UNITED STATES
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 March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission file no. 0-19502
SISKON GOLD CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 68-0254824
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
350 Crown Point Circle, Suite 100
GRASS VALLEY, CA. 95945 (916) 273-4311
(Address of principal executive offices) (Zip Code) (Registrant's
telephone number)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934, 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 .
As of May 17, 1996, the number of Class A common stock outstanding was
10,562,544, the number of Series 2 Class B common stock outstanding was
39,065.5 and the number of Series 1 Class B Common Stock outstanding was 638.
Transitional Small Business Disclosure Format (check one): Yes . No X .
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements 2
ITEM 2. Management's Discussion and Analysis 2
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 4
ITEM 2. Changes in Securities 4
ITEM 3. Defaults Upon Senior Securities 4
ITEM 4. Submission of Matters to a Vote of Security Holders 4
ITEM 5. Other Information 4
ITEM 6. Exhibits and Reports on Form 8-K 4
SIGNATURES ......... 5
FINANCIAL STATEMENTS 6
<PAGE>
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The Consolidated Interim Financial Statements of Siskon Gold Corporation are
attached at the end of this document and incorporated fully by this reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
(A) PLAN OF OPERATIONS
The Company's short term and long term liquidity position is dependent upon
bringing the San Juan Mine to commercial levels of production, and on the
successful development of the Company's other properties. The Company has
historically relied on debt and equity financing for property exploration and
development and operating requirements.
San Juan
The San Juan Mine produced 4,137 ounces of dor<e'> during the first quarter of
1996. Attainment of commercial production was delayed due to ventilation and
pumping projects being constructed. The new ventilation shaft is expected to
be completed by the middle of May and was delayed three months due to
complications experienced by the drilling contractor. The permanent mine
dewatering system is expected to be completed by the end of May. The area of
high water flows was successfully plugged in January. Also, additional
definition drilling of a section of the reserves to the west was completed in
March. In March 1996, the Company entered into a contract with the Doe Run
Company to provide management personnel, engineering, training and other
technical and systems services for the San Juan Mine. The contract is for 27
months and provides for an initial fee, base monthly compensation commencing
July, 1996 and an incentive bonus for the twelve months ended June 30, 1997
based on the attainment of specified development, cost and production goals.
The Company estimates that an additional $1,034,000 will be expended for
development and equipment at the San Juan Mine during the second quarter of
1996. Siskon plans to meet these cash requirements and mine operating costs
from existing working capital, the proceeds from production and if needed from
the proceeds from the project financing discussed below. However, no assurances
can be given that there will be no further delays in completing development and
the attainment of commercial production, which could require additional debt or
equity capital. With the new management team and as these projects are
completed and additional headings are opened, mining at commercial levels of
production is expected to be attained. Production is initially planned for an
output of 1,570 tons per day and 2,000 ounces of gold dor<e'> per month. During
the quarter, 35,846 tons of ore were mined producing 4,137 ounces of dor<e'>.
To increase working capital to a level that management deems prudent,
additional debt and equity is being sought. The Company is negotiating with
Carl and Linda Seaman (the "Seamans"), shareholders and holders of a majority
of existing convertible debt, to borrow $500,000 in project financing. The loan
would be secured by the San Juan and Big Horn mines and senior to the existing
convertible debt. The loan would be due November 15, 1998, bear interest at ten
percent with the principle and interest convertible into Class A common stock
at $1.75 per share. The Seamans would also have the option to convert an equal
amount of their existing convertible debt into Class A common stock at the same
price. If a private placement is completed within three months after the
financing the Seamans would have the right to change the conversion price to
the same as the private placement. No assurance can be given that the project
financing with the Seamans can be funded or that other sources of financing can
be obtained.
Big Horn
The Company received the major air and water quality permits for the mine site
of the Big Horn Mine in 1995. Ore from the mine is proposed to be trucked to an
off site processing plant. Environmental permits will have to be obtained for
the mill site. A mill site located in the City of Adelanto was purchased in
March 1995 and the Company is currently evaluating other mill sites that may be
more appropriate before resuming environmental permitting. The Company is
presently considering various alternatives to expand the reserves at the Mine
through further geology reviews and conducting additional drilling. The cash
requirements for this work would be met from additional debt or equity capital.
Exploration
The Company is reviewing historical data on properties in California that have
the same geology and characteristics as San Juan and has identified several
potential deposits. In addition, the Company is investigating other properties
in the U.S., Mexico and South America.
General and Administrative
General and administrative costs for the remainder of 1996 are estimated to be
$669,000 net of royalty and lease receipts and interest income. The Company
plans to meet these requirements from existing working capital.
(B) FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Siskon had cash on hand of $1,943,127 and $4,251,032 at March 31, 1996 and
March 31, 1995 respectively.
Cash used by operating activities for the first quarter of 1996 totalled
$235,873 versus $443,343 for the first quarter of 1995.
Cash used in investing activities during the first quarter of 1996 totalled
$1,859,708 as compared to $1,434,347 in the first quarter of 1995. During 1996
$1,539,352 was expended on development costs, $154,195 on equipment and
$160,772 on bonds, as compared with $1,236,853 for development, $142,666 for
equipment, $114,776 on land and $13,052 on bonds during 1995 . Cash provided
from investing activities during 1995 totalled $73,000 from the sale of USNGS
property.
Pre-production development costs and related plant and equipment for the San
Juan Mine aggregated $1,675,470 net of gold recoveries of $1,510,334 during the
first quarter of 1996 as compared to $1,359,465 net of gold recoveries of
$332,614 in the first quarter of 1995. Permitting and land acquisition costs at
the Big Horn Mine amounted to $18,077 during 1996 versus $134,830 in 1995.
Cash used in financing activities during the first quarter of 1996 totalled
$217,713 as compared to $60,000 during the first quarter of 1995. During 1996
payments of capital lease obligations and long-term debt amounted to $188,851
versus $60,000 in 1995. In 1996 $28,862 was expended on financing costs for
financing raised in the last quarter of 1995.
Siskon incurred a net loss of $251,106 for the first quarter of 1996 compared
to a net loss of $184,005 for the first quarter of 1995.
There were no project costs during the first quarter of 1996 and 1995 as all
costs to bring the San Juan Mine into commercial levels of production have been
capitalized as pre-production development.
General and administrative expenses were $312,940 in the first quarter of 1996
as compared with $306,052 during the first quarter of 1995.
Exploration costs were $8,528 in the first quarter of 1996 versus $40,493 in
the first quarter of 1995 resulting primarily from reduced activities in
Mexico.
The gain on sale of mineral rights and equipment was $93,001 in the first
quarter of 1995 related to the sale of the USNGS Beatty property.
Interest and miscellaneous income was $47,456 in the first quarter of 1996 as
compared with $53,525 in the first quarter of 1995 reflecting higher cash
balances during 1995.
The Company believes that its business and operations were not materially
affected by inflation during the first quarter of 1996 and 1995.
PART II
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
As previously disclosed in the Company's Form 10-KSB, Item 2. Description of
Properties - Environmental Matters, the Company owns certain mill sites, known
as the Croman Mill Site , located in Siskiyou County, California. The Croman
Mill Site is a historical mining mill site which contains stockpiled mine
tailings from mining operations conducted by prior operators and represents a
"pre-existing" condition in relation to the time the Company acquired the
property. Although the Company received correspondence from the California
Regional Water Quality Control Board as early as May 1991, and exchanged
correspondence during the time period between May 1991 and March 1992, no
further activity from environmental agencies had occurred until the Company
received a request by the Environmental Protection Agency ("EPA") to visit the
site for the purposes of collecting water and soil samples. A representative of
the Company accompanied state and federal environmental officials during the
site visit, which occurred on April 19, 1996. Several soil and water samples
were taken by officials during the visit. Simultaneously, the Company also
conducted limited sampling of the water and soil at the mill site. Test results
from the sampling have not yet been received from the laboratories commissioned
to analyze the samples. In the event that the test results lead to further
testing and analysis which ultimately results in a clean-up or abatement order
issued by a state or federal environmental agency, then the Company intends to
seek indemnification from the prior operators of the property which may have
been primarily responsible for the condition of the mine tailings located on
the mill site.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Not applicable.
(B) REPORTS ON FORM 8-K
Not applicable.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SISKON GOLD CORPORATION
Dated May 17, 1996 Timothy Callaway
Timothy A. Callaway,
President, CEO and Chairman of the Board
Dated May 17, 1996 Michael K. Epstein
Michael K. Epstein, Vice-
President Finance and Chief Financial
Officer
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
FORM 10-QSB - ITEM 1
SISKON GOLD CORPORATION AND SUBSIDIARY
LIST OF FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included in
response to Item 1:
Consolidated Balance Sheets -
March 31, 1996 (Unaudited) and December 31, 1995 8
Consolidated Statements of Operations -
Three Months Ended March 31, 1996 and 1995 (Unaudited) 9
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 (Unaudited) 10
Notes to Consolidated Financial Statements 11
<PAGE>
SISKON GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
1996 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,943,127 $ 4,251,032
Accounts receivable 5,093 7,586
Inventories 542,155 240,605
Prepaid expenses and other 123,897 74,121
Total Current Assets 2,614,272 4,573,344
NOTES RECEIVABLE 290,748 288,053
PROPERTY, PLANT AND EQUIPMENT 26,651,663 24,753,240
OTHER ASSETS 433,387 257,416
TOTAL ASSETS $ 29,990,070 $ 29,872,053
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 1,086,816 $ 719,113
Capital lease obligations - 48,964
Current portion of long-term debt 271,391 513,971
Total Current Liabilities 1,358,207 1,282,048
LONG TERM DEBT ($7,811,657 in 1996 and
1995 to related parties) 8,273,898 8,171,205
OTHER LIABILITIES 51,190 51,190
Total Liabilities 9,683,295 9,504,443
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Capital Stock
Preferred stock, $.001 par value; no shares issued
Common stock, $.001 par value; issued and outstanding:
Class A 10,638,621 in 1996; 10,562,544 in 1995 10,638 10,562
Convertible Class B Series 2 39,062.5 in 1996 and 1995 39 39
Convertible Class B Series 1 638 in 1996 and 1995 1 1
Additional paid-in capital 52,884,704 52,690,024
Stock subscription receivable (322,326) (317,841)
Accumulated deficit (32,266,281) (32,015,175)
Total Shareholders' Equity 20,306,775 20,367,610
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 29,990,070 $ 29,872,053
See notes to consolidated financial statements.
<PAGE>
SISKON GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
Royalty and lease revenue $ 22,906 $ 16,014
OPERATING EXPENSES
General and administrative 312,940 306,052
Exploration costs 8,528 40,493
Total Operating Expenses 321,468 346,545
OPERATING LOSS (298,562) (330,531)
OTHER INCOME
Gain on sale of mineral rights and equipment - 93,001
Interest and other income 47,456 53,525
Total Other Income 47,456 146,526
NET LOSS $ (251,106) $ (184,005)
NET LOSS PER SHARE $ (0.02) $ (0.02)
WEIGHTED AVERAGE NUMBER OF SHARES 10,562,544 9,056,043
See notes to consolidated financial statements.
<PAGE>
SISKON GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (251,106) $ (184,005)
Adjustments to reconcile net loss to net cash used in
operating activities
Issuance of common stock for services - 2,500
Depreciation, depletion and amortization 3,543 4,859
Gain on sale of mineral rights and equipment - (93,001)
Accrued interest receivable (4,485) -
(Increase) decrease in accounts receivable (202) 15,768
Increase in inventories (301,550) (123,683)
(Increase) decrease in prepaid expenses (49,776) 8,962
Increase (decrease) in accounts payable and accrued liabilities 367,703
(54,793)
Decrease in accrued reclamation costs - (20,000)
Net cash used in operating activities (235,873) (443,343)
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of mineral rights - 73,000
Purchase of equipment (154,195) (142,666)
Purchase of land - (114,776)
Deferred development costs (1,539,352) (1,236,853)
Increase in bonds (160,772) (13,052)
Net cash used in investing activities (1,859,708) (1,434,347)
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred financing costs (28,862) -
Payments of obligations under capital leases (48,964) (60,000)
Payments of long-term debt (139,887) -
Net cash used in financing activities (217,713) (60,000)
DECREASE IN CASH (2,307,905) (1,937,740)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,251,032 4,244,698
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,943,127 $ 2,306,958
See notes to consolidated financial statements.
<PAGE>
SISKON GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Siskon Gold Corporation and subsidiary (the Company) is engaged in the
business of exploring, developing and mining precious mineral
properties, principally gold. Gold dor<e'>, the Company's principle
product, is produced and sold in the United States. At March 1996, the
Company owned (directly or through a joint venture) interests in various
mineral properties located in the Western United States. The Company's
operations are conducted in one business segment: mineral resource
exploration, development and production.
The accompanying interim consolidated financial statements have been
prepared by the Company without audit and contain all adjustments which,
in the opinion of management, are necessary to present fairly the
Company's financial position as of March 31, 1996 and December 31, 1995
and the results of its operations and cash flows for the interim periods
ending March 31, 1996 and 1995. Such adjustments consist of normal,
recurring adjustments.
The accompanying interim consolidated financial statements do not contain
all disclosures required by generally accepted accounting principles for annual
financial statements. It is suggested that these financial statements be read
in conjunction with the audited consolidated financial statements and the
related notes contained in the Company's Annual Report on Form 10-KSB, for the
year ended December 31, 1995.
Operating results for interim periods are not necessarily indicative of
those expected for a full year.
2. INVENTORIES
Inventories at March 31 and December 31, 1995 were as follows:
1996 1995
Gold dor<e'> inventory $ 300,159 $ 117,441
Materials and supplies 241,996 123,164
$ 542,155 $ 240,605
3. PROPERTY, PLANT AND EQUIPMENT
In March 1995, USNGS sold its interest in the Beatty claims for $175,000
in cash, assumption of all reclamation liabilities and a two percent NSR
royalty resulting in a gain on sale to the Company of $93,001.
4. CAPITAL STOCK, STOCK OPTIONS AND WARRANTS
Stock option and warrant transactions for the three months ended March
31, 1996 were as follows:
Number of Exercise Exercisable
CLASS A SHARES PRICE PER SHARE OPTIONS
Options outstanding at December 31, 1995 606,666 $2.00 - $4.94 504,166
Granted 111,500 2.00 - 2.56 96,000
Cancelled (87,166) 3.44 - 4.00 (87,166)
Vested - 3.05 10,000
Options outstanding at March 31, 1996 631,000 $2.00 - $4.94
523,500
Warrants outstanding at
December 31, 1995 and March 31, 1996 4,719,083 $2.82 - $7.50
4,719,083
In March 1996, subject to shareholder approval, the Board of Directors
approved an increase in the number of Class A common stock issuable under
the Directors Stock Grant Plan by 75,000 shares.
5. COMMITMENTS AND CONTINGENCIES
In March 1994, the Company received preliminary notice from the U.S.
Forest Service (USFS) naming the Company and six other parties as
potentially responsible parties to a hazardous substance release in
Siskiyou County, California. The hazardous release is alleged to be
coming from old mill tailings, storage containers and a mine tunnel. One
of the sites may have been the Siskon Mine which was previously owned by
the Company and may have been operated by a predecessor of the Company
among others. In September 1995, the Company received a letter from the
USFS requesting a field visit to the Siskon Mine. No date has yet been
determined for the field visit. The Company is unable to determine
whether it will be liable for environmental remediation or estimate the
amount of any liability. In the event that the Company is issued a clean
up or abatement order, the Company will seek indemnification from other
potentially responsible parties who may have been responsible.
The Company owns certain mill sites, known as the Croman Mill Site ,
located in Siskiyou County, California. The Croman Mill Site is a
historical mining mill site which contains stockpiled mine tailings from
mining operations conducted by prior operators and represents a "pre-
existing" condition in relation to the time the Company acquired the
property. Although the Company received correspondence from the
California Regional Water Quality Control Board as early as May 1991, and
exchanged correspondence during the time period between May 1991 and
March 1992, no further activity from environmental agencies had occurred
until the Company received a request by the Environmental Protection
Agency ("EPA") to visit the site for the purposes of collecting water and
soil samples. A representative of the Company accompanied state and
federal environmental officials during the site visit, which occurred on
April 19, 1996. Several soil and water samples were taken by officials
during the visit. Simultaneously, the Company also conducted limited
sampling of the water and soil at the mill site. Test results from the
sampling have not yet been received from the laboratories commissioned to
analyze the samples. In the event that the test results lead to further
testing and analysis which ultimately results in a clean-up or abatement
order issued by a state or federal environmental agency, then the Company
intends to seek indemnification from the prior operators of the property
which may have been primarily responsible for the condition of the mine
tailings located on the mill site.
<PAGE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SISKON GOLD CORPORATION
Dated May 17, 1996 /S/TIMOTHY A. CALLAWAY
Timothy A. Callaway, President, CEO and
Chairman of the Board
Dated May 17, 1996 /S/MICHAEL K. EPSTEIN
Michael K. Epstein, Vice-President
Finance
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED INTERIM FINANCIAL STATEMENT OF SISKON GOLD FOR MARCH 31, 1996
CONSISTING OF CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF OPERATIONS
AND CONSOLIDATED STATEMENT OF CASH FLOWS.
</LEGEND>
<CIK> 0000876459
<NAME> SISKON GOLD CORP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,943,127
<SECURITIES> 0
<RECEIVABLES> 5,093
<ALLOWANCES> 0
<INVENTORY> 542,155
<CURRENT-ASSETS> 2,614,272
<PP&E> 26,651,663
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,990,070
<CURRENT-LIABILITIES> 1,358,207
<BONDS> 0
0
0
<COMMON> 10,678
<OTHER-SE> 20,296,097
<TOTAL-LIABILITY-AND-EQUITY> 29,990,070
<SALES> 0
<TOTAL-REVENUES> 22,906
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 321,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (251,106)
<INCOME-TAX> 0
<INCOME-CONTINUING> (251,106)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (251,106)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0
</TABLE>
