-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FBsAskBZVLMTZUz9Ubt1boKWRJWmCezURZ1fGTM/ybYK7cAvP4TcgmjjPqFGrCLJ TWcpEtepRQcX8Ljo/0uFjg== 0000844788-95-000004.txt : 19950619 0000844788-95-000004.hdr.sgml : 19950619 ACCESSION NUMBER: 0000844788-95-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950614 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FISCHER WATT GOLD CO INC CENTRAL INDEX KEY: 0000844788 STANDARD INDUSTRIAL CLASSIFICATION: 1040 IRS NUMBER: 880227654 STATE OF INCORPORATION: NV FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-17386 FILM NUMBER: 95546876 BUSINESS ADDRESS: STREET 1: 1410 CHERRYWOOD DRIVE CITY: COEUR DALENE STATE: ID ZIP: 83814 BUSINESS PHONE: 2086646757 MAIL ADDRESS: STREET 2: 1410 CHERRYWOOD DRIVE CITY: COEUR DALENE STATE: ID ZIP: 83814 10QSB 1 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended APRIL 30, 1995 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 Number 0-17386 FISCHER-WATT GOLD COMPANY, INC. (Exact name of registrant as specified in its charter) NEVADA 88-0227654 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 1410 Cherrywood Drive Coeur d'Alene, ID 83814 (Address of principal executive offices) (Zip Code) (208) 664-6757 (Registrant's telephone number, including area code) 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 [ ] The number of shares of Common Stock, $0.001 par value, outstanding as of May 22, 1995 was 12,344,000 Transition Small Business Disclosure Format (check one): Yes [ ] No [X] Part 1 - Financial Information Item 1. Financial Statements FISCHER-WATT GOLD COMPANY, INC. BALANCE SHEETS April 30, January 31, ASSETS 1995 1995 (Unaudited) CURRENT ASSETS: Cash $ 10,000 $ 6,000 Trading securities 278,000 358,000 Accounts receivable 13,000 2,000 Other current assets 4,000 6,000 ------- ------- Total current assets 305,000 372,000 MINERAL INTERESTS 360,000 387,000 MINING AND OTHER EQUIPMENT 51,000 50,000 LESS DEPRECIATION, DEPLETION AND AMORTIZATION ( 35,000) ( 36,000) ------- ------- 376,000 401,000 INVESTMENT IN HONDURAN CORPORATION 100,000 91,000 OTHER ASSETS 27,000 27,000 ------- ------- Total assets $ 808,000 $ 891,000 ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 95,000 $ 89,000 Notes payable 500,000 500,000 Accrued payroll and benefits 43,000 59,000 Accrued interest expense 45,000 51,000 Other accrued liabilities 32,000 31,000 ------- ------- Total current liabilities 715,000 730,000 LONG TERM LIABILITIES: Nonrecourse debt (Note 5) 96,000 87,000 Total liabilities 811,000 817,000 COMMITMENTS AND CONTINGENCIES, Notes 1,3, 6 SHAREHOLDERS' (DEFICIT) EQUITY: Common stock, $0.001 par value, 50,000,000 shares authorized; 12,344,000 shares outstanding at April and January 1995 12,000 12,000 Additional paid-in capital 5,773,000 5,773,000 Deficit (5,788,000) (5,711,000) -------- -------- Total shareholders' (deficit) equity (3,000) 74,000 -------- -------- Total liabilities and shareholders' equity $ 808,000 $ 891,000 -------- -------- The accompanying notes are an integral part of these balance sheets. FISCHER-WATT GOLD COMPANY, INC. STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended April 30, 1995 1994 ------ ------ REVENUES: Gain on sale of mineral interest $ - $ 109,000 COSTS AND EXPENSES: Abandoned properties and prospects 22,000 - Generative exploration expense 3,000 - Operating and administrative 48,000 72,000 Public company costs 21,000 21,000 ------ ------ 94,000 93,000 ------ ------ OTHER INCOME (EXPENSE): Interest expense ( 22,000) ( 19,000) Unrealized gain on trading securities 50,000 - Other (expense) income ( 11,000) 20,000 ------ ------ 17,000 1,000 ------ ------ Net (loss) income before income taxes ( 76,000) 17,000 TAX PROVISION ( 1,000) ( 1,000) ------ ------- NET (LOSS) INCOME $ ( 77,000) $ 16,000 ------ ------- (LOSS) INCOME PER SHARE AND COMMON EQUIVALENT $( .01 ) $ .00 ------ ------ WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 12,344,000 12,344,000 ---------- ---------- The accompanying notes are an integral part of these statements. FISCHER-WATT GOLD COMPANY, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended April 30, 1995 1994 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (Loss) Income $ ( 77,000) $16,000 Adjustments to reconcile net (loss income to net cash used in operating activities- Unrealized gain on trading securities ( 50,000) - Gain on sale of mineral interest - (109,000) Abandoned properties and prospects 22,000 - Generative exploration expensed 2,000 - Depreciation and amortization - 1,000 Accrued interest added to principal balance 20,000 21,000 (Increase) decrease in receivables and other current assets (9,000) - Gain on sale of equipment - ( 20,000) Proceeds from sale of trading securities 117,000 - Loss on sale of trading securities 13,000 - (Decrease) increase in accounts payable and accrued liabilities ( 12,000) ( 55,000) -------- -------- Net cash provided by (used in) operating activities 26,000 ( 46,000) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of mineral interest - 105,000 Property acquisition and development costs(17,000) (13,000) Investment in Honduran Corporation ( 9,000) - Investment in Mexican Corporation - ( 1,000) Equipment acquired ( 2,000) ( 3,000) -------- -------- Net cash (used in) provided by investing activities ( 28,000) 88,000 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 6,000 - -------- -------- Net cash provided by (used in) financing activities 6,000 - -------- -------- NET INCREASE (DECREASE) IN CASH 4,000 (58,000) CASH, at beginning of period 6,000 106,000 CASH, at end of period $ 10,000 $ 48,000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $2,000 $ 1,000 SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NONCASH ACTIVITIES: Application of bonus on unproven property to offset accrued interest expense $ 25,000 $ 25,000 Cost basis of trading securities sold in connection with loss on trading securities $130,000 - Short-term debt eliminated in connection with sale of mineral interest $ - $ 90,000 Cost basis in mineral interest sold in connection with short- term debt eliminated $ - $ 86,000 Fair market value of vehicles and office equipment offset against wages and expenses due to former employees $ - $ 33,000 The accompanying notes are an integral part of these statements. FISCHER-WATT GOLD COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) FINANCIAL STATEMENT ADJUSTMENTS AND FOOTNOTES DISCLOSURES The accompanying financial statements are unaudited; however, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been made. These financial statements and notes thereto should be read in conjunction with the financial statements and related notes included in Fischer-Watt Gold Company, Inc.'s ("Fischer-Watt" or the "Company") Annual Report on Form 10-K for the year ended January 31, 1995 ("Form 10-K"). Future Financing and Realization While Fischer-Watt was profitable in the latest fiscal year, it had negative cash flow from operations in the latest fiscal year and suffered losses from operations and negative cash flow from operations in each of its prior years. The entire profit was attributable to a sale of a mineral interest. Since the Company has no sustaining income or cash flow from operations, it is currently funding its operations from proceeds of property sales and the sale of stock received as part of the sale price of a mineral interest. The ability of the Company to continue as a going concern is dependent upon establishing successful future operations or additional financing, or disposition of some of the Company's assets. While the Company has been successful in raising cash from these sources in the past, there can be no assurance that its cash raising efforts will succeed. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Gain on Sale of Mineral Interest--Gain on sale of mineral interests represents the excess of the proceeds realized from the sale of a mineral interest over the Company's cost basis in that property. In March 1994, Fischer-Watt optioned its interest in the San Andres mineral property in Honduras to Greenstone Resources Ltd. ("Greenstone"). In October 1994, the option was exercised. Fischer-Watt's gross proceeds from the sale of this property were $955,000 ($161,000 in cash, $700,000 worth of Greenstone's restricted common stock plus elimination of its $94,000 debt to Greenstone). Fischer-Watt's cost basis in the property was $86,000 resulting in a realized gain of $869,000 from the sale and exercise of the option. (See Note 5) Bonuses--As an incentive to enter into a joint exploration and development agreement, Fischer-Watt may receive bonus payments. The bonus payments are recognized as revenue if the agreement entered into relates to a proven property. For unproven properties, bonus payments are first applied as a reduction of the cost basis of the property with any excess being recognized as revenue. Trading Securities Shares of Greenstone Resources Ltd.--The Company received 427,300 restricted shares of Greenstone Resources Ltd. ("Greenstone"), common stock upon exercise of the San Andres option (Note 5). These shares were valued at $700,000 which was the average of the daily closing price on the Toronto Stock Exchange for the five trading days preceding the exercise date of the option, adjusted to United States dollars. In the quarter ended April 30, 1995, the Company sold 119,000 shares and received net proceeds of $117,000 which resulted in a loss on the sale of trading securities of $13,000 which is shown on the statement of operations. The Company has adopted Statement of Financial Accounting Standards ("SFAS ") No. 115 which applies to certain investments in equity securities. At April 30, 1995, the Company held 208,300 shares of Greenstone stock. Since the shares are listed on both NASDAQ and the Toronto Stock Exchange, the average closing price (converted to United States dollars) of the two exchanges was used to determine the fair value. The fair value was determined to be $278,000 which resulted in an unrealized gain on trading securities of $50,000. The gain is included in the statements of operations. Abandonment of Mineral Interests Mineral Interests in unproven properties are evaluated on a quarterly basis for possible impairment. Management evaluation considers all the facts and circumstances known about each property including: the results of drilling and other exploration activities to date; the desirability and likelihood that additional future exploration activities will be undertaken by the Company or by others; the land holding costs including work commitments, rental and royalty payments and other lease and claim maintenance commitments; the expiration date of the lease including any earlier dates by which notice of intent to terminate the lease must be given in order to avoid work commitments; the accessibility of the property; the ability and likelihood to joint venture the property with others; and, if producing, the cost and revenue of operation. Unproven properties are considered fully or partially impaired, and are fully or partially abandoned, at the earliest of the time that: geologic mapping, surface sample assays or drilling results fail to confirm the geologic concepts involved at the time the property was acquired; a decision is made not to perform the work commitments or to make the lease payments required to retain the property; the Company discontinues its efforts to find a joint venture partner to fund future exploration activities and has decided not to fund those costs itself; or, the time the property interest terminates by contract or by operation of law. Reclamation Liabilities Reclamation liabilities are recorded as liabilities (and as a cost of the related property) in the period in which the drilling or mining activity which generates the reclamation requirement occurs. Generative Exploration Expense The costs of generative exploration activities that do not result in the acquisition of mineral interests are expensed. Income Taxes Because of the Company's exploration activities and net operating loss carryovers, the tax rate for the year ended January 31, 1995 was zero. Accordingly, no provision for Federal Income taxes was mad in the statement of operations for the quarter ended April 30, 1995. Earnings Per Share Net (loss) income per common share has been computed on the basis of the weighted average number of common shares outstanding during each period. Shares issuable upon exercise of outstanding stock options have been excluded from the computation as their effect would be anti-dilutive. (3) PROPERTY AND EQUIPMENT A summary of the cost basis of mineral properties and prospects as of April 30 and January 31, 1995, is: April 30 January 31 -------- -------- Oatman (United Western), Arizona $ 136,000 $ 136,000 Modoc, California 72,000 72,000 Minas de Oro, Honduras * 41,000 59,000 Tuscarora, Nevada 77,000 77,000 America Mine, California 17,000 16,000 Other mineral interests (each less than $20,000) 17,000 27,000 -------- -------- $ 360,000 $ 387,000 * In February 1995, an agreement was made to sell all of Fischer-Watt's interest in Minas de Oro to Tombstone Explorations Company Ltd. The transaction closed on May 16, 1995. (See Item 2 "Subsequent Event" and Note 4.) The Company's property interests require minimum payments to be made, or work commitments to be satisfied, to maintain ownership of the property. However, all of these payments may be avoided by timely forfeiture of the related property interest. If the joint venture partner, or the Company, fails to meet these commitments, the Company could lose its rights to explore, develop or mine the property. The table below lists the various properties and the required financial commitments. PROPERTY COMMITMENTS For the year ending April 30, 1996 Lease Work J.V. Net FWG Property Payments Commit. Total Share Cost - - -------- -------- -------- -------- -------- -------- America $48,000 $106,000 $154,000 $154,000 $ - Minas de Oro* 45,000 157,000 202,000 202,000 - Tuscarora - 2,000 2,000 2,000 - Modoc 20,000 - 20,000 20,000 - Oatman - - - - - Other 48,000 193,000 241,000 191,000 50,000 ------ -------- -------- -------- ------- Totals $161,000 $458,000 $619,000 $569,000 $50,000 * In February 1995, an agreement was made to sell all of Fischer-Watt's interest in Minas de Oro to Tombstone Explorations Company Ltd. The transaction closed on May 16, 1995. (See Item 2 "Subsequent Event" and Note 4.) (4) NOTES PAYABLE Kennecott Loan In March 1992, Kennecott loaned Fischer-Watt $500,000. Principal and interest on this loan were repayable in monthly installments of $100,000 beginning August 1, 1992. The loan bears interest at the higher of 10% or prime plus 5% and is secured by the Company's interest in the America Mine property. AT APRIL 30, 1995, THE COMPANY WAS IN DEFAULT ON THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS LOAN. Principal and interest of $542,000 were due and payable. Kennecott has not agreed with the amount of unpaid interest due to a difference in interpretation of the timing of the initial starting date of semi-annual, recoupable, advance royalty payments due Fischer-Watt on the Minas de Oro property in Honduras. The differing amounts with accrued interest total approximately $33,000. However, upon closing of the Tombstone Explorations Company Ltd.'s ("Tombstone") purchase of the Minas de Oro property, the entire loan amount, plus accrued interest, regardless of the amount, was canceled. When the Tombstone transaction closed, the Company had a recognized gain of approximately $650,000, of which $150,000 was cash. (See Item 2 "Subsequent Event".) (5) GREENSTONE RESOURCES TRANSACTIONS On November 2, 1993, the Company signed a letter of intent to be acquired by Greenstone Resources Ltd. During the due diligence period, Greenstone advanced funds to the Company for current operations. The proposed merger was terminated by Greenstone in February 1994. Greenstone advanced $94,000 during that period. In March 1994, Fischer-Watt accepted an offer from Greenstone to acquire an option to purchase all of Fischer-Watt's interests in the San Andres project in Honduras. As consideration for the option, Greenstone paid Fischer-Watt $105,000 and forgave $90,000 of a $94,000 loan provided to Fischer-Watt pursuant to the terminated merger transaction. At April 30, 1994, the Company recognized a gain of $109,000 on this transaction. Greenstone exercised its option on October 31, 1994 by forgiving the remaining loan balance of $4,000, paying Fischer-Watt a further $56,000 and issuing it $700,000 worth of Greenstone common stock, valued at the time of exercise. Upon exercise of the option, Greenstone was assigned Fischer-Watt's option to acquire 51% of Compania Minerales de Copan, S.A. de C.V. from Milner Consolidated Silver Mines (25.5%) and North American Palladium Resources (25.5%) as well as all of Fischer-Watt's other rights and interest in the San Andres project subject to the shares described below. Minerales de Copan owns the San Andres project and is currently producing gold from a small open pit, heap leach operation within the project boundaries. On August 4, 1994, the Company received the first instalment of a loan from Greenstone Resources Canada Ltd. The loan was negotiated as part of the San Andres option agreement. The loan is to provide all of the funds to purchase up to nine percent of the shares of Compania Minerales de Copan S.A. de C.V. ("Copan"). The Company believes that the total loan amount may eventually exceed $250,000. The loan is nonrecourse as to both principal and interest to the Company and is to be repaid out of dividends, if any, from the Copan shares. The shares are pledged to Greenstone as collateral for the loan which is due on or before December 31, 1999. At April 30,1995, this loan plus associated accrued interest totaled $96,000. At May 22, 1995, the Company owned, or had options to purchase, seven percent of the outstanding shares of Copan. (6) COMMITMENTS Property Leases The Company's property interests require minimum payments to be made, or work commitments to be satisfied, to maintain ownership of the property. However, all of these payments may be avoided by timely forfeiture of the related property interest. (See Note 3). Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of Fischer-Watt Gold Company, Inc.'s ("Fischer-Watt" or the "Company") current financial condition as well as its operations for the three months ended April 30, 1995 (fiscal 1996) and April 30, 1994 (fiscal 1995). This discussion should be read in conjunction with the Financial Statements in Item 1 of this report as well as the Financial Statements in Form 10-K for the fiscal year ended January 31, 1995 on file with the Securities and Exchange Commission, as the discussion set forth below is qualified in its entirety by reference thereto. LIQUIDITY AND FINANCIAL POSITION Short-Term Liquidity As of May 22, 1995, the Company had $164,000 in cash and accounts payable of $64,000. The Company also has 198,300 shares of Greenstone common stock that had an approximate market value of $310,000 that could be sold to provide funds for operations. In March 1992, Kennecott loaned Fischer-Watt $500,000. Principal and interest on this loan were repayable in monthly installments of $100,000 beginning August 1, 1992. The loan bore interest at the higher of 10% or prime plus 5% and was secured by the Company's interest in the America Mine property. AT APRIL 30, 1995, THE COMPANY WAS IN DEFAULT ON THE PAYMENT OF PRINCIPAL OF $500,000 AND ACCRUED INTEREST OF $42,000 ON THIS LOAN. Fischer-Watt and Kennecott disagreed upon the amount of unpaid interest due to a difference in interpretation of the timing of the initial starting date of semi-annual, recoupable, advance royalty payments due Fischer-Watt on the Minas de Oro property in Honduras. The differing amounts with accrued interest total approximately $33,000. Subsequent Event On February 28, 1995, Tombstone Explorations Co. Ltd. ("Tombstone"), a Vancouver-based mining and exploration company entered into a letter agreement with Fischer-Watt to purchase Fischer-Watt's interest in the Minas de Oro property in Honduras. Minas de Oro was joint ventured with Kennecott Exploration Company ("Kennecott") who had an 80 percent working interest. Tombstone agreed to buy the Kennecott interest and to acquire Fischer-Watt's $500,000 promissory note to Kennecott, as well as Fischer-Watt's interest in the property. Under the terms of the agreement, Tombstone agreed to pay Fischer-Watt $150,000 in cash and deliver for cancellation, Fischer-Watt's $500,000 promissory note to Kennecott plus all accrued interest. The transaction closed on May 16, 1995 with the sale of the Minas de Oro interests to Cerenex Financial A. V. V., a subsidiary of Tombstone. The sale provided $150,000 in cash and eliminated the $500,000 debt and accrued interest to Kennecott Exploration Company. (See Note 4 to Financial Statements) The Company's net cash provided by operating activities during the first quarter of fiscal 1996 was $26,000 compared to $46,000 used during the first quarter of the prior year. This increase in cash provided of $72,000 is due primarily to the Company's proceeds from the sale of trading securities as reduced by a net loss, as adjusted to eliminate noncash items (unrealized gain on trading securities and abandonments of properties and prospects). This compares with net income of $16,000 in the prior year which was primarily the result of gains on the sale of a mineral interest and on the sale of equipment, reduced by a reduction in accounts payable. In the April 30, 1994 period, the accounts payable decreased $55,000 during that quarter as the Company had some funds available to pay a portion of its overdue bills. The $12,000 reduction in accounts payable in the April 30, 1995 is more reflective of normal operations and demonstrated the ability of the Company to continue its program of repaying its old bills in a consistent and timely manner. Net cash provided by investing activities was $88,000 in the first quarter of fiscal 1995 compared to $28,000 used in the first quarter of fiscal 1996. This decrease of cash provided of $116,000 results primarily from the proceeds of the sale of mineral property in the April 30, 1994 quarter. There were no property sales in the April 30, 1995 period. The $28,000 of cash used in investing activities during the first quarter of fiscal 1996 was not reflective of normal investments in property acquisition and development costs. If available, significantly more cash would have been used to explore for and acquire mineral properties. Proceeds from long-term debt was $6,000 in the quarter ended April 30, 1995. There was no net cash provided by, or used for,financing activities in the first quarter of fiscal 1995. On April 30, 1995, Fischer-Watt's current ratio was .4:1 based on current assets of $305,000 and current liabilities of $715,000. On January 31, 1995, its current ratio was .5:1 based upon current assets of $372,000 and current liabilities of $730,000. While the current ratio was little changed, both the current assets and current liabilities decreased in the current quarter. A current ratio of less than 1:1 indicates that the Company does not have sufficient cash and other current assets to pay its bills and other liabilities incurred at the end of its fiscal period which are due and payable within the next 12 months. Long-Term Liquidity The Company plans to continue its search for long-term debt or equity capital to fund its proposed operating and exploration activities until these activities can be funded from production of mineral resources. At April 30, 1995, the Company's long-term debt consisted entirely of a nonrecourse loan from Greenstone Resources Canada Ltd. The loan was negotiated as part of the San Andres option agreement. The loan is to provide all of the funds to purchase up to nine percent of the shares of Compania Minerales de Copan S.A. de C.V. ("Copan"). The Company believes that the total loan amount may eventually exceed $250,000. The loan is nonrecourse as to both principal and interest to the Company and is to be repaid out of dividends, if any, from the Copan shares. The shares are pledged to Greenstone as collateral for the loan which is due on or before December 31, 1999. At April 30, 1995, this loan plus associated accrued interest totaled $96,000. At May 22, 1995, the Company owned, or had options to purchase, seven percent of the outstanding shares of Copan. (See Note 5 to Financial Statements.) RESULTS OF OPERATIONS Fischer-Watt had a net loss of $77,000, or $.01 per share, in the quarter ended April 30, 1995 compared to net income of $16,000, or $.00 per share in the quarter ended April 30, 1994. The loss would have been larger except for an unrealized gain on trading securities of $50,000 in the current quarter. (See Note 2 to Financial Statements.) The most significant reason for the difference in the two periods was the gain of $109,000 realized from the sale of an option to purchase Fischer-Watt's interest in the San Andres property during the first quarter of fiscal 1995. In March 1994, Fischer-Watt accepted an offer from Greenstone to acquire an option to purchase all of Fischer-Watt's interests in the San Andres project in Honduras. As consideration for the option, Greenstone paid Fischer-Watt $105,000 and forgave $90,000 of a $94,000 loan provided to Fischer-Watt pursuant to a terminated merger transaction. Greenstone exercised its option on October 31, 1994 by forgiving the remaining loan balance of $4,000, paying Fischer-Watt a further $56,000 and issuing it $700,000 worth of Greenstone common stock, valued at the time of exercise. During the April 30, 1994 quarter, the Company had a $33,000 gain on the sale of equipment,primarily as a result of vehicles and equipment sold as a result of agreements with former employees. No sales of mineral interests or equipment were made in the April 30, 1995 quarter. Other items Abandonments totaled $22,000 in the quarter ended April 30, 1995. The Rio Tinto property in Honduras was abandoned when an exploration program conducted at the end of fiscal 1995 and the beginning of fiscal 1996 could not confirm mineral values discovered under earlier exploration programs. Rio Tinto had cost of $22,000. An additional $2,000 of generative exploration expense was incurred when a prospect in Nevada was abandoned when the Company decided not to fund the work needed to perfect its mining claims. There were no abandonments or generative exploration expense in the quarter ended April 30, 1994. Operating and administrative costs decreased from $72,000 in the first quarter of fiscal 1995 to $48,000 in the first quarter of fiscal 1996. The $24,000 reduction in fiscal 1996 was primarily the result of lower office occupancy costs and the elimination of costs associated with the employee termination settlements in the prior year. Public company costs were $21,000 in both first quarter of fiscal 1996 and in the first quarter of fiscal 1995. These costs do not reflect normal operations and consist primarily of costs associated with accounting requirements pursuant to Securities and Exchange rules and regulations. Interest expense increased to $22,000 in the first quarter of fiscal 1996 from $19,000 in the first quarter of fiscal 1995. This increase is due primarily to accrued interest tied to the prime rate on the note payable to Kennecott. The prime rate increased four times from fiscal 1995 to fiscal 1996. Other income decreased from $20,000 in the first quarter of fiscal 1995 to a $11,000 loss in the first quarter of fiscal 1996. In the first quarter or fiscal 1996, the Company had a loss on the sale of trading securities of $13,000. In the first quarter of fiscal 1995 the Company had a gain on the sale of vehicles and equipment to former employees pursuant to employee settlement agreements. No such sales occurred in the quarter ended April 30, 1995. Part II - Other Information Item 3. Defaults Upon Senior Securities In March 1992, Kennecott Exploration Company loaned Fischer-Watt $500,000. Principal and interest on this loan was repayable in monthly installments of $100,000 beginning August 1, 1992. The loan bears interest at the higher of 10% or prime plus 5% and is secured by the Company's interest in the America Mine property. As of April 30, 1995, no payments have been made on this loan. THE COMPANY WAS IN DEFAULT ON THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS LOAN. As of April 30, 1995, principal and interest of $542,000 were due and payable. On May 16, 1995, the default was cured when the sale of the Minas de Oro mineral interest to Tombstone closed and the note and all accrued interest were canceled. (See Item 2"Subsequent Event" and Note 4 to Financial Statements.) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Exhibit Item 601 No. Category Exhibit - - ------- -------- ------- 1 10 Letter Agreement between BMR Gold Corporation and Fischer-Watt Gold Company, Inc., regarding the America Mine Property effective September 20, 1989, and filed as Exhibit 19.1 to Form 10-Q filed November 20, 1989 and incorporated herein by reference. 2 10 Fischer-Watt Gold Company, Inc., non-qualified stock option plan of May 1987 and filed as Exhibit 36.10 to Form 10-K filed April 23, 1991 and incorporated herein by reference. 3 99 Promissory Note from Fischer-Watt Gold Company, Inc. to Kennecott Exploration Company in the amount of $500,000 dated March 25, 1992 and filed as Exhibit 44.28 to Form 10-K filed April 22, 1993 and incorporated herein by reference. 4 10 First Amendment to Exploration Agreement and Mining Venture Agreement dated March 25, 1992 between Kennecott Exploration Company and Fischer-Watt Gold Company, Inc., and filed as Exhibit 45.10 to Form 10-K filed April 22, 1993 and incorporated herein by reference. 5 10 Financial Advisor Agreement dated July 1, 1993 between Donald Lawrence and Evans Investment Management and Fischer-Watt Gold Company, Inc., whereby Donald Lawrence and Evans Investment Management will provide financial and investment advice for a three year period in exchange for shares of Fischer-Watt's restricted common stock and filed as Exhibit 48.10 to Form 10-Q filed September 9, 1993 and incorporated herein by reference. 6 10 Greenstone Letter Agreement dated November 2, 1993 whereby Greenstone Resources Ltd., and Fischer-Watt Gold Company, Inc. agree to a merger of Fischer-Watt Gold Company, Inc., with a wholly-owned subsidiary of Greenstone and filed as Exhibit 49.10 to Form 10-Q filed December 10, 1993 and incorporated herein by reference. 7 10 Employment Agreement effective September 1, 1993 between Fischer-Watt Gold Company, Inc., and George Beattie whereby Fischer-Watt agrees to employ Mr. Beattie for a two-year period as Chief Executive Officer and filed as Exhibit 20.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 8 10 Loan Agreement dated November 12, 1993 between Fischer-Watt Gold Company, Inc., and Greenstone Resources Ltd., whereby Greenstone agreed to lend Fischer-Watt working capital during the prospective merger's due diligence period and filed as Exhibit 21.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 9 10 Letter from Greenstone Resources Ltd., dated February 1, 1994 to Fischer-Watt Gold Company, Inc., whereby Greenstone advised that the merger agreement dated November 2, 1993 between Greenstone and Fischer-Watt Gold is terminated as of that date and filed as Exhibit 22.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 10 10 Option Agreement between Greenstone Resources Ltd., and Fischer-Watt Gold Company, Inc., dated March 24, 1994, whereby Greenstone has the right to purchase all of Fischer-Watt's interest in the San Andres property in Honduras and filed as Exhibit 23.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 11 10 Exploration Agreement between Fischer-Watt Gold Company, Inc.'s 50% owned Mexican company, Minera Montoro S.A. de C.V., and Gatro South America Holdings Limited (GSA) dated March 25, 1994, whereby GSA funds a Generative Exploration program in Baja California, Mexico and filed as Exhibit 24.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 12 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and W. Perry Durning, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 25.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 13 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and Joel Heath, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 26.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 14 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and Robert Gordon, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 27.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 15 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and Frank L. Hillemeyer, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 28.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 16 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and Michael D. Johnson, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 29.10 to Form 10-Q filed June 14, 1994 and incorporated herein by reference. 17 10 Agreement to Assign Leases dated July 7, 1994 between Fischer-Watt Gold Company, Inc., and Kennecott Exploration Company whereby Fischer-Watt agrees to assign its interests in the Modoc property located in Imperial County, California to Kennecott, reserving a Net Smelter Return royalty. This agreement was filed as Exhibit 22.10 to Form 10-Q filed September 13, 1994 and incorporated herein by reference. 18 10 Letter agreement between Fischer-Watt Gold Company, Inc., and La Cuesta International (LCI) dated August 11, 1994 whereby LCI agrees to lease the Oatman property located in Mohave County, Arizona. This agreement was filed as Exhibit 23.10 to Form 10-Q filed September 13, 1994 and incorporated herein by reference. 19 10 Stock Pledge Agreement between Fischer-Watt Gold Company, Inc., and Greenstone Resources Canada Ltd., dated July 31, 1994 whereby Fischer-Watt grants a security interest in shares of Compania Minerales de Copan S.A. de C.V., acquired under Stock Loans, to Greenstone. This agreement was filed as Exhibit 24.10 to Form 10-Q filed September 13, 1994 and incorporated herein by reference. 20 10 Option Agreement - Lock-up Agreement between Fischer-Watt Gold Company, Inc., and Greenstone Resources Ltd., dated October 17, 1994 whereby the San Andres option agreement was amended to provide for an early advance of $50,000 as partial payment of the option in exchange for restrictions on the disposition of Greenstone shares. This agreement was filed as Exhibit 22.10 to Form 10-Q filed December 14, 1994 and incorporated herein by reference. 21 10 English translation of an Exploration Agreement between Fischer-Watt's Mexican subsidiary, Minera Montoro, S.A. de C.V. and Minera Cuicuilco, S.A. de C.V., dated October 18, 1994 whereby Minera Cuicuilco is granted the rights to explore the Cerrito property in Baja California, Mexico and was filed as Exhibit 23.10 to Form 10-Q filed December 14, 1994 and incorporated herein by reference. 22 99 Minutes of Special Meeting of Board of Directors of Fischer-Watt Gold Company, Inc., dated October 19, 1994, whereby George Beattie's employment contract dated September 1, 1993 is extended to September 1, 1997. These minutes were filed as Exhibit 28.99 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 23 10 Acquisition agreement dated November 10, 1994 among Greenstone Resources Canada Ltd., Greenstone Resources Ltd., and Fischer-Watt Gold Company, Inc., whereby the parties finalize the Option Agreement of March 24, 1994 to purchase the San Andres property in Honduras and modify the Lock-Up Agreement dated October 17, 1994. This agreement was filed as Exhibit 29.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 24 10 Letter agreement dated February 28, 1995 between Tombstone Explorations Co. Ltd., and Fischer-Watt Gold Company, Inc., whereby Tombstone agrees to purchase all of Fischer-Watt's rights to the Minas de Oro property in Honduras. This agreement was filed as Exhibit 30.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 25 10 Letter agreement dated April 13, 1995 between Begeyge Minera Limitada and Fischer-Watt Gold Company, Inc., whereby Fischer-Watt will acquire rights to the La Victoria, Honduras property. This agreement was filed as Exhibit 31.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 26 10 Option whereby Fischer-Watt Gold Company, Inc., grants Gerald D. Helgeson an option to purchase 100,000 shares of Fischer-Watt restricted common stock. This option was filed as Exhibit 32.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 27 10 Option whereby Fischer-Watt Gold Company, Inc., grants Larry J. Buchanan an option to purchase 100,000 shares of Fischer-Watt restricted common stock. This option was filed as Exhibit 33.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 28 10 Amendment dated April 20, 1995 to Agreement to Assign Leases dated July 7, 1994 between Fischer-Watt Gold Company, Inc., and Kennecott Exploration Company whereby Fischer-Watt agrees to assign its interests in the Modoc property located in Imperial County, California to Kennecott. 29 10 Asset Purchase Agreement dated May 16, 1995 between Fischer-Watt Gold Company, Inc., and Cerenex Financial A. V. V., whereby the February 28, 1995 sale of Minas de Oro is closed. 30 27 Financial Data Schedule for the quarterly period ended April 30, 1995. (b) Reports on Form 8-K - NONE SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. FISCHER-WATT GOLD COMPANY, INC. June 2, 1995 By George Beattie (Signature) George Beattie, President, Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer), Chairman of the Board and Director EX-10 2 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made this 16th day of May, 1995, by and between Cerenex Financial A.V.V., an Aruban corporation, having an office at Orangestadt, Aruba ("Buyer"), and Fischer-Watt Gold Company, Inc., a Nevada corporation with offices at 1410 Cherrywood Drive, Coeur d'Alene, Idaho 83814 ("Fischer"); WITNESSES: WHEREAS, Fischer has previously entered into that certain Mining Venture Agreement (the "Venture Agreement") with Kennecott Exploration Company ("Kennecott"), a copy of which is attached as Exhibit A, relating to those certain mineral concessions in the Municipality of Minas de Oro, Department of Comayagua, Honduras, a more complete description of which is attached as Exhibit B (the "Properties"); WHEREAS, subject to the Venture Agreement, title to the Properties is held in the name of Minerales Kennecott de Honduras S.A., ("MKH") a Honduran corporation and an affiliate of Kennecott; WHEREAS, Tombstone Explorations Co. Ltd. ("Tombstone") and Fischer have previously entered into that certain Letter Agreement dated February 28, 1995, wherein Tombstone has expressed the desire to acquire the interests of Fischer and its subsidiaries in the Venture Agreement, the Properties and any legal or beneficial royalties it may hold pursuant thereto and Fischer has expressed the desire to sell such interest and, in connection therewith Tombstone has arranged for Buyer to enter into this Agreement; NOW THEREFORE, in consideration of the promises and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties agree as follows: A. REPRESENTATIONS AND WARRANTIES 1. Representations and Warranties of Buyer. Buyer hereby represents and warrants to Fischer the following matters as of the date hereof, and as of the date of the Closing (as hereinafter defined): (a) Organization of Buyer. Buyer is a wholly-owned subsidiary of Tombstone and is a corporation duly incorporated, validly existing and in good standing under the laws of Aruba and has all necessary corporate power to undertake the transactions contemplated by to this Agreement; (b) Corporate Authorization of Buyer. Buyer has taken all necessary corporate actions to authorize the execution and delivery of this Agreement and the performance of the transactions contemplated herein; and (c) Valid and Binding Agreement. This Agreement when executed and delivered by Buyer, is valid and binding upon Buyer, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally and by general principles of equity. The consummation of the transactions contemplated hereby and the compliance with the provisions hereof will not, with or without the giving of notice or the lapse of time or both, result in any material breach of any provision of applicable law or the provisions of any order of any court or other agency of government, the constating documents of Buyer, or any agreement or other instrument to which Buyer is a party or by which it is bound. 2. Representations and Warranties of Fischer. Fischer hereby represents and warrants to Buyer the following matters as of the date hereof and as of the date of Closing: (a) Organization of Fischer. Fischer is a corporation duly organized, validly existing and in good standing under the laws of Nevada and has all necessary corporate power to undertake the transactions contemplated by this Agreement; (b) Valid and Binding Agreement. This Agreement, when executed and delivered by Fischer, is valid and binding upon Fischer and enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally and by general principles of equity. Subject to obtaining the consents referred to in E.1.c and F (the "Consents"), the consummation of the transactions contemplated hereby and the compliance with the provisions hereof will not, with or without the giving of notice or the lapse of time or both, require any consent under or result in any material breach of any provision of applicable law or the provisions of any order of any court or other agency of government, the Articles of Incorporation or By-laws of Fischer, or any contract, license, lease, permit or other instrument to which Fischer is a party or by which it is bound or result in the creation of any lien, charge or encumbrance pursuant to any of the foregoing; (c) Corporation Authorization. Fischer has taken all corporate actions required by law, its Articles of Incorporation, By-laws or otherwise to authorize the execution and delivery of this Agreement and all other documents contemplated by this Agreement to be executed by Fischer, and to undertake the transactions contemplated herein; (d) Compliance with Applicable Law. To the best of the knowledge of Fischer, there are no material violations or alleged material violations of any applicable zoning, regulatory, statutory, employment, environmental or other laws, orders, regulations or requirements relating to the Properties; (e) Status of Properties. Fischer will convey to Buyer at the Closing, title to the Interest (as hereinafter defined) free and clear of all liens, mortgages, security interests, charges, encumbrances, exceptions, demands or adverse claims of any nature whatsoever, other than the interests of Kennecott and MKH pursuant to the terms and conditions of the Venture Agreement, and if valid and enforceable, that certain personal contract agreement between Fischer and Begeyge Minera Ltd. dated June 13, 1990, a copy of which is attached as Exhibit B-1 (the "Begeyge Contract") (collectively, the "Permitted Exceptions"); (f) Material Contracts. To the best of the knowledge of Fischer, except for the contracts set forth on Exhibit C and the Begeyge Contract, there are no contracts, agreements, understandings or undertakings of any nature whatsoever relating to the Properties, the Venture Agreement or the "Assets" as defined in the Venture Agreement (the "Assets"); (g) Authority. Subject to obtaining the Consents, Fischer has the legal right and authority to enter into this Agreement and to perform its obligations under this Agreement; (h) Ownership of the Interests. Fischer is the sole registered and beneficial owner of the Interests and has good and marketable title to the Interests, free and clear of all liens, mortgages, security interests, charges, assignments and encumbrances, demands or adverse claims of any kind whatsoever, except for the Permitted Exceptions; (i) Consents. Except for the Consents, Fischer is not under any obligation, contractual or otherwise, to request or obtain the consent of any person, and no consents, waivers, permits, licenses, certifications, authorizations or approvals of, or notifications to, any federal, provincial, state, departmental, municipal or local government or governmental agency, board, commission or authority are required to be obtained by Fischer in connection with the execution, delivery or performance by Fischer of this Agreement or the completion of any of the transactions contemplated herein; (j) Right to Properties and Assets. Fischer has taken no action that will prevent or limit Buyer from obtaining the full benefit of the Properties or the Assets and to the best of the knowledge of Fischer no person other than Tombstone, Buyer, Fischer, Kennecott and MKH has any right, present or future, contingent or absolute,to the Assets or the Properties; (k) Legal Matters. There are no actions, suits or proceedings, judicial or administrative (whether or not purportedly on behalf of Fischer) pending or, to the best of the knowledge of Fischer, threatened, at law or in equity, before or by any court or any federal, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Interests, the Properties or the Assets, and to the knowledge of Fischer, there are no grounds on which any such action, suit or proceeding might be commenced with any reasonable likelihood of success; (l) Description of Properties. The Properties are accurately described on Schedule B; (m) Licences and Permits. To the best of the knowledge of Fischer, Kennecott and MKH hold all licences, permits and operating authorities as may be requisite for carrying on their business and operations in connection with the Properties, such licenses, permits and operating authorities are in good standing and the business and operations of Kennecott, MKH and Fischer have been conducted in full compliance with such licences, permits and operating authorities; (n) Compliance. Fischer, and to the best of the knowledge of Fischer, Kennecott and MKH have prepared and filed all reports, information returns and other documentation required to be filed by them in respect of the Properties, have paid all taxes, rates, assessments and governmental fees, charges or dues lawfully levied (collectively, "Taxes"), against or imposed against Kennecott, MKH and Fischer in respect of the Properties and the Properties are in good standing; (o) Disclosure. None of the representations, warranties or statements of Fischer contained in this agreement contain any untrue statement or fact or omit to state any fact necessary in order to make any such representations, warranties or statements not misleading and all information relating to the Properties which is known to Fischer and which may be material to purchase for value of the Interest, the Properties and the Assets has been disclosed to Buyer and any such information becoming known to Fischer before or at the Closing will forthwith be disclosed to Buyer; and (p) Note. The Note (as hereinafter defined) was validly created and issued by Fischer and is valid and enforceable . B. SALE AND PURCHASE 1. Sale and Purchase. Subject to the terms and conditions contained herein and to the satisfaction or waiver of the conditions precedent, Fischer hereby agrees to sell, deliver, convey, assign and transfer to Buyer and Buyer agrees to purchase, at Closing, all of Fischer's right, title and interest in and to the Venture Agreement including all of its Participating Interest and the Assets, as described therein(collectively, the "Interests"). C. PURCHASE PRICE 1. Purchase Price. The purchase price for the Interests (the "Purchase Price") shall consist of the following payments and deliveries that Buyer agrees to cause to be paid and delivered to Fischer: (a) Cash Payment. At the Closing, Buyer shall make a cash payment to Fischer in the amount of US$150,000, which payment shall be made by certified cheque or bank draft or wire transfer in immediately available funds to an account designated by Fischer in the United States or Honduras; and (b) Note. At the Closing, Buyer shall deliver or cause to be delivered to Fischer for cancellation that certain Promissory Note dated March 25, 1992, in the original principal amount of $500,000 (the "Note"), granted by Fischer to Kennecott, a copy of which is attached as Exhibit D. Within 60 days following the date of Closing, Buyer shall deliver to Fischer a duly executed and recorded release of that certain Deed of Trust, Assignment, Security Agreement and Financing Statement, in favour of First American Title Insurance Company (San Bernardino office) as trustee and Kennecott as beneficiary. D. CONDITIONS TO CLOSING The Closing is subject to the following conditions: 1. Conditions to Obligations of Fischer. The obligation of Fischer to complete the purchase and sale contemplated hereby is subject to the conditions that: (a) Buyer has executed and delivered the instruments and certificates to be executed and delivered by it as described in Section E.2. below; (b) Buyer shall not be a party to, or be threatened by, any litigation, claim or proceeding of whatever type or description relating to this Agreement or the transactions contemplated herein, which seeks to restrain, prohibit, or otherwise challenge this Agreement or the transactions contemplated herein, or which in the reasonable judgment of Fischer would materially affect the desirability of carrying out this Agreement; (c) Buyer shall have made all filings and taken all actions with, and obtained all consents and approvals of, all governmental authorities or other third persons required in connection with the execution, delivery and performance of this Agreement, including without limitation, approval of The Toronto Stock Exchange, or shall have provided evidence that such approval is unnecessary; and (d) Fischer shall have received prior written consent of Kennecott, as required under Section 15.2 of the Venture Agreement. 2. Conditions to Obligations of Buyer. The obligation of Buyer to complete the purchase and sale contemplated by this Agreement is subject to the conditions that: (a) Fischer has delivered to Buyer originally executed copies of the opinions, instruments and certificates to be executed and delivered by it as described in Section E.1. below; (b) Fischer shall not be a party to, or be threatened by, any litigation, claim or proceeding of whatever type or description relating to this Agreement or the transactions contemplated herein, which seeks to restrain, prohibit, or otherwise challenge this Agreement or the transactions contemplated herein, or which in the reasonable judgment of Buyer would materially affect the desirability of carrying out this Agreement; (c) Buyer has reached agreement with Kennecott and MKH relating to the acquisition of Kennecott's and MKH's interests in the Properties; and (d) Tombstone and Buyer shall have received the approval by all regulatory authorities having jurisdiction over it or the Interests including, without limitation, approval of The Toronto Stock Exchange. E. CLOSING The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at 5:00 p.m. on May 16, 1995, at the offices of Jones & Keller, P.C. 1625 Broadway, Suite 1600 Denver, Colorado 80202. At the Closing, the parties shall make the following deliveries: 1. Deliveries by Fischer. Fischer shall deliver to Buyer the following: (a) a certificate, substantially in the form set forth on Exhibit E, from a corporate officer of Fischer to the effect that the representations and warranties with respect to Fischer set forth in Section A-2 are, to the best of such officer's knowledge, true and correct in all material respects; (b) an executed and notarized Assignment and Assumption of Venture Agreement, Participating Interests and Assets substantially in the form of Exhibit F; (c) evidence of consent from Kennecott as required under Section 15.2 of the Venture Agreement in form and content acceptable to Buyer which Fischer shall use reasonable efforts to obtain, provided, however, that the failure to obtain the same shall not be a default of Fischer; (d) an opinion of Jones & Keller, legal counsel to Fischer in form and substance satisfactory to Buyer; and (e) such other instruments and agreements as may be reasonably required to effect the transactions contemplated herein, and as may reasonably be requested by counsel to Buyer. 2. Deliveries by Buyer. Buyer shall deliver the following to Fischer: (a) a certificate, substantially in the form set forth on Exhibit G, from a corporate officer of Buyer to the effect that the representations and warranties set forth in Section A-1 are, to the best of his knowledge, true and correct in all material respects; (b) a certified cheque or bank draft or wire transfer evidence of immediately available funds to an account designated by Fischer in the amount of US$150,000; (c) an executed and notarized Assignment and Assumption of Venture Agreement and Assets substantially in the form of Exhibit F; (d) the Note marked "cancelled"; and (e) such other instruments and agreements as may be reasonably required to effect the transactions contemplated herein, and as may reasonably be requested by counsel to Fischer. F. GOVERNMENTAL CONSENTS From the date of this Agreement to the Closing and thereafter, Fischer and Buyer shall use reasonable efforts to obtain the approval of the appropriate governmental authorities in Honduras for the transfer of the Properties to Buyer or its nominee/assignee. G. ALLOCATIONS Fischer shall be responsible for all property taxes and assessments with respect to the Properties, royalty payments to third parties, and other similar costs and obligations arising with respect to the Venture Agreement and Properties allocable to the period prior to Closing and for which it is liable pursuant to the terms of the Venture Agreement and Buyers shall be responsible for such costs allocable to the period after the Closing. H. RELEASE From and after the Closing, Buyer shall be solely responsible for the Properties and for the enforceable obligations in the Venture Agreement and for the Participating Interests and shall assume all enforceable obligations and duties of Fischer with respect thereto. Buyer hereby releases Fischer from any and all obligations with respect to the Interests acquired pursuant to this Agreement, except as set forth in this Agreement. I. TERMINATION Notwithstanding anything in this Agreement to the contrary, this Agreement may be terminated at any time prior to the Closing upon the following: 1. by both parties, upon their mutual written consent; 2. by either party, if the Closing has not occurred prior to 5:00 pm, Salt Lake City time, May 16, 1995, unless the parties have agreed to extend such date; 3. by either party, if there shall have been entered a final, non-appealable order or injunction by any governmental entity of competent jurisdiction restraining or prohibiting the consummation of the transactions contemplated hereby, or any of them; or 4. by Fischer upon written notice to Buyer, if there shall have been a material breach of any representation, warranty, covenant or agreement on the part of Buyer set forth in this Agreement which has not been cured within five business days after receipt of such notice; or 5. by Buyer upon written notice to Fischer, if there shall have been a material breach of any representation, warranty, covenant or agreement on the part of Kennecott set forth in this Agreement which has not been cured within five business days after the receipt of such notice; or 6. by Buyer, if Kennecott has not given the consent to transfer as required in Section 15.2 of the Venture Agreement it being recognized that neither party shall have any liability for the failure to obtain such consent. In the event of a termination of this Agreement pursuant to this paragraph, this Agreement shall thereafter become void and shall have no force and effect, and there shall be no obligation or liability hereunder on the part of any party, except (i) to the extent that such termination results from the breach by a party hereto of any of its representations, warranties, covenants or agreements set forth in this Agreement, in which event the parties shall retain such legal or equitable remedies as they may enjoy; and (ii) the parties shall each pay their own expenses incidental to the preparation and revision of this Agreement, and all accounting fees and expenses incurred in connection with the transactions contemplated by this Agreement. J. CONFIDENTIALITY 1. For a term of one year after the Closing, the terms of this Agreement and any information regarding the Properties shall not be disclosed by Fischer to any third party or to the public without prior consent of the Buyer, which consent shall not be unreasonably withheld. 2. The consent required by this Section shall not apply to a disclosure: (a) by a party to a potential successor by sale (or other conveyance of rights) or consolidation or merger, or to a proposed joint venturer or partner in a joint venture or partnership in which such party may become a participating partner or venturer; (b) to a consultant, contractor or subcontractor that has a bona fide need to be informed; (c) to a bank or other potential source of financing; (d) to a court, governmental agency or to the public if the disclosing party is advised by counsel that disclosure is required by pertinent law, regulation, rule, order or the rules of any stock exchange; or (e) to Kennecott in connection with obtaining the consent of Kennecott as required in Section E.l.(c) above. 3. In any case to which Section J.2 is applicable, the disclosing party shall use reasonable commercial efforts to obtain reasonable confidentiality protections as generally obtained with respect to the disclosing party's own similar information. K. INDEMNITIES Fischer hereby agrees to indemnify and save Buyer harmless from and against any and all claims, demands, actions, causes of action, damage, loss, deficiency, cost, liability and expense which may be made or brought against Buyer or which Buyer may suffer or incur as a result of, in respect of or arising out of: (a) any non-performance or non-fulfilment of any covenant or agreement of Fischer contained in this Agreement or in any document given in order to carry out the transactions contemplated hereby; (b) any misrepresentation, inaccuracy, incorrectness or breach of any representation or warranty made by Fischer contained in this Agreement or contained in any document or certificate given in order to carry out the transactions contemplated hereby; (c) all tax rates, assessments and government fees, charges or dues lawfully levied against or imposed in respect of the Properties and related to Fischer that may give rise to a lien or encumbrance on the Properties ("Taxes") and all penalties, fines and interest related to Taxes, payable to any Honduran governmental authority, in any jurisdiction whatsoever and imposed on or payable by Buyer in respect of the Properties for any taxable year or period that ends on or before the Closing and, with respect to any taxable year or period beginning before and ending after the Closing, the portion of such Taxes relating to such taxable year or period ending on the Closing and including, without limitation, any and all Taxes which may be imposed on Buyer in connection with the transactions contemplated by this Agreement; and (d) all costs and expenses including, without limitation, legal fees on a solicitor and client basis, incidental to or in respect of the foregoing. L. REMEDIES 1. In addition to all other remedies contemplated by this Agreement, each party shall have all remedies provided at law or in equity with respect to the obligations hereunder including the remedy of specific performance. 2. Limitation of Liability. In no event shall the liability of Fischer, for any default of breach of this Agreement, exceed the amount of the Purchase Price, plus reasonable attorney's fees and expenses. 3. Causes of Action. No claim, action, demand or cause of action, however characterized, arising hereunder shall be valid unless the same is brought within two years after the Closing. M. ASSET PURCHASE AGREEMENT The parties intend this to be an asset purchase and sale and transfer and assumption of leases and contracts only. None of Fischer' employees, labor contracts, pension benefit obligations or related employee benefit arrangements, are being acquired by Buyer under this Agreement. N. GENERAL 1. Waiver, Remedies. No failure on the part of any party to exercise, and no delay in exercising a right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right remedy, power or privilege, and no waiver whatever shall be valid, unless in writing signed by the other party or parties to be charged and then only to the extent specifically set forth in such writing. All remedies, rights, powers and privileges, either under this Agreement or by law or otherwise afforded to the parties to this Agreement, shall be cumulative and shall not be exclusive of any remedies, rights, powers and privileges provided by law. Each party hereto may exercise all such remedies afforded to it in any order of priority. 2. Notices. Any notice required or permitted under this Agreement shall be in writing and sufficient if delivered personally, sent by facsimile or mailed by registered or certified mail, postage prepaid, and return receipt requested, addressed to the appropriate recipient as set forth above, or at such other address as the recipient shall designate by written notice, as herein provided, from time to time, as well as to the following persons: If to Tombstone or Buyer: Tombstone Explorations Co. Ltd. c/o Richard Clark, President 1351 - 409 Granville Street Vancouver, B.C. V6C 1T2 CANADA Facsimile: 682-1514 With a copy to: Bull, Housser & Tupper 3000 - 1055 West Georgia Street Vancouver, B.C. V6E 3R3 CANADA Attention: Peter J. O'Callaghan Facsimile: (604) 641-4949 If to Fischer: Fischer-Watt Gold Company, Inc. 1410 Cherrywood Drive Coeur d'Alene, Idaho 83814 U.S.A. Attention: Mr. George Beattie Facsimile: (208) 667-6516 with a copy to: Jones & Keller, P.C. 1625 Broadway, Suite 1600 Denver, Colorado 80202 Attention: Clifford R. Pearl Facsimile: (303) 893-6506 Any notice which is personally delivered shall be deemed effective upon the date of delivery (or refusal to accept delivery) as indicated on the return receipt; any notice sent by facsimile shall be deemed to be provided on the date of transmission if sent during normal business hours of the recipient and, if not, on the next business day thereafter; and if mailed, on the seventh business day after mailing. 3. Waivers, Strict Performance. The failure of a party to insist on the strict performance of any provision of this Agreement or to exercise any right power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit the party's right thereafter to enforce any provision or exercise any right. 4. Assignment. Prior to Closing, this Agreement may not be assigned by any party without the written consent of the other parties, and any attempt to assign this Agreement or delegate performance hereunder without such consent shall be void. 5. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the British Columbia, Canada, excluding any conflict of law provisions that would require the application of the laws of any other jurisdiction. 6. Costs and Expenses. Each party shall pay its own expenses incurred in connection with the authorization, preparation, execution and performance of this Agreement including, without limitation, all fees and expenses of counsel. Buyer shall be responsible for and shall timely pay all recording and other fees in connection with the conveyance of the Property. 7. Counterparts. This Agreement may be executed in counterparts, each of which when so executed shall be deemed an original, and such counterparts shall together constitute but one and the same instrument. 8. Survival. The terms and conditions, representations and warranties and covenants and agreements of the parties shall survive the Closing and shall continue for a period of two years thereafter. 9. Binding on Parties. Nothing expressed or implied in this Agreement is intended by the parties or shall be construed to confer upon or to give to any person or entity other than the parties to this Agreement or their successors or assigns any rights or remedies under or by reason of this Agreement. 10. Force Majeure. Neither party shall be liable to any other party for its failure to perform any of its obligations under this Agreement during any period in which performance is prevented, in whole or part, by any other cause beyond a parties reasonable control, except for the party's inability to meet financial commitments. If a party invokes its rights under this Section, the time for discharging its obligations with respect to the prevented performance shall be extended for the period of the prevented performance. 11. Successors. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties. 12. Severability. Should any one or more of the provisions of this Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement and each other agreement entered into pursuant to this Agreement shall be given effect separately from the provision or provisions determined to be illegal or unenforceable and shall not be effected thereby. 13. Broker. No person acting on behalf of Fischer or under the authority of Fischer is or will be entitled to any broker's or finder's fee or any other commission or similar fee, directly or indirectly, from any of the parties hereto in connection with any of the transactions contemplated by this Agreement; 14. Further Assurances. Buyer and Fischer shall execute, acknowledge, if necessary, and deliver such documents, certificates or other instruments and shall take such other action as either shall reasonably require from time to time to complete the transactions contemplated hereby or as otherwise may be reasonably requested to carry out the intents and purposes of this Agreement. If at any time after the date of Closing, Buyer shall consider or be advised that any further assignment and conveyances are reasonably necessary to vest, perfect, confirm or record in Buyer the title or other appropriate right to any of the Properties, or otherwise to carry out the provisions hereof, Fischer, through its proper officers and directors, shall execute and deliver any and an proper assignments, and do all things reasonably necessary to vest, perfect or confirm the title or other right to any of the Properties in Buyer and otherwise to carry out the provisions hereof. 15. Incorporation of Exhibits. All Exhibits attached to this Agreement are incorporated herein as though fully set forth. 16. Entire Agreement. This Agreement, and the agreements delivered pursuant hereto, constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, letters of intent, representations and understandings of the parties in connection with the transaction contemplated hereby, including without limitation, that certain Letter Agreement dated February 28, 1995. No supplement modification or amendment shall be binding unless executing in writing by both parties. IN WITNESS WHEREOF, the parties hereto have signed or caused this Agreement to be signed in their respective corporate names as of the day and date first above written. FISCHER-WATT GOLD COMPANY, INC. By: Gerald D. Helgeson (Signature) Its: Secretary CERENEX FINANCIAL A.V.V. By: Richard P. Clark (Signature) Its: President EX-10 3 AGREEMENT TO ASSIGN LEASES AND QUITCLAIM OF INTERESTS THIS AGREEMENT TO ASSIGN LEASES AND QUITCLAIM OF INTERESTS (the "Agreement") is made this 20th day of April, 1995 by and between KENNECOTT EXPLORATION COMPANY, a Delaware corporation, with an office at 10 East South Temple, Salt Lake City, Utah 84133 ("Kennecott") and FISCHER-WATT GOLD COMPANY, INC., a Nevada corporation, with an office at 340 Freeport Boulevard, Suite 3, Sparks, Nevada 89431 ("Fischer-Watt"). RECITALS A. Pursuant to that certain Assignment of Leases dated July 15, 1994, and the related Agreement to Assign Leases dated July 7, 1994, Fischer-Watt assigned to Kennecott certain leases located in Imperial County, California, it being the intent of the parties that all of the real property interests relating to that project of Fischer-Watt would be transferred to Kennecott. B. The parties have discovered that certain property interests were inadvertently omitted in such assignments and now desire to cause an assignment and transfer of those interests, which property interests are more particularly described in Exhibit "A" to this Agreement (the "Property"). B. Fischer-Watt desires to sell, assign and transfer all of its right, title and interest in the Property and Kennecott desires to purchase all of Fischer-Watt's right, title and interest in the Property on the terms and conditions set forth in this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement, Kennecott and Fischer-Watt agree as follows: 1. Assignment of the Property. 1.1 Upon the terms and conditions set forth in this Agreement, Fischer-Watt hereby sells, transfers, conveys, assigns, and delivers to Kennecott, all of Fischer-Watt's right, title and interest in the Property by an Assignment of Leases in the form attached to this Agreement as Exhibit "B" and by the Quitclaim Deed attached to this Agreement as Exhibit "C", reserving only to Fischer-Watt a 2.5% Net Smelter Return royalty which shall be calculated and paid as provided in Exhibit "D" to this Agreement. 1.2 In consideration of the sale, transfer, conveyance, assignment and delivery of Fischer-Watt's right, title and interest in the Property as provided in Section 1.1, Kennecott agrees: (a) to pay a 2.5% Net Smelter Return royalty to Fischer-Watt on all minerals produced and sold from the Property as provided in Exhibit "D" to this Agreement. (b) to reimburse Fischer-Watt for any and all land holding and related costs under the leases related to such Property, and any taxes or other costs incurred by Fischer-Watt, from and after July 15, 1994 to the date hereof. (c) to offer to reassign the Property to Fischer-Watt, if Kennecott at any time on or before the fourth anniversary of the date hereof determines to relinquish the interest in the Property acquired under this Agreement. Fischer-Watt shall accept Kennecott's offer in writing within 20 days after Kennecott notifies Fischer-Watt of the offer. Fischer-Watt's failure to provide written notice of its acceptance of the offer within such 20 day period shall be deemed to be an election to decline the offer and Kennecott may thereafter relinquish the Property. Kennecott's obligation to make the payments as provided in Section 1.2(a) shall terminate upon the date that Kennecott gives notice of the offer to Fischer-Watt under this Section 1.2(c). This Section 1.2(c) shall apply only if Kennecott intends to relinquish the Property and shall not apply to any assignment by Kennecott of the Property subject to the terms of this Agreement. 1.3 The consideration described above is the sole and complete consideration given by Kennecott to Fischer-Watt for the assignment of the Property by Fischer-Watt to Kennecott. 2. Fischer-Watt' Representations and Warranties. Fischer-Watt represents and warrants to Kennecott as follows: 2.1 Fischer-Watt is a corporation, duly incorporated, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and Fischer-Watt has the corporate power and authority to enter into this Agreement. 2.2 The execution, delivery and performance of this Agreement by Fischer-Watt have been authorized by all necessary corporate action, create binding obligations on Fischer-Watt, and do not and will not: (a) require any consent or approval of Fischer-Watt's stockholders; (b) contravene Fischer-Watt's charter or bylaws; (c) violate any provision of law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Fischer-Watt; or (d) result in a breach of or constitute a default under any agreement to which Fischer-Watt is a party. 2.3 No consent, approval, permit, license, or authorization of any governmental body is required in connection with the execution, delivery, or performance of this Agreement by Fischer-Watt. 2.4 As of the date hereof, Fischer-Watt is lawfully seized of a defeasible estate in the Property as set forth in Exhibit "A," and has the right and power to assign and quitclaim the Property as provided in this Agreement. 2.5 Fischer-Watt has provided to Kennecott true and complete copies of all instruments affecting title to the Property. 2.6 As of the date hereof, and to the best of its knowledge, the Leases relating to the Property are in good standing, Fischer-Watt has not taken any action or failed to take any required action that with the passage of time would result in a default under the Leases, and Fischer-Watt has not received any notice or threat of default under the Leases. 2.7 As of the date hereof, and except as otherwise provided in Section 2.10, the Property is free from all liens or encumbrances created by Fischer-Watt, or any person claiming by, through, or under Fischer-Watt. Fischer-Watt will defend its title to the Property against all persons who may claim the same by, through, or under Fischer-Watt, but not otherwise. 2.8 Fischer-Watt has not committed, nor will Fischer-Watt in the future commit, any act or acts which will encumber or cause a lien to be placed against the Property. 2.9 Fischer-Watt has not deposited any petroleum, hazardous waste, hazardous substances, pollutants, contaminants, or toxic materials (as those terms are defined by any applicable local, state or federal law presently in effect) on the Property, nor conducted any activities that have caused an adverse environmental condition on the Property. 2.10 Fischer-Watt has no material contractual commitments or obligations which relate to or affect the Property. 3. Representations and Warranties of Kennecott. Kennecott represents and warrants to Fischer-Watt as follows: 3.1 Kennecott is a corporation, duly incorporated, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and Kennecott has the corporate power and authority to enter into this Agreement. 3.2 The execution, delivery and performance of this Agreement by Kennecott have been authorized by all necessary corporate action, create binding obligations on Kennecott, and do not and will not: (a) require any consent or approval of Kennecott's stockholders; (b) contravene Kennecott's charter or bylaws; (c) violate any provision of law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Kennecott; or (d) result in a breach of or constitute a default under any agreement to which Kennecott is a party. 3.3 No consent, approval, permit, license, or authorization of any governmental body is required in connection with the execution, delivery, or performance of this Agreement by Kennecott. 4. Confidentiality. 4.1 The terms of this Agreement shall be the exclusive property of the Parties and, except as provided in Section 4.2, shall not be disclosed to any third party or the public without the prior written consent of the other Party, which consent shall not be unreasonably withheld. 4.2 The consent required by Section 4.1 shall not apply to a disclosure: (a) By a Party to a potential successor by sale of all or substantially all of its interest in the Property, or to a potential successor by consolidation or merger, or to a proposed joint venturer or partner in a joint venture or partnership in which such Party may become a participating partner or venturer. (b) To an affiliate, consultant, contractor or subcontractor that has a bona fide need to be informed. (c) To a bank or other potential source of financing. (d) To a court, governmental agency or to the public if the disclosing Party believes in good faith that disclosure is required by pertinent law, regulation, rule, order or the rules of any stock exchange. 4.3 In any case to which Section 4.2 is applicable, the disclosing Party shall give notice to the other Party concurrently with the making of such disclosure. As to a disclosure pursuant to Section 4.2(a) or (b), only such confidential information as such third party shall have a legitimate business need to know shall be disclosed and such third party shall first agree in writing to protect the confidential information from further disclosure to the same extent as the Parties are obligated under this Section 4. 5. General Provisions. 5.1 This Agreement may be assigned by either Party; however, any such assignment shall be subject to the rights and interests granted by this Agreement to the other Party and shall not relieve the assigning Party from any obligation to the other Party that arose prior to the assignment. 5.2 The failure of a Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit the Party's right thereafter to enforce any provision or exercise any right. 5.3 This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah, except for its rules pertaining to conflicts of laws. In the event that any condition or other provision of this Agreement is held to be invalid or void by any court of competent jurisdiction, the same shall be deemed severable from the remainder of this Agreement and shall in no way affect any other covenant or condition. If such condition, covenant or other provision shall be deemed invalid due to its scope or breadth, such provision shall be deemed valid to the extent of the scope or breadth permitted by law. 5.4 There are no implied covenants given by either Party or otherwise contained in this Agreement. 5.5 Each of the Parties agrees that it shall take from time to time such actions and execute such additional instruments as may be reasonably necessary or convenient to implement and carry out the intent and purpose of this Agreement. 5.6 This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Parties. In the event of any conflict between this Agreement and any Exhibit attached hereto, the terms of this Agreement shall be controlling. 5.7 No modification of this Agreement shall be valid unless made in writing and duly executed by the Parties. 5.8 This Agreement may be executed in counterparts, each of which when so executed shall be deemed an original, and such counterparts shall together constitute but one and the same instrument. 5.9 The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 5.10 All representations, warranties, covenants, and agreements of the Parties shall survive the delivery of the Assignment of Leases and Quitclaim Deed and shall not merge with or be extinguished by delivery of any document of transfer contemplated by this Agreement. 5.11 Nothing expressed or implied in this Agreement is intended by the Parties or shall be construed to confer upon or to give to any person or entity other than the Parties to this Agreement or their successors or assigns any rights or remedies under or by reason of this Agreement. 5.12 All notices, requests, demands, and other communications pertaining to or contemplated by this Agreement shall be addressed to the Party to whom such communication is to be directed as follows: if to Kennecott Exploration Company: 10 East South Temple Salt Lake City, Utah 84133 Telecopier: (801) 322-8303 with a copy to: Kennecott Corporation 10 East South Temple Salt Lake City, Utah 84133 Attention: Legal Department Telecopier: (801) 322-8081 if to Fischer-Watt Gold Company, Inc.: 340 Freeport Boulevard, Suite 3 Sparks, Nevada 89431 Telecopier: (702) 358-4026 with a copy to: George Beattie 1410 Cherrywood Drive Coeur d'Alene, Idaho 83814 Telecopier: ((208) 765-9461 and to: Cliff Pearl Jones and Keller 1625 Broadway, Suite 1600 Denver, Colorado 80202 Telecopier: (303) 893-6506 All Notices shall be given (I) by personal delivery to the Party, or (ii) by electronic communication, with a confirmation sent by commercial courier, registered or certified mail return receipt requested, or (iii) by registered or certified mail return receipt requested or by commercial courier. All Notices shall be effective and shall be deemed delivered (I) if by personal delivery, on the date of delivery if delivered during normal business hours, and, if not delivered during normal business hours, on the next business day following delivery, (ii) if by electronic communication, on the next business day following receipt of the electronic communication, and (iii) if solely by mail or by commercial carrier, on the next business day after actual receipt. A Party may change its address by Notice to the other Party. 5.13 This Agreement contains the entire understanding of the Parties and supersedes all prior agreements, communications and understandings between the Parties relating to the subject matter of this Agreement. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. FISCHER-WATT GOLD COMPANY, INC. By George Beattie (Signature) Its President KENNECOTT EXPLORATION COMPANY By Thomas C. Patton (Signature) Its President EXHIBIT "A" Property The Property consists of the following real property situated as follows: Fee Interests: All that real property situated in Section 19, Township 19 South, Range 9 East, of Imperial County, California: 1. An undivided 12.5 percent ownership interest in the mineral estate in and to the: SE1/4 SW1/4 NE1/4; NE1/4 SE1/4 NE1/4; NE1/4 SE1/4 SE1/4; SE1/4 NE1/4 SW1/4; and S/2 NW1/4 SW1/4. Being the same property quitclaimed to Fischer-Watt by that certain Quitclaim, Assignment and Agreement between Homestake Mining Company of California and Fischer-Watt Gold Company, Inc., dated effective as of December 26, 1990. Assignment of Leases: Mining Lease dated April 1, 1990 between Wes and Mary Martin, Owner, and Homestake Mining Company of California, as Lessee; a short form of which is recorded in Book 1658, Page 1269, Official Records, Imperial County, California; Mining Lease dated April 1, 1990 between Emily Martin, Owner, and Homestake Mining Company of California, as Lessee; a short form of which is recorded in Book 1658, Page 1273, Official Records, Imperial County, California. EXHIBIT "B" ASSIGNMENT OF LEASES THIS ASSIGNMENT OF LEASES effective as of April 20, 1995, is between FISCHER-WATT GOLD COMPANY, INC., a Nevada corporation ("Assignor"), with an office at 340 Freeport Boulevard, Suite 3, Sparks, Nevada 89431, and KENNECOTT EXPLORATION COMPANY, a Delaware corporation ("Assignee") with an office at 10 East South Temple, Salt Lake City, Utah 84133. IN CONSIDERATION OF good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor conveys, transfers and assigns to Assignee all of Assignor's interest in certain real property situated in Imperial County, California which property is more particularly described as follows: That certain Mining Lease dated April 1, 1990 between Wes and Mary Martin, Owner, and Homestake Mining Company of California, as Lessee; a short form of which is recorded in Book 1658, Page 1269, Official Records, Imperial County, California; That certain Mining Lease dated April 1, 1990 between Emily Martin, Owner, and Homestake Mining Company of California, as Lessee; a short form of which is recorded in Book 1658, Page 1273, Official Records, Imperial County, California. Assignor's warranty of title to Assignee shall be limited to claims asserted by any person claiming by, through or under Assignor. DATED this 20 day of April, 1995. FISCHER-WATT GOLD COMPANY, INC. By George Beattie (Signature) Its President COUNTY OF Kootenai ) ) ss. STATE OF Idaho ) On this 20 day of April, 1995, before me, Robert A. Sampson, a notary public, personally appeared George Beattie, personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity and that by his signature on the instrument the entity on behalf of which he acted, executed the instrument. IN WITNESS WHEREOF, I hereunto set my hand and seal. My commission expires 3-30-2001 Robert A. Sampson (SEAL) (Signature) Notary Public EXHIBIT "C" QUITCLAIM DEED FOR $10 AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, FISCHER-WATT GOLD COMPANY, INC., a Nevada corporation ("Fischer-Watt"), with an office at 340 Freeport Boulevard, Suite 3, Sparks, Nevada 89431, hereby sells, assigns, transfers and quitclaims to KENNECOTT EXPLORATION COMPANY, a Delaware corporation with an office at 10 East South Temple, Salt Lake City, Utah 84133, all of Fischer-Watt's rights, titles and interests in and to the real property described below: All that real property situated in Section 19, Township 19 South, Range 9 East, of Imperial County, California consisting of an undivided 12.5 percent ownership interest in the mineral estate in and to: SE1/4 SW1/4 NE1/4; NE1/4 SE1/4 NE1/4; NE1/4 SE1/4 SE1/4; SE1/4 NE1/4 SW1/4; and S/2 NW1/4 SW1/4. Being the same property quitclaimed to Fischer-Watt by that certain Quitclaim, Assignment and Agreement between Homestake Mining Company of California and Fischer-Watt Gold Company, Inc., dated effective as of December 26, 1990. Dated this 20 day of April, 1995. FISCHER-WATT GOLD COMPANY, INC. By George Beattie (Signature) Its President COUNTY OF Kootenai ) ) ss. STATE OF Idaho ) On this 20 day of April, 1995, before me, Robert A. Sampson, a notary public, personally appeared George Beattie, personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity and that by his signature on the instrument the entity on behalf of which he acted, executed the instrument. IN WITNESS WHEREOF, I hereunto set my hand and seal. My commission expires 3-30-2001 Robert A. Sampson (SEAL) (Signature) Notary Public EXHIBIT "D" NET SMELTER RETURN CALCULATION Pursuant to the terms of the Agreement to Assign Leases and Quitclaim of Interests between Kennecott Exploration Company and Fischer-Watt Gold Company, Inc. dated January ___, 1995,Kennecott Exploration Company (the "Payor") grants to Fischer-Watt Gold Company, Inc. (the "Royalty Holder") a 2.5% Net Smelter Return royalty to Fischer-Watt on all minerals produced and sold from the Property as provided herein. A. Net Smelter Return Definition. 1. Except as provided in paragraph 2 below, in the event that the Payor sells ores, concentrates, precipitates, cathodes, leach solutions or any other primary, intermediate or final product or any other mineral substances (other than fine gold and/or silver bullion or dore bullion) produced from the Property, Net Smelter Return for the calendar quarter shall mean the amount of Revenues (as defined below) actually received by the Payor from the sale of such mineral substances, less to the extent paid or incurred by the Payor, (a) the cost of transporta- tion between the Payor's mill and the buyer, (b) the cost of assaying, sampling, custom-smelting and refining such products, including any independent representative and umpire charges, and (c) taxes (other than income taxes) imposed upon or in connection with producing, transporting and selling such products. 2. If the Payor produces as a final product or has pro- duced as a final product through a tolling/refining contract or any other transaction that results in the Payor owning title to fine gold and/or silver bullion or dore bullion produced from the Property, Net Smelter Return for a calendar quarter shall mean the amount of fine gold and/or silver bullion produced or the amount of payable gold and/or silver contained in dore bullion produced from the Property during the quarter multiplied by (I) for gold, the average London Bullion Brokers P.M. Gold Fixing for the calendar quarter of production and (ii) for silver, the average London Bullion Market Association daily Silver Fixing for the calendar quarter of production, less the following costs attributed to that production, to the extent paid or incurred by the Payor prior to the date payment is due to the Royalty Holder as prescribed in Section C.1(b) of this Exhibit, (a) the costs of transportation from the Payor's mill to the smelter/refiner, (b) the cost of assaying, sampling, custom-smelting and refining said bullion, including tolling costs, independent representative and umpire charges, and including any penalties assessed by the purchaser of said fine gold and/or silver bullion, (c) taxes (other than income taxes) imposed upon or in connection with producing, transporting and selling said fine gold and/or silver bullion and (d) costs of sale, if any, actually paid or incurred by the Payor prior to the date payment is due the Royalty Holder as described above. For purposes of this Section A.2., the average gold and silver prices for the production quarter shall be determined by dividing the sum of all daily prices posted during the calendar quarter by the number of days that prices were posted. The posted prices shall be obtained from The Wall Street Journal, Reuters, or another reliable source. If either the London Bullion Brokers P.M. Gold Fixing or the London Bullion Market Association daily Silver Fixing ceases to be published, the Payor and the Royalty Holder shall agree upon a similar alternative method for determining the average spot market price for gold and/or silver, as the case may be, which shall be used in calcu- lating Net Smelter Return. The Payor and the Royalty Holder acknowledge that the purpose of this Section A.2. is to assure that Net Smelter Return is determined in a timely manner for fine gold and/or silver bullion produced or dore bullion produced during a calendar quarter regardless of whether an actual sale of gold and/or silver to a third party is made by the Payor. The parties further acknowledge that the Payor shall have the right to market and sell to third parties the gold and silver produced from the Property in any manner it chooses, including the forward sale of gold and silver on the commodity markets. The Royalty Holder shall have absolutely no right to participate whatsoever in any sales of mineral substances by the Payor on the commodity market or otherwise share in any profits or losses received by the Payor as a result of the Payor's marketing activities. 3. In no event shall the Payor deduct the cost of mining, milling, leaching or any other processing costs incurred by the Payor in the determination of Net Smelter Return. 4. In the event smelting or refining are carried out in facilities owned or controlled, in whole or in part, by the Payor, then charges, costs and penalties for such smelting or refining shall mean the amount the Payor would have incurred if such smelting or refining were carried out at facilities not owned or controlled by the Payor then offering comparable ser- vices for comparable products on prevailing terms, but in no event greater than actual costs incurred by the Payor with respect to such smelting and refining. B. Other Definitions. 1. "Payor" shall mean the person or entity obligated to pay a Net Smelter Return royalty to the Royalty Holder pursuant to the terms of the Agreement to Assign Leases. 2. "Royalty Holder" shall mean the person or entity entitled to receive a Net Smelter Return royalty pursuant to the terms of the Agreement to Assign Leases. 3. "Revenues" shall mean the total amounts received by the Payor from the sale of mineral substances produced from the Property at the point of sale, less all selling costs, provided such sales are arm's length transactions, and provided further that sales to affiliates of the Payor are valued at the fair market value of the products sold. For the purposes of this Exhibit, mineral substances may be in a primary, intermediate or final form. C. Payments of Net Smelter Return Royalty. 1. The amount of Net Smelter Return royalty due the Royalty Holder shall be payable in the following alternative manners depending on the Payor's method of selling mineral substances produced from the Property: (a) If the Payor produces and sells ores, concen- trates, precipitates, cathodes, leach solutions or any other primary, intermediate product or mineral substances other than fine gold and/or silver bullion or dore bullion, the Net Smelter Return royalty paid to the Royalty Holder shall be calculated by multiplying the amount of Net Smelter Return determined in Section A.1 by 2.5 %. Payment shall be made within 30 days after the Payor's receipt of Revenues from such sales during a calendar quarter. (b) If the Payor produces fine gold and/or silver bullion or dore bullion, the Net Smelter Return royalty paid to the Royalty Holder shall be calculated by multiplying the amount of Net Smelter Return determined in Section A.2 by 2.5 %. Payment shall be made within 30 days after the end of a calendar quarter. 2. The Payor shall provide copies of all data relating to the Net Smelter Return royalty calculation (including, but not limited to, settlement sheets used in calculating the Royalty Holder's Net Smelter Return royalty) to the Royalty Holder at the same time that the Royalty Holder's Net Smelter Return royalty payments are paid. D. Audits and Disputes. 1. The Royalty Holder, upon written notice, shall have the right to have an independent firm of certified public accountants audit the records that relate to the calculation of the Net Smelter Return interest within 24 months after receipt of a payment described in Section C. of this Exhibit for a calendar quarter. 2. The Royalty Holder shall be deemed to have waived any right it may have had to object to a payment made for any calen- dar quarter, unless it provides notice in writing of such objec- tion within 24 months after receipt of final payment for the calendar quarter. If the parties are unable to resolve the dispute within 60 days after the receipt of such notice, the dispute shall be resolved by arbitration in Salt Lake City, Utah, pursuant to the commercial arbitration rules of the American Arbitration Association. The resolution pursuant to such arbi- tration shall be binding on the parties. Alternatively, the parties may elect to submit the dispute to a mutually acceptable certified public accountant, or firm of certified public accoun- tants, for a binding resolution thereof. Unless the parties agree to share the costs of arbitration, the arbitrator shall determine what part of the costs and expenses incurred in any such proceeding shall be borne by each party participating in the arbitration. E. General. 1. Unless otherwise specified, capitalized terms used herein shall have the same meaning as given to them in the Agreement to Assign Leases to which this Exhibit C is attached. 2. The Payor shall keep true and accurate books and records for the purposes of this Exhibit. Such books and records shall be kept on the accrual basis in accordance with generally accepted accounting principles and practices consistently applied. 3. The Royalty Holder or its authorized representative on not less than 2 days' notice to the Payor, may enter upon all surface and subsurface portions of the Property for the purpose of inspecting the Property, all improvements thereto and operations thereon, and may inspect and copy all records and data pertaining to the calculation of its interest, including without limitation such records and data which are maintained electroni- cally. The Royalty Holder or its authorized representative shall enter the Property at the Royalty Holder's own risk and may not unreasonably hinder operations on or pertaining to the Property. The Royalty Holder shall indemnify and hold harmless the Payor and its Affiliates (including without limitation direct and indirect parent companies), and its or their respective direc- tors, officers, shareholders, employees, agents and attorneys, from and against any Liabilities which may be imposed upon, asserted against or incurred by any of them by reason of injury to the Royalty Holder or any of its agents or representatives caused by the Royalty Holder's exercise of its rights herein. 4. All notices or communications hereunder shall be made and effective in accordance with the provisions of the Agreement to Assign Leases. 5. The Net Smelter Return interest shall attach to any amendments, relocations or conversions of any mining claims or leases comprising the Property, or to any renewals or extensions of leases, and to any mineral rights acquired by the Payor and any Affiliates in lands embraced within any mining claims or leases comprising the Property within one year after the loss or relinquishment of any mining claim or lease comprising the Property. The Net Smelter Return interest shall be a real property interest that runs with the Property and shall be applicable to any person who produces and sells Products from the Property. 6. All information and data provided to Royalty Holder shall be subject to the confidentiality provisions of the Agreement to Assign Leases. 7. Notwithstanding anything to the contrary herein, the Payor shall have the right to mine and market amounts of precious metals or other minerals reasonably necessary for non-bulk sampling, assaying, metallurgical testing and evaluation of the minerals potential of the Property without initiating the obligation to make production royalty payments hereunder. 8. The Payor shall have the right to commingle ore and minerals from the Property with ore from other lands and properties; provided, however, that the Payor shall calculate from representative samples the average grade of the ore and shall weigh (or calculate by volume) the ore before commingling. If concentrates are produced from the commingled ores by the Payor, the Payor shall also calculate from representative samples the average recovery percentage for all concentrates produced during the calendar quarter. In obtaining representative sam- ples, calculating the average grade of the ore and average recovery percentages, the Payor may use any procedures accepted in the mining and metallurgical industry which it believes suitable for the type of mining and processing activity being conducted and, in the absence of fraud, its choice of such procedures shall be final and binding on the Royalty Holder. In addition, comparable procedures may be used by the Payor to apportion among the commingled ores penalty charges, if any, imposed by the purchaser of such ore or concentrates. 9. The Royalty Holder may assign its interest in the Net Smelter Return royalty, in whole or in part, provided however, that the Payor shall not be obligated to make Net Smelter Return royalty payments to any such assignee until the Payor has been provided with a certified or authenticated copy of a properly executed and recorded instrument conveying all or a portion of the Net Smelter Return royalty to the assignee. ASSIGNMENT OF LEASES THIS ASSIGNMENT OF LEASES effective as of January __, 1995, is between FISCHER-WATT GOLD COMPANY, INC., a Nevada corporation ("Assignor"), with an office at 340 Freeport Boulevard, Suite 3, Sparks, Nevada 89431, and KENNECOTT EXPLORATION COMPANY, a Delaware corporation ("Assignee") with an office at 10 East South Temple, Salt Lake City, Utah 84133. IN CONSIDERATION OF good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor conveys, transfers and assigns to Assignee all of Assignor's interest in certain real property situated in Imperial County, California which property is more particularly described as follows: That certain Mining Lease dated April 1, 1990 between Wes and Mary Martin, Owner, and Homestake Mining Company of California, as Lessee; a short form of which is recorded in Book 1658, Page 1269, Official Records, Imperial County, California; That certain Mining Lease dated April 1, 1990 between Emily Martin, Owner, and Homestake Mining Company of California, as Lessee; a short form of which is recorded in Book 1658, Page 1273, Official Records, Imperial County, California. Assignor's warranty of title to Assignee shall be limited to claims asserted by any person claiming by, through or under Assignor. DATED this ____ day of January, 1995. FISCHER-WATT GOLD COMPANY, INC. By Its COUNTY OF ____________ ) ) ss. STATE OF _______________ ) On this _____ day of January, 1995, before me, _______________________, a notary public, personally appeared ________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity and that by his signature on the instrument the entity on behalf of which he acted, executed the instrument. IN WITNESS WHEREOF, I hereunto set my hand and seal. My commission expires __________________. Notary Public QUITCLAIM DEED FOR $10 AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, FISCHER-WATT GOLD COMPANY, INC., a Nevada corporation ("Fischer-Watt"), with an office at 340 Freeport Boulevard, Suite 3, Sparks, Nevada 89431, hereby sells, assigns, transfers and quitclaims to KENNECOTT EXPLORATION COMPANY, a Delaware corporation with an office at 10 East South Temple, Salt Lake City, Utah 84133, all of Fischer-Watt's rights, titles and interests in and to the real property described below: All that real property situated in Section 19, Township 19 South, Range 9 East, of Imperial County, California consisting of an undivided 12.5 percent ownership interest in the mineral estate in and to: SE1/4 SW1/4 NE1/4; NE1/4 SE1/4 NE1/4; NE1/4 SE1/4 SE1/4; SE1/4 NE1/4 SW1/4; and S/2 NW1/4 SW1/4. Being the same property quitclaimed to Fischer-Watt by that certain Quitclaim, Assignment and Agreement between Homestake Mining Company of California and Fischer-Watt Gold Company, Inc., dated effective as of December 26, 1990. Dated this ____ day of January, 1995. FISCHER-WATT GOLD COMPANY, INC. By Its COUNTY OF ____________ ) ) ss. STATE OF _______________ ) On this _____ day of January, 1995, before me, _______________________, a notary public, personally appeared ________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity and that by his signature on the instrument the entity on behalf of which he acted, executed the instrument. IN WITNESS WHEREOF, I hereunto set my hand and seal. My commission expires __________________. Notary Public EX-27 4 ART. 5 FDS FOR 1ST QUARTER 10QSB
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED APRIL 30, 1995 CONTAINED IN FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000844788 FISCHER-WATT GOLD COMPANY, INC. 1,000 U.S. DOLLARS 3-MOS JAN-31-1995 FEB-01-1995 APR-30-1995 1 10 278 13 0 0 305 411 35 808 715 96 12 0 0 (15) 808 0 0 0 0 55 0 22 (76) 1 (77) 0 0 0 (77) (.01) (.01)
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