 per share, of Fischer-Watt Gold Company, Inc. and hereby makes payment of
$_____ in accordance with the provisions of Section 1 of the Option Certificate
in payment of the purchase price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
-------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
----------------------------------------------------------------------
By
-------------------------------
-6-
<PAGE>
ASSIGNMENT FORM
For value received, the undersigned hereby sells, assigns, and transfers to
Name
-------------------------------------------------------------------------
Address
-----------------------------------------------------------------------
this Option and irrevocably appoints ------------------------------- attorney
(with full power of substitution) to transfer this Option on the books of the
Company.
Date:
---------------------------- ----------------------------------------
(Please sign exactly as name
appears on Option)
Taxpayer ID No.
------------------------
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED OCTOBER 31, 1997 CONTAINED IN
FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED OCTOBER 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> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1
<CASH> 373
<SECURITIES> 0
<RECEIVABLES> 306
<ALLOWANCES> 0
<INVENTORY> 802
<CURRENT-ASSETS> 2,069
<PP&E> 2,492
<DEPRECIATION> 555
<TOTAL-ASSETS> 8,764
<CURRENT-LIABILITIES> 3,978
<BONDS> 0
0
0
<COMMON> 35
<OTHER-SE> 3,968
<TOTAL-LIABILITY-AND-EQUITY> 8,764
<SALES> 4,063
<TOTAL-REVENUES> 4,063
<CGS> 3,886
<TOTAL-COSTS> 5,285
<OTHER-EXPENSES> 769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 196
<INCOME-PRETAX> (2,187)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,187)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,187)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
