UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 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 (I.R.S. Employer
incorporation or organization) 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, including area code)
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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ].
Revenues for the year ended December 31, 1996 were $2,322,476.
As of March 17, 1997, the aggregate market value of voting Class A common stock
held by non-affiliates was $3,443,155 based on the average bid and ask price of
$0.30.
As of March 17, 1997, the number of Class A common stock outstanding was
14,949,673, the number of Series 1 Class B common stock outstanding was 638
and the number of Series A Convertible Preferred Stock outstanding was 341.
Documents incorporated by reference: Items 9 through 12 of Part III of this
Form 10-KSB are incorporated by reference to Siskon's definitive proxy
statement for the 1996 annual shareholders meeting to be filed with the
Commission within 120 days from the end of the year.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X].
<PAGE> 1
TABLE OF CONTENTS
PART I
GLOSSARY OF MINING TERMS 2
ITEM 1. Description of Business 4
ITEM 2. Description of Properties 6
San Juan 6
Big Horn 7
Other Properties 8
Other Interests 9
Environmental Matters 9
Safe Harbor Statement 10
ITEM 3. Legal Proceedings 10
ITEM 4. Submission of Matters to a Vote of Security Holders 10
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters 11
Comparative Market Prices 11
Holders 11
Dividends 11
ITEM 6. Management's Discussion and Analysis or Plan of Operation 11
Plan of Operation 11
Financial Condition and Results of Operations 12
ITEM 7. Financial Statements 15
ITEM 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 15
PART III
ITEM 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 15
ITEM 10. Executive Compensation 15
ITEM 11. Security Ownership of Certain Beneficial Owners and Management 15
ITEM 12. Certain Relationships and Related Transactions 15
ITEM 13. Exhibits and Reports on Form 8-K
Exhibits 15
Reports on Form 8-K 16
SIGNATURES 17
FINANCIAL STATEMENTS 18
<PAGE> 2
GLOSSARY OF MINING TERMS
ASSAY - the tests performed on a sample to determine mineral content.
BANK CUBIC YARD (BCY) - measurement of the volume of material contained in one
compacted (in place) cubic yard. A dry bulk cubic yard of the lower gravels
at the San Juan Mine is equivalent to 1.57 tons.
CASH COST PER OUNCE - includes all mining, processing and other plant costs,
state and local taxes (other than income) and refining expenses, on-site
general and administrative costs, and other direct costs; but excludes all
royalties, depreciation, depletion and amortization, corporate general and
administrative expenses, mineral exploration expense, financing costs and long-
term reclamation accruals.
CONCENTRATE - a product containing valuable metal from which most of the waste
material in the ore has been removed.
CONTAINED OUNCES - the estimated number of ounces of precious metals contained
in an ore body which is a gross measurement of ounces in the ground. The ounces
ultimately recovered from the ore (recoverable ounces) will be less than
contained ounces due to inherent inefficiencies in recovery methods.
CORE DRILLING - drilling using a hollow diamond-studded bit to cut a
cylindrical hole leaving an undisturbed column of rock. This rock core is then
removed for analysis.
CUTOFF GRADE - the lowest grade of mineralized material that can be mined and
processed economically.
DEFINITION DRILLING - drilling between existing holes to better define the
geology or to improve the reliability of the ore reserve calculation.
DILUTION - an estimate of the amount of waste mined with ore as part of normal
mining practices.
DOR<e'> - unrefined metal bars consisting of gold, silver and impurities which
will be further refined.
FLOTATION - a milling process for mineral concentration based on the selective
adhesion of minerals to air bubbles in a water and ground-ore mixture. Air and
specific chemicals are introduced into the mixture. The finely ground minerals
float to the surface forming a metal rich concentrate that is skimmed off the
surface. The resulting concentrates are shipped to a smelter where the final
products are produced.
GEOLOGIC RESOURCE - a mineralized zone in rock of unproven size and
undetermined economic value for which only preliminary sample data has been
collected. Under SEC standards, a mineral deposit does not qualify as a
reserve unless sufficient sampling demonstrates that the recoveries from the
deposit are expected to be sufficient to recover total cash and non-cash costs
for the mine and related facilities.
GRADE - refers to the amount of gold contained in one ton or one cubic yard of
mineralized material. The grade for an ore reserve or geologic resource may,
or may not, be adjusted for dilution, mining loses or metallurgical loses.
GRAVITY CONCENTRATION - a method of recovering precious metals and other heavy
constituents from ore in which the ore may be physically reduced in size,
combined with water and then processed utilizing gravity to separate the
heavier precious metals from the waste material.
MILL - a plant where ore is ground, often to fine powder, and the minerals and
metals are concentrated and extracted by physical or chemical processes.
MINERAL DEPOSIT OR MINERALIZED MATERIAL - a mineralized body which has been
delineated by appropriate drilling and/or underground sampling and containing a
sufficient amount of material with an average grade of metal or metals to
warrant further exploration expenditures. Under SEC standards, a mineral
deposit does not qualify as a reserve unless sufficient sampling demonstrates
that the recoveries from the deposit are expected to be sufficient to recover
total cash and non-cash costs for the mine and related facilities.
<PAGE> 3
NET PROFITS ROYALTY OR INTEREST (NPI) - a royalty based on the pretax profits
(proceeds) remaining after recapture of certain operating, capital and other
costs. The type and manner of computation of such capital and other costs may
vary considerably.
NET SMELTER RETURN ROYALTY (NSR) - a royalty based on the actual sale price
received for the subject metal less the cost of smelting and/or refining the
material at an off-site refinery or smelter along with off-site transportation
costs.
NON-CASH COST PER OUNCE - includes depreciation, depletion and amortization of
capital assets as well as accruals for the costs of reclamation, long-term
monitoring and care that are usually incurred at a the end of mine life.
ORE OR ORE BODY - mineral or mineral deposit that can be economically mined and
processed.
OUNCE - troy ounce, which is equivalent to 31.103 grams.
PATENTED MINING CLAIM - a mining claim, usually comprising about 20 acres in
area, to which the U.S. Government has conveyed title to the owner.
PRE-PRODUCTION CAPITAL COSTS - includes all development work, plant and
equipment and operating costs to bring the property to commercial levels of
production.
PROBABLE (INDICATED) RESERVES - reserves for which grade and/or quantity are
computed from information sufficient for proven (measured) reserves, but the
sites for inspection, sampling and measurement are further apart or are
otherwise less adequately spaced. The degree of assurance, although lower than
that for proven (measured) reserves, is high enough to assume continuity
between points of observation.
PROVEN (MEASURED) RESERVES - reserves for which (a) a quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade
and/or quantity are computed from the results of detailed sampling and (b) the
sites for inspection, sampling and measurement are spaced so closely and the
geologic character is so well defined that size, shape, depth and mineral
content of reserves are well established.
RECOVERABLE OUNCES - those ounces contained in ore which can be ultimately
produced and shipped from the mine.
RECOVERY RATE - percentage of a metal recovered in a mineral separation
process. Recovery rates vary significantly depending on physical, metallurgical
and economic circumstances.
REFINING - a process for removing impurities from metals by introducing air and
fluxes into the molten metal. The impurities are removed as gas or slag.
REVERSE CIRCULATION DRILLING - a type of rotary drilling that uses a double
walled drill pipe. Compressed air, water or other drilling medium is forced
down the space between the two pipes to the drill bit, and the drilled chips
are flushed back up to the surface through the center tube of the drill pipe.
ROTARY DRILLING - drilling with a bit that brakes the rock into chips. The
chips are continually flushed from the hole (outside the drill pipe) and are
collected in sequence for geological examination and assay.
TAILINGS - material removed from a milling circuit after separation of the
valuable minerals.
TON (SHORT TON) - 2,000 pounds.
UNDERGROUND DEVELOPMENT WORK - is the construction of tunnels and rooms
underground necessary to facilitate mining. If the material excavated contains
ore, it may be processed.
UNPATENTED MINING CLAIM - that portion of public mineral lands which a party
has staked or marked out in accordance with federal and state mining laws to
acquire the exclusive right to explore for and exploit the minerals which may
occur on such lands.
<PAGE> 4
PART I
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
Siskon Gold Corporation ("Siskon" or the "Company"), a California corporation,
was formed in 1991 as a result of the consolidation of Centurion Gold Ltd.,
U.S. Precious Metals, Inc., and Siskon Corporation, and which, with it's
predecessors, has been in existence since as early as 1935. Unless the context
otherwise indicates, reference to the Company includes its predecessors and its
majority owned Mexican subsidiary, Siskomex, S.A. de C.V.
The Company's primary business is the exploration, development and mining of
precious metal properties located primarily in the Western United States. The
properties are held either directly or through royalty interests. The
Company's primary properties are the San Juan and Big Horn Mines, respectively,
located in Nevada County and Los Angeles County, California.
Since receiving permits in June 1993, the Company has been engaged in the
construction of the San Juan Mine which was completed in mid-May 1996. During
1996, $3.2 million was incurred for development and plant and equipment at the
San Juan Mine. With the completion of construction and development activities
and attainment of sustained levels of production at the mine in mid-May, the
Company commenced the recognition of revenues, production costs, non-cash costs
and royalties in operations. During 1996, 145,611 tons of ore were mined
producing 9,651 ounces of gold of which 84,034 tons yielding 4,648 ounces of
gold have been reflected in operations. In January and February 1997, 24,429
tons were mined yielding 1,932 ounces of gold. As a result of recent declines
in the gold price and higher than expected operating costs, the Company reduced
the carrying value of the San Juan Mine by $10.3 million in the fourth quarter
of 1996. See "Item 2 - Description of Properties - San Juan".
The Big Horn Mine is in the development stage and the Company received the
major air and water quality permits for the mine site in 1995. Ore from the
mine is proposed to be trucked to an off site processing plant. The Company
is currently evaluating potential mill sites for which environmental permits
will have to be obtained. The Company is presently considering various
alternatives to expand the reserves at the mine through further geology
reviews and conducting additional drilling. See "Item 2 - Description of
Properties - Big Horn".
In May 1996, the Board of Directors determined that the proceeds received in a
November 1995 private placement to Vengold Inc. ("Vengold") had been fully
expended, the two directors appointed by Vengold resigned and the Board
dissolved the Budget Committee. In August 1996, Vengold converted the
39,062.5 shares of Class B Series 2 common stock into 781,250 shares of Class A
common stock.
In May 1996, the Company borrowed $500,000 from Carl Seaman, a shareholder and
holder of a majority of the existing convertible debt. In October 1996 the
Company borrowed $1.15 million of debentures convertible into shares of the
Company's Class A common stock at a conversion price equal to the lesser of (a)
$1.92 or (b) 75% of the market price if the conversion is before January 25,
1997 or 70% of the market price if the conversion is after January 24, 1997.
In November 1996, the Company borrowed $500,000 of debentures convertible into
shares of the Company's Class A common stock at a conversion price equal to
75% of the market price on the date of conversion. The conversions are limited
to one third after the sixtieth day from the date of issue, one third after
the eightieth day from the date of issue and the remainder one hundred days
after the date of issue. In February 1997, the Company issued $450,000 in debt
convertible into shares of the Company's Class A common stock at a conversion
price equal to 75% of the market price on the date of conversion. Through
March 17, 1997 $1.12 million of debt had been converted into 3,378,176 shares
of Class A common stock. See "Item 6 - Management's Discussion and Analysis or
Plan of Operations".
During 1996 and into the first quarter of 1997, the San Juan Mine has
experienced less than anticipated ore grades and negative cash flows as the
Company continues its effort to increase production and gold recoveries to
levels sufficient to attain positive cash flow and profitable operating
results. As a result, in an effort to maintain its cash reserves, the Company
has raised additional capital through the issuance of convertible debentures.
<PAGE> 5
Even though the Company believes it currently has sufficient working capital to
operate the San Juan Mine during 1997, this forward looking statement assumes,
among other things, that the ore grade is at least the ore grade in the
feasibility study and that production levels continue to increase. If the
San Juan Mine experiences less than anticipated ore grades or lower levels
of production, even for a relatively short period of time, then the Company may
decide to curtail or significantly reduce its operations while it studies
various alternatives which may include, but are not necessarily limited to,
different mining methods, alternative mine plans, additional capital raising or
the identification of potential joint venture or merger partners. Should
operations be curtailed it is anticipated that the Company could generate
sufficient working capital to fund its obligations over the next year. See
"Item 2 - Description of Properties - San Juan" and "Item 6 - Managements
Discussion and Analysis or Plan of Operations".
EXPLORATION AND BUSINESS DEVELOPMENT
The Company has identified areas of geological interest near the San Juan Mine
and various potential mine sites in Mexico for exploration activities and spent
$71,234 in 1996 compared to $74,893 in 1995. No material expenditures are
currently anticipated during 1997.
SALES AND MARKETING
The Company shipped and sold 9,734 ounces of gold at an average gold price of
$390 during 1996 for refining by Metalor U.S.A. located in North Attleborough,
Massachussets. Gold can be sold on numerous markets throughout the world, and
the market price is readily ascertainable. The Company's sells all refined
metal to Gerald Metals, Inc. Due to the nature of the precious metals market,
the Company is not dependent on its customer to provide a market for its
refined gold.
GOLD PRICE
The Company's future revenues, profitability and cash flow will be strongly
influenced by the price of gold. The gold price is unpredictable and affected
by numerous factors beyond the Company's control, including expectations for
inflation, the strength of the U.S. dollar in relation to the major currencies,
political and economic conditions, and production costs in major gold producing
regions. If the market price of gold falls below the cost of production and
remains at such level for any sustained period, the Company may suspend or
curtail its operations in order to minimize losses. During 1996, the price of
gold varied from a low of $368 to a high of $415 per ounce. During the first
two months of 1997, the price of gold varied from a low of $336 to a high of
$361 per ounce.
ENVIRONMENTAL MATTERS
RECLAMATION
Generally, the Company is required to mitigate long-term environmental impacts
by stabilizing, contouring, resloping and revegetating various portions of a
site once mining and mineral processing operations are completed. These
reclamation efforts are conducted in accordance with detailed plans which have
been reviewed and approved by the appropriate regulatory agencies. The Company
is accruing for reclamation costs at its San Juan property . For non-producing
properties see "Item 2 - Environmental Matters".
PERMITTING
Permitting is a continuing process, and as the Company expands, it regularly
amends its existing permits and obtains new permits. The Company believes it
has obtained all permits necessary for its current operations. The Company's
ongoing costs for environmental compliance, estimated to be $120,000 annually,
encompass primarily water monitoring. See "Item 2 - Description of Properties -
San Juan".
INSURANCE
The business of gold mining is subject to certain types of risks, including
environmental hazards, industrial accidents, and gold bullion theft. The
Company carries insurance against property damage and loss, comprehensive
general liability, and losses from theft of gold and goods in transit. While
the Company maintains insurance consistent with industry practice, it is not
possible to ensure against all risks associated with the mining business, and
no assurance can be given that insurance will continue to be available at a
reasonable cost.
<PAGE> 6
COMPETITION
The Company competes with other mining companies in connection with the
acquisition of gold properties. There is significant and increasing
competition for the limited number of gold acquisition properties, with some
companies having substantially greater financial resources than the Company.
As a result, in the future the Company may be unable to acquire attractive gold
mining properties on acceptable terms. The Company believes no single company
has sufficient market power to affect the price or supply of gold in the world
market.
EMPLOYEES
There were 48 and 67 full time employees as of December 31, 1996 and 1995
respectively. At December 31, 1996, 42 were engaged in mining operations and 6
in administration and finance.
ITEM 2. DESCRIPTION OF PROPERTIES
SAN JUAN, NEVADA COUNTY, CALIFORNIA
The San Juan Mine, owned 100% by Siskon, is located approximately 70 miles
northeast of Sacramento, in Nevada County, California near the towns of Grass
Valley and Nevada City. The property covers approximately 2,000 acres, owned
by the Company, with access by paved road.
The deposit is a thick, flat lying bed of cemented conglomerate containing
native gold and is a remanent of a sixty million year old paleoplacer. The
property has been mined for gold on and off since 1850. Drilling campaigns
conducted by the Company and prior owners, comprising over 324 exploration
holes and totalling 152,000 lineal feet, defined a geologic resource containing
approximately 908,000 ounces of gold. Subsequently, a geologic resource was
defined for an open pit mine of 506,000 ounces of gold on a portion of the
property. The Company has identified a high grade zone which is indicated to
contain 3,174,424 tons of ore at a grade of 0.092 ounce of gold per ton. Using
metallurgical recoveries projected at 96% and gold fineness of 92% the zone is
estimated to contain 257,707 fine ounces of gold. Grades at the San Juan Mine
are discussed in terms of tons whereas they were previously shown in bank cubic
yards. Based on drilling results, 1.57 tons of ore from the San Juan Mine is
equivalent to one bank cubic yard.
Siskon acquired a 30% interest in the property in 1985 and acquired the
remainder of the mine in 1992 from Battle Mountain Gold Company for cash and
common stock totaling $5.5 million. In connection with the acquisition the
Company issued a $3 million convertible note to the Seamans secured by the
property. In 1993, the Company granted a 2% NSR royalty in the San Juan
property to Callahan Mining Corporation in connection with acquiring certain
used mining equipment.
In 1991, Pincock, Allen & Holt ("PAH"), international resource consultants,
completed a feasibility study, based on underground mining of a portion of this
deposit, which identified a proven/probable reserve of 257,707 ounces of gold
that could potentially be extracted at a projected cash cost per ounce of $195.
Such costs are based on an initial annual production of 392,500 tons of ore
yielding an average of 31,000 ounces of gold increasing to 588,750 tons
yielding an average of 40,000 ounces annually. Siskon completed additional
engineering studies that indicated an additional resource of 50,000 ounces of
gold in some of the thicker areas of the ore body may exist. The engineering
studies for these areas were not completed at the time the PAH study was
prepared. However, the Company anticipates lower levels of production in the
earlier stages with corresponding higher cash costs per ounce. See "Item 6 -
Management's Discussion or Plan of Operations".
The Company prepared and filed permit applications to mine the San Juan
Property in 1992 and received the necessary permits in June 1993. Since
receiving the permit, the access decline, surface buildings, shops, surface
plant, settling ponds, roads and electric utility services, drainage and
ventilation tunnels, underground plant and main underground haulage ways have
been constructed and installed.
During 1996, $3.2 million was incurred for development and plant and equipment
at the San Juan Mine. Total pre-production development costs and related plant
and equipment amounted to $19.8 million net of gold recoveries of $3.7 million.
The increase in development costs from the Company's original estimate of $8.3
million are primarily attributable to the delay in the construction of the
<PAGE> 7
access tunnel resulting from unforeseen unfavorable rock conditions with a
commensurate extended period of mine support, equipment maintenance and mine
administration. Additional power delivery facilities were constructed and
mining equipment was purchased that were originally anticipated after
production commenced. Delays were incurred to reinforce most of the
underground roads with crushed rock and to install larger dewatering pumps as a
result of additional ground water flowing into the mine. The difficulty in
obtaining qualified and experienced miners resulted in greater than expected
training costs and has required longer periods of on the job training both of
which have delayed the attainment of expected levels of productivity. Also,
the majority of the development work for the underground workings did not occur
in the high grade zones. As a result of recent declines in the gold price and
higher than expected operating costs, the Company reduced the carrying value of
the San Juan Mine by $10.3 million in the fourth quarter of 1996.
Since the start of construction of the San Juan Mine, the Company has improved
or replaced twelve domestic wells on property adjacent to the project at a cost
of approximately $108,000. Concerns by neighbors over whether the development
of the mine is adversely affecting their wells were raised at the bi-annual
Nevada County Planning Commission ("Commission") permit review meeting held on
December 8, 1995. The Company engaged a hydrologist and presented its report to
the Commission on May 23, 1996. The report indicated that the development had
affected those twelve wells but that future dewatering activities at the mine
should not have an adverse effect on any other adjacent wells. Nevada County
has increased the remedial water supply bonds by $135,000 to $189,000 and
required that the Company continue to replace or improve any other impacted
wells adjacent to the property. On December 19, 1996, the Commission found that
the mine was in compliance with its operating permit. No assurance can be
given, however, that in the event the future operations of the Mine is
determined to adversely affect surrounding neighbors' wells the Commission
will allow the Company to continue to address such concerns through
replacement wells, additional conditions to San Juan's operating permit, or
increases in bonds.
On November 14, 1995 the California Regional Water Quality Control Board issued
a letter to the Company concluding that the volume of water being discharged
from the San Juan Mine was in excess of the permitted amount and on January 7,
1996 the Company received an interim dewatering permit. Subsequently, an area
of high water flow into the mine was sealed off and other remediation steps
were taken which the Company believes have brought the discharges of water from
the mine into compliance with the original permit. To meet the long term
potential discharge requirements of the Mine, the Company applied for and
received on January 24, 1997, an amendment to its permit allowing increased
volumes of water to be discharged from the Mine.
Operations of the San Juan Mine uses established underground room and pillar
mining methods. Primary separation of the gold and waste occurs underground.
The waste is available for back fill in the mined areas and the gold rich
slurry is pumped to the surface for final recovery. The ore is amenable to
gravity separation and does not require fine grinding. Because a gravity
processing circuit is used no chemicals are required in the final processing.
With the completion of construction and development activities and attainment
of sustained levels of production at the mine in mid-May 1996, the Company
commenced the recognition of revenues, production costs, non-cash costs and
royalties in operations. During 1996, 145,611 tons of ore were mined producing
9,651 ounces of gold of which 84,034 tons yielding 4,648 ounces of gold have
been reflected in operations. In January and February 1997, 24,429 tons were
mined yielding 1,932 ounces of gold.
As of December 31, 1996, the net carrying values of the San Juan property
consisted of acquisition costs (including land) of $6,323,819, and deferred
development costs of $3,780,386.
BIG HORN, LOS ANGELES COUNTY, CALIFORNIA
The Big Horn Mine, 100% owned by Siskon, is located approximately 40 miles
east of Los Angeles, California and 6 miles from the town of Wrightwood. The
property comprises 278 acres owned by the Company and 3 unpatented mining
claims covering 60 acres with access by state highway and a 1.5 mile dirt road.
The Big Horn deposit is a thick vein type deposit that dips at a shallow angle
and was worked intermittently in the 1890's and 1930's as an underground gold
<PAGE> 8
mine and was acquired by the Company in 1961.
From 1990 to 1992, the Company conducted underground diamond drilling programs
and contracted with PAH to conduct an independent feasibility study of the
project which was completed in 1993. According to PAH, the Big Horn deposit has
mineralized material delineated by drilling of 3,710,080 tons containing
434,079 ounces of gold. Within this material is a proven/probable reserve of
1,211,440 tons containing 188,137 ounces of gold that the study estimates can
be produced at a cash cost per ounce of $208. Annual production was forecasted
at 275,000 tons yielding approximately 39,000 ounces of gold. The PAH study
assumes a 15% dilution from material grading approximately one-half of reserve
grade, a 92% recovery from mining and a 92% recovery from processing. The
proven/probable reserves have not been adjusted for the effects of dilution and
recovery rates. Projected pre-production capital costs are estimated at $13.7
million.
In addition to the proven/probable reserves, PAH reported that within the
mineralized material there is another 662,392 tons containing an estimated
101,458 ounces of gold that had been drilled at wider intervals. It is the
opinion of PAH that a substantial part of this additional tonnage will be added
to the proven/probable reserves after additional sampling. The PAH report also
states that there is good potential for the discovery of significant additional
tonnage of ore grade mineralization in other areas.
The proposed plan to mine the Big Horn property calls for underground mining
with a modified room and pillar method which accounts for the favorable
projected mining costs. Power is anticipated to be generated at the mine and
obtained from local utilities at the processing plant. The mine is located in
steep, rugged terrain adjacent to the Sheep Mountain Wilderness area and each
stage of the mine plan is designed to have minimal environmental impact.
The processing plant will be built off-site and the ore will be trucked to the
site for processing. The Company is currently evaluating potential mill sites
for which environmental permits will have to be obtained. A site located in
the City of Adelanto that was purchased in March 1995 is currently for sale.
Based on the results of the PAH study, the Company has begun environmental
permitting for the Big Horn property and the major permits are in place. Air
quality permits to construct power generation facilities at the mine were
issued at the end of March 1995 and water quality permits were issued in June
1995. The Company is currently considering further geological reviews and
additional definition drilling at the mine site.
As of December 31, 1996, the carrying values of the Big Horn property consisted
of acquisition costs (including land) of $737,203 and deferred development
costs of $442,525.
OTHER PROPERTIES
The Company also owns the following properties: Gold Point consisting of 18
unpatented claims located in Sierra County, California, Gray Eagle consisting
of 16 patented claims located in Siskiyou County, California, Argonaut
consisting of 15 unpatented claims located in Baker County, Oregon, Iron Creek
consisting of 7 patented and 35 unpatented claims located in Lemhi County,
Idaho and Humbolt Starlight consisting of 19 patented claims located in
Pershing County, Nevada.
The Gold Point Mine was acquired in 1991 and covers approximately 360 acres.
Drilling and exploration carried out by previous owners in 1989 indicated a
geologic resource of 244,000 tons grading 0.22 ounce per ton of gold.
In October 1995, the Company leased the Humbolt Starlight property to Pegasus
Gold Corporation The lease provides for an annual minimum lease of $6,000 with
a 3% NSR royalty up to $262,000, a 2% NSR royalty on the excess up to $1
million and a 1% NSR royalty thereafter.
In October 1995, the Company leased the Iron Creek property to Cominco American
Incorporated ("Cominco"). The lease provides for a $15,000 payment at inception
and an annual minimum of $12,000 in the first year, increasing $12,000 a year
to $60,000 in the fifth through the ninth year and $100,000 thereafter. The
lease provides for the greater of a 3% NSR royalty or a 12% NPI royalty.
Cominco has an option to purchase two-thirds of the royalty (2% NSR or 9% NPI)
<PAGE> 9
for $5 million and has a work commitment for a maximum of $1 million over ten
years which is allowable on adjacent properties.
Lease income for 1996 was $25,000 from the Iron Creek and Humbolt Starlight
properties and is expected to be $36,000 in 1997. As of December 31, 1996, the
carrying value of the properties amounted to $95,000 attributable to Gold
Point. The Company has no present plans to pursue exploration of these
properties in 1997.
OTHER INTERESTS
The Company also owns the following interests: 1.25% and 1% NSR royalty
interests in the Aurora and Humbolt West properties located in Mineral County,
Nevada, a 2% NSR royalty interest in the Siskon Mine located in Siskiyou
County, California, a 2.5% NSR royalty interest in the Pine Flats property
located in Humboldt County, California, 0.8% NSR royalty interests in the
Mother Lode and Bullfrog properties located in Nye County, Nevada and a 10% NPI
royalty interest in the Hilltop property located in Lander County, Nevada. The
oil and gas royalty interests ranging from 3% to 5% located in Ponderosa and
Teton Counties, Montana were sold March 14, 1997 for $17,500 in cash.
The Mother Lode and Bullfrog properties comprised the Beatty Claims which were
owned by the U.S.-Nevada Gold Search Joint Venture in which Siskon was a 40%
joint venture partner and which were sold in the first quarter of 1995 for
$175,000 cash, the assumption of all reclamation liabilities and a 2% NSR
royalties. The joint venture was liquidated in 1996.
Royalty income for 1996 was $76,828 from the Aurora, Humbolt West and Montana
properties and should continue at lower levels in 1997 reflecting the sale of
the oil and gas interests. As of December 31, 1996 there was no recorded book
value for these interests.
ENVIRONMENTAL MATTERS
Mineral exploration and production is subject to environmental regulations by
federal, state and county authorities. In most states, mineral exploration and
production is regulated by conservation laws and other statutes and regulations
relating to exploration procedures, reclamation, safety of mine operations,
employee health and safety, use of explosives, air and water quality standards,
noxious odors, noise, dust and other environmental protection controls. In
addition, some of the Company's properties are historic gold mines operated by
other companies before the enactment of modern environmental laws. There are
three instances in which the Company has been contacted by governmental
agencies with regard to environmental matters.
In May 1991, the Company received a request from the California Regional Water
Quality Control Board to prepare an environmental site assessment report on a
site known as the Croman Mill Site, located in Siskiyou County, California. In
April 1996, state and federal environmental officials and a representative of
the Company conducted a site visit. Several soil and water samples were taken
by the officials as well as the Company. The Croman Mill Site is a historical
mining mill site which contains stockpiled mine tailings from mining operations
conducted by prior operators and owners and represents a "pre-existing"
condition in relation to the time the Company owned the property. The Company
owned the site from 1989 to June 1996 and did not conduct any mining related
activities on the site during that time. As of March 17, 1997 no further
correspondence has been received from the respective parties in relation to
this matter. In the event that the test results lead to further testing and
analysis which ultimately results in a clean-up and abatement order issued by a
state or federal environmental agency, then the Company intends to seek
indemnification from the prior operators of the property who may have been
primarily responsible for the condition of the mine tailings located on the
mill site.
On March 11, 1997 an action in U.S. District Court for the Eastern District of
California, case number CIVS 970357 WBSJFM, was brought against the Company by
the California Sportfishing Protection Alliance alleging violations of the
Clean Water Act at the Gray Eagle Mine and Croman Mill Site in Siskiyou County,
California. The allegations include the failure to obtain a permit for the
wastewater treatment plant, discharges from the mine and failure to monitor
pollutants released into Indian Creek. The suit seeks to require the Company to
obtain a discharge permit, payment towards an environmental remediation fund,
civil penalties of $25,000 per day and attorneys fees. The Company believes it
has a meritorious defense in that; the water treatment plant owned by a prior
mine operator is on U.S. Forest Service ("USFS") land, the plant is operating
under the proper authorizations and satisfactorily treats discharges into
<PAGE> 10
Indian Creek; the Croman Mill Site is more than three miles from the Gray
Eagle Mine, the tailings came from prior mine owners and a prior lumber
company's actions, the Company's activities on the site during the time of
its ownership did not include any related mining activities and that the
prior owners who created the mill site are liable for any remediation. However,
there are no assurances that the Company will prevail or that the ultimate
judgement or costs of defending itself will not have a material impact on the
Company's financial position.
In March 1994, the Company received preliminary notice from the USFS naming the
Company and six other parties as potentially responsible parties to a hazardous
waste site in Siskiyou County, California. The hazardous waste site is
believed to be related to 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, however the field visit was
postponed due to the occurrence of forest fires in the area. On October 31,
1996, the Company received a notice from the USFS that a field visit to the
site was scheduled for November 4, 1996. The USFS has contracted with a
private contractor to prepare an environmental evaluation to determine if the
site poses any significant environmental risk and, if so, the establishment of
clean-up goals. If necessary, an Engineering Evaluation/Cost Assessment may be
conducted by the USFS to determine appropriate alternatives, if any, for
removal of any hazardous wastes located on the site. Due to flooding in the
area, the USFS has agreed to an additional visit to the site with Company
representatives at a later date. Until more information is developed, the
Company is not able to determine if it will be liable for environmental
remediation or estimate the amount of liability, if any. In the event that the
Company incurs any liability associated with the site, the Company intends to
seek indemnification from other potentially responsible parties who may have
been responsible for creating the hazardous waste found on the property.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
With the exception of historical facts stated herein, the matters discussed in
this report are "forward looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward looking" statements include, but are not
necessarily limited to, statements regarding anticipated levels of future
production in tons of material produced as well as ounces of gold recovered
from the mining operations of the Company, projected costs and expenditures
relating to the Company's mining operations and exploration activities, and the
availability of future debt and equity capital on commercially reasonable
terms. Factors that could cause actual results to differ materially include, in
addition to the other factors identified in this report, risks and
uncertainties relating to general economic and political conditions, both
domestically and internationally, the cyclical and volatile prices of gold,
unanticipated ground and water conditions, unanticipated grade and geological
problems, including lower than anticipated ore grades, metallurgical and other
processing problems, availability of seasoned personnel and equipment, delays
in the receipt of, or failure to receive necessary governmental permits or the
renewals thereof, changes in the law and regulations governing gold mining
specifically and environmental matters generally, results of financing efforts
and market conditions, and other risk factors detailed in above. Readers of
this report are cautioned not to put undue reliance on "forward looking"
statements which are, by their nature, uncertain as reliable indicators of
future performance. The Company disclaims any intent or obligation to publicly
update these "forward looking" statements, whether as a result of new
information, future events or otherwise.
ITEM 3. LEGAL PROCEEDINGS.
Other than the matter discussed under "Environmental Matters - Gray Eagle Mine
and Croman Mill Site" neither Siskon nor its subsidiary was involved in any
legal proceedings, nor is any property of Siskon the subject of any legal
proceedings that may have a material impact on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
<PAGE> 11
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(A) COMPARATIVE MARKET PRICES
Siskon Gold Class A common stock has been listed on the NASDAQ National Market
System ("NMS") under the symbol "SISK" since August 26, 1991. The following
tables set forth the high and low closing sale prices, as reported by the
NASDAQ, for Siskon Class A common stock for the quarters indicated. The high
and low closing bid quotations shown reflect inter-dealer quotations and do not
necessarily represent actual transactions. None of the prices shown reflect
retail mark-ups, mark-downs or commissions.
COMMON STOCK-CLASS A
HIGH LOW
1995 1st Quarter $4.38 $3.25
2nd Quarter 4.50 3.12
3rd Quarter 4.12 2.94
4th Quarter 2.88 1.88
1996 1st Quarter 3.75 1.88
2nd Quarter 2.63 1.75
3rd Quarter 2.44 1.50
4th Quarter 2.06 0.69
During the Company's fiscal year ended December 31, 1996, the National
Association of Securities Dealers, Inc. ("NASD") proposed changes to its
Quantitative Maintenance Criteria for continued listing on the NMS of the
NASDAQ Stock Market. These changes were subsequently approved by the NASD, but
are still awaiting final approval by the Securities and Exchange Commission
("SEC"). The Company anticipates that the SEC will approve the new Quantitative
Maintenance Criteria as approved by the NASD. As amended, all NMS designated
securities must trade at or above a $1.00 bid price. Although in the past, NMS
designated securities could trade at less than a $1.00 minimum bid price if the
market value of the public float equaled at least $3 million and the issuer had
net tangible assets of at least $4 million, this alternative has been deleted
by the amendments to the rule. Consequently, when the new rule is approved by
the SEC, the Company's Class A common stock will not qualify for continued
listing on the NASDAQ Stock Market unless it increases in price. Among other
things the Company may recommend to the shareholders a reverse stock split for
the purposes of preserving the Company's listing on the NASDAQ Stock Market
as an NMS security, although no assurance can be given that if recommended a
stock split will be approved by the shareholders or that the Company's Class A
common stock may not otherwise be delisted for failure to meet the new
Quantitative Maintenance Criteria due to further declines in the share price.
(B) HOLDERS
On March 17, 1997, there were 14,949,673 shares of Siskon Class A Common Stock
outstanding, held by 8,194 holders of record, 638 shares of Series 1 Class B
common stock outstanding, held by 1 shareholder of record and 341 shares of
Series A convertible preferred stock held by 1 shareholder of record.
(C) DIVIDENDS
Siskon has not paid or declared dividends upon its common stock since its
inception and by reason of its anticipated financial requirements, does not
contemplate paying any dividends on its Class A common stock in the foreseeable
future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(A) PLAN OF OPERATION
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
completion of permitting, raising sufficient capital and attaining commercial
<PAGE> 12
levels of production at the Big Horn Mine. The Company has historically relied
on debt and equity financing to meet its operating and development requirements
and is currently actively pursuing alternative vehicles to finance current
operations and development.
During 1996, $3.2 million was incurred for development and plant and equipment
at the San Juan Mine. As a result of recent declines in the gold price and
higher than expected operating costs, the Company reduced the carrying value of
the San Juan Mine by $10.3 million in the fourth quarter of 1996. With the
completion of construction and development activities and attainment of
sustained levels of production at the mine in mid-May 1996, the Company
commenced the recognition of revenues, production costs, non-cash costs and
royalties in operations. During 1996, 145,611 tons of ore were mined producing
9,651 ounces of gold of which 84,034 tons yielding 4,648 ounces of gold have
been reflected in operations. In January and February 1997, 24,429 tons were
mined yielding 1,932 ounces of gold. As a forward looking statement, the
Company is anticipating achieving levels of production of 1,570 tons per day
yielding an average of 2,000 ounces of gold dor<e'> per month before the end of
its fiscal year. In making this statement, the Company is assuming the
following important factors are true: 1) the Company will not encounter further
delays in increasing the levels of production due to poor ground conditions,
unexpected increases in the flow of groundwater into the mine or the lack of
availability of experienced mining personnel; 2) the grade of the gold deposit
meets or exceeds the grade set forth in the Company's feasibility and ore
reserve study; and 3) the Company's mining permits will continue in force and
effect without modifications which would materially affect the level of gold
production and that any modifications if required to sustain production will be
obtained.
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 was terminated in December
1996 as anticipated production levels had not been attained.
The pre-production capital budget for the Big Horn Mine is anticipated to be
$13.7 million, based on an annual production level of 275,000 tons of ore
yielding approximately 39,000 ounces of gold. The Company does not have
sufficient capital on hand to complete development of the Big Horn Mine and
will have to obtain other sources of debt or equity capital. The Company is
presently considering further geology reviews, updating the pre-production
capital budget and conducting additional definition drilling on the inferred
reserves at the Big Horn Mine. The cash requirements for this work would be met
from proceeds from production or other sources of debt or equity capital.
Exploration and general and administrative costs for 1997 are estimated to be
$653,000 net of royalty and lease receipts and interest income. The Company
plans to meet these requirements from existing working capital.
On February 18, 1997 the Company borrowed $450,000 through the issuance of a
convertible debenture bearing interest at 8% and a maturity date of February 1,
1999. The principle plus accrued interest may be converted into shares of the
Company's Class A common stock at a conversion price equal to the lesser of
seventy five percent of the market price of the common stock on February 19,
1997, or the market price on the date of conversion. The market price for the
applicable date is defined as the average closing bid price of the common stock
for five days preceding that date. The principle amount and accrued interest
may be converted after April 5, 1997. At maturity, the Company has the option
of repaying the principle and accrued interest in cash or in shares of common
stock using the conversion prices set forth above. The Company issued the
convertible debentures in reliance upon an exemption from the registration
provisions of the Securities Act of 1933, as amended, provided for in
Regulation S promulgated thereunder.
(B) FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Siskon had cash on hand of $812,606 and $4,251,032 at December 31, 1996 and
1995 respectively.
Cash used by operating activities in 1996 totalled $2,184,703 versus $712,749
in 1995.
Cash used in investing activities during 1996 totalled $2,548,604 as compared
to $5,601,449 in 1995. During 1996 $2,149,827 was expended on development
costs, $510,949 on equipment and $192,276 on land and bonds, as compared with
$4,509,301 for development, $1,040,012 for equipment and $131,398 on land and
bonds during 1995 . Cash provided from investing activities during 1996
totalled $304,448 from the sale of mining equipment and note collections as
<PAGE> 13
compared with $79,262 in 1995 from the sale of the USNGS Beatty properties and
note collections.
Cash flows from financing activities during 1996 totalled $1,294,880 as
compared to $6,320,532 during 1995. During 1996 $1,926,058 was received from
the issuance of convertible debt as compared to $1,524,443 from the sale of
common stock, $5,847,532 from the issuance of convertible debt and $7,860 from
the exercise of options in 1995. During 1996 payments of capital lease
obligations and debt amounted to $604,510 and registration and other issuance
costs of $65,747 versus $1,059,303 for capital lease obligations and debt in
1995.
Pre-production development costs and related plant and equipment for the San
Juan Mine aggregated $4,474,935 net of gold recoveries of $1,993,169 during
1996. In mid-May 1996 construction of the mine was completed. Permitting and
land acquisition costs at the Big Horn Mine amounted to $179,010 during 1996.
In May 1996 the Board of Directors determined that the proceeds received in a
November 1995 private placement to Vengold had been fully expended, the two
directors appointed by Vengold resigned and the Board dissolved the Budget
Committee. In August 1996 Vengold converted the 39,062.5 shares of Class B
Series 2 common stock into 781,250 shares of Class A common stock.
In May 1996 the Company borrowed $500,000 from Carl Seaman, a shareholder and
holder of a majority of existing convertible debt. The loan is collateralized
by the San Juan and Big Horn mines, is due November 15, 1998 and bears
interest at ten percent with the principle and interest convertible into Class
A common stock at $1.75 per share. In connection with the loan Mr. Seaman was
granted the right to convert $500,000 of the Seamans' existing convertible debt
into Class A common stock at $1.75 per share as well. If a private placement is
completed prior to November 15, 1998 at a price below $1.75 per share, Mr.
Seaman would have the right to change the conversion price of his new note to
the same as that under the private placement.
If the note holders of the $8.3 million in convertible debt do not elect to
convert prior to maturity, the Company anticipates meeting the repayment
requirements from future production proceeds from the San Juan Mine or
additional debt or equity financing although no assurance can be given that the
proceeds from production will be sufficient or that the financing can be
obtained. For further details to the convertible debt see note 9 to the
financial statements.
On October 17, 1996 the Company borrowed $1,150,000 through the issuance of a
convertible debenture bearing interest at 8% and a maturity date of October 1,
1998. The principle plus accrued interest may be converted into shares of
Class A common stock at a conversion price equal to the lesser of (a) the
market price of the common stock on October 17, 1996, or (b) seventy five
percent of the market price if the conversion is before January 25, 1997 or
seventy percent of the market price if the conversion is after January 24,
1997. The market price for the applicable date is defined as the average
closing bid price of the common stock for five days preceding that date. One
quarter of the principle amount and accrued interest may be converted after
November 27, 1996, with additional one quarter amounts eligible for conversion
after December 15, 1996, January 4, 1997 and January 24, 1997. In the event
that the conversion price is less than or equal to $1.00 per share, then the
Company has the right to redeem the debenture for 133% of the principle amount
if the redemption occurs prior to January 25, 1997 and 142.8% of the principle
amount if the redemption occurs thereafter. At maturity, the Company has the
option of repaying the principle and accrued interest in cash or in shares of
Class A common stock using the conversion prices set forth above. The holder of
the debenture has agreed not to convert the debenture if at any time, except at
maturity, the holder would beneficially own more than 5% of the Class A common
stock of the Company. The Company issued the convertible debentures in
reliance upon an exemption from the registration provisions of the Securities
Act of 1933, as amended, provided for in Regulation S promulgated thereunder.
$950,000 of the debentures have been converted through March 17, 1997 into
2,738,176 shares of Class A common stock.
On November 18, 1996, the Company borrowed $500,000 through the issuance of
convertible debt bearing interest at 8% and a maturity date of January 1,
2000. Principal, plus accrued interest, may be converted into shares of
Series A convertible preferred stock at a conversion price of $1,000 per share.
One third of these debentures are convertible into shares of Class A common
stock after January 24, 1997, one third after February 13, 1997 and the
remaining one third after March 5, 1997. The number of shares of Class A common
stock issuable upon the conversion of the Series A convertible preferred stock
<PAGE> 14
is determined by dividing the number 1,000 by seventy five percent of the
average bid price of the Class A common stock over a ten day trading period
immediately preceding the conversion date. The debenture may be prepaid,
without penalty, anytime after one hundred eighty days from the date of issue.
Likewise, the Series A cumulative preferred stock may be redeemed by the
Company at its liquidation value of $1,000 per share, plus accrued dividends.
Dividends on the Series A cumulative preferred stock accrue at eight percent
per annum and are cumulative. At maturity, any remaining debentures or
preferred stock automatically convert into shares of Class A common stock at
the conversion price set forth above. So long as any debenture or any share of
Series A cumulative preferred stock remains outstanding, the holder may not,
directly or indirectly, initiate or maintain any short position in the
securities of the Company. The Company agreed to issue this series of
debentures in reliance upon an exemption from the registration provisions of
the Securities Act of 1933, as amended, provided for in Regulation S
promulgated thereunder. On March 7, 1997 all of the debentures and accrued
interest amounting to $511,111 were converted into 512 shares of Series A
convertible preferred stock and 171 shares of the preferred stock so issued
were converted into 640,000 shares of Class A common stock.
Siskon incurred a net loss of $14,394,185 for 1996 compared to a net loss of
$703,571 in 1995. Commencing in mid-May 1996, revenues, production costs, non-
cash costs and royalties at the San Juan Mine were reflected in operations.
During 1995 production costs were capitalized as the Company's operations were
in the development stage and gold revenues received were credited against
capitalized costs. During 1996 revenues of $1,770,648 resulted from 4,648
ounces of fine gold at an average price of $381 per ounce. Production costs,
non-cash costs and royalty expense totalled $3,309,196, $794,371 and $35,301
respectively. As a result of recent declines in the gold price and higher than
expected operating costs, the Company determined that it may not recover its
investment in the San Juan Mine over the life of the property and accordingly
reduced the carrying value of the property by $10,295,517 in the fourth quarter
of 1996 based on the Company's estimate of fair value. Fair value was
determined based on the estimated discounted future net cash flows expected to
be generated over the life of the San Juan Mine.
In July 1996, the Company sold for $450,000 cash the merchantable timber on the
San Juan property which must be harvested in three years. There were no sales
of timber in 1995.
The note receivable collateralized by the Comstock property amounting to
$275,326 is currently in default and the Company is negotiating with the payee
to either bring the note current or initiate foreclosure.
General and administrative expenses were $1,150,590 for 1996 as compared with
$1,031,492 during 1995. The increase is primarily due to compensation expense
that was included in general and administrative in 1996 versus being
capitalized in deferred development costs in 1995.
Exploration costs were $71,234 for 1996 versus $74,593 during 1995.
The loss on sale of property and equipment was $33,315 during 1996 versus a
gain of $90,616 in 1995. The gain during 1995 primarily related to the sale of
the USNGS Beatty property.
Interest and miscellaneous income was $78,438 for 1996 as compared with
$164,965 during 1995 reflecting higher cash balances during 1995.
Interest expense in 1996 amounted to $1,105,575 reflecting commencement of
production and the amortization of the discount of the price of the stock
underlying the convertible debt. In 1995 interest costs were capitalized.
The Company believes that its business and operations were not materially
affected by inflation during 1996 and 1995.
During 1996 and into the first quarter of 1997, the San Juan Mine has
experienced less than anticipated ore grades and negative cash flows as the
Company continues its effort to increase production and gold recoveries to
levels sufficient to attain positive cash flow and profitable operating
results. As a result, in an effort to maintain its cash reserves, the Company
has raised additional capital through the issuance of convertible debentures.
Even though the Company believes it currently has sufficient working capital to
operate the San Juan Mine during 1997, this forward looking statement assumes,
among other things, that the ore grade is at least the ore grade in the
<PAGE> 15
feasibility study and that production levels continue to increase. If the San
Juan Mine experiences less than anticipated ore grades or lower levels of
production, even for a relatively short period of time, than the Company may
decide to curtail or significantly reduce its operations while it studies
various alternatives which may include, but are not necessarily limited to,
different mining methods, alternative mine plans, additional capital raising or
the identification of potential joint venture or merger partners. Should
operations be curtailed, it is anticipated that the Company could generate
sufficient working capital to fund its obligations over the next year.
ITEM 7. FINANCIAL STATEMENTS.
The Consolidated Financial Statements of Siskon Gold Corporation and Subsidiary
are attached at the end of this document.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
During the registrants' two most recent fiscal years and subsequent period,
there were no disagreements on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT OF THE REGISTRANT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Items 9, 10, 11 and 12 will be incorporated by reference to Siskon's definitive
proxy statement for the 1996 shareholders meeting to be filed with the
Commission within 120 days from the end of the year.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
3.1 Amended and Restarted Articles of Incorporation of Siskon Gold
Corporation (1)
3.2 Bylaws of Siskon Gold Corporation (1)
4.1 Form of 8% Convertible Debenture due February 1, 1999 (10)
4.2 Certificate of Determination for Series A Convertible Preferred
Stock
4.3 Form of 8% Convertible Debenture due January 1, 2000
10.8 Siskon Gold Stock Option Plan (2)
(a) Amendment to the Siskon Gold Stock Option Plan (1)
10.9 Consulting Agreement with Charles D. Snead, Jr. (3)
10.10 Employment Agreement with Timothy A. Callaway (3)
10.16 Placement Agent Agreement (4)
10.17 Unit Purchase Agreement (4)
10.18 Stock, Note and Warrant Purchase Agreement, dated November 15, 1995
(5)
10.19 Standstill Agreement, dated November 15, 1995 (5)
10.20 Convertible Note with SJ Gold Holdings Inc., dated November 15,
1995 (5)
10.21 Debt Conversion and Modification Agreement, dated November 15, 1995
(5)
10.22 Amended and Restated Convertible Note with Carl and Linda Seaman,
dated November 15, 1995 (5)
10.23 Amended and Restated Convertible Note with Jordan Seaman, dated
November 15, 1995 (5)
10.24 Amended and Restated Convertible Note with Dana Manning, dated
November 15, 1995 (5)
10.25 Mine Services Agreement with the Doe Run Company, dated March 15,
1996 (7)
10.26 Timber Sales Agreement (8)
10.27 Convertible Note Agreement - Cygni S.A. (9)
10.28 Convertible Note Agreement - Carl Seaman
16.1 Letter on Changes in Certifying Accountants (6)
<PAGE> 16
21.1 List of Subsidiaries
23.1 Consent of Coopers & Lybrand L.L.P.
(1) Incorporated by reference to the Company's Registration Statement
S-3 filed on December 20, 1993 (File No. 33-73066)
(2) Incorporated by reference to the Company's Form 10-K for the year
ended December 31, 1991
(3) Incorporated by reference to the Company's Form 10-KSB for the year
ended December 31, 1992, as amended on Form 8 on April 30, 1993 and
on Form 10-KSB/A on June 1, 1993 (which conformed the Form 10-K to
a Form 10-KSB)
(4) Incorporated by reference to the Company's Form 10-KSB for the year
ended December 31, 1994
(5) Incorporated by reference to the Company's Form 10-QSB for the
quarterly period ended September 30, 1995 as amended on form 10-
QSB/A No. 1 on November 24, 1995
(6) Incorporated by reference to the Company's Form 8-K for October 20,
1994 and filed on October 26, 1994
(7) Incorporated by reference to the Company's Form 10-KSB for the year
ended December 31, 1996.
(8) Incorporated by reference to the Company's Form 10-QSB for the
quarterly period ended June 30, 1996.
(9) Incorporated by reference to the Company's Form 10-QSB for the
quarterly period ended September 30, 1996.
(10) Incorporated by reference to the Company's Form 8-K for February
21, 1997 and filed on February 28, 1997.
(B) REPORTS ON FORM 8-K
On February 21, 1997 the Company reported that on February 18, 1997 the Company
borrowed $450,000 through the issuance of a convertible debenture bearing
interest at 8% and a maturity date of February 1, 1999. The principle plus
accrued interest may be converted into shares of the Company's Class A common
stock at a conversion price equal to the lesser of seventy five percent of the
market price of the common stock on February 19, 1997, or the market price on
the date of conversion. The market price for the applicable date is defined as
the average closing bid price of the common stock for five days preceding that
date. The principle amount and accrued interest may be converted after April 5,
1997. At maturity, the Company has the option of repaying the principle and
accrued interest in cash or in shares of common stock using the conversion
prices set forth above. The Company issued the convertible debentures in
reliance upon an exemption from the registration provisions of the Securities
Act of 1933, as amended, provided for in Regulation S promulgated thereunder.
<PAGE> 17
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 March 25, 1997 /S/TIMOTHY A. CALLAWAY
Timothy A. Callaway, President, CEO
and Chairman of the Board
(Principal Executive Officer)
Dated March 25, 1997 /S/MICHAEL K. EPSTEIN
Michael K. Epstein, Vice-President
Finance and Chief Financial Officer
(Principal Financial and Accounting
Officer)
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/S/TIMOTHY A. CALLAWAY Dated MARCH 25, 1997
Timothy A. Callaway, Director
/S/CHARLES D. SNEAD Dated MARCH 25, 1997
Charles D. Snead, Director
/S/MICHAEL K. EPSTEIN Dated MARCH 25, 1997
Michael K. Epstein, Director
/S/SCOTT E. BARTEL Dated MARCH 25, 1997
Scott E. Bartel, Director
<PAGE> 18
FINANCIAL STATEMENTS
<PAGE> 19
FORM 10-KSB - ITEM 7
SISKON GOLD CORPORATION AND SUBSIDIARY
LIST OF FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included in
response to Item 7:
Independent Auditors' Report -
Coopers & Lybrand, L.L.P. 20
Consolidated Balance Sheets -
December 31, 1996 and 1995 21
Consolidated Statements of Operations -
Years Ended December 31, 1996 and 1995 22
Consolidated Statements of Cash Flows -
Years Ended December 31, 1996 and 1995 23
Consolidated Statements of Shareholders' Equity -
Years Ended December 31, 1996 and 1995 24
Notes to Consolidated Financial Statements 25
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Siskon Gold Corporation and Subsidiary
Grass Valley, California
We have audited the accompanying consolidated balance sheets of Siskon Gold
Corporation and Subsidiary (the Company) as of December 31, 1996 and 1995, and
the related consolidated statements of operations, shareholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for that opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Siskon Gold Corporation and
Subsidiary as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
As described in Note 16 to the consolidated financial statements, an action has
been brought against the Company on March 11, 1997, alleging violations of the
Clean Water Act at one of the Company's mine sites the outcome of which is
uncertain at this time. Accordingly, no provision for any liability that may
result from this case has been made in the financial statements.
COOPERS AND LYBRAND, L.L.P.
San Francisco, California
March 12, 1997
<PAGE> 21
SISKON GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
CURRENT ASSETS
Cash and cash equivalents $812,606 $4,251,032
Accounts receivable 6,080 7,586
Inventories 230,875 240,605
Prepaid expenses and other 400,792 74,121
----------- -----------
Total Current Assets 1,450,353 4,573,344
NOTES RECEIVABLE 292,812 288,053
PROPERTY, PLANT AND EQUIPMENT, net 16,653,046 24,753,240
OTHER ASSETS 428,569 257,416
----------- -----------
TOTAL ASSETS $18,824,780 $29,872,053
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $773,306 $719,113
Capital lease obligations - 48,964
Current portion of long-term debt 292,248 0
---------- -----------
Total Current Liabilities 1,065,554 1,282,048
LONG TERM DEBT ($9,772,640 in 1996 and
$7,811,657 in 1995 to related parties) 10,692,224 8,171,205
OTHER LIABILITIES 60,551 51,190
---------- -----------
Total Liabilities 11,818,329 9,504,443
---------- -----------
COMMITMENTS AND CONTINGENCIES (Note 16)
SHAREHOLDERS' EQUITY
Capital Stock
Preferred stock, $.001 par value; no shares issued - -
Common stock, $.001 par value; issued and outstanding:
Class A: 11,989,662 in 1996; 10,562,544 in 1995 11,989 10,562
Convertible Class B Series 1: 638 in 1996 and 1995 1 1
Convertible Class B Series 2: 0 in 1996; 39,062.5 in 1995 - 39
Additional paid-in capital 53,730,633 52,690,024
Stock subscription receivable (326,812) (317,841)
Accumulated deficit (46,409,360) (32,015,175)
---------- ----------
Total Shareholders' Equity 7,006,451 20,367,610
---------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $18,824,780 $29,872,053
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 22
SISKON GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
Gold sales $1,770,648 $ -
Timber sales 450,000 -
Royalties and leases 101,828 147,233
---------- -----------
Total Revenues 2,322,476 147,233
---------- -----------
OPERATING EXPENSES
Production 3,309,196 -
Depreciation, depletion and amortization 794,371 -
Mineral property impairment loss 10,295,517 -
General and administrative 1,150,590 1,031,492
Royalties 35,301 -
Exploration costs 71,234 74,893
---------- -----------
Total Operating Expenses 15,656,209 1,106,385
---------- -----------
OPERATING LOSS (13,333,733) (959,152)
OTHER (EXPENSE) INCOME
(Loss) Gain on sale of mineral rights and equipment (33,315) 90,616
Interest expense (1,105,575) -
Interest and other income 78,438 164,965
---------- -----------
Total Other (Expense) Income (1,060,452) 255,581
---------- -----------
NET LOSS $(14,394,185) ($703,571)
========== ============
NET LOSS PER SHARE $ (1.31) $ (0.08)
========== ============
WEIGHTED AVERAGE NUMBER OF SHARES 10,980,783 9,255,124
========== ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 23
SISKON GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(14,394,185) ($703,571)
Adjustments to reconcile net loss to net
cash used in operating activities
Mineral property impairment loss 10,295,517 -
Issuance of common stock for services 50,000 82,500
Issuance of common stock for interest 489,155 -
Discount on price of stock underlying
convertible debt 490,647 -
Depreciation, depletion and amortization 794,371 22,098
Loss (Gain) on sale of mineral rights and equipment 33,315 (90,616)
Accrued interest payable (receivable) 2,012 (17,991)
(Increase) decrease in accounts receivable (4,331) 15,247
Decrease (increase) in inventories 9,730 (114,839)
Increase in prepaid expenses (5,127) (45,746)
Increase in accounts payable and accrued liabilities 54,193 160,169
Decrease in accrued reclamation costs - (20,000)
---------- ----------
Net cash used in operating activities (2,184,703) (712,749)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of mineral rights and equipment 303,370 73,000
Collections on notes receivable 1,078 6,262
Purchase of equipment (510,949) (1,040,012)
Purchase and additions to land (5,934) (124,121)
Deferred development costs (2,149,827) (4,509,301)
Increase reclamation bonds (186,342) (7,277)
---------- ---------
Net cash used in investing activities (2,548,604) (5,601,449)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock,
net of offering costs - 1,524,443
Proceeds from issuance of convertible debt,
net of financing costs 1,926,059 5,847,532
Proceeds from exercise of stock options - 7,860
Payments of obligations under capital leases (48,964) (572,199)
Payments of equipment debt (501,232) (476,475)
Payment of land notes payable (15,235) (10,629)
Registration and other issuance costs (65,747) -
---------- ---------
Net cash provided by financing activities 1,294,881 6,320,532
---------- ---------
(DECREASE) INCREASE IN CASH (3,438,426) 6,334
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,251,032 4,244,698
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $812,606 $4,251,032
========== =========
Supplemental cash flow disclosure (Note 14)
See notes to consolidated financial statements.
<PAGE> 24
SISKON GOLD CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock Additional Stock
Paid-In Subscription Accumulated
Capital Receivable Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Series 2 Class B
Shares Shares Shares Amount
Balance -
December 31,
1994 9,056,043 - 638 $9,057 $49,126,795 $(299,850) $(31,311,604) $17,524,398
Shares issued
for:
Cash (less
offering
expenses of
$475,557) 39,062.5 39 1,524,404 1,524,443
Private placement
(see Note 10) 718,556 719 (719) -
Services 23,236 23 82,477 82,500
Stock options 3,000 3 7,857 7,860
Convertible debt 707,679 707 1,810,949 1,811,656
Interest 54,030 54 138,261 138,315
Accrued interest (17,991) (17,991)
Net loss (703,571) (703,571)
-------- ---------- ----- ------- ----------- --------- ------------ -----------
Balance -
December 31,
1995 10,562,544 39,062.5 638 10,602 52,690,024 (317,841) (32,015,175) 20,367,610
Shares issued
for:
Services 18,850 19 49,981 50,000
Convertible debt 303,577 304 247,391 247,695
Interest 323,441 323 808,984 809,307
Conversion of
Series 2 shares 781,250 (39,062.5) 742 (65,747) (65,005)
Accrued interest (8,971) (8,971)
Net loss (14,394,185) (14,394,185)
--------- ---------- ------ ------ --------- --------- ------------ -----------
Balance -
December 31,
1996 11,989,662 - 638 $11,990 $53,730,633 $(326,812) $(46,409,360) $7,006,451
========== ========== ====== ======= =========== ========== ============= ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 25
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 December 31, 1996,
the Company owned interests in various mineral properties located in the
Western United States. In mid-May 1996 the San Juan Mine attained
sustained levels of production and the Company commenced the recognition
of revenues, production costs, non-cash costs and royalties in
operations. The Company's operations are conducted in one business
segment being that of mineral resource exploration, development and
production.
The consolidated balance sheet at December 31, 1996 includes deferred
development costs and mineral rights relating to the San Juan Mine
amounting to $7,904,205 after reducing the carrying value of deferred
costs by $10,295,577 (see note 6). The ability of the Company to continue
mining in the foreseeable future without any significant curtailment of
operations and its ability to recover the carrying value of deferred
development costs and mineral rights is dependant on the San Juan Mine
being able to reach economic levels of production. Management believes
that economic levels of production are attainable and will lead to the
recovery of carrying values of deferred development costs and mineral
rights. However, the Company has experienced lower than anticipated
levels of production resulting in losses from operations and negative
cash flows for 1996 and 1995. Should these conditions persist, the
Company may need to seek alternative means of financing to fund
operations, the likelihood of which is uncertain at this time, or to
significantly reduce or curtail the scope of its operations while it
reviews various alternatives.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company, its 99% owned Mexican subsidiary SISKOMEX,
S.A. de C.V. and for 1995 its 40% share of the revenues and expenses of
U.S.- Nevada Gold Search Joint Venture ("USNGS") which was liquidated on
December 31, 1995. All significant intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent liabilities
at the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of cash and
U.S. Treasury bills with original maturity dates of three months or less.
The Company's policy is to invest cash in conservative, highly rated
instruments and to limit the amount of credit exposure to any one
institution.
REVENUE RECOGNITION - Revenue from gold production is recognized when the
finished product is poured based upon estimated weights and assays at
current market prices. Until sustained levels of production are attained
and development is complete, gold revenues are offset against deferred
development costs.
INVENTORIES - Inventories of materials and supplies are carried at the
lower of average costs or estimated net realizable value. Inventories of
gold dor<e'> bars are carried at net realizable value.
PROPERTY, PLANT AND EQUIPMENT - Plant and equipment are stated at cost.
Plant depreciation is computed using the units of production method based
on proven and probable reserves. Mining and other equipment
depreciation is computed on straight-line methods over the estimated
useful lives of the assets, principally 7 to 10 years.
<PAGE> 26
Property acquisition costs are recorded at cost and are depleted on a
unit of production method based on proven and probable reserves.
Land is recorded at cost.
Development costs are capitalized and amortized on a unit of production
method based on proven and probable reserves.
Borrowing costs are capitalized on expenditures related to development
projects actively being prepared for their intended use. Capitalization
is discontinued when the asset is substantially complete and ready for
its intended use.
Asset carrying values: The recoverability of investments in operating
mines and non-operating properties is evaluated periodically. Estimated
future net cash flows from each mine and non-operating property are
calculated using estimates of proven and probable ore reserves for
operating properties and estimated contained mineralization expected to
be classified as proven and probable reserves based on geological
delineation to date for non-operating properties, estimated future sales
prices (considering historical and current prices, price trends and
related factors) and operating, capital and reclamation costs.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 121
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable,
and, if deemed impaired, measurement and recording of an impairment loss
be based on the fair value of the asset which generally will be computed
using discounted cash flows. See note 6 for the impairment loss
recognized at December 31, 1996.
Management's estimates of gold prices, recoverable proven and probable
reserves, operating, capital and reclamation costs are subject to
certain risks and uncertainties which may affect the recoverability of
the Company's investment in property, plant and equipment. Although
management has made its best estimate of these factors based on current
conditions, it is reasonably possible that changes could occur in
the near term which could adversely affect management's estimate of
the net cash flows expected to be generated from its operating
properties.
EXPLORATION COSTS - Exploration costs are expensed as incurred.
RECLAMATION COSTS - Reclamation costs are estimated and accrued on an
undiscounted basis over the productive life of properties using the
units-of-production method, based on ounces recovered. Remediation
liabilities are expensed immediately when the liability is probable and
estimable. Based on current environmental regulations and known
reclamation requirements, management has included ts best estimates of
these obligations in its reclamation accruals. However, it is
reasonably possible that the Company's estimates of its ultimate
reclamation liabilities could change as a result of changes in
regulations or cost estimates.
DEFERRED FINANCING COSTS - Costs associated with issuing convertible debt
are deferred and amortized over the life of the debt. The discount on the
price of the stock underlying convertible debt is capitalized and
amortized over the period from the issuance of the debt until the first
date of conversion.
INCOME TAXES - The Company accounts for income taxes using the liability
method which requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred tax assets
and liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse. Valuation allowances against deferred tax assets are
recorded to the extent management estimates that the benefit will not be
realized.
<PAGE> 27
STOCK BASED COMPENSATION - SFAS 123 "Accounting for Stock-Based
Compensation" encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. ("APB") 25, "Accounting for Stock Issued to
Employees," and related interpretations. Accordingly, compensation cost
for stock options is measured as the excess, if any, of the quoted market
price of the Company's common stock at the date of grant over the amount
an employee must pay to acquire the stock.
LOSS PER SHARE - In February 1997, the Financial Accounting Standards
Board issued SFAS 128, "Earnings per Share," which is effective for
periods beginning after December 15, 1997. SFAS 128 has simplified the
existing computational guidelines as well as revised the existing
disclosure requirements. The Company will adopt the provisions of SFAS
128 in the 1997 year.
Loss per share is calculated based on the weighted average Class A
common shares outstanding during 1996 and 1995, respectively. Common
stock equivalents, mainly series 2 Class B common stock and convertible
debt and stock options and warrants, are not included in the calculation
of weighted average shares outstanding as they are anti-dilutive.
3. INVENTORIES
Inventories at December 31 were as follows: 1996 1995
Gold dor<e'> inventory $81,380 $117,441
Materials and supplies 149,495 123,164
-------- --------
$230,875 $240,605
======== ========
4. PREPAID EXPENSES AND OTHER
Prepaid expenses and other at December 31 were as follows:
1996 1995
Deferred financing costs $135,602 $ -
Discount on price of stock underlying
convertible debt 137,923 -
Property taxes, insurance and other 127,267 74,121
-------- --------
$400,792 $74,121
======== ========
5. NOTES RECEIVABLE
Notes receivable at December 31 were as follows: 1996 1995
Comstock property $275,326 $275,559
USNGS trailer park property 19,633 17,292
-------- --------
294,959 292,851
Less current portion 2,147 4,798
-------- --------
$292,812 $288,053
======== ========
The notes are collateralized by property and equipment, payable in
monthly installments of $2,191 with interest payable from seven to eight
per cent and are due in 2002 and 2005. The note receivable collateralized
by the Comstock property is in default. The Company is negotiating with
the payee to either bring the note current or the Company will initiate
foreclosure.
<PAGE> 28
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 were as follows:
1996 1995
Property acquisition and development costs
San Juan $20,747,399 $18,135,688
Big Horn 1,179,728 1,000,716
Gold Point 95,000 95,000
Mining equipment 5,442,216 4,981,075
Plant 1,326,380 1,211,017
Office equipment, furniture and vehicles 145,699 305,478
---------- ----------
28,936,422 25,728,974
Less: accumulated depletion, depreciation and
amortization 1,987,859 975,734
amortization
mineral property impairment loss 10,295,517 -
---------- ----------
$16,653,046 $24,753,240
=========== ===========
As a result of recent declines in the gold price combined with higher
than anticipated operating costs, the Company determined that it may not
recover its investment in the San Juan mine over the life of the property
and accordingly reduced the carrying value of this property by
$10,295,517 in the fourth quarter of 1996 based on the Company's estimate
of its fair value. The fair value was determined based on the estimated
discounted future net cash flows expected to be generated over the life
of the San Juan mine.
Included in property acquisition costs is the cost of land, amounting to
$2,861,479 and $2,855,545 at December 31, 1996 and 1995, respectively.
Included in mining equipment is equipment under capital leases amounting
to $321,750 at December 31, 1995. The leases matured in 1996.
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 $87,946.
7. OTHER ASSETS
Other assets at December 31 were as follows: 1996 1995
Reclamation Bonds $295,942 $109,600
Deferred Financing costs 132,627 147,816
-------- --------
$428,569 $257,416
======== ========
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at December 31 were as follows:
1996 1995
Trade payables $539,367 $470,941
Accrued wages 141,590 154,450
Accrued sales and property taxes
and insurance 92,349 93,722
-------- --------
$773,306 $719,113
======== ========
<PAGE> 29
9. LONG-TERM DEBT
Long-term debt at December 31 was as follows: 1996 1995
Land purchase notes $186,203 $201,438
Equipment contracts 477,390 672,081
Convertible notes payable to shareholders 9,772,640 7,811,657
Discount on the price of stock underlying
convertible notes 548,239 -
----------- ----------
10,984,472 8,685,176
Less: current portion 292,248 513,971
----------- ----------
$10,692,224 $8,171,205
=========== ==========
Activity in the convertible notes payable to shareholders for the years
ended December 31 was as follows: 1996 1995
Balance - beginning of year $7,811,657 $3,380,850
Borrowings 2,150,000 6,000,000
Accrued interest 10,983 242,463
Conversion to common stock (200,000) (1,811,656)
---------- ----------
Balance - end of year $9,772,640 $7,811,657
========== ==========
Components of notes payable to shareholders for the years ended
December 31 was as follows: 1996 1995
Carl and Linda Seaman and family $5,302,783 $4,811,657
Vengold Inc. 3,000,000 3,000,000
Cygni S.A. 965,912 -
Income Partnership of America, Ltd. 503,945 -
---------- ----------
$9,772,640 $7,811,657
========== ==========
Maturities of long term debt at December 31, 1996 are as follows:
1997 $292,248
1998 9,815,541
1999 71,859
2000 774,155
2001 6,297
Thereafter 24,372
---------
$10,984,472
===========
The land purchase notes are payable in monthly installments of $2,570
including interest at 8%, are collateralized by the Big Horn mill
site and mature in March 2000 and March 2005.
The equipment notes are payable in monthly installments of $43,621
including interest from zero to nine percent, are collateralized by
mining equipment and mature in 1997 and 1998.
The convertible notes payable to Carl and Linda Seaman and family (the
"Seamans") are collateralized by the San Juan and Big Horn mines,
mature November 15, 1998 and bear interest at 10%. Interest accruing for
the first two years is payable in Class A common stock at $2.56 per share
and in cash thereafter. On May 17, 1996, the Company borrowed an
additional $500,000 from Carl Seaman under the same terms except that
<PAGE> 30
principle and interest is convertible into Class A common stock at $1.75
per share. Additionally, Mr. Seaman was granted the right to convert
$500,000 of the Seamans' existing convertible debt into Class A common
stock at $1.75 per share as well. If a private placement is completed
prior to November 15, 1998 at a price below $1.75 per share, Mr. Seaman
would have the right to change the conversion price of his new note to
the same as that under the private placement. During 1995 $1,811,657 of
debt was converted into 707,678 shares of Class A common stock at $2.56
per share. At December 31, 1996, $1,000,000 of debt is convertible into
571,428 shares of Class A common stock at $1.75 per share and $4,302,783
is convertible into 1,229,367 shares of Class A common stock at $3.50 per
share. (See Note 11.)
The convertible note payable to Vengold Inc. is collateralized by the San
Juan and Big Horn mines, matures November 15, 1998, bears interest at
10% and is convertible into 1,171,875 shares of Class A common stock at
$2.56 per share. Interest accruing for the first two years is payable in
Class A common stock at $2.56 per share and in cash thereafter. (See Note
11.)
The convertible note payable to Cygni S.A. bears interest at 8% and
matures October 1, 1998. The note is convertible into shares of Class A
common stock at a conversion price equal to the lesser of (a) the market
price of the common stock on October 17, 1996, or (b) seventy five per
cent of the market price if the conversion is before January 25, 1997
or seventy per cent of the market price if the conversion is after
January 24, 1997. The market price for the applicable date is defined as
the average closing bid price of the common stock for five days preceding
that date. One quarter of the principle amount and accrued interest may
be converted after November 27, 1996, with additional one quarter amounts
eligible for conversion after December 15, 1996, January 4, 1997 and
January 24, 1997. In the event that the conversion price is less than or
equal to $1.00 per share, then the Company has the right to redeem the
debenture for 133% of the principle amount if the redemption occurs prior
to January 25, 1997 and 142.8% of the principle amount if the redemption
occurs thereafter. At maturity, the Company has the option of repaying
the principle and accrued interest in cash or in shares of common stock
using the conversion prices set forth above. The holder of the debenture
has agreed not to convert the debenture if at any time, except at
maturity, the holder would beneficially own more than 5% of the common
stock of the Company. The Company issued the convertible debentures in
reliance upon an exemption from the registration provisions of the
Securities Act of 1933, as amended, provided for in Regulation S
promulgated thereunder. The original note was for $1,150,000 issued on
October 17, 1996 and during 1996, $200,000 of principle has been
converted into 303,576 shares of Class A common stock. From January 1,
1997 to March 17, 1997, an additional $750,000 of principle has been
converted into 2,434,600 shares of Class A common stock.
The convertible note payable to Income Partnership of America, Ltd bears
interest at 8% and matures January 1, 2000. The note is convertible into
shares of Series A convertible preferred stock at a conversion price of
$1,000 per share. The debentures may not be converted into preferred
stock for a period of sixty days from the date of issue. One third of the
principal amount of the debenture may be converted after sixty days, one
third after eighty days and the remaining one third and all accrued
interest may be converted after one hundred days. The number of shares of
Class A common stock issuable upon the conversion of the preferred stock
is determined by dividing the number 1,000 by seventy five percent of the
average bid price of the Class A common stock over a ten trading day
period immediately preceding the conversion date. The debenture may be
prepaid, without penalty, anytime after one hundred eighty days from the
date of issue. Likewise, the preferred stock may be redeemed by the
Company at its liquidation value of $1,000 per share, plus accrued
dividends. Dividends on the preferred stock accrue at eight percent per
annum and are cumulative. Any debenture or shares of preferred stock
outstanding on January 1, 2000, automatically convert to shares of Class
A Common Stock at the conversion price set forth above. So long as any
debenture or share of preferred stock remain outstanding, the holder may
not, directly or indirectly, initiate or maintain any short position in
the securities of the Company. The Company issued the debentures in
reliance upon an exemption from the registration provisions of the
Securities Act of 1933, as amended, provided for in Regulation S
promulgated thereunder. The original note was for $500,000 issued on
November 18, 1996. On March 7, 1997 all of the debentures and accrued
interest amounting to $511,111 were converted to 512 shares of Series A
convertible preferred stock and 171 shares of the preferred stock thus
issued were converted into 640,000 shares of Class A common stock.
<PAGE> 31
On February 18, 1997 the Company issued convertible notes for $450,000
with interest at 8%, due February 1, 1999. The Company issued the
convertible debentures in reliance upon an exemption from the
registration provisions of the Securities Act of 1933, as amended,
provided for in Regulation S promulgated thereunder. The debentures were
offered and sold in an "offshore" transaction to qualified persons who
were not "U.S. Persons," as defined in Regulation S. At the option of the
holder, the principle and accrued interest may be converted into shares
of the Company's Class A common stock after forty five days from the date
of issuance at a conversion price equal to the lesser of seventy five
percent of the market price of the common stock on February 18, 1997 or
on the date of conversion. The market price for the applicable date is
defined as the average closing bid price of the common stock for five
days preceding that date.
Total interest costs during 1996 and 1995 were $1,457,746 and $415,573
respectively, of which $352,171 in 1996 and $415,573 in 1995 was
capitalized to development costs. Included in interest expense in 1996 is
$490,647 relating to the amortization of the discount in the price of the
stock underlying the convertible debt. The offset to the discount in the
price of the stock underlying the convertible debt is included in long
term debt and credited to paid in capital as the debt is converted.
10. INCOME TAXES
The components of the deferred tax assets (liabilities) as of December 31
were as follows:
1996 1995
Benefit from NOL's $10,844,000 $9,335,000
Exploration and development costs 2,933,000 (49,000)
Basis in mineral rights 568,000 571,000
Property, plant & equipment 65,000 34,000
Other 53,000 55,000
------------ -----------
14,463,000 9,946,000
Less: valuation allowance ( 14,463,000) (9,946,000)
------------ -----------
Net deferred tax assets $0 $0
============ ===========
Due to the uncertainty of realization, a valuation allowance has been
provided on all net deferred tax assets at both December 31, 1996 and
1995.
At December 31, 1996, the Company has net operating loss carryforwards
(NOL's) of approximately $31,894,000 for Federal income tax purposes and
$7,091,000 for state income tax purposes. $17,071,000 of the NOL's arose
from predecessor companies that had changes of ownership as defined by
Federal income tax laws. Such laws limit the annual utilization of NOL's
in subsequent years. At December 31, 1996 NOL's available for current
utilization are estimated to be $19,217,000. The Company's NOL's expire
at various dates through 2010.
11. CAPITAL STOCK
AUTHORIZED CAPITAL
The Company is authorized to issue up to 50,000,000 shares of common
stock with a $.001 par value, of which 49,500,000 shares are designated
as "Class A" common stock and 500,000 shares are designated as "Series 1
Class B" and "Series 2 Class B" common stock. The Board of Directors is
authorized to provide for the issuance of Class B common stock and to
determine the rights and privileges of the Class B common stock,
including the conversion rights and voting rights of any such issuance
without any further vote or action by shareholders. Class A common
shareholders are entitled to one vote for each share on each matter
submitted to a vote of shareholders.
The Company is authorized to issue up to 10,000,000 shares of preferred
stock with a $.001 par value. The Board of Directors is authorized to
provide for the issuance of preferred stock in series and to determine
the rights, preferences and privileges of the preferred stock, including
<PAGE> 32
the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption, liquidation preferences and sinking fund
terms of any future series of preferred stock, the number of shares
constituting any such series and the designation thereof, without any
further vote or action by common shareholders. Shares of preferred
stock may be issued by the Board of Directors with voting, conversion or
other rights that could have the effect of delaying, deferring or
preventing a change in control of the Company, or that could adversely
affect the voting power of Class A common shareholders. On November 18,
1996 the Company authorized the issuance of 2,400 shares of Series A
Convertible Preferred Stock in connection with the issuance of
convertible debt. (See note 9.)
SERIES 1 CLASS B COMMON STOCK
At December 31, 1996, 638 shares of Series 1 Class B common stock were
owned by a Director and former Chairman. Each share of Series 1 Class B
common stock may be converted into 100 shares of Class A common stock for
every $25,000 increment of equity, debt, or project financing raised by
the Company through the Director's efforts. The Company has the right to
repurchase the Series 1 Class B shares for cash, before the shares are
converted, or upon certain events.
CLASS A COMMON STOCK
The Company has reserved approximately 7,000,000 shares of Class A common
stock for future issuance in connection with convertible notes (see Note
9) and 3,500,000 shares of Class A common stock for future issuance in
connection with the exercise of options and warrants.
ISSUANCE OF CLASS A COMMON STOCK TO DIRECTORS AND OFFICERS
The Company has a Directors Stock Compensation plan adopted on October
14, 1991 of which 81,740 shares of Class A common stock were available
for issuance at December 31, 1996. The plan provides for the initial
grant of $10,000 of shares of Class A common stock to each director upon
the initial election or appointment as director and the annual grant of
$10,000 of Class A shares to each director who has been elected or
appointed to the board on or after June 18, 1993. The number of Class A
shares granted are derived by dividing the average bid price for the
Class A shares for the preceding year or quarter, whichever is lower into
$10,000. During 1996 and 1995, 18,850 and 23,236 shares of Class A
common stock were granted under this plan, respectively.
In February 1993, the Company issued 150,000 shares of Class A common
stock to its Chief Executive Officer at a price of $2.00 per share in
exchange for $150 in cash and a five year non-recourse promissory note in
the amount of $299,850 reported as a reduction of shareholders' equity.
The note is secured by the common stock. The note bears interest at 6%
per annum with all principal and interest due at maturity.
PRIVATE PLACEMENTS
In 1994, the Company received $4,225,245 from a private placement for
928,000 units at a price of $5.00 per unit, each unit comprising one
share of Class A common stock and one warrant to purchase one-half share
of Class A common stock at $6.00 per share. The Company registered with
the Securities and Exchange Commission the shares included in the units
as well as the shares underlying the warrants on November 10, 1995. The
warrants expire November 10, 1997. As part of the private placement, the
Company granted purchasers of the units a limited price protection
provision and as the average trading price of the Company's common stock
was $2.82 for the 60 day period preceding the effective date an
additional 718,556 shares of Class A common stock were issued to the
purchasers of the units.
On November 15, 1995 the Company completed a private placement with
Vengold Inc. and restructured its convertible debt with the Seamans. The
Company received $5,000,000 from the private placement which comprised
$2,000,000 for 39,062.5 shares of the Company's Series 2 Class B common
stock, $3,000,000 principle convertible debt, warrants to purchase
2,000,000 shares of Class A common stock at $3.50 per share expiring on
December 31, 1996 and warrants to purchase an additional 2,000,000 shares
of Class A common stock at $4.00 per share expiring November 15, 1997.
The Series 2 Class B shares convert at the rate of 20 shares of Class A
common stock for each share of Series 2 Class B common stock. The
$2,000,000 Series 2 Class B shares equates to $2.56 per share of Class A
common stock. The Series 2 Class B shares have the same rights as the
Class A shares except that the Series 2 Class B shareholders have the
<PAGE> 33
right to elect two directors to the Board of Directors. A project
committee of the Board was formed to approve project budgets for the
expenditure of the $5,000,000 and proceeds from future warrant exercises.
The Committee comprised of three directors, two of which could be
appointed by the Series 2 Class B shareholders. In May the Board of
Directors determined that the proceeds received in the private placement
had been fully expended and as a result, the two directors appointed by
Vengold Inc. resigned and the Board dissolved the Budget Committee. On
August 15, 1996 Vengold Inc. converted the 39,062.5 shares of Class B
Series 2 common stock into 781,250 shares of Class A common stock.
12. STOCK OPTIONS
Stock option transactions for the two years ended December 31, 1996 were
as follows:
<TABLE>
<CAPTION>
Number of Exercise Exercisable
CLASS A SHARES PRICE PER SHARE OPTIONS
<S> <C> <C> <C>
Outstanding at December 31, 1994 669,166 $2.62 - $4.94 527,166
Exercised (3,000) 2.62 (3,000)
Granted 215,500 2.82 - 3.94 113,000
Cancelled (275,000) 4.00 - 4.75 (155,000)
Vested - 4.00 - 4.24 22,000
--------- --------
Outstanding at December 31, 1995 606,666 2.62 - 4.94 504,166
Granted 354,000 1.75 - 2.56 171,500
Cancelled (237,166) 2.82 - 4.50 (197,166)
Vested - 2.82 - 3.05 22,500
--------- ---------
Outstanding at December 31, 1996 723,500 $1.75 - $4.94 501,000
========= =========
</TABLE>
In accordance with the pro forma disclosure requirements of SFAS 123, the
Company's net loss and loss per share for the years ended December 31,
1996 and 1995 would have been increased to the pro forma amounts
indicated below:
1996 1995
Net loss As reported ($14,394,185) ($703,571)
Pro forma ($14,478,303) ($797,747)
Net loss per share As reported ($1.31) ($0.08)
Pro forma ($1.32) ($0.09)
The weighted average fair value of the options granted during 1996 was
$0.75 and $1.07 in 1995. The fair value of each stock option is
estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions: risk-free rate of
6.5%, expected life of 4.8 years, expected volatility of 70% and no
dividend yield.
The Company grants incentive stock options to directors, officers and
employees pursuant to the Siskon Stock Option Plan (the "Plan"), as
amended, under which options are granted to eligible employees at the
discretion of the Stock Option and Compensation Committee (the
"Committee"). Options have a term of up to ten years, and become
exercisable as determined by the Committee. The exercise price of the
options granted is not less than the fair market value of the shares at
the date of grant. Generally, stock options when granted are exercisable
all or in part at the discretion of the option holder and are non-
transferable. In addition, optionees must continue to hold a position
with the Company for three months beyond the date of grant of the option
for it to become effective, subject to waiver in certain circumstances.
The exercise price of an option is payable at the time of exercise. In
June 1995, shareholders approved an increase in the number of Class A
common stock issuable under the Plan from 460,500 shares to 660,500
shares. At December 31, 1996 and 1995 there were 53,000 and 247,000
shares of Class A common stock available to grant. From January 1, 1997
though March 17, 1997 3,000 options were issued, 22,500 options expired
and 25,000 options vested.
<PAGE> 34
13. WARRANTS
Warrant transactions for the two years ended December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
Number of Exercise Exercisable
CLASS A SHARES PRICE PER SHARE WARRANTS
<S> <C> <C> <C>
Outstanding at December 31, 1994 678,200 $4.00 - $7.50 678,200
Granted 4,040,883 2.82 - 4.00 0
--------- ----------
Outstanding at December 31, 1995 4,719,083 2.82 - 7.50 4,719,083
Granted 100,000 2.00 100,000
Cancelled (2,000,000) 3.50 (2,000,000)
---------- ----------
Outstanding at December 31, 1996 2,819,083 $2.00 - $7.50 2,819,083
========== ==========
</TABLE>
In November 1995, the Company issued Vengold warrants to purchase
2,000,000 shares of Class A common stock at $3.50 per share which expired
December 31, 1996 and 2,000,000 shares of Class A common stock at $4.00
expiring November 15, 1997. In October 1996, the Company issued
underwriter warrants to purchase 100,000 shares of Class A common stock
at a price of $2.00 which expire in 1998.
14. SUPPLEMENTAL CASH FLOW INFORMATION
Noncash investing and financing activities for the years ended December
31 were as follows:
1996 1995
Common stock issued for services $50,000 $82,500
Common Stock issued for interest 809,307 138,315
Accrued interest on convertible debt 10,983 242,467
Capitalized interest 352,171 415,573
Capitalized depreciation 291,192 371,445
Capital lease obligations - 361,163
Conversion of convertible debt 247,695 1,811,656
Discount on price of stock underlying
convertible debt 548,289 -
Borrowings of land debt - 212,068
Borrowings of equipment debt 306,541 1,148,555
Cash paid for interest during 1996 and 1995 totalled $60,064 and $34,795
respectively.
15. RELATED PARTY TRANSACTIONS
During 1996 and 1995, the Company incurred expenses of $239,850 and
$303,586 to directors, former directors, officers, and shareholders for
legal, geological and other consulting services. During 1995, the
Company paid $19,875 to an officer for mining equipment purchases and
rentals. See also Note 9 related to convertible notes payable issued to
shareholders.
16. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases office space under a noncancellable operating lease.
Rent expense for 1996 and 1995 totalled $36,785 and $39,228 respectively.
Future minimum lease payments under the above operating lease is $27,000
in 1997.
RECLAMATION
The Company estimates that the total cost to reclaim the San Juan mine
will be $750,000. Costs accrued for the San Juan Mine amounted to $9,361
at December 31, 1996. No costs were accrued up to December 31, 1995.
<PAGE> 35
ENVIRONMENTAL
In May 1991, the Company received a request from the California Regional
Water Quality Control Board to prepare an environmental site assessment
report on a site known as the Croman Mill Site, located in Siskiyou
County, California. In April 1996, state and federal environmental
officials and a representative of the Company conducted a site visit.
Several soil and water samples were taken by the officials as well as the
Company. The Croman Mill Site is a historical mining mill site which
contains stockpiled mine tailings from mining operations conducted by
prior operators and owners and represents a "pre-existing" condition in
relation to the time the Company owned the property. The Company owned
the site from 1989 to June 1996 and did not conduct any mining related
activities on the site during that time. As of March 17, 1997 no further
correspondence had been received from the respective parties in relation
to this matter. In the event that the test results lead to further
testing and analysis which ultimately results in a clean-up and abatement
order issued by a state or federal environmental agency, then the Company
intends to seek indemnification from the prior operators of the property
who may have been primarily responsible for the condition of the mine
tailings located on the mill site.
On March 11, 1997 an action in U.S. District Court was brought against
the Company by the California Sportfishing Protection Alliance alleging
violations of the Clean Water Act at the Gray Eagle Mine and Croman Mill
Site in Siskiyou County, California. The allegations include the failure
to obtain a permit for the wastewater treatment plant, discharges from
the mine and failure to monitor pollutants released into Indian Creek.
The suit seeks to require the Company to obtain a discharge permit,
payment towards an environmental remediation fund, civil penalties of
$25,000 per day and attorneys fees. The Company believes it has a
meritorious defense in that; the water treatment plant owned by a prior
mine operator is on U.S. Forest Service ("USFS") land, the plant is
operating under the proper authorizations and satisfactorily treats
discharges into Indian Creek; the Croman Mill Site is more than three
miles from the Gray Eagle Mine, the tailings came from prior mine owners
and a prior lumber company's actions, the Company's activities on the
site during the time of its ownership did not include any related mining
activities and that the prior owners who created the mill site are
liable for any remediation. However, there are no assurances that the
Company will prevail or that the ultimate judgement or costs of
defending itself will not have a material impact on the Company's
financial position.
In March 1994, the Company received preliminary notice from the USFS
naming the Company and six other parties as potentially responsible
parties to a hazardous waste site in Siskiyou County, California. The
hazardous waste site is believed to be related to 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, however the field visit was postponed due to
the occurrence of forest fires in the area. On October 31, 1996, the
Company received a notice from the USFS that a field visit to the site
was scheduled for November 4, 1996. The USFS has contracted with a
private contractor to prepare an environmental evaluation to determine if
the site poses any significant environmental risk and, if so, the
establishment of clean-up goals. If necessary, an Engineering
Evaluation/Cost Assessment may be conducted by the USFS to determine
appropriate alternatives, if any, for removal of any hazardous wastes
located on the site. Due to flooding in the area, the USFS has agreed to
an additional visit to the site with Company representatives at a later
date. Until more information is developed, the Company is not able to
determine if it will be liable for environmental remediation or estimate
the amount of liability, if any. In the event that the Company incurs any
liability associated with the site, the Company intends to seek
indemnification from other potentially responsible parties who may have
been responsible for creating the hazardous waste found on the property.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of the Company's cash and cash equivalents, notes
receivable and long term debt approximate their estimated fair values.
Exhibit 4.2
CERTIFICATE OF DETERMINATION
of
SISKON GOLD CORPORATION
Timothy A. Callaway and Claudia J. Mack certify that:
1. They are the president and the secretary respectively, of Siskon
Gold Corporation, a California corporation (the "Company").
2. The number of shares of preferred stock, par value $.001,
authorized by the Company's Articles of Incorporation is 10,000,000 none of
which have been issued or are outstanding.
3. The Company's board of directors (the "Board of Directors")
desire to establish a new series of preferred stock to be designated Series
A Convertible Preferred Stock and the initial number of shares constituting
such series shall be two thousand four hundred (2,400), none of which have
been issued or are outstanding.
4. The board of directors has duly adopted the following resolution:
WHEREAS, article fourth of the Articles of Incorporation of the
Company presently authorizes the issuance of 10,000,000 shares of Preferred
Stock, $0.001 par value, in one or more series upon terms and conditions
that are to be designated by the Board of Directors; and
WHEREAS, in order to accommodate a business purpose deemed proper by
the Board of Directors, i.e., to facilitate a private placement of
securities which when completed will generate additional working capital
for the Company, the Board of Directors does hereby seek to provide for the
designation of a segment of the Company's Preferred Stock as "Series A
Convertible Preferred Stock;" and
WHEREAS, the terms, conditions, voting rights, preferences,
limitations and special rights of the Series A Convertible Preferred Stock
in their entirety are as provided herein.
NOW THEREFORE, be it:
RESOLVED, that a series of the class of authorized Preferred Stock,
$0.001 par value, of the Company hereinafter designated "Series A
Convertible Preferred Stock," is hereby created, and that the designation
and amount thereof and the voting powers, preferences and relative
participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:
Section 1. DESIGNATION AND AMOUNT.
The shares of such series shall be designated as the "Series A
Convertible Preferred Stock" (the "Series A Convertible Preferred Stock")
and the number of shares initially constituting such series shall be two
thousand four hundred (2,400).
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Each holder of a share of Series A Convertible Preferred
Stock in preference to the holders of shares of the Company's Class A and
Class B Common Stock, $0.001 par value (the "Common Stock"), and of any
other capital stock of the Company ranking junior to the Series A
Convertible Preferred Stock as to payment of dividends, shall be entitled
to receive, out of funds legally available therefor, dividends at the rate
of eighty (80) United States Dollars ("USD") per share per annum on the
first day of January each year when and as declared by the Board of
Directors. Such dividends shall accrue on each share of Preferred Stock
from the date of its original issuance and delivery upon conversion of the
Company's 8% Convertible Debentures due January 1, 2000, and shall accrue
from day to day whether or not declared or legally distributable. Such
dividends shall be cumulative so that if such dividends in respect of any
previous dividend period at the above specified rate shall not have been
declared and paid or set apart for payment, the deficiency shall be
declared and paid or set apart for payment, but without interest, before
the payment of any dividend on the Common Stock, or any other capital stock
of the Company ranking junior to the Series A Convertible Preferred Stock.
(b) The holders of shares of Series A Convertible Preferred
Stock shall not be entitled to receive any dividends or other distributions
except as provided in this Certificate of Determination of Series A
Convertible Preferred Stock.
Section 3. VOTING RIGHTS.
(a) Except as required by law, the holders of shares of Series A
Convertible Preferred Stock shall have no voting rights and their consent
shall not be required for the taking of any corporate action.
Section 4. LIQUIDATION, DISSOLUTION, WINDING UP OR CERTAIN MERGERS OR
CONSOLIDATIONS.
(a) If the Company shall adopt a plan of liquidation or of
dissolution, or commence a voluntary case under the federal bankruptcy laws
or any other applicable state or federal bankruptcy, insolvency or similar
law, or consent to the entry of an order for relief in any involuntary case
under such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or similar official) of the Company or
of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due and on account of such event the Company
shall liquidate, dissolve or wind up, or engage in a merger, plan of
reorganization or consolidation, then and in that event, no distribution
shall be made to the holders of shares of Common Stock, unless, prior
thereto, the holders of the Series A Convertible Preferred Stock shall have
first received an amount in cash or equivalent value in securities or other
consideration equal to the "liquidation preferences" thereof.
If upon any such liquidation, dissolution, winding up, merger, plan of
reorganization or consolidation, the amount so payable or distributable
does not equal or exceed the "liquidation preferences" of the Series A
Convertible Preferred Stock, then, and in that event, the amount of cash so
payable, and the amount of securities or other consideration so
distributable, shall be distributed ratably to the holders of the Series A
Convertible Preferred Stock on the basis of the number of shares of Series
A Convertible Preferred Stock held. After payment in full of the
"liquidation preferences" owed to the holders of the Series A Convertible
Preferred Stock, the holders of the Common Stock shall be entitled, to the
exclusion of the holders of the Series A Convertible Preferred Stock, to
share in all remaining assets of the Company in accordance with their
respective interests.
For the purposes hereof, the term "liquidation preferences" shall
mean, with respect to the Series A Convertible Preferred Stock, one
thousand United States Dollars ($1,000.00 USD) per share plus accrued and
unpaid dividends.
(b) Except as provided in subparagraph (a) above, neither the
consolidation, merger or other business combination of the Company with or
into any other person or persons nor the sale, lease, exchange or
conveyance of all or any part of the property, assets or business of the
Company to a person or persons other than the holders of the Company's
Common Stock, shall be deemed to be a liquidation, dissolution or winding
up of the Company for purposes of this Section 4.
Section 5. CONVERSION.
(a) The holders of Preferred Stock shall have conversion rights
as follows:
1. Each holder of Series A Convertible Preferred Stock may, on
or after the date the Series A Convertible Preferred Stock is issued, upon
surrender of the certificates therefor, convert any or all Series A
Convertible Preferred Stock held by such holder into fully paid and
nonassessable shares of Class A Common Stock at the following rate: each
share of Series A Convertible Preferred Stock shall be convertible into a
number of Class A Common Stock determined by dividing one thousand dollars
($1,000) plus accrued and unpaid dividends by seventy five percent (75%) of
the average closing bid price of the Company's Class A Common Stock over a
ten (10) day trading period preceding the holder's election to convert.
Such option to convert shall be exercised by surrendering for such purpose
to the Company, at office of the Company or of any transfer agent for the
Class A Common Stock or Series A Convertible Preferred Stock, certificates
representing the shares to be converted duly endorsed in blank or
accompanied by proper instruments of transfer. Such conversion shall be
deemed to have been made as of the date of such surrender of the Series A
Convertible Preferred Stock and the person entitled to receive the Class A
Common Stock therefor shall be treated for all purposes as the record
holder of such Class A Common Stock on such date. If any shares of Series
A Convertible Preferred Stock have been called for redemption, the right of
conversion shall terminate as to such shares at the close of business on
the fifth day preceding the redemption date. Notwithstanding anything else
to the contrary, the Series A Convertible Preferred Stock shall
automatically convert into shares of Class A Common Stock in an amount
determined as provided for herein at midnight, January 1, 2000, Pacific
Standard Time.
2. The number of shares of Class A Common Stock into which
shares of Series A Convertible Preferred Stock may be converted shall be
subject to adjustments as follows:
(A) In case the Company shall be recapitalized through the
subdivision or combination of its outstanding Class A Common Stock into a
larger or smaller number of shares, then in each such case the number of
shares of Class A Common Stock into which shares of Series A Convertible
Preferred Stock may be converted shall be increased or reduced in the same
proportion.
(B) In case the Company declares a dividend on Class A Common
Stock payable in Class A Common Stock or securities convertible into Class
A Common Stock, then, as of the record date for determining the holders
entitled to receive such dividend, the number of shares of Class A Common
Stock into which shares of Series A Convertible Preferred Stock may be
converted shall be increased in proportion to the increase through such
dividend of the number of outstanding shares of Class A Common Stock.
(C) In case the Company determines to offer rights to the
holders of Class A Common Stock entitling them to subscribe to additional
Class A Common Stock or securities convertible into Class A Common Stock,
the Company shall give written notice of such proposed rights offering to
the holder of Series A Convertible Preferred Stock at least 15 days prior
to the proposed record date in order to permit them to convert their Series
A Convertible Preferred Stock into Class A Common Stock on or before such
record date. There shall be no adjustment in the conversion rate by virtue
of such rights offering or by virtue of any sale of any class of securities
of the Company.
(D) In case of any capital reorganization, including any
reclassification of the capital stock of the Company or any merger of the
Company with another corporation or the sale or conveyance of all or
substantially all of the assets of the Company to another corporation, each
share of Series A Convertible Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or
property to which a holder of the number of shares of Class A Common Stock
deliverable upon conversion of such share of Series A Convertible Preferred
Stock would have been entitled upon such reorganization; and in any such
case, appropriate adjustments (as determined by the Board of Directors)
shall be made in the application of the provisions herein set forth with
respect to the rights and interests thereafter of the holders of the Series
A Convertible Preferred Stock to the end that the provisions set forth
herein (including provisions with respect to changes in, and other
adjustments of, the conversion rate) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any securities or other
property thereafter deliverable upon the conversion of the Series A
Convertible Preferred Stock.
(E) In the event that the Company fails to deliver to a holder,
free of restrictions imposed by the Company, the number of shares of Class
A Common Stock deliverable upon conversion of the Series A Convertible
Preferred Stock within ten (10) business days from the date the Company
receives all necessary documents, including opinions of counsel acceptable
to the Company that the issuance of the shares of Class A Common Stock does
not require registration under the Securities Act of 1933, as amended,
then, in lieu of the conversion rate provided for in Section 5(a)1 above,
each share of Series A Convertible Preferred Stock shall be convertible
into a number of Class A Common Stock determined by dividing one thousand
dollars ($1,000) plus accrued and unpaid dividends by fifty percent (50%)
of the average closing bid price of the Company's Class A Common Stock over
a ten (10) day trading period preceding the holder's election to convert.
(b) Whenever the amount of Class A Common Stock or other
securities deliverable upon the conversion of Series A Convertible
Preferred Stock shall be adjusted pursuant to the provisions hereof, the
Company shall forthwith file, at its principal executive office and with
any transfer agent for its Class A Common Stock and Series A Convertible
Preferred Stock, a statement signed by the Chief Executive Officer and
Chief Financial Officer of the Company stating the adjusted amount of its
Class A Common Stock or other securities deliverable per share of Series A
Convertible Preferred Stock calculated to the nearest one-hundredth and
setting forth in reasonable detail the method of calculation and facts
requiring such adjustment and upon which such calculation is based. Each
adjustment shall remain in effect until a subsequent adjustment is required
hereunder.
(c) The Company shall at all times reserve and keep available
out of its authorized but unissued Class A Common Stock the full number of
shares deliverable upon conversion of all the then outstanding Series A
Convertible Preferred Stock and shall take all such action and obtain all
such permits and orders as may be necessary to enable the Company lawfully
to issue such Class A Common Stock upon the conversion of Series A
Convertible Preferred Stock.
(d) No fractions of shares of Class A Common Stock shall be
issued upon the conversion of Series A Convertible Preferred Stock. In
lieu of fractions, the Company shall issue a whole share for any fractional
share required to be issued on conversion of the Series A Convertible
Preferred Stock.
(e) Any notice required or permitted by this Section 5 or any
other provision contained herein to be given to a holder of Series A
Convertible Preferred Stock or to the Company shall be in writing and be
deemed given upon the earlier of (1) personal delivery to such holder at
the address appearing on the books of the Company, (2) actual receipt or
three (3) days after the same has been deposited with a recognized
international courier, delivery charges prepaid, and addressed to the
holder at the address appearing on the books of the Company, or (3) sending
of facsimile to such holder at the facsimile number provided by such holder
to the Secretary of the Company
Section 6. NOTICES OF RECORD DATE.
In the event of (1) any taking by the Company of a record of the
holders of any class or series of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution or (2) any reclassification or recapitalization of the capital
stock of the Company or any voluntary or involuntary dissolution,
liquidation or winding up of the Company, the Company shall send by
personal delivery to such holder at the address appearing on the books of
the Company, by recognized international courier, delivery charges prepaid,
and addressed to the holder at the address appearing on the books of the
Company, or by sending of facsimile to such holder at the facsimile number
provided by such holder to the Secretary of the Company, at least fifteen
(15) days prior to the record date specified therein, a notice specifying
(A) the date on which any such record is to be taken for the purpose of
such dividend or other distribution and a description of such dividend or
distribution, (B) the date on which any such reorganization,
reclassification, dissolution, liquidation or winding up is expected to
become effective, and (C) the time, if any is to be fixed, as to when the
holders of record of Series A Convertible Preferred Stock shall be entitled
to exchange their Series A Convertible Preferred Stock for securities or
other property deliverable upon such reorganization, reclassification,
dissolution, liquidation or winding up.
Section 7. REACQUIRED SHARES.
Any shares of Series A Convertible Preferred Stock converted,
purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof, and,
if necessary to provide for the lawful purchase of such shares, the capital
represented by such shares shall be reduced in accordance with the General
Corporation Law of the State of California. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred
Stock, $0.001 par value, of the Company undesignated as to series and may
be reissued as part of another series of Preferred Stock, $0.001 par value,
of the Company.
Section 8. REDEMPTION.
(a) This corporation, at the option of the Board of Directors,
may redeem the whole or any part of the Series A Convertible Preferred
Stock by paying $1,000 per share (the "redemption price") at any time
together with all accrued and unpaid dividends thereon to and including the
date fixed for redemption (the "redemption date"). The Company shall give
notice of the redemption of any or all such shares by causing a notice of
redemption to be mailed not earlier than 60 nor later than 30 days prior to
the redemption date to the holders of record of the Series A Convertible
Preferred Stock to be redeemed addressed to each such holder at the
holder's post office address appearing on the records of the Company or, if
no address is shown, at the place where the principal executive office of
the Company is located. The notice of redemption shall set forth: (i)
the class or series of shares or part of any class or series of shares to
be redeemed; (ii) the redemption date; (iii) the redemption price; and
(iv) the place at which the shareholder may obtain payment of the
redemption price upon surrender of their share certificates. In case of
the partial redemption of Series A Convertible Preferred Stock, such
redemption shall be pro rata among the various holders thereof or as
determined by lot in the discretion of the Board of Directors. On or
before the redemption date, each holder of shares called for redemption
shall surrender the certificate representing such shares to the Company at
the place designated in the redemption notice and shall thereupon be
entitled to receive payment of the redemption price on the redemption date.
If less than all of the shares represented by a surrendered certificate are
redeemed, the Company shall issue a new certificate representing the
unredeemed shares.
(b) If, on or before the redemption date, the Company has cash
funds available or has deposited for such purpose in trust with a bank or
trust company sufficient funds to pay the redemption price in full to the
holders of all shares called for redemption, the shares so called shall be
deemed to be redeemed as of the date of deposit, dividends on those shares
shall cease to accrue and no interest shall accrue on the redemption price
from and after the redemption date.
(c) The right to convert said shares shall terminate at the close
of business on the fifth day prior to the redemption date. Any amounts so
deposited on account of the redemption price of shares converted subsequent
to the date of deposit shall be repaid to the Company forthwith upon the
conversion of such shares.
IN WITNESS WHEREOF, the undersigned officers have executed this
Certificate of Determination of Series A Convertible Preferred Stock this
18th day of November, 1996, in Grass Valley, California and we further
declare, under penalty of perjury under the laws of the State of California
that the matters set forth in this certificate are true and correct of our
own knowledge.
TIMOTHY A. CALLAWAY
Timothy A. Callaway, President
CLAUDIA J. MACK
Claudia J. Mack, Secretary
Exhibit 4.3
Form of 8% Convertible Debenture due January 1, 2000
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT IN
ACCORDANCE WITH REGULATION S UNDER THE ACT, OR AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE HARBOR THEREFROM.
No. __ US $_________
Date of Issue: ______________
SISKON GOLD CORPORATION
8% CONVERTIBLE DEBENTURE DUE JANUARY 1, 2000
THIS DEBENTURE is one of a duly authorized issue of up to a maximum of
$2,000,000 in Debentures of SISKON GOLD CORPORATION, a corporation duly
organized and existing under the laws of the State of California (the
"Company") designated as its 8% Convertible Debenture Due January 1, 2000.
FOR VALUE RECEIVED, the Company promises to pay to [investor], a
corporation organized under the laws of [country], [address], the
registered holder hereof (the "Holder"), the principal sum of
_______________________ United States Dollars ($__________) on or before
January 1, 2000 (the "Maturity Date") and to pay interest on the principal
sum outstanding from time to time in arrears on or before January 1, 2000
at the rate of 8% per annum accruing from the date of issue inscribed
hereon. Accrual of interest shall commence on the first such business day
to occur after the date of issue inscribed hereon until payment in full of
the principal sum has been made or duly provided for. The Company shall
not be entitled to pre-pay this Debenture within the first one hundred
eighty days (180) from the date of issue inscribed hereon, but may pre-pay
this Debenture, subject to the Holder's right of conversion upon terms and
conditions set forth herein, without a pre-payment penalty thereafter by
paying the principal amount of this Debenture plus accrued interest in
United States Dollars. Subject to the provisions of <para>4 below, the
principal of, and interest on, this Debenture are payable at the option of
the Company, in shares Series A Convertible Preferred Stock (the "Preferred
Stock") of the Company or in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts, at the address last appearing on the Debenture Register of
the Company as designated in writing by the Holder from time to time. The
Company will pay the principal of and interest upon this Debenture on or
before the Maturity Date, less any amounts required by law to be deducted,
to the registered holder of this Debenture as of the tenth day prior to the
Maturity Date and addressed to such holder as the last address appearing on
the Debenture Register. The forwarding of such check shall constitute a
payment of interest hereunder and shall satisfy and discharge the liability
for principal and interest on this Debenture to the extent of the sum
represented by such check plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand
Dollars ($10,000(USD)) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders
surrendering the same.
No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax
laws or other applicable laws at the time of such payments and Holder shall
execute and deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended
(the "Securities Act"), and other applicable state and foreign securities
laws. In the event of any proposed transfer of this Debenture, the Company
may require, prior to issuance of a new Debenture in the name of such other
person, that it receive reasonable transfer documentation including
opinions that the issuance of the Debenture in such other name does not and
will not cause a violation of the Securities Act or any applicable state or
foreign securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture
Register as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
4. The Holder of this Debenture is entitled, at its option, to
convert at any time after sixty (60) days from the issuance of this
Debenture up to one-third (1/3) of the principal amount of the Debenture(s)
held by the Holder into Preferred Stock; and on or after eighty (80) days
from the issuance of this Debenture the Holder may convert an additional
one-third (1/3) of the principal amount of the Debenture(s) into shares of
Preferred Stock; and on or after one hundred (100) days from the issuance
of this Debenture, the undersigned may convert all remaining principal and
accrued interest into shares of Preferred Stock, at a conversion price
equal to One Thousand Dollars ($1,000(USD)) per share (the "Conversion
Price"). Upon maturity, the Company may elect, by written notice given at
least thirty (30) days prior to the Maturity Date, to convert the principal
and all unpaid interest into Shares of Preferred Stock ("Mandatory
Conversion") at the Conversion Price. Conversion shall be effectuated by
surrendering the Debentures to be converted to the Company with the form of
conversion notice attached hereto as Exhibit A, executed by the Holder of
the Debenture evidencing such Holder's intention to convert this Debenture
or a specified portion (as above provided) hereof, and accompanied, if
required by the Company, by proper assignment hereof in blank. Interest
accrued or accruing from the date of issuance to the date of conversion
shall, at the option of the Company, be paid in cash or Preferred Stock
upon conversion. No fraction of Shares or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable
shall be rounded up to the nearest whole share. The date on which notice
of conversion is given (the "Conversion Date") shall be deemed to be the
date on which the Holder has delivered this Debenture, with the conversion
notice duly executed, to the Company or, if earlier, the date set forth in
such notice of conversion if the Debenture is received by the Company
within three (3) business days therefrom. Facsimile delivery of the
conversion notice shall be accepted by the Company at telephone number
(916) 273-3933. Certificates representing Preferred Stock upon conversion
will be delivered promptly after Conversion Date.
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate,
and in the coin or currency, herein proscribed. This Debenture and all
other Debentures now or hereafter issued of similar terms are direct
obligations of the Company.
6. No recourse shall be had for the payment of the principal of, or
the interest on, this Debenture, or for any claim based hereon, or
otherwise in respect hereof, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Company or any
successor corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by, the acceptance hereof and as part
of the consideration for the issue hereof, expressly waived and released.
7. If the Company merges or consolidates with another corporation or
sells or transfers all or substantially all of its assets to another person
and the holders of the Company's Preferred Stock are entitled to receive
stock, securities or property in respect of or in exchange for Preferred
Stock, then as a condition of such merger, consolidation, sale or transfer,
the Company and any such successor, purchaser or transferee shall amend
this Debenture to provide that it may thereafter be converted on the terms
and subject to the conditions set forth above into the kind and amount of
stock, securities or property receivable upon such merger, consolidation,
sale or transfer by a holder of the number of shares of Preferred Stock
into which this Debenture might have been converted immediately before such
merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. ln the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of
the assets of the Company (a "Sale"), the Holder hereof shall have the
right to convert by delivering a notice of conversion to the Company within
fifteen (15) days of receipt of notice of such Sale from the Company. In
the event the Holder hereof shall elect not to convert, the Company may
prepay all outstanding principal and accrued interest on this Debenture,
less all amounts required by law to be deducted, upon which tender of
payment following such notice, the right of conversion shall terminate.
8. The Holder of the Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the Shares of
Preferred Stock issuable upon conversion thereof except under circumstances
which will not result in a violation of the Securities Act or any other
applicable Blue Sky or foreign laws or similar laws relating to the sale of
securities.
9. This Debenture shall be governed by and construed in accordance
with the laws of the State of California.
10. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Debenture; or
b. Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate
or financial or other written statements heretofore or
hereafter furnished by the Company in connection with the
execution and delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any material
respect at the time made; or
c. The Company shall fail to perform or observe, in any
material respect, any other covenant, term, provision,
condition, agreement or obligation of the Company under this
Debenture and such failure shall continue uncured for a
period of thirty (30) days after written notice from the
Holder of such failure; or
d. The Company shall (1) admit in writing its inability to pay
its debts generally as they mature; (2) make an assignment
for the benefit of creditors or commence proceedings for its
dissolution; or (3) apply for or Consent to the appointment
of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
e. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or
business without its consent and shall not be discharged
within sixty (60) days after such appointment; or
f. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any
substantial portion of the properties or assets of the
Company and shall not be dismissed within sixty (60) days
thereafter; or
g. Any money judgment, writ or warrant of attachment, or
similar process in excess of Two Hundred Thousand ($200,000)
in the aggregate shall be entered or filed against the
Company or any of its properties or other assets and shall
remain unpaid, unvacated, unbonded or unstayed for a period
of sixty (60) days or in any event later than five (5) days
prior to the date of any proposed sale thereunder; or
h. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within sixty
(60) days after such institution or the Company shall by any
action or answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations of, or
default in answering a petition filed in any such
proceeding; or
i. The Company shall have the trading in its Common Stock
delisted from all exchanges or over-the-counter markets.
Then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default)
at the option of the Holder and in the Holder's sole discretion, the Holder
may consider this Debenture immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and the Holder may immediately
enforce any and all of the Holder's rights and remedies provided herein or
any other rights or remedies afforded by law.
11. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company,
unless and to the extent converted in accordance with the terms hereof.
IN WITNESS WHEREOF, the Company has cause this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: November ___, 1996
SISKON GOLD CORPORATION
By: TIMOTHY A. CALLAWAY
Timothy A. Callaway
(Print Name)
President
(Title)
ATTEST:
CLAUDIA MACK
Claudia Mack, Secretary
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________ of the
principal amount of the above Debenture No. ____ into Shares of Preferred Stock
of SISKON GOLD CORPORATION (the "Company") according to the conditions hereof,
as of the date written below.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933 and is not converting
the Debenture on behalf of any U.S. Person.
Date of Conversion* _________________________________________________
Applicable Conversion Price ___________________________________________
Signature ________________________________________________________
(Name)
Address: _________________________________________________________
_______________________________________________________________
*This original Debenture and Notice of Conversion must be received by the
Company by the third business date following the Date of Conversion.
Exhibit 10.28
SISKON GOLD CORPORATION
(A California Corporation)
________________________________________
PROJECT FINANCE CONVERTIBLE NOTE
$500,000 AGGREGATE PRINCIPAL AMOUNT
DUE NOVEMBER 15, 1998
________________________________________
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF AS PROVIDED HEREIN HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER THE LAWS OF ANY STATE OR OTHER
JURISDICTION. TRANSFER OF THIS NOTE AND SUCH SECURITIES IS RESTRICTED
PURSUANT TO SUCH LAWS.
Sacramento, California
$500,000 May 17, 1996
1. NOTE.
1.1. SISKON GOLD CORPORATION, a California corporation having its
principal office at 350 Crown Point Circle, Suite 100, Grass Valley,
California (the "Company"), hereby promises to pay to the order of CARL
SEAMAN, having an address at 63 Hunting Ridge Road, Greenwich, Connecticut
06831 (the "Holder") the principal amount of Five Hundred Thousand Dollars
($500,000) on November 15, 1998 (the "Due Date") together with interest
from May 17, 1996, at ten percent (10%) per annum on the outstanding
principal and interest, if any, until paid or converted. Payments of
interest only shall be paid annually on the first day of November of each
year. Payments shall be made to the Holder as follows:
(a) SHARES: The first two payments of interest (i.e., the payments
due on November 1, 1996, and November 1, 1997) may be paid to the
Holder in shares of the Company's fully paid and nonassessable
Class A Common Stock (the "Shares") (or, in the event of a
merger, recapitalization or like transaction, the equivalent
capital stock for which such number of shares shall be exchanged
or exchangeable or converted or convertible), which Shares shall
be subject to registration before subsequent transfer or sale by
the Holder. The exact number of Shares to be delivered to the
Holder in payment of the accrued interest shall be determined by
dividing the accrued interest by ONE DOLLAR AND 75/100THS ($1.75)
per Share (regardless of the then market price of such Shares).
If the Company at any time, or from time to time, shall cause an
"Event" (as defined in Section 3.3) to affect the number of
Shares outstanding or required to be reserved for issuance to pay
interest as required under this Note, then the number of Shares
to be delivered to Holder shall be calculated according to the
following formula:
[ (I/$1.75) = S1 ] x X/Y = S2
defining the variables in such formula as:
I = the amount of accrued Interest then due;
S1 = the number of Shares that would have been issued
at $1.75 per Share but for the Event;
S2 = the number of Shares to be issued;
X = the number of Shares outstanding on the date the
Event is effective; and
Y = the number of Shares outstanding immediately prior
to the Event.
(FOR EXAMPLE, IF I = $300,000 AND THE "EVENT" IS A STOCK SPLIT
DOUBLING THE NUMBER OF OUTSTANDING SHARES, THEN:
[ (I/$1.75) = S1 ] X X/Y = S2
WOULD BE SOLVED:
[ ($300,000/$1.75) = 171,428.57 ] X 2/1 = 342,857
AND 342,857 SHARES WOULD BE ISSUED TO THE HOLDER.)
(b) CASH: the third payment of interest (and all subsequent payments
of interest, if any), shall be paid to the Holder in lawful money
of the United States at Holder's principal address identified
above, or at such other place as the Holder may specify in
writing. In addition, the first and second payments of interest
due on November 1, 1996 and November 1, 1997, respectively, may
also be paid to the Holder, at the election of the Company, in
lawful money of the United States.
1.2. In the event the Company does not make when due any payment
of principal or interest required to be made hereunder, the Company will
pay, on demand, interest on the amount of any overdue payment of principal
or interest for the period following the Due Date, at a rate of fourteen
percent (14%) per annum or the maximum interest rate permitted by
California law, whichever is lower.
2. DEFAULT.
In the event of an occurrence of any event of default specified below
("Event of Default"), the principal and all accrued interest on this Note
shall, at the election of Holder, become immediately due and payable
without notice, except as specified below. The occurrence of any of the
following events shall constitute an Event of Default under this Note:
2.1. If the Company fails to make, on or before any due date in
the manner required herein any payment of principal or interest due under
the terms of this Note, and such failure has not been cured within ten (10)
days following the due date thereof.
2.2 If the Company shall default in the observance or
performance of any covenant contained in or provision of the Project
Finance Loan Agreement between the Company and the Holder of even date
herewith or the Deed of Trust or Assignment of Rents and Leases of even
date herewith between the Company and the Holder relating to the property
known as the San Juan Property located in Nevada County, California, or the
Deed of Trust or Assignment of Rents and Leases of even date herewith
between the Company and the Holder relating to property known as the
Big Horn Property located in Los Angeles County, California, as the same
may be amended from time to time, and which default has not been cured
within twenty (20) days of the receipt by the Company of written notice
thereof from or on behalf of the Holder.
2.3 If a default shall occur in the payment of any principal,
interest or premium with respect to any indebtedness for borrowed money or
any obligation which is the substantive equivalent thereof (including,
without limitation, obligations under conditional sales contracts, finance
leases and the like) of the Company or under any agreement or instrument
under or pursuant to which any such indebtedness or obligation may have
been issued, created, assumed, guaranteed or secured by the Company, or any
agreement or instrument executed in connection with any of the foregoing,
including without limitation any security agreement or pledge agreement or
other agreement of any nature or description, and such default shall
continue for more than the period of grace, if any, therein specified, or
if any such indebtedness shall be declared due and payable prior to the
stated maturity thereof and which has not been cured within twenty (20)
days of the receipt by the Company of written notice thereof from or on
behalf of the Holder.
2.4 If the Company shall be unable to pay its debts generally as
they become due; file a petition to take advantage of any insolvency act;
make an assignment for the benefit of its creditors; commence a proceeding
for the appointment of a receiver, trustee, liquidator or conservator of
itself of a whole or any substantial part of its property; file a petition
or answer seeking reorganization or arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute of the
United States of America or any state; or
2.5 If a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of the Company or of the whole or any substantial part of its
properties, or approve a petition filed against the Company seeking
reorganization or arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United States
of America or any state; or if, under the provisions of any other law for
the relief or aid of debtors, a court of competent jurisdiction shall
assume custody or control of the Company or of the whole or any substantial
part of its properties; or if there is commenced against the Company any
proceeding for any of the foregoing relief and such proceeding or petition
remains undismissed for a period of thirty (30) days of the receipt by the
Company of a written notice thereof; or if the Company by any act indicates
its consent to or approval of any such proceeding or petition; or
2.6 If (i) any judgment, remaining unpaid, unstayed or
undismissed for a period of thirty (30) days is rendered against the
Company which by itself or together with all other such judgments rendered
against the Company remaining unpaid, unstayed or undismissed for a period
of thirty (30) days, is in excess of $200,000, or (ii) there is any
attachment or execution against the Company's properties remaining unstayed
or undismissed for a period of thirty (30) days which by itself or together
with all other attachments and executions against the Company's properties
remaining unstayed or undismissed for a period of thirty (30) days is for
an amount in excess of $200,000.
3. CONVERSION.
The Holder of this Note shall have conversion rights as follows:
3.1. RIGHT TO CONVERT. The principal amount of this Note, together
with accrued but unpaid interest, shall be convertible, at the option of
the Holder on one or more occasions at any time immediately following the
date of this Note through, and including, the Due Date into shares (subject
to adjustment pursuant to Section 3.4) of the Company's fully paid and
nonassessable Class A Common Stock ("Shares") (or, in the event of a
merger, recapitalization or like transaction, the equivalent capital stock
for which such number of Shares shall be exchanged or exchangeable or
converted or convertible). The exact number of Shares into which such
principal and accrued interest is convertible shall be determined by
dividing the amount of principal and accrued interest by the then effective
Conversion Price (as defined in Section 3.2). Upon conversion into Shares,
the amount of principal and accrued interest which is converted into Shares
shall be discharged.
3.2. CONVERSION PRICE. Subject to adjustment pursuant to Section 3.3
hereof, the Conversion Price at which Shares shall be issuable upon
conversion under Section 3.1 of this Note shall be
$1.75 per Share. However, in the event that the Company issues any Shares
or other securities convertible into Shares at a price of less than $1.75
per Share at any time during which this Note is outstanding, (the
"Underpriced Shares"), then the Conversion Price under this Note shall be
adjusted downward to match the price at which such Underpriced Shares were
sold.
3.3. ADJUSTMENT TO THE CONVERSION PRICE. If the Company at any time,
or from time to time, shall by reason of capital reorganization,
combination, stock split, reverse stock split, stock dividend or like event
(the "Event") affect the number of Shares outstanding or required to be
reserved for issuance upon conversion of this Note, then the Conversion
Price shall be adjusted to be the product of the Conversion Price and the
fraction (x/y), the numerator (x) of which shall be the number of Shares
outstanding or required to be reserved for issuance upon conversion of this
Note immediately prior to the Event, and the denominator (y) of which shall
be the number of Shares outstanding or required to be reserved for issuance
upon conversion of this Note on the date such Event is effected.
3.4. ADJUSTMENT OF NUMBER OF SHARES. If the Company at any time, or
from time to time, effects an Event (as defined in Section 3.3) which
affects the number of Shares outstanding or required to be reserved for
issuance upon conversion of this Note, then the number of Shares into which
this Note is convertible shall be adjusted to be the product of the number
of Shares into which this Note is convertible at the date of this Note and
the fraction (x/y), the numerator (x) of which shall be the number of
Shares outstanding or required to be reserved for issuance upon conversion
of this Note on the date such Event is effected, and the denominator (y) of
which shall be the number of Shares outstanding or required to be reserved
for issuance upon conversion of this Note immediately prior to the Event.
3.5. MECHANICS OF CONVERSION. Before the Holder shall be entitled to
convert this Note into Shares, it shall surrender this Note duly endorsed,
and shall deliver to the Company a Notice of Conversion (in the form as
attached hereto as EXHIBIT A and incorporated herein by this reference) at
the office of the Company, and shall state therein the amount or amounts in
which the certificate or certificates for Shares are to be issued. The
Company shall, as soon as practicable thereafter, but in no event more than
ten (10) days, issue and deliver to the Holder at the address designated by
the Holder, a certificate or certificates for the number of Shares to which
the Holder shall be entitled as aforesaid, a statement indicating the
manner in which any adjustments pursuant to Sections 3.3 and 3.4 have been
made, and a new note for the remaining unpaid principal with all other
terms and conditions in the same form as the Note surrendered hereunder.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the Note and the Holder
shall be treated for all purposes as the record holder or holders of such
Shares as of such date. All Shares issuable upon conversion of this Note
shall be fully paid and nonassessable.
3.6. FRACTIONAL SHARES. In no event shall the Company issue any
certificate evidencing any fraction of a Share, but in lieu thereof shall
pay cash for such fraction at the then effective Conversion Price.
3.7. RESERVATION OF SHARES. The Company shall at all times reserve
and keep available out of its authorized but unissued Shares, solely for
the purpose of effecting the conversion of this Note, the full number of
whole Shares then deliverable upon the conversion of the entire principal
amount of this Note at the time outstanding. The Company shall take at all
times such corporate action as shall be necessary in order that the Company
may validly and legally issue fully paid and nonassessable Shares upon the
conversion of this Note in accordance with the provisions hereof.
4. SECURITY.
This Note is made in consideration of an advance of funds by Holder to
the Company subject to the terms and conditions of the Project Finance Loan
Agreement effective as of May 17, 1996 between the Company and the Holder
(the "Project Finance Loan Agreement). The Company's obligations hereunder
are secured by the grant to the Holder of a security interest in certain
assets of the Company in accordance with the terms and conditions set forth
in the Deed of Trust and Assignment of Rents and Leases of effective as of
May 17, 1996 entered into between the Company and the Holder relating to
the property known as the San Juan Property located in Nevada County,
California as more fully described therein, and as may be amended from time
to time, a form of which is attached as EXHIBIT B to the Project Finance
Loan Agreement, and another Deed of Trust and Assignment of Rents and
Leases of effective as of May 17, 1996 entered into between the Company and
the Holder relating to the property known as the Big Horn Property located
in Los Angeles County, California as more fully described therein, and
as may be amended from time, a form of which is attached as EXHIBIT C
to the Project Finance Loan Agreement.
5. PREPAYMENT/NOTICE OF CERTAIN EVENTS.
The Company shall have the right to prepay this Note at any time
before maturity by paying the principal amount of this Note together with
all accrued but unpaid interest; provided, however, that the Company shall
give the Holder not less than ninety (90) days prior written notice of its
intent to prepay this Note. The Holder may convert this Note into Shares
at any time following delivery of such notice until receipt by the Holder
of payment in full of the amounts due under this Note. The Company shall
provide the Holder with not less than thirty (30) days prior written notice
(and in no event less than ten (10) days prior to the record date or the
date on which the Company's transfer books are closed in respect thereto)
of any merger, consolidation, buy-out, dividend, stock dividend or other
event or transaction affecting the Shares which may be acquired upon the
conversion of this Note.
6. SECURITIES LAW COMPLIANCE
6.1. RESTRICTIONS ON TRANSFER. The Holder understands that the
right of conversion of this Note is subject to full compliance with the
provisions of all applicable securities laws and the availability
thereunder upon any conversion of any exemption from registration
thereunder for such conversion or registration thereunder as provided in
the Project Finance Loan Agreement, and that the certificate or
certificates evidencing such Shares shall bear a legend to the following
effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE SECURITIES LAWS OF ANY STATE. THEY HAVE BEEN ACQUIRED BY THE
HOLDER FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING THESE SECURITIES UNDER THE SAID ACT OR LAWS,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT REGISTRATION IS NOT REQUIRED THEREUNDER."
6.2. REGISTRATION RIGHTS. Holder shall have the right to have
the shares of the Company's Class A Common Stock issuable to Holder on
conversion of this Note and the shares issued in payment of interest
registered under and in accordance with the provisions of the Securities
Act of 1933, as amended, as provided for in Section 6 of the Project
Finance Loan Agreement.
7. NOTICES.
Any notice herein required or permitted to be given shall be in
writing and may be personally served, sent by United States Mail,
registered or certified, return receipt requested, postage prepaid, or sent
by telecopy facsimile with a copy sent by recognized national overnight
delivery service, and shall be deemed effectively given upon personal
delivery or on the earlier of actual receipt or five (5) days after deposit
with the United States Postal Service, postage prepaid. For the purposes
hereof, the address of the Holder and the address of the Company shall be
as reflected in the Project Finance Loan Agreement. Both the Holder and
the Company may change the address for service by written notice to the
other as herein provided.
8. NO WAIVER; RIGHTS AND REMEDIES CUMULATIVE.
No failure on the part of the Holder to exercise, and no delay in
exercising any right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise by the Holder of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies herein provided are cumulative and not
exclusive of any remedies or rights provided by law or by any other
agreement between the Company and the Holder.
9. COSTS AND EXPENSES.
The Company shall reimburse the Holder for all costs and expenses
incurred by the Holder in connection with the preparation, execution and
closing of this Note and the Deeds of Trust and Assignments of Rents and
Leases, and shall pay the reasonable fees and disbursements of counsel to
the Holder in connection with the enforcement of the Holder's rights
hereunder.
10. AMENDMENTS.
No amendment, modification or waiver of any provision of this Note nor
consent to any departure by the Company therefrom shall be effective unless
the same shall be in writing and signed by the Holder and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
11. SUCCESSORS AND ASSIGNS.
This Note shall be binding upon the Company and its successors and
assigns and the terms hereof shall inure to the benefit of the Holder and
their successors and assigns, including subsequent holders hereof.
12. SEVERABILITY.
The provisions of this Note are severable, and if any provision shall
be held invalid or unenforceable in whole or in part in any jurisdiction,
then such invalidity or unenforceability shall not in any manner affect
such provision in any other jurisdiction or any other provision of this
Note in any jurisdiction.
13. WAIVER OF NOTICE.
The Company hereby waives presentment, demand for payment, notice of
protest and all other demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note.
14. GOVERNING LAW.
This Note has been executed in and shall be governed by the laws of
the State of California without regard to the conflicts of law provisions
thereof.
15. NOTEHOLDER IS NOT A SHAREHOLDER.
No Holder of this Note, solely by virtue of the ownership of this
Note, shall be considered a shareholder of the Company for any purpose, nor
shall anything in this Note be construed to confer on any Holder of this
Note any rights of a shareholder of the Company including, without
limitation, any right to vote, give or withhold consent to any corporate
action, receive notice of meetings of shareholders or receive dividends.
16. TRANSFER, EXCHANGE AND REPLACEMENT OF NOTE.
This Note and any payment of principal or interest due hereunder is
transferable, negotiable and assignable at the option of the Holder hereof.
Upon surrender of this Note to the Company, the Company shall execute and
deliver, at its expense, one or more new Notes of such denominations and in
such names, as requested by the Holder of the surrendered Note. Upon
receipt of evidence satisfactory to the Company of the loss, theft,
mutilation, or destruction of any Note, the Company will make and deliver a
new Note, of like tenor, at the request of the Holder of such Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by
its officers, hereunto duly authorized to be effective as of the date first
written above.
SISKON GOLD CORPORATION
By TIMOTHY A. CALLAWAY
Timothy A. Callaway, President
ATTEST:
CLAUDIA MACK
Claudia Mack, Secretary
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
The undersigned holder of a Project Finance Convertible Note (the
"Note") due November 15, 1998, in the original principal amount of Five
Hundred Thousand Dollars ($500,000) of Siskon Gold Corporation (the
"Company") hereby exercises the option to convert the Note into ___________
shares of Class A Common Stock of the Company in accordance with the terms
of the Note, and directs that the shares issuable upon the conversion be
issued in the undersigned's name and delivered to the undersigned as soon
as practicable.
The number of shares to be received in the conversion is
________________, and after the conversion the principal amount and accrued
interest remaining outstanding on the Note is $_______________.
Date:__________________ _________________________________
Date:__________________ _________________________________
EXHIBIT 21.1
SISKON GOLD CORPORATION
LIST OF SUBSIDIARIES
SUBSIDIARY PLACE OF INCORPORATION PERCENT OWNED
Siskomex, S.A. de C.V. Mexico 99%
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Siskon Gold Corporation on Form S-3 (Registration No. 33-73066, 33-
63596, 33-65874, 33-95876 and 333-07833) and on Form S-8 (Registration No.
33-95770) of our report dated March 12, 1997, on our audits of the
consolidated financial statements of Siskon Gold Corporation as of December
31, 1996 and 1995, and for the years then ended, which report is included
in this annual report on Form 10-KSB.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-KSB FOR THE PERIOD ENDED DECEMBER 31, 1996 FOR SISKON GOLD
CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000876459
<NAME> SISKON GOLD CORPORATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 812,606
<SECURITIES> 0
<RECEIVABLES> 6,080
<ALLOWANCES> 0
<INVENTORY> 230,875
<CURRENT-ASSETS> 1,450,353
<PP&E> 28,936,422
<DEPRECIATION> (12,283,376)
<TOTAL-ASSETS> 18,824,780
<CURRENT-LIABILITIES> 1,065,554
<BONDS> 10,692,224
0
0
<COMMON> 11,990
<OTHER-SE> 53,403,821
<TOTAL-LIABILITY-AND-EQUITY> 18,824,780
<SALES> 2,220,648
<TOTAL-REVENUES> 2,322,476
<CGS> 3,309,196
<TOTAL-COSTS> 5,360,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,295,517
<INTEREST-EXPENSE> 1,105,575
<INCOME-PRETAX> (14,394,185)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,394,185)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,394,185)
<EPS-PRIMARY> (1.31)
<EPS-DILUTED> (1.31)
</TABLE>
