UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission file 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)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934, during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X . No .
As of May 7, 1997, the number of Class A common stock outstanding was
19,917,735, the number of Series 1 Class B Common Stock outstanding was 638,
and the number of Series A cumulative preferred stock outstanding was 341.
Transitional Small Business Disclosure Format (check one): Yes . No X.
<PAGE>1
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements 2
ITEM 2. Management's Discussion and Analysis 2
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 5
ITEM 2. Changes in Securities 5
ITEM 3. Defaults Upon Senior Securities 5
ITEM 4. Submission of Matters to a Vote of Security Holders 5
ITEM 5. Other Information 5
ITEM 6. Exhibits and Reports on Form 8-K 5
SIGNATURES 6
FINANCIAL STATEMENTS 7
<PAGE>2
PART I
ITEM 1. FINANCIAL STATEMENTS
The Consolidated Interim Financial Statements of Siskon Gold Corporation are
attached at the end of this document and incorporated fully by this reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
(A) PLAN OF OPERATIONS
The San Juan Mine produced 2,459 ounces of gold during the first quarter of
1997. The average price for gold during the first quarter of 1997 was $349
versus $401 for the first quarter of 1996. During the first week in April, 1997
unforeseen ground failures occurred in the area where mining operations were
advancing in the eastern ore body which prevented any further progress from
existing haulage ways. The mining crews were reduced and retreat mining was
conducted back to the area of the underground plant. In early May the Company
decided to suspend mining operations while it reviews the feasibility and costs
associated with extending the underground headings at different levels to avoid
the area of ground failure or developing a new access tunnel to the western ore
blocks. Should these reviews indicate that some or all of the existing ore
reserves are not economically minable, the decrease in the reserve estimates
would result in a reduction of some or all of the carrying value of development
costs and mineral rights which totalled $7,622,461 at March 31, 1997. The sale
of any of the plant and equipment for less than net book value would result in
a reduction in the carrying value of plant and equipment which amounted to
$4,627,986 at March 31, 1997. The ability to develop and implement any future
mining plans, is dependant upon the Company's ability to raise additional
capital through equity or debt offerings. No assurance can be given that the
Company will be able to raise the additional capital.
<PAGE>3
Due to the suspension of mining operations at the San Juan Mine, the Company's
ability to remain in operation over the foreseeable future is dependent upon
generating sufficient working capital from any production proceeds from the San
Juan Mine, reducing overhead costs and from the sales of mining equipment or
obtaining additional capital. No assurance can be given that these activities
will generate sufficient working capital.
In addition to studying its alternatives at the San Juan Mine, the Company is
presently considering various alternatives to expand the reserves at the Big
Horn Mine through further geology reviews and conducting additional drilling.
Additionally, a property in Northern California has been identified and the
Company is currently in negotiation with the lease holder to acquire such
property. In May, 1997 the Company signed an agreement with Boulder Creek
Exploration which has identified several prospective mineral properties in
Mexico. Pursuant to the agreement Boulder Creek will receive 200,000 shares of
Siskon's Class A common stock and a ten percent net profits interest if Siskon
makes an acquisition. The Company is also investigating other properties in
South America and Cambodia. The acquisition, exploration and development of
these mineral properties are dependant upon the Company's raising additional
capital through equity or debt offerings. No assurance can be given that the
Company will be able to raise the additional capital.
The debt secured by the San Juan and Big Horn properties amounting to
$8,503,832 at March 31, 1997, matures November 15, 1998. The ability of the
Company to meet these debt requirements may be dependant upon the successful
renegotiation or refinancing of the debt. No assurance can be given that the
Company will successfully renegotiate or refinance the debt.
Due to price declines of the Company's Class A common stock the NASDAQ National
Market System removed the listing of the Company's Class A common stock
effective April 18, 1997. The Company's Class A common stock is now quoted on
the OTC Bulletin Board under the symbol "SISK".
(B) FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Siskon had cash on hand of $467,375 and $1,943,127 at March 31, 1997 and 1996,
respectively.
Cash used by operating activities for the first quarter of 1997 totalled
$827,576 versus $237,993 for the first quarter of 1996.
Cash provided by investing activities during the first quarter of 1997 totalled
$326,197 versus $2,120 for the first quarter of 1996. During 1997, $308,000
was received from the sale of equipment, $17,500 from the sale of oil and gas
royalty interests in Montana and note collections of $697 as compared to $2,120
from the sale of equipment during the first quarter of 1996. Cash used in
investing activities during the first quarter of 1997 totalled $43,568 as
compared to $1,857,588 in 1996. During 1997, $40,663 was expended on equipment
at the San Juan Mine and $2,905 on permitting costs at the Big Horn Mine as
compared with $154,195 for equipment, $1,521,275 for development and $160,772
for bonds at the San Juan Mine during 1996 and $18,077 for permitting at the
Big Horn Mine during 1996. In mid-May 1996, construction of the San Juan Mine
was completed. 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.
Cash provided by financing activities during the first quarter of 1997 totalled
$450,000 from the issuance of convertible debt. On February 18, 1997 the
Company issued convertible debentures 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
<PAGE>4
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.
Cash used in financing activities during the first quarter of 1997 totalled
$250,284 as compared to $217,713 during the first quarter of 1996. During
1997, $127,176 was paid on equipment notes, $4,063 on land notes and $119,045
for registration and issuance costs. During 1996 $48,964 was paid on capital
lease obligations, $136,170 on equipment notes, $3,717 on land notes and
$28,862 on registration and issuance costs.
Siskon incurred a net loss of $1,565,521 for the first quarter of 1997 as
compared to a net loss of $251,106 for the first quarter of 1996. Commencing in
Mid-May 1996, revenues, production costs, non-cash costs and royalties at the
San Juan Mine were reflected in operations. During the first quarter of 1997
revenues of $857,358 resulted from 2,459 ounces of fine gold at an average
price of $349 per ounce. Production costs, non-cash costs and royalty expense
totalled $1,069,878, $463,372 and $17,089, respectively. During the first
quarter of 1996 production costs were capitalized as the Company's operations
were in the development stage and gold revenues received from 3,770 ounces of
gold amounting to $1,510,334 at an average price of $401 were credited against
capitalized costs. Subsequent to May 10, 1997, no revenues from gold sales are
expected since mining operations at the San Juan Mine were suspended.
General and administrative expenses were $290,376 in the first quarter of 1997
as compared with $310,382 during the first quarter of 1996 primarily relating
to reductions in overhead and printing costs. At March 31, 1997 accrued salary
and interest owed to Mr. Callaway, President and Chairman of the Board,
amounted to $36,192. Exploration costs were $29,592 in the first quarter of
1997 versus $7,543 in the first quarter of 1996 resulting primarily from costs
related to the Gray Eagle Mine litigation.
The loss on sale of mineral rights and equipment was $30,847 in the first
quarter of 1997 versus a gain of $2,120 on the sale of equipment in the first
quarter of 1996. During 1997 the oil and gas royalty interests in Montana were
sold for a gain of $17,500 and equipment was sold at a loss of $48,347.
Interest expense during the first quarter of 1997 amounted to $558,429
including amortization of the discount of the price of the stock underlying
convertible debt amounting to $241,257. During the first quarter In 1996
interest costs were capitalized. Interest and miscellaneous income was $18,634
in the first quarter of 1997 as compared with $45,336 in the first quarter of
1996 reflecting higher cash balances during 1996.
The Company believes that its business and operations were not materially
affected by inflation during the first quarter of 1997 and 1996.
<PAGE>5
PART II
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
Not applicable.
<PAGE>6
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.
Dated May 12, 1997 TIMOTHY A. CALLAWAY
Timothy A. Callaway, President, CEO and
Chairman of the Board
Dated May 12, 1997 MICHAEL K. EPSTEIN
Michael K. Epstein, Vice-President Finance
and Chief Financial Officer
<PAGE>7
FORM 10-QSB - ITEM 1
SISKON GOLD CORPORATION AND SUBSIDIARY
LIST OF FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are included in
response to Item 1:
Consolidated Balance Sheets -
March 31, 1997 (Unaudited) and December 31, 1996 8
Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and 1996 (Unaudited) 9
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 (Unaudited) 10
Notes to Consolidated Financial Statements 11
<PAGE>8
SISKON GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996
1997 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents $467,375 $812,606
Accounts receivable 4,867 6,080
Inventories 333,358 230,875
Prepaid expenses and other 275,081 400,792
---------- ----------
Total Current Assets 1,080,681 1,450,353
NOTES RECEIVABLE 292,072 292,812
PROPERTY, PLANT AND EQUIPMENT, net 15,928,530 16,653,046
OTHER ASSETS 344,330 428,569
----------- -----------
TOTAL ASSETS $17,645,613 $18,824,780
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $559,905 $773,306
Current portion of long-term debt 228,821 292,248
----------- ----------
Total Current Liabilities 788,726 1,065,554
LONG TERM DEBT ($9,117,255 in 1997 and
$9,772,640 in 1996 to related parties) 9,669,685 10,692,224
OTHER LIABILITIES 65,504 60,551
----------- -----------
Total Liabilities 10,523,915 11,818,329
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Capital Stock
Preferred stock, $.001 par value; no shares
issued; Convertible Series A: 341 in 1997;
0 in 1996 1 -
Common stock, $.001 par value; issued and
outstanding:
Class A: 15,434,983 in 1997; 11,989,662
in 1996 15,433 11,989
Convertible Class B Series 1: 638 in 1996
and 1995 1 1
Additional paid-in capital 55,412,392 53,730,633
Stock subscription receivable (331,248) (326,812)
Accumulated deficit (47,794,881) (46,409,360)
------------ ------------
Total Shareholders' Equity 7,121,698 7,006,451
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $17,645,613 $18,824,780
============ ============
See notes to consolidated financial statements.
<PAGE>9
SISKON GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
1997 1996
REVENUES
Gold sales $857,358 $ -
Royalties and leases 18,070 22,906
---------- ---------
Total Revenues 875,428 22,906
---------- ---------
OPERATING EXPENSES
Production 1,069,878 -
Depreciation, depletion and amortization 463,372 3,543
General and administrative 290,376 310,382
Royalties 17,089 -
Exploration costs 29,592 7,543
---------- ---------
Total Operating Expenses 1,870,307 321,468
---------- ---------
OPERATING LOSS (994,879) (298,562)
---------- ---------
OTHER (EXPENSE) INCOME
(Loss) Gain on sale of mineral rights
and equipment (30,847) 2,120
Interest expense (558,429) -
Interest and other income 18,634 45,336
----------- --------
Total Other (Expense) Income (570,642) 47,456
----------- --------
NET LOSS $(1,565,521) $ (251,106)
=========== ===========
NET LOSS PER SHARE $ (0.12) $ (0.02)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES 13,285,995 10,562,544
=========== ============
See notes to consolidated financial statements.
<PAGE>10
SISKON GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,565,521) $(251,106)
Adjustments to reconcile net loss to net cash used in
operating activities
Issuance of common stock for interest 71,205 -
Discount on price of stock underlying convertible debt 241,257 -
Depreciation, depletion and amortization 463,372 3,543
Loss (gain) on sale of mineral rights and equipment 30,847 (2,120)
Accrued interest on convertible debt 161,829 -
Amortization of deferred financing costs 66,499 -
Accrued interest receivable (4,436) (4,485)
Decrease (increase) in accounts receivable 1,256 (202)
Increase in inventories (102,483) (301,550)
Decrease (increase) in prepaid expenses 22,000 (49,776)
(Decrease) Increase in accounts payable and accrued liabilities (213,401) 367,703
------------ ----------
Net cash used in operating activities (827,576) (237,993)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of mineral rights and equipment 325,500 2,120
Collections on notes receivable 697 -
Purchase of equipment (40,663) (154,195)
Deferred development costs (2,905) (1,539,352)
Increase in reclamation bonds - 160,772
------------ -----------
Net cash provided by (used in) investing activities 282,629 (1,857,588)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debt 450,000 -
Payments of obligations under capital leases - (48,964)
Payments of equipment debt (127,176) (136,170)
Payment of land notes payable (4,063) (3,717)
Registration and issuance costs (119,045) (28,862)
------------ ----------
Net cash provided by (used in) financing activities 199,716 (217,713)
------------ ----------
DECREASE IN CASH (345,231) (2,307,905)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 812,606 4,251,032
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $467,375 $1,943,127
============ ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>11
SISKON GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Siskon Gold Corporation and subsidiary (the Company) is engaged in the business
of exploring, developing and mining precious mineral properties, principally
gold. Gold dor<e'>', the Company's principle product, is produced and sold in
the United States. At March 31, 1997, the Company owned interests in various
mineral properties located in the Western United States. The Company's
operations are conducted in one business segment being that of mineral resource
exploration, development and production.
In early May the Company decided to suspend mining operations while it reviews
the feasibility and costs associated with extending the underground headings at
different levels to avoid the area of ground failure or developing a new
access tunnel to the western ore blocks. Should these reviews indicate that
some or all of the existing ore reserves are not economically minable, the
decrease in the reserve estimates would result in a reduction of some or all of
the carrying value of development costs and mineral rights which totalled
$7,622,461 at March 31, 1997. The sale of any the plant and equipment for less
than net book value would result in a reduction in the carrying value of plant
and equipment which amounted to $4,627,986 at March 31, 1997. The ability to
develop and implement any future mining plans, is dependant upon the Company's
ability to raise additional capital through equity or debt offerings. No
assurance can be given that the Company will be able to raise the additional
capital.
Due to the suspension of mining operations at the San Juan Mine, the Company's
ability to remain in operation over the foreseeable future is dependent upon
generating sufficient working capital from any production proceeds from the San
Juan Mine, reducing overhead costs and from the sales of mining equipment or
obtaining additional capital. No assurance can be given that these activities
will generate sufficient working capital.
The accompanying interim consolidated financial statements have been prepared
by the Company without audit and contain all adjustments which, in the opinion
of management, are necessary to present fairly the Company's financial position
as of March 31, 1997 and December 31, 1996 and the results of its operations
and cash flows for the interim periods ending March 31, 1997 and 1996. Such
adjustments consist of normal, recurring adjustments.
The accompanying interim consolidated financial statements do not contain all
disclosures required by generally accepted accounting principles for annual
financial statements. It is suggested that these financial statements be read
in conjunction with the audited consolidated financial statements and the
related notes contained in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1996.
Operating results for interim periods are not necessarily indicative of those
expected for a full year.
<PAGE>12
2. INVENTORIES
Inventories at March 31, 1997 and December 31, 1996 were as follows:
1997 1996
Gold dor<e'> inventory $221,226 $81,380
Materials and supplies 112,132 149,495
-------- --------
$333,358 $230,875
======== ========
3. LONG TERM DEBT
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.
During the first quarter of 1997, $1,331,111 of convertible debt was converted
into 2,801,604 shares of Class A common stock and 512 shares of Series A
convertible preferred stock and 171 share of the preferred stock thus issued
were converted into 640,000 shares of Class A common stock. From April 1, 1997
to April 30, 1997, an additional $384,056 of debt has been converted into
4,524,894 shares of Class A common stock. As of April 30, 1997, $232,753 of
debt and 344 shares of Series A convertible preferred stock were unconverted.
4. STOCK OPTIONS AND WARRANTS
Stock option and warrant transactions for the three months ended March 31, 1997
were as follows:
Number of Exercise Exercisable
Class A Shares Price Per Share Options
Options outstanding at:
December 31, 1996 723,500 $ 2.00 - $ 4.94 501,000
Granted 3,000 0.78 3,000
Cancelled (22,500) 2.06 -
Vested - 2.56 - 3.05 25,000
------- -------
March 31, 1997 704,000 $ 0.78 - $ 4.94 529,000
========= =========
Warrants outstanding at
December 31, 1996 and
March 31, 1997 2,819,083 $ 2.82 - $ 7.50 2,819,083
========= =========
<PAGE>13
5. COMMITMENTS AND CONTINGENCIES
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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEETS AND CONDENSED STATEMENTS OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 467,375
<SECURITIES> 0
<RECEIVABLES> 4,867
<ALLOWANCES> 0
<INVENTORY> 333,358
<CURRENT-ASSETS> 1,080,681
<PP&E> 29,600,723
<DEPRECIATION> (13,672,193)
<TOTAL-ASSETS> 17,645,613
<CURRENT-LIABILITIES> 788,726
<BONDS> 9,669,685
0
1
<COMMON> 15,434
<OTHER-SE> 55,081,144
<TOTAL-LIABILITY-AND-EQUITY> 17,645,613
<SALES> 857,358
<TOTAL-REVENUES> 18,070
<CGS> 1,069,878
<TOTAL-COSTS> 1,870,307
<OTHER-EXPENSES> 12,213
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 558,429
<INCOME-PRETAX> (1,565,521)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,565,521)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,565,521)
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</TABLE>
