<PAGE> 1
1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the period ended September 30, 1995
Commission File Number 1-7241
ALASKA GOLD COMPANY
(exact name of registrant as specified in its charter)
Delaware 13-2774390
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2959 NORTH ROCK ROAD
WICHITA, KANSAS 67226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (316) 636-6316
Indicate by a 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
As of November 3, 1995, 5,000,000 shares of the Registrant's common stock were
outstanding.
<PAGE> 2
ALASKA GOLD COMPANY
FORM 10-Q
For the Period Ended September 30, 1995
INDEX
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
a.) Statements of Operations
for the quarters and nine-months ended September 30, 1995
and September 24, 1994...............................................3
b.) Balance Sheets
as of September 30, 1995 and December 31, 1994.......................5
c.) Statements of Cash Flows
for the nine-months ended September 30, 1995 and
September 24, 1994...................................................6
d.) Notes to Financial Statements........................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K...................................10
Signatures.................................................................11
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
ALASKA GOLD COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Quarter Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Net sales $ 3,033 $ 7
Sales to Mueller - 3,416
----------- -----------
Total sales 3,033 3,423
Cost of sales 2,035 3,685
General and administrative
expenses 176 210
----------- -----------
Operating income (loss) 822 (472)
Interest expense:
Mueller (1,099) (910)
Other (38) (6)
Other income, net 796 383
----------- -----------
Income (loss) before income taxes 481 (1,005)
Income tax expense - -
----------- -----------
Net income (loss) $ 481 $ (1,005)
=========== ===========
Number of common shares outstanding 5,000 5,000
=========== ===========
Net income (loss) per share $ 0.10 $ (0.20)
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE> 4
<TABLE>
ALASKA GOLD COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Nine-months Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Net sales $ 3,542 $ 220
Sales to Mueller - 3,416
----------- -----------
Total sales 3,542 3,636
Cost of sales 3,347 4,586
General and administrative
expenses 576 565
----------- -----------
Operating income (loss) (381) (1,515)
Interest expense:
Mueller (3,332) (2,356)
Other (122) (6)
Other income, net 1,300 1,008
----------- -----------
Income (loss) before income taxes (2,535) (2,869)
Income tax expense - -
----------- -----------
Net income (loss) $ (2,535) $ (2,869)
=========== ===========
Number of common shares outstanding 5,000 5,000
=========== ===========
Net income (loss) per share $ (0.51) $ (0.57)
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE> 5
<TABLE>
ALASKA GOLD COMPANY
BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 964 $ 542
Gold inventory 2,496 233
Due from affiliate 183 191
Prepaid preparation costs 353 1,568
----------- -----------
Total current assets 3,996 2,534
Property and equipment, net 5,015 4,155
Other assets 25 25
----------- -----------
$ 9,036 $ 6,714
=========== ===========
Liabilities and Stockholders' Deficit
Current liabilities:
Current portion of long-term debt $ 496 $ 486
Accounts payable 260 239
Accrued expenses 327 314
Term loans and advances payable to Mueller 95,016 91,334
----------- -----------
Total current liabilities 96,099 92,373
Long-term debt:
Notes payable to Mueller 4,900 3,400
Other 1,189 1,558
Environmental reserve 1,800 1,800
Restructuring reserve 1,436 1,436
----------- -----------
Total liabilities 105,424 100,567
----------- -----------
Stockholders' deficit:
Common stock, $.10 par value;
10,000,000 shares authorized;
5,000,000 shares issued and
outstanding 500 500
Additional paid-in capital 4,897 4,897
Accumulated deficit (101,785) (99,250)
----------- -----------
Total stockholders' deficit (96,388) (93,853)
Commitments and contingencies - -
----------- -----------
$ 9,036 $ 6,714
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE> 6
<TABLE>
ALASKA GOLD COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
For the Nine-Months Ended
September 30, September 24,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,535) $ (2,869)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Interest not paid on Mueller borrowings 3,073 2,309
Depreciation 798 219
Gain on sales of land (149) (637)
Changes in assets and liabilities:
Receivables - 113
Inventories (2,263) (1,160)
Due from affiliate 8 63
Prepaid preparation costs 1,215 249
Current liabilities 34 341
----------- -----------
Net cash provided by (used in)
operating activities 181 (1,372)
----------- -----------
Cash flows from investing activities:
Capital expenditures (1,659) (3,697)
Proceeds from sales of properties 150 639
----------- -----------
Net cash used in
investing activities (1,509) (3,058)
----------- -----------
Cash flows from financing activities:
Issuance of other long-term debt - 2,162
Net principal repayments and advances from Mueller 609 406
Repayment of other long-term debt (359) -
Issuance of notes payable to Mueller 1,500 3,400
----------- -----------
Net cash provided by
financing activities 1,750 5,968
----------- -----------
Increase in cash and cash equivalents 422 1,538
Cash and cash equivalents at the
beginning of the period 542 350
----------- -----------
Cash and cash equivalents at the
end of the period $ 964 $ 1,888
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE> 7
ALASKA GOLD COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Financial Statements
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. This quarterly report on Form 10-Q
should be read in conjunction with the Alaska Gold Company ("the Company")
Annual Report on Form 10-K, including the annual financial statements
incorporated therein.
The accompanying unaudited interim financial statements include all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. Certain amounts
in the 1994 quarterly financial statements have been reclassified to conform
with current period presentation.
Operations of the Company are seasonal in nature because of the climatic
conditions in Alaska. In addition, the Company sells gold based upon gold
market conditions and cash needs and does not necessarily sell gold in any
given period, quarter, or year. Accordingly, the results of operations for
any interim period are not necessarily indicative of the results for any other
period or for a full year.
Note 2 - Sales to Mueller
On August 29, 1994, the Company granted to Mueller Industries, Inc.
("Mueller"), the Company's majority stockholder, an option to purchase gold
produced or received as royalties. Terms of the option include establishing
the method of pricing as the average of the London PM price for gold for the
first ten days following shipment to the refiner. During the first nine-
months of 1995, no produced gold was sold to Mueller. However, in February
1995, Mueller purchased $505,000 of gold received as royalties by the Company.
Note 3 - Prepaid Preparation Costs
Expenditures related to open pit mining and removal of overburden and pay
gravel in preparation for wash plant operations are classified as prepaid
preparation costs. These expenditures are capitalized as inventory when the
gold-bearing material is processed through the wash plant.
Note 4 - Commitments and Contingencies
The Company is subject to normal environmental standards imposed by
federal, state and local environmental laws and regulations. Management
believes that the outcome of any environmental proceedings will not materially
affect the overall financial position of the Company.
Note 5 - Proposed Merger Transaction
On September 1, 1995, the Company's Board of Directors approved an
Agreement and Plan of Merger (the Plan). Under the Plan, all of the Company's
common stock will be acquired by the majority stockholder, for cash. The
Company expects this merger transaction to be completed by the end of this
year. The proposed merger will be voted upon by the stockholders of the
Company. Mueller, the holder of approximately 85 percent of the outstanding
shares, has expressed its intent of voting in favor of the merger.
<PAGE> 8
Note 6 - Notes payable to Mueller
During the first nine-months of 1995, the Company borrowed an additional
$1,500,000 from Mueller (the Notes). The Notes include interest at eight and
three quarters percent (8.75%) payable quarterly beginning June 30, 1995.
Principle on the Notes is due December 31, 2001, and is secured by an interest
in substantially all assets of the Company. Subsequent to the end of the
third quarter, the Company borrowed an additional $900,000 from Mueller with
terms similar to the above Notes.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company's operating capital requirements are subject to significant
fluctuation because of the seasonal nature of operations. Total aggregate
operating costs were approximately $1.9 million during the third quarter of
1995, and approximately $5.0 million for the first nine-months of 1995.
Open Pit
The Company commenced full scale open pit gold mining operations during
the winter of 1994-95 at its Nome properties. For more detail on the open pit
mining operation, reference is made to the Company's Form 10-Ks for 1994, 1993
and 1992. Implementation of a full scale operation required the Company to
obtain additional excavation equipment during the latter part of 1994.
Although a later than anticipated delivery of this equipment delayed start up
of the larger scale operation in the fall of 1994, the Company has been able
to proceed with its winter operations according to plan.
The Company had originally anticipated that open pit mining was feasible
only through the winter months. However, production and removal of some
overburden and pay gravel was possible during the summer and fall of 1995.
Mining of overburden and pay gravel for 1995 production was completed on
October 20. On October 26, stripping of overburden for 1996 production began.
Wash plant operations commenced on May 25, 1995, and continued until
October 15, 1995. Through September 30, 1995, an estimated 17,440 troy ounces
of gold were recovered from approximately 300,000 cubic yards of pay gravel
processed during the second and third quarters. The gold recovery per yard of
pay gravel compares favorably to the Company's projection.
Preliminary exploratory drilling studies by Company management and
independent consultants indicate that there may be scattered gold reserve
blocks available that contain necessary grades to support open pit mining at
current levels of production for up to ten years.
Dredging
The Company's only remaining operating dredge, Dredge 5, operated in
naturally thawed, low grade ground during 1994. At the end of the 1994
dredging season, Dredge 5 was operating in an area where the pay grades were
marginal. During the winter of 1994-95, an assay drilling program was
undertaken to determine if further operations were economically feasible. The
assays indicated the pay grade adjacent to the dredge is potentially
sufficient to support limited mining. However, additional exploration,
environmental permitting and development of a mine plan are necessary to
determine if operations should resume.
<PAGE> 9
Lode Mining
In July 1994, the Company entered into an Exploration and Option
Agreement ("Agreement") with Bering Straits Native Corp. (d.b.a. Golden
Glacier, Inc., ("GGI")), and Kennecott Exploration Company ("Kennecott") to
allow Kennecott to explore the lode mining potential of certain lands in the
Nome area. The Company and GGI jointly committed lands to an area of interest
which Kennecott believes may contain gold bearing ore. Kennecott has
substantial exploration operations, now in progress near Nome, working on this
area of interest as well as on adjacent lands. Kennecott has met the
requirements of the agreement and has completed exploration for 1995 with
plans to resume in 1996. The committed area contains approximately 10,000
acres of which 9,100 acres are controlled by GGI, and 900 acres are owned by
the Company. For more detail on the lode mining Agreement with Kennecott,
reference is made to the Company's Form 10-K for 1994.
Other
On September 1, 1995, the Company entered into an Agreement and Plan of
Merger with Mueller Acquisition Corporation, a Delaware corporation ("MAC"),
pursuant to which MAC will be merged with and into the Company with the
Company being the surviving corporation. Additionally all shares of the
common stock of the Company other than the shares owned by Mueller, will be
converted into the right to receive $0.25 cash per share and thereafter the
Company will be wholly owned by Mueller.
During the second quarter of 1995, the Company borrowed an additional
$1,500,000 from Mueller (the Notes). The Notes include interest at eight and
three quarters percent (8.75%) payable quarterly beginning June 30, 1995.
Principal on the Notes is due December 31, 2001, and is secured by an interest
in substantially all assets of the Company. Subsequent to the end of the
third quarter, the Company borrowed an additional $900,000 from Mueller with
terms similar to the above Notes.
In May 1995, the Company selected a realtor to assist in developing and
implementing a marketing plan for sale of land owned by the Company, primarily
in the Fairbanks area. An agreement was reached whereby the Company reserves
all rights to market properties on its own.
The continued viability of the Company as a going concern is dependent
upon its ability to generate sufficient working capital through future
profitable operations and sales of assets, including land owned by the
Company, and to maintain or restructure its existing financing from Mueller in
a manner acceptable to both Mueller and the Company. The Company's ability to
attain and maintain profitable operations depends, in part, upon the market
price of gold and production yield. If the Company were unable to generate or
obtain sufficient working capital or if demand were made for the payment of
loans and advances made to it by Mueller, the Company's management may have no
choice other than to file for protection under the Federal Bankruptcy Code.
In that event, it is likely that the Company's stockholders, other than
Mueller as the holder of the Company's debt, would receive no distribution
with respect to their shares from the Company's bankruptcy estate.
Results of Operations
Activity in the third quarter consisted of excavation of pay gravel from
the open pit and operation of the wash plant to process pay gravel mined
during the preceding winter and spring.
<PAGE> 10
During the first nine months of 1995, the Company's sales were $3,542,000
(7,897 ounces) compared to $3,636,000 (9,460 ounces) in 1994. Cost of sales
decreased to $3,347,000 in 1995 compared to $4,586,000 in 1994. Gold produced
increased in 1995 to 17,440 ounces for the first three quarters compared to
12,327 ounces for the same period in 1994. Gold inventory consisted of 9,323
ounces at the end of the quarter. The reduction in cost of sales is due to
the decrease in ounces sold as well as efficiencies gained in the open pit
method of mining. During 1994, the majority of produced ounces were mined by
dredging. In 1995, all the production has been from the open pit method of
mining.
General and administrative expenses have remained constant in 1995
compared to 1994. Total interest expense has increased in 1995 to $3,454,000
compared to $2,362,000 in 1994. This increase is due to increased borrowings
and increased interest rates in 1995. Other income, net increased to
$1,300,000 for the first nine-months of 1995 compared to $1,008,000 in the
first nine-months of 1994. This increase is due to increases in gravel sales
and royalty income offset by a reduction in gains on land sales.
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended September 30, 1995, the Registrant filed one
Current Report on Form 8-K, dated September 1, 1995, which reported that the
Registrant and Mueller Acquisition Corporation ("MAC") have entered into an
Agreement and Plan of Merger dated as of September 1, 1995, pursuant to which
among other things, (a) MAC, a newly formed Delaware corporation wholly owned
by Mueller, will be merged with and into the Registrant with the Registrant
being the surviving corporation and (b) all shares of common stock of the
Registrant other than the shares of the Registrant's common stock owned by
Mueller, will be converted into the right to receive $0.25 cash per share, and
thereafter the Registrant will be wholly owned by Mueller.
PART II. OTHER INFORMATION
Items 1, 2, 3, 4, and 5 are not applicable and have been omitted.
<PAGE> 11
ALASKA GOLD COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 3, 1995.
ALASKA GOLD COMPANY
/s/ Gary L. Barker
Gary L. Barker
President
/s/ Richard W. Corman
Richard W. Corman
Treasurer, Chief Financial
Officer and Chief Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000003228
<NAME> ALASKA GOLD COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 964
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,496
<CURRENT-ASSETS> 3,996
<PP&E> 7,857
<DEPRECIATION> 2,842
<TOTAL-ASSETS> 9,036
<CURRENT-LIABILITIES> 96,099
<BONDS> 6,089
<COMMON> 500
0
0
<OTHER-SE> (96,888)
<TOTAL-LIABILITY-AND-EQUITY> 9,036
<SALES> 3,542
<TOTAL-REVENUES> 3,542
<CGS> 3,347
<TOTAL-COSTS> 3,347
<OTHER-EXPENSES> 576
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,454
<INCOME-PRETAX> (2,535)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,535)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> 0
