<PAGE>
________________________________________________________________________________
________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
---------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
Commission file number: 0-28204
XAVIER MINES LIMITED
(Exact name of registrant as specified in its charter)
ONTARIO, CANADA 76-049009
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
XAVIER MERGER CORPORATION
DELAWARE 76-0490006
(State or other jurisdiction of
incorporation or organization)
1600 SMITH STREET
SUITE 4700
HOUSTON, TX 77002
(Address of principal offices)
(713) 652-5111
(Issuers telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES NO X
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
70,139,427 shares of common stock, no par value, issued and outstanding at June
24, 1996.
- --------------------------------------------------------------------------------
________________________________________________________________________________
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XAVIER MINES LIMITED
TABLE OF CONTENTS
PAGE
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
<S> <C>
Item 1 Financial Statements
---------------------
</TABLE>
CONSOLIDATED FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
<S> <C>
Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995............................................... 3
Consolidated Statements of Income (Loss) and Retained Deficit
for the three months ended March 31, 1996 and 1995............... 5
Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1995.......................................... 6
Condensed Notes to Consolidated Financial Statements.............. 7
Item 2 Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations.......................................... 9
- -------------------------
PART II OTHER INFORMATION
Item 1 - Legal Proceedings......................................... 14
-----------------
Item 2 - Changes in Securities..................................... 14
---------------------
Item 3 - Defaults upon Senior Securities........................... 14
-------------------------------
Item 4 - Submission of Matters to a Vote of Security Holders....... 14
---------------------------------------------------
Item 5 - Other Information......................................... 14
-----------------
Item 6 - Exhibits and Reports on Form 8-K.......................... 14
--------------------------------
</TABLE>
(a) Exhibits
(b) Reports on Form 8-K
2
<PAGE>
XAVIER MINES LIMITED
CONSOLIDATED BALANCE SHEETS
[UNAUDITED]
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ --------------
<S> <C> <C>
ASSETS
CURRENT:
Cash.................................. $ 388,217 $ 25,435
Cash-restricted....................... 1,000,000 1,000,000
Accounts receivable................... 1,367,927 882,925
Short-term note receivable,
collateralized by the stock of
KMNGG whose reserves are
principally unproved............. 19,949,532 19,949,532
Other................................. 178,051 193,323
----------- -----------
Total current assets......... 22,883,727 22,051,215
----------- -----------
OIL AND GAS CONTRACT RIGHTS,
FULL COST METHOD, NET................ 35,232,853 29,427,822
INVESTMENT IN AND ADVANCES TO
OIL AND GAS JOINT VENTURE............. 11,769,614 11,870,107
INVESTMENT IN PRODUCTION
PLATFORM HELD FOR RESALE, NET......... 1,499,877 1,499,877
INTANGIBLE ASSETS, NET.................. 7,918,066 8,132,791
OTHER EQUIPMENT, NET.................... 1,563,733 1,419,293
LOAN RECEIVABLE-AFFILIATED COMPANY...... 1,060,232 914,845
LOAN RECEIVABLE - OTHER................. 900,771 895,613
DEFERRED FINANCING COSTS................ 3,779,162 4,229,036
OTHER................................... 741,858 631,894
----------- -----------
$87,349,893 $81,072,493
=========== ===========
</TABLE>
3
<PAGE>
XAVIER MINES LIMITED
CONSOLIDATED BALANCE SHEETS
[UNAUDITED]
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities............. $ 13,666,445 $ 7,604,765
Notes payable....................... 831,605 1,376,646
Production platform advances........ 1,519,037 1,519,037
Due to affiliates:
Accounts payable.............. 42,220 42,220
Management and consulting fees 212,159 180,909
Other............................... 11,988 29,988
------------ ------------
Total current liabilities... 16,283,454 10,753,565
------------ ------------
SHARE SUBSCRIPTIONS RECEIVED............ 500,000 -
DEFERRED INCOME TAX..................... 3,247,514 3,252,042
LONG TERM NOTES PAYABLE................. 20,780,763 20,888,400
OTHER................................... 837,347 131,744
MINORITY INTEREST IN NET ASSETS OF
CONSOLIDATED SUBSIDIARIES........... 6,515,728 6,637,496
SHAREHOLDERS' EQUITY
Share capital................... 59,238,156 58,309,202
Deficit......................... (20,053,069) (18,899,956)
------------ ------------
39,185,087 39,409,246
------------ ------------
$ 87,349,893 $ 81,072,493
============ ============
</TABLE>
4
<PAGE>
XAVIER MINES LIMITED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
[UNAUDITED]
<TABLE>
<CAPTION>
For the Quarters ended March 31,
--------------------------------------
1996 1995
------------- -----------
<S> <C> <C>
REVENUES:
Oil and gas........................... $ 3,250,185 $3,137,618
Pipeline repair....................... 1,156,880 -
----------- ----------
TOTAL REVENUES.......................... 4,407,065 3,137,618
----------- ----------
EXPENSES:
Production taxes and fees............. 1,781,046 1,312,809
Lease operating expense.............. 581,460 121,999
Pipeline repair cost of sales......... 747,232 -
Depreciation and amortization......... 861,354 183,070
General and administrative............ 1,344,217 656,097
Interest and loan fees................ 1,041,035 99,069
----------- ----------
TOTAL EXPENSES.......................... 6,356,344 2,373,044
----------- ----------
OTHER INCOME (EXPENSE):
Interest income....................... 683,200 10,448
Equity in net loss of oil and gas
joint venture........................ (13,333) -
----------- ----------
TOTAL OTHER INCOME (EXPENSE)............ 669,867 10,448
----------- ----------
INCOME (LOSS) BEFORE THE FOLLOWING.... (1,279,412) 775,022
PROVISION FOR DEFERRED INCOME TAX....... 4,528 (490,889)
MINORITY INTEREST IN NET LOSS OF
CONSOLIDATED SUBSIDIARIES.............. 121,770 -
----------- ----------
NET INCOME (LOSS)....................... $(1,153,114) $ 284,133
=========== ==========
NET INCOME (LOSS) PER SHARE............. $ (0.07) $ 0.06
=========== ==========
</TABLE>
5
<PAGE>
XAVIER MINES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOW
[UNAUDITED]
<TABLE>
<CAPTION>
For the Quarters ended March 31,
----------------------------------------
1996 1995
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) for the period...... $(1,153,114) $ 284,133
Non-cash items:
Depreciation....................... 861,354 183,070
Amortization of deferred financing
costs............................. 449,874 -
Deferred foreign income tax........ (4,528) 490,889
Minority interest in loss of
subsidiaries...................... (121,770) -
----------- -----------
31,816 958,092
Net changes in non-cash balances
relating to operating activities... 6,310,806 (288,418)
----------- ----------
6,342,622 669,674
----------- -----------
INVESTING ACTIVITIES:
Expenditures for oil and gas
investment and contract rights..... (6,378,853) (1,861,162)
Purchase of other equipment.......... (218,272) (18,611)
Loan to affiliated company........... (145,387) (130,448)
Loans and advances to others......... (5,158) -
Other................................ (8,446) (78,144)
----------- -----------
(6,756,116) (2,088,365)
----------- -----------
FINANCING ACTIVITIES:
Shares issued for cash................ 928,954 -
Shares issued for consulting and loan
fees................................. - 474,918
Share subscriptions received.......... 500,000 150,000
Repayment of debt..................... (152,678) (35,000)
Conversion of third party debt to
share subscriptions.................. (500,000) -
Proceeds from third party borrowings.. - 800,000
----------- -----------
776,276 1,389,918
----------- -----------
INCREASE (DECREASE) IN CASH............. 362,782 (28,773)
CASH, BEGINNING OF PERIOD............... 25,435 107,222
----------- -----------
CASH, END OF PERIOD..................... $ 388,217 $ 78,449
=========== ===========
</TABLE>
6
<PAGE>
XAVIER MINES LIMITED
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
NOTE 1 - ACCOUNTING POLICIES:
- -----------------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to interim financial reporting as
prescribed by the Securities and Exchange Commission. All adjustments, which,
in the opinion of management, are necessary for a fair presentation of the
results for the interim periods have been reflected in the accompanying
unaudited financial statements. For further information regarding accounting
policies, refer to the Company's audited financial statements for the years
ended December 31, 1995 and 1994 included in its 1995 Annual Report or on Form
S-4 as submitted to the Commission.
NOTE 2 - CARNEGIE/AITORNEFTEGAS NOTES:
- --------------------------------------
The Company has been unable to complete its due diligence on
Khantymansiyskeftegazgeologiya (KMNGG), whose shares collateralize the
$19,949,532 convertible promissory note due to Xavier from Aitorneftegas.
Consequently, the note is being extended to December 5, 1996.
NOTE 3 - NOTES PAYABLE:
- -----------------------
The Company intends to ask the credit provider to activate the $12
million line of credit by June 30, 1996. If the lender is unwilling to provide
the credit facility, the Company will ask for the return of the $1,000,000
commitment fee that was prepaid for the availability of the line of credit.
NOTE 4 - COMMITMENTS AND CONTINGENCIES:
- ---------------------------------------
In June 19, 1996, Xavier settled the litigation styled Steven W.
Weller v. Xavier Mines Limited, Xavier (USA), Inc., Noramco Mining Corporation,
Robert C. Gardner, Murray Sinclair, George W. Bowman, II, Chris A. Dittmar and
S. Lionel McAuley. Mr. Weller had filed the suit on May 25, 1994, in the 334th
District Court of Harris County, Texas. As part of the settlement, the Company
paid $4.1 million to Mr. Weller, of which $500,000 will be paid under a
promissory note due July 19, 1996.
7
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XAVIER MINES LIMITED
NOTE 5 - SHARE CAPITAL:
- -----------------------
During the first quarter of 1996, the Company issued 1,059,154 shares
of common stock for $1,000,000, before deductions for commissions and related
fees. Subsequent to March 31, 1996, a convertible note payable in the amount of
$500,000 was converted to 524,786 shares of common stock. The note payable is
shown as Share Subscriptions Received as of March 31, 1996.
<TABLE>
<CAPTION>
NOTE 6 - SUBSEQUENT EVENTS:
- ---------------------------
<S> <C>
(a) In June of 1996, Xavier advanced $2,000,000 to Brimstone Sales Corporation
to facilitate the buying and reselling of ammonium nitrate from a Russian
supplier to a western buyer.
(b) In June of 1996, the Company issued an unsecured promissory note for an
additional SEK 57,695,000 ($9,025,000) before deductions for commissions
and fees under the same terms and conditions as the December 1995 Carnegie
note. The Company must also issue a yet to be determined number of
warrants to Morgan Grenfell International Funds, Ltd. which facilitated
the additional funding tranche of the Carnegie note.
(c) In April of 1996, the Company sold 3,365,385 shares of common stock for
approximately $3,143,000 before commissions and related fees.
</TABLE>
8
<PAGE>
XAVIER MINES LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In the first quarter of 1996, the Company hooked-up six wells to oil
gathering lines, initiated three well work-overs and drilled three dry holes in
the Potany/Kartopyinskoye (P&K) license area. At the Kamennoye East license
area, the Company successfully worked-over one well but failed to achieve
expected results with two additional work-overs. At the Kamennoye West license
area, the Company's Russian drilling contractor drilled six wellbores to within
100 meters above the Cretaceous formation. (By June 24, the drilling contractor
had drilled twelve wellbores to within 100 meters of the Cretaceous objective.)
The Company's own drilling rig, with a specialized drilling package for the
underbalanced drilling program required to complete in the Cretaceous objective,
was shipped to the license area.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
regarding Technical Service Agreement (TSA) average daily oil production, oil
production sold, average TSA revenue receipts per Bbl sold and amortization and
expenses attributable to such production. No depreciation, depletion or
amortization was recorded on the Company's investment in the Black Gold Joint
Venture since the venture has not achieved production in excess of designated
baseline levels.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
PRODUCTION DATA:
TSA Average daily oil production (Bbls) 2,776 1,063
TSA Oil production sold (Bbls) 188,909(1) 208,102
Average TSA sales price per Bbl sold $17.21 $15.08
Operating costs and expenses per Bbl sold:
Production costs $12.51 $6.89
Amortization $3.04 $.83
------ -----
Total $15.55 $7.72
====== =====
</TABLE>
- ----------------
(1) Sales are from barrels produced from September 16, 1994, the initial date of
production, to March 31, 1995.
QUARTERS ENDED MARCH 31, 1996 AND 1995
TSA - Revenue. Total revenue for the quarter ended March 31, 1996
increased by $112,567 to $3,250,185 from $3,137,618 in the same period in 1995.
TSA revenue increased on lower sales volumes because of higher crude prices.
9
<PAGE>
Pipeline Repair Revenue. Total pipeline repair revenue for the quarter
ended March 31, 1996 increased to $1,156,880 from $0 in the same period in 1995.
This is a result of the Company's acquisition of the Bandera Group in July of
1995.
Production Taxes and Fees. Production taxes and fees for the quarter ended
March 31, 1996 increased by $468,237 to $1,781,046 from $1,312,809 in the same
period for 1995. Production taxes and fees increased due to higher lease
operating expenses and due to production taxes in the Khanty Mansiysk region of
western Siberia.
General and Administrative. General and administrative expenses for the
quarter ended March 31, 1996 increased by $688,120 to $1,344,217 from $656,097
for the same period in 1995. The increase was the result of expanding operations
activity in the Black Gold Joint Venture and Kamennoye East license area and
additional business expenses associated with marketing and capital formation
efforts.
Interest and Loan Fees. Interest and loan fees for the quarter ended March
31, 1996 increased by $941,966 to $1,041,035 from $99,069 for the same period in
1995. The incrase in interest expense and loan fees was principally the result
of accrued interest on the Carnegie loan and amortization of the associated
warrants.
Depreciation and Amortization. Depreciation and amortization expense for
the quarter ended March 31, 1996 increased by $678,284 to $861,354 from $183,070
for the same period in 1995. The increase resulted from amortization of the
intangible assets obtained in the purchase of 54.5% of the Bandera Group
(Bandera), and to a higher charge to depreciation for equipment obtained in the
Bandera purchase and for new corporate assets purchased as the Company's
business activity expanded.
Other (Income) and Expense. Other income and expense for the quarter ended
March 31, 1996 increased by $659,419 to income of $669,867 from income of
$10,448 for the same period in 1995. The increase reflects interest income from
loans the Company made to Bandera prior to the closing date of the purchase
transaction, interest due on the Convertible Note due from Aitorneftegaz (ANG),
interest income from a promissory note due from Kachina Capital Corporation
(KCC) and interest income from loans made to certain entities to fund the
Company's sulfur processing and trading plans.
Income Taxes. Deferred income taxes for the quarter ended March 31, 1996
decreased $495,417 to $4,528 from ($490,889) for the same period in 1995.
Deferred income taxes arise primarily from timing differences between the book
and tax basis of Bandera's intangible assets and from the Russian treatment of
the Company's advances under the TSAs. The change in deferred taxes as reported
in the Company's financial statements is due to the amortization of the step-up
in the basis of Bandera's assets. The Company's Russian branch, however, has a
deferred foreign tax liability from on-going operations.
Net Income (Loss). The Company had a net loss of $1,153,114 for the
quarter ended March 31, 1996, as compared to a net a income of $284,133 for the
1995 period. Net loss for the 1996 period was the result of TSA revenue and
interest income, reduced by general and administrative expense, oil and gas
operations expense, interest expense and loan fees, TSA amortization expense and
Xavier's $218,669 net share of Bandera's operating losses.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has an immediate need for cash to meet it currently due
obligations. At March 31, 1996, the Company had $388,217 of unrestricted cash on
hand. Of the available cash on hand, $238,802 was attributable to Bandera, and
as such, was unavailable to the Company. Bandera's future cash position will be
determined by its success in winning all or a portion of $10,400,000 in bids
outstanding and the profits margins realized on its $1,370,000 backlog of
contracts at March 22, 1996. Bandera began factoring some of its accounts
receivable in January 1996 to raise cash.
In January 1996, Xavier received $2,000,000 from PETECO, a partner in the
P&K and Kamennoye East TSA's. In March 1996, the Company received $1,000,000
before deductions of commissions and fees from the sale of equity via a private
placement. In April 1996 the Company sold 3,365,385 shares of common stock for
$3,143,000 before commissions and related fees. The proceeds were used to pay
drilling costs of $1,275,000 in the West Kamennoye license area, to provide a
non-refundable agency fee of $1,000,000 for a bond placement contract, and for
working capital. In June 1996, the Company issued an unsecured promissory note
for SEK 57,695,000 (US$9,025,000) under the same terms and conditions as the
December 1995 Carnegie note. The Company must also issue a yet to be determined
number of warrants to Morgan Grenfell International Funds, Ltd. which
facilitated the additional funding tranche of the Carnegie loan. Funds from the
note proceeds were disbursed as follows: $3.6 million to settle litigation (see
note 4); $2,000,000 to Brimstone Sales Corporation to facilitate the buying and
re-selling of ammonium nitrate (see note 6); and, the remainder to reduce
accounts payable and for general corporate purposes.
The Company has verbally rescheduled payment of the principal and interest
outstanding under a promissory note due December 31, 1995 aggregating 265,000 to
June 30, 1996. The Company also extended the conversion terms of a convertible
note in the amount of $500,000 due December 31, 1995 to April 15, 1996. This
convertible note was subsequently converted to equity in the second quarter of
1996. In the first quarter of 1996, the Company also made a payment of $147,000
in connection with the Gazprom joint venture (which payment was made in the
fourth quarter of 1995 by the Company's 54.5%-owned subsidiary, Bandera, and
which Xavier repaid to Bandera in the first quarter of 1996). In the second
quarter, the Company advanced $2,028,000 to facilitate the buying and reselling
of ammonium nitrate from a Russian supplier to a western buyer (see Note 6). To
date, the Company's aggregate investment in the Gazprom joint venture totals
$2,930,000. In addition to its capital requirements for proposed field
development plans described below, the Company, in association with the
formation of Genesis Eurasia Xavier (GEX) in 1994, entered into a credit
agreement with Genesis Eurasia Corporation (GEC). The agreement requires the
Company to advance a maximum of $40,000 per month to GEC through April 1, 1997.
The advances bear interest at 12%, are payable in monthly amounts, including
interest, and are collateralized by GEC's interest in GEX. The advances mature
no later than April 1, 2000, at which time all unpaid advances and accrued
interest are due. At March 31, 1996, the Company had advances of $930,000 and
accrued interest of $110,232 due from GEC.
The Company's principal future capital commitments arise under the
Kamennoye East and Kamennoye West TSAs. Each of these TSAs has contractual
requirements that obligate the Company to contribute a minimum amount of funds
per year for a specified number of years unless, in the case of Kamennoye East
TSA, the Company determines that development of the license area becomes
uneconomic. Under the Kamennoye West TSA, the Company agreed to make
11
<PAGE>
aggregate capital contributions of $75,000,000 payable over a five-year period
ending in 2000 at the rate of $15,000,000 per year. The Kamennoye East TSA
requires aggregate capital contributions of $40,000,000 payable over a four year
period. Such funds may be supplied to the development of either the Kamennoye
East or P&K fields. The Company is obligated to fund 90% of such amount at the
rate of $9,000,000 per year in each of 1994, 1995, 1996 and 1997. The Company
and PETECO have agreed to reinvest the first $8,000,000 of TSA net revenue under
each of the Kamennoye East TSA and the P&K TSA in the development of the
applicable license area with such reinvestment to be applied to the Company's
contractual commitments under the Kamennoye East TSA. Annual field development
expenditures or capital contributions in excess of the annual minimum
requirements specified in the Kamennoye East and Kamennoye West TSAs may be
carried forward and applied against the following year's contractual capital
spending requirements. In January 1996, the Company received $2.0 million from
PETECO, which reduced its TSA advance account balance. This transfer, when added
to the net reinvested revenue from P&K and Kamennoye East from first quarter
1996 sales, resulted in a remaining contractual investment requirement of $13.9
million. At March 31, 1996, the Company had committed approximately $10.0
million towards the $15 million contractual capital commitment at Kamennoye
West. The Kamennoye West TSA commitment year runs from July to June.
The Company believes that cash flow from operations will be insufficient
to meet its 1996 capital needs by approximately $26,540,000. The Company intends
to seek such additional required capital primarily through a combination of
funding sources that may include offerings of equity and debt securities,
including possible public offerings in the United States and internationally
which the Company believes will be facilitated by its domestication in the
United States. In addition, the Company has entered into discussions with
certain entities concerning the private placement in Europe of up to $100
million in convertible debentures. Xavier has no definitive agreement with
respect to the issue of such private placement and there can be no assurances
that such an agreement will be concluded. In connection with any such offerings,
effective January 1, 1996, the Company and Kachina Capital Corp. (KCC)
terminated their verbal agreement whereby Xavier had agreed to pay KCC an amount
equal to 2% of all amounts raised in public or private offerings of debt or
equity.
The Company may also seek to finance a portion of its capital needs with
borrowings under the Line of Credit. The Line of Credit provides for a maximum
borrowing of $12,000,000, bears interest at LIBOR plus 2% compounded daily, is
unsecured and has a term of one year from the first drawdown. The Line of Credit
requires the Company to maintain a compensating balance of $1,000,000, which has
been paid, and pay an annual commitment fee of $100,000 to maintain the Line of
Credit and a $60,000 administration fee. On the initial drawdown under the Line
of Credit, the Company is required to issue the lending institution 1,500,000
Common Shares and 500,000 Common Share purchase warrants exercisable at CDN$2.00
per warrant and expiring in May 1997. Borrowings under the Line of Credit are
subject to the lender's due diligence and to the presentation of all appropriate
documentation by the Company. The Company paid the compensating balance in May
and June 1995. The Company intends to ask the credit provider to activate the
$12 million line of credit by June 30, 1996. If the lender is unwilling to
provide the credit facility, the Company will ask for the return of the
$1,000,000 commitment fee that was prepaid for the availability of the line of
credit.
Subsequent to the Company's domestication in the United States, the
Company expects to be in a better position to seek capital and/or loan
guarantees from U.S. and foreign governmental and quasi-governmental agencies in
connection with its Russian projects. The Company may also seek an industry
partner looking for an entrance into the Russian oil and gas arena or could sell
an
12
<PAGE>
interest in one or more of its concessions to a third party. There can be no
assurance, however, that the Company will be successful in obtaining the funds
required to meet its capital needs on a timely basis or, if it is successful,
that the terms on which such funds are obtained will be advantageous to the
Company. If the Company is unable to obtain sufficient capital in a timely
manner, either as described above or otherwise, it would be forced to delay the
development of the properties and/or seek to renegotiate its obligations under
the TSAs, either of which could have a material adverse effect on the financial
condition and results of operations of the Company. There can be no assurance
that the Company would be able to renegotiate its obligations under the TSAs if
required to do so.
The Company has entered into Interest Purchase Agreements, effective
November 3, 1993, with each of Mr. Dittmar and Mr. Bowman pursuant to which the
Company acquired its initial rights in and to certain of its properties. The
Interest Purchase Agreements, among other things, grant to each of Mr. Dittmar
and Mr. Bowman a non-assignable royalty of 1.0% of all earnings before interest,
taxes, depreciation and amortization in and from all properties and/or projects
identified and/or introduced to Xavier, with certain limited exceptions.
Messrs. Dittmar and Bowman have the right to collateralize their respective
royalty interests against the properties subject thereto.
13
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XAVIER MINES LIMITED
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On June 19, 1996, Xavier settled the litigation styled Steven W. Weller v.
Xavier Mines Limited, Xavier (USA), Inc., Noramco Mining Corporation, Robert C.
Gardner, Murray Sinclair, George W. Bowman, II, Chris A. Dittmar and S. Lionel
McAuley. Mr. Weller had filed the suit on May 25, 1994, in the 334th District
Court of Harris County, Texas. As part of the settlement, the Company paid
$4.1 million to Mr. Weller, of which $500,000 will be paid under a promissory
note due July 19, 1996.
ITEM 2 - CHANGES IN SECURITIES - NONE
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
ITEM 5 - OTHER INFORMATION - NONE
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K- None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, who has signed this
report on behalf of the Registrant and as the principal financial and accounting
officer of the Registrant.
XAVIER MINES LIMITED
Date: June 26, 1996 By: /s/ Robert S. Parsons
------------------------------------
Robert S. Parsons
Vice President and
Chief Financial Officer
XAVIER MERGER CORPORATION
By: /s/ Robert S. Parsons
------------------------------------
Robert S. Parsons
Vice President and
Chief Financial Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000921905
<NAME> XAVIER MINES LIMITED
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
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