SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 1995
FISCHER-WATT GOLD COMPANY, INC.
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(Exact name of registrant as specified in charter)
NEVADA 0-17386 88-0227654
- -----------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) file number) Identification No.)
1621 North 3rd Street, Suite. 1000 Coeur d'Alene, Idaho 83814
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 208-664-6757
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1
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- ------ -------------------------------------
On August 28, 1995, Fischer-Watt Gold Company, Inc. ("FWG") entered into an
agreement with Greenstone Resources Ltd., ("Greenstone") to acquire the Oronorte
property in northern Colombia, which includes the El Limon Mine, an underground
gold mine, and the rights to several exploration concessions effective August
24, 1995.
On October 20, 1995, FWG closed the acquisition from Greenstone. All of the
outstanding shares of Greenstone Resources of Colombia Ltd. ("GRC"), a Bermuda
corporation were acquired. GRC owns 61,540,000 shares of Compania Minera
Oronorte S.A.("Oronorte"). FWG completed the acquisition of 470,000 shares of
Oronorte from Minas Santa Rosa, a subsidiary of Greenstone. Also on such date,
FWG completed the acquisition of 2,800,000 shares of Oronorte from Dual
Resources. This significant acquisition resulted in FWG owning, directly or
indirectly, 99.9% of Oronorte, which owns the El Limon Mine, a small underground
gold mine in the Department of Antioquia, Colombia. FWG assumed operational
control of Oronorte on August 24, 1995.
In exchange for the various interests in Oronorte, FWG conveyed to Greenstone,
all of its interests in Minerales de Copan S.A. de C.V., ("Copan") which
included shares and options to purchase shares totaling approximately eight
percent of Copan. Copan owns the San Andres Mine in Honduras. FWG's non-recourse
debt to Greenstone of $115,000 was canceled in connection with this conveyance.
The amount of consideration was not determined by reference to any particular
principle, but rather was determined solely as the result of extensive
arm's-length negotiations.
Subsequent to this acquisition, on April 24, 1996, Mr. Peter Bojtos became Vice
President and Vice Chairman of the Board of Directors for FWG. From August 1993
until August 1995, Mr. Bojtos was President and Chief Executive Officer of
Greenstone.
Item 7. Financial Statements and Exhibits.
- ------- ----------------------------------
(a) Financial Statements of Business Acquired.
------------------------------------------
(1) Greenstone Resources Ltd. of Colombia Consolidated Balance Sheets
as of December 31, 1995 and 1994 and the related Consolidated
Statements of Income (Loss) and Accumulated Deficit and of
Consolidated Statements of the two years in the Period Ended
December 31, 1995 and the Independant Auditor's Report. See pages
4-23.
2
<PAGE>
(b) Pro Forma Financial Information.
--------------------------------
(1) Fischer-Watt Gold Company, Inc. Pro Forma Condensed Consolidated
Balance Sheet (unaudited) January 31, 1996. See page 24.
(2) Fischer-Watt Gold Company, Inc. Pro Forma Condensed Consolidated
Statement of Operations (unaudited) for the year ended January
31, 1996. See page 25.
(3) Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited). See pages 26 & 27.
(c) Exhibits
---------
Exhibit Item
No. 601 Code Exhibit
- ------- -------- -------
1 2 Closing Agreement dated October 20, 1995 among
Fischer-Watt Gold Company, Inc.,and Greenstone Resources
Canada Ltd., and Greenstone Resources Ltd. Filed as exhibit
1.2 to Form 8-K filed November 3, 1995 and incorporated
herein by reference.
The following Schedules are a part of the Closing Agreement dated
October 20, 1995 among Fischer-Watt Gold Company, Inc., and Greenstone
Resources Canada Ltd., and Greenstone Resources Ltd., and will be
provided to the Commission upon request.
Schedule 1 Assets of Greenstone of Colombia as at the
Effective Time
Schedule 2 Liabilities of Greenstone of Colombia as at the Effective
Time, including known contingent liabilities
Schedule 3 Copan Interests
2 2 August 28, 1995 agreement between Fischer- Watt Gold
Company, Inc., and Greenstone Resources Ltd., whereby
Fischer-Watt agrees to purchase 100% of Greenstone Resources
Ltd.'s wholly-owned Colombian branch, Greenstone of
Colombia, filed as Exhibit 2.2 to Form 10-QSB filed
September 15, 1995 and incorporated herein by reference.
3
<PAGE>
GREENSTONE RESOURCES LTD. OF COLOMBIA
Consolidated Financial Statements
December 31, 1995 and 1994
With Independent Auditors' Reports Thereon
4
<PAGE>
GREENSTONE RESOURCES OF COLOMBIA LTD.
Table of Contents
Independent Auditors' Reports
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Financial Position
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
5
<PAGE>
Independent Auditors' Report
------------------------------
The Board of Directors and Shareholders
Greenstone Resources Ltd.
We have audited the accompanying consolidated balance sheets of Greenstone
Resources of Colombia Ltd., Colombian Branch of Greenstone Resources Ltd., as of
December 31, 1995 and 1994, and the related consolidated statements of income
(loss) and accumulated deficit, changes in financial position and cash flows for
each of the years in the two-year period ended December 31, 1995. These
financial statements are the responsibility of the Branch management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
Except as discussed in the following paragraph, we conducted our audits in
accordance with generally accepted auditing standards in Colombia. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
We were unable to obtain sufficient evidence supporting the balance payable to
Home Office Greenstone Resources Ltd by Ps 3,259,172 thousands at December 31,
1994, and we were not able to satisfy ourselves as to the amount using other
auditing procedures.
In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to examine evidence
regarding the balance with Greenstone Resources Ltd, the financial statements
referred to in the first paragraph above present fairly, in all material
respects, the financial position of Greenstone Resources Ltd. as of December 31,
1995 and 1994, and the results of its operations, changes in its financial
position and cash flows for the years ended December 31, 1995 and 1994, in
conformity with generally accepted accounting principles in Colombia.
Generally accepted accounting principles in Colombia vary in certain significant
respects from generally accepted accounting principles in the United States.
Application of generally accepted accounting principles in the United States
would have affected results of operations for each of the years in the two-year
period ended December 31 1995 and branch' equity as of December 31, 1995 and
1994, to the extent summarized in note 12 to the financial statements.
6
<PAGE>
The accompanying financial statements have been prepared assuming that the
Branch will continue as a going concern. As discussed in Note 1 to the financial
statements, the Branch has suffered recurring losses from operations and has an
accumulated deficit that raise substantial doubt about its ability to continue
as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty
/s/ Luis Eduardo Nino Cortes
Luis Eduardo Nino Cortes
T.P. 3164-T
Medellin, Colombia
August 5, 1996
7
<PAGE>
<TABLE>
<CAPTION>
Greenstone Resources of Colombia
Consolidated Balance Sheets
December 31, 1995 & 1996
Assets
1995 1995 1994
---- ---- ----
Thousands of Thousands of constant
U.S. dollars Colombian pesos
(convenience
translation)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents ........................ US $ 140 Ps 138,143 184,191
Accounts receivable, net (note2) ................. 743 734,240 488,605
Inventories (note 4) ............................. 553 546,179 579,322
Prepaid expenses ................................. 11 10,783 8,124
------- --------- ---------
1,447 1,429,345 1,260,242
------- --------- ---------
Depletable assets, net (note 5) .................... 1,662 1,641,423 2,278,516
Property, plant and equipment, net
(note 6) ......................................... 1,984 1,959,139 2,511,822
Other assets ....................................... -- 24 6,329
------- --------- ---------
US $ 5,093 Ps 5,029,931 6,056,908
======= ========= =========
Memorandum accounts ................................ US $ 4,912 Ps 4,851,373 4,352,091
======= ========= =========
Liabilities and Branch's Equity
Current Liabilities:
Notes payable to banks ........................... -- -- 6,621
Current installments of long-term
debt (note 7) .................................. 60 59,250 634,030
Accounts payable and accured
expenses (note 8) .............................. 911 899,376 455,009
------- --------- ---------
Total current liabilities ........... 971 958,626 1,095,660
Due to related parties (note 3) .................... 4,015 3,965,251 3,259,172
Long-term debt, excluding current
installments (note 7) .......................... -- -- 62,126
------- --------- ---------
Total liabilities ................... 4,986 4,923,876 4,416,958
------- --------- ---------
Minority interest .................................. 342 337,356 429,104
Branch's equity (note 9)
Assigned capital ................................. 4,475 4,419,402 4,419,402
Reserves ......................................... -- 465 465
Equity revaluation ............................... 2,540 2,509,049 3,098,022
Accumulated deficit .............................. (7,250) (7,160,218) (6,307,044)
------- --------- ---------
Branch's equity, net ................ (235) (231,302) 1,210,845
Commitments and contingencies (note 10)
US $ 5,093 Ps 5,029,931 6,056,908
======= ========= =========
Memorandum Accounts ................................ US $ 4,912 Ps 4,851,373 4,352,091
======= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE RESOURCES LTD. OF COLOMBIA
Consolidated Statements of Income (Loss) and Accumulated Deficit
Years ended December 31, 1995, and 1994
1995 1995 1994
---- ---- ----
Thousands of Thousands of constant
U.S. dollars Colombian pesos
(convenience
translation)
<S> <C> <C> <C>
Net sales ..................................................... US $ 3,150 Ps 3,111,247 3,335,978
Costs and expenses:
Production costs ............................................ (2,627) (2,594,714) (3,235,152)
Administrative expenses ..................................... (532) (525,246) (1,124,478)
Selling expenses ............................................ (486) (479,942) (326,401)
Depreciation,depletion, and ................................. (681) (672,408) (1,050,486)
amortization
Provision inventories ....................................... (162) (160,000) --
Provision for sales settlements ............................. -- -- (145,322)
----------- ----------- -----------
(4,488) (4,432,310) (5,881,839)
Operating Loss ................................. (1,338) (1,321,063) (2,545,861)
Other income (expense)
Other income ................................................ 338 333,700 25,360
Gain (loss) on sale of assets ............................... 110 108,619 --
Foreign exchange ............................................ 292 287,959 237,674
Other ....................................................... (683) (674,727) (19,347)
Interest expense ............................................ (167) (164,600) (597,625)
Net monetary correction (note 11) ........................... 1,514 1,495,482 (372,581)
----------- ----------- -----------
1,404 1,386,433 (726,519)
Income (loss) before income taxes ............................. 66 65,370 (3,272,380)
Provision for income taxes .................................... (214) (211,251) 4,674
----------- ----------- -----------
Net loss ....................................... (148) (145,881) (3,267,705)
Accumulated deficit at begining of
period ..................................................... (6,386) (6,307,044) (5,496,237)
Effect of revaluing to constant pesos ......................... (716) (707,293) 2,456,899
----------- ----------- -----------
Accumulated deficit at end
of period ........................................... US $ (7,250) Ps (7,160,218) (6,307,044)
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE RESOURCES LTD. OF COLOMBIA
Consolidated Statements of changes in financial position
Years ended December 31, 1995, and 1994
1995 1995 1994
---- ---- ----
Thousands of Thousands of constant
U.S. dollars Colombian pesos
(convenience
translation)
<S> <C> <C> <C>
Uses of working capital:
Net Loss .................................................... US $ 148 Ps 145,882 3,267,705
Items that do not us working capital:
Depreciation, amortization, and
depletion ................................................. (681) (672,408) (1,050,486)
Loss in sale of property, plant
and equipment ............................................. 110 108,619 (30,706)
inventory Provision ........................................ (162) (160,000) (155,157)
Inflation adjustments, net ................................. 1,729 1,707,466 (232,022)
----------- ----------- -----------
Working capital used
by operations .................................. 1,144 1,129,559 1,799,334
Purchases of property, plant and
equipment .................................................. 40 39,152 111,160
Increase in depletable asset ................................ -- -- 1,005,011
Increase in deferred charges ................................ -- -- 186,867
Decrease in long-term debt .................................. -- -- 68,124
Decrease in minority interest ............................... 22 21,667 --
Decrease value added tax payable ............................ -- -- 79,392
Increase in working capital ................................. 222 219,070 451,697
----------- ----------- -----------
1,428 1,409,448 3,701,585
=========== =========== ===========
Sources of working capital:
Decrease other assets ....................................... US $ 5 Ps 5,270 58,871
Proceeds form sales of property,
plant and equipment ........................................ 115 113,830 62,410
Increase long-term debt ..................................... 53 51,980 --
Increase in minority interest ............................... -- -- 429,104
Increase in due to related parties .......................... 1,254 1,238,368 3,151,200
----------- ----------- -----------
1,427 1,409,448 3,701,585
=========== =========== ===========
Changes in components of working capital:
Increase(decrease) in current assets:
Cash and cash equivalents ................................. (16) Ps (15,966) 169,612
Accounts receivable ....................................... 330 325,434 (42,895)
Due from related parties .................................. -- -- (101,716)
Inventories ............................................... (53) (52,475) (28,310)
Prepaid expenses .......................................... 4 3,986 (52,706)
----------- ----------- -----------
265 260,979 (56,014)
Increase (decrease) in current liabilities:
Notes payable to banks ...................................... (6) (5,540) (670,449)
Currents installments of
long-term debt ............................................. (477) (471,230) 634,030
Accounts payable and
accrued expenses ........................................... 525 518,679 (242,485)
Income Tax .................................................. -- -- (228,808)
----------- ----------- -----------
42 41,909 (507,711)
----------- ----------- -----------
US $ 223 219,070 451,697
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
10
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE RESOURCES LTD. OF COLOMBIA
Consolidated Statements of cash flows
Years ended December 31, 1995, and 1994
1995 1995 1994
---- ---- ----
Thousands of Thousands of constant
U.S. dollars Colombian pesos
(convenience
translation)
<S> <C> <C> <C>
Cash flows form operating activities:
Net loss ........................................................... US $ (148) Ps (145,882) (3,267,705)
Adjustments to reconcile net loss to
net cash provided (used) by
operating activities:
Depreciation, amoritization, and
depletion ...................................................... 681 672,408 1,050,486
Inventory provision ............................................. 162 160,000 155,157
Net monetary inflation adjustment ............................... (1,729) (1,707,466) 232,021
Changes in operational assets and liabilities:
Accounts receivable ................................................ (330) (325,434) 42,896
Due from related Companies ......................................... 1,254 1,238,368 --
Inventories ........................................................ 53 52,475 28,310
Prepaid expenses ................................................... (4) (3,986) 52,706
Accounts payable and accrued expenses .............................. (31) (30,789) (94,938)
Income tax payable ................................................. -- -- (308,199)
Decrease in other assets ........................................... 5 5,270 58,871
---------- ---------- ----------
Net cash provided by
operating activities .................................. US $ (85) Ps (85,036) (2,050,395)
========== ========== ==========
Cash flows from investing activities:
Increase in depletable assets ...................................... -- -- (1,005,011)
Purchases of property, plant
and equipment ..................................................... 40 39,152 68,124
Increase in deferred charges ....................................... -- -- (141,865)
Procceds from sale of property,
plant and equipment ............................................... 115 113,830 62,124
---------- ---------- ----------
Net cash provided by
investing activities .................................. 155 152,982 (897,600)
========== ========== ==========
Cash flows from financing activities:
Increase (decrease) repayments of notes
payable and long term ............................................. (53) (51,980) 68,124
Increase in due to related parties ................................. -- -- 3,049,483
---------- ---------- ----------
Net cash provided by
financing activities .................................. (53) (51,980) 3,117,607
========== ========== ==========
Net increase in cash
and cash equivalents .................................. 16 15,966 169,612
Cash and cash equivalents at the
beginning of the period ............................................. 186 184,191 17,737
Constant pesos adjustment ............................................ (63) (62,014) (3,158)
---------- ---------- ----------
Cash and cash equivalents at the
end of the period ................................................ US $ 140 Ps 138,143 184,191
========== ========== ==========
Supplemental discloure of cash flow information-cash paid:
Interest paid ..................................................... 167 164,600 533,237
---------- ---------- ----------
Tax paid .......................................................... 137 135,488 162,752
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE>
GREENSTONE RESOURCES LTD. OF COLOMBIA
Notes to consolidated financial statements
December 31, 1995
(Expressed in thousamd of constant Colombian pesos)
(1) Operations and summary of significant accounting principles:
------------------------------------------------------------
Reporting entity
- ----------------
Greenstone Resources Ltd. of Colombia is a branch of Greenstone Resources Canada
Ltd., a Canadian corporation, legally incorporated in the city of Santafe de
Bogota in Colombia on September 11, 1987. On October 20, 1995, Fischer-Watt Gold
Company, Inc. acquired from subsidiaries of Greenstone Resources Ltd. the branch
Greenstone Resources Ltd. of Colombia
Its main objective is to perform activities in connection with the exploration,
extraction, exploitation and sale of minerals. The Branch produces concentrates
with contents of gold and silver minerals, which or are totally exported to
Nippon Mining Co. Ltd., based on a contract entered into with this entity on
June 25, 1990.
Operations
- ----------
In November 1990 the Branch finished the installation of its plant and initiated
its operating activities during December 1990. The Branch has suffered recurring
losses from operations, which exceeds 50% of the assigned capital, and has an
accumulative deficit at December 31, 1995. In order to solve these matters, the
home office has confirmed its support increasing the working capital with the
purpose of permitting to the Branch to recover its capital deficiency and the
payment of unpaid balances with financial entities, suppliers and tax.
Convenience translation (unaudited)
- -----------------------------------
For the convenience of the reader, the financial statements of the Branch
contain translations of certain Colombian peso amounts into US dollars at the
December 31, 1995 exchange rate of 986.75 pesos per US$ dollar, the rate
reported by the Superintendency of Banks. No representation is made that the
Colombian peso amounts have been, could have been, or could be converted into US
dollars at such a rate or any other rates.
Significant accounting principles
- ----------------------------------
The accompanying financial statements are prepared in accordance with generally
accepted accounting principles in Colombia:
(a) Basis of consolidation
----------------------
12
<PAGE>
The consolidated financial statements include the financial statements of
Greenstone Resources Ltd. of Colombia and its 94.92% owned subsidiary, Compania
Minera Oronorte S.A. All significant intercompany balances and transactions have
been eliminated in consolidation.
(b) Inflation accounting
--------------------
Consolidated financial statements are adjusted for the effects of inflation on
the basis of changes in the official Colombian middle income consumer Price
Index ("CPI") established by the National Administrative Statistics Department.
This index is applied, on a one- month lagging basis, to non-monetary assets and
liabilities, Branch's equity and revenue and expense accounts. Monetary balances
are not adjusted because they reflect purchasing power of the currency at the
balance sheet date. Foreign currency balances are not adjusted since they are
translated into Colombian pesos at the date of the balance sheet and
consequently reflect the purchasing power of the currency on that date.
The resulting net gain or loss from exposure to inflation is reflected as "Net
Monetary Correction" in the statement of operations. Accordingly, the "Net
Monetary Correction" reflected in the statements of operations of the Branch is
the result of netting or offsetting the following items:
. a credit for inflation affecting non-monetary assets;
. a charge for inflation affecting non-monetary liabilities
and Branch's equity; and
. charges and credits representing inflation adjustments
made to revenue and expense items, respectively. Such
adjustments are included in the individual expense and
income captions in the statements of operations.
Since monetary inflation adjustments are offset in the Net Monetary Correction
account in the statements of operations, the net effect on net income or loss
from the expense and income inflation adjustments is zero. Therefore, the only
impact on the statements of operations of the effects of inflation is
attributable to the restatement of non-monetary assets,liabilities and branch
equity accounts.
Unless expressly stated otherwise, the financial information included in the
accompanying financial statements and notes thereto for all periods presented
has been restated into constant Colombian pesos as of December 31, 1995 in order
to express all financial information in purchasing power as of that date. The
rate of inflation and the CPI factor applied to the Branch's nominal financial
statements data for each period is as follows:
Rate of inflation CPI constant
for the fiscal period peso factor
--------------------- -----------
Year ended December 31, 1994 1,1952
Year ended December 31, 1995 19,52% 1,0000
13
<PAGE>
(c) Cash and cash equivalents
-------------------------
Short-term investments with original maturities of three months or less are
considered cash equivalents for the purposes of the cash flow statements due to
their high liquidity.
(d) Inventories
-----------
Ore, concentrate and broken ore inventory are valued at de lower of average
production cost or net realizable value.
Material and supplies are valued at the lower of average cost or replacement
value.
(e) Depletable assets
-----------------
The Branch records its interest in mineral projects and areas of geological
interest at cost less expenses recoveried and receipts from exploration
agreements. Exploration costs, and development costs, are deferred until the
project to which the related expense is placed in production or abandoned.
Deferred costs are amortized over the economic life of the project following
commencement of production, by reference to the ratio of units produced to total
estimated production (proven and probable reserves), or written off if the
mineral properties or projects are sold or abandoned.
(f) Property, plant and equipment
-----------------------------
Property, plant and equipment are recorded at cost, adjusted for inflation after
January 1, 1992. Depreciation of property, plant and equipment is calculated on
the straight-line method over the estimated useful lives of the assets, as
follows:
Years
-----
Buildings 20
Office equipment 10
Computers and communication equipment 5
Vehicles 5
(g) Lease payments
--------------
Lease payments are recorded as expense. The total liability under lease
contracts is recorded in memorandum accounts. The leased asset is only booked
when the purchase option is exercised.
(h) Deferred charges
----------------
Deferred charges consist of incorporation costs and expenses during the period
of settlement and pre-operations adjusted for inflation.
14
<PAGE>
The total amount is amortized over a period not exceeding five years from the
start of the production stage that was in December 1990.
(i) Minority interest
-----------------
Minority interest includes minority ownership in Compania Minera
Oronorte S. A.
(j) Labor liabilities
-----------------
Labor liabilities are adjusted on the basis of legal regulations.
(k) Income tax
----------
Income tax is determined on the basis of estimates. The provision for income tax
which is charged to the statement of loss includes a minimum tax on imputed
income of 5% of the equity taxable at rate of 30%.
(l) Revenue recognition
-------------------
Revenue is recognized when tittle passes to the purchaser. Subsequent
adjustments based on final weights and assays are recorded when determined.
(m) Use of estimates
----------------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(n) Foreing currency transactions
-----------------------------
Foreing currency transactions are accounted for at the average market exchange
rate in effect on the date of each transaction. Balances receivable or payable
at the end of the period are adjusted to such exchange rate in effect on those
dates as published by the Superintendency of Banking.
(2) Accounts receivable
-------------------
The following is a summary of accounts receivable as of December 31:
1995 1994
---- ----
Trade Ps 308,868 413,922
Income tax 367,352 56,428
Interest -- 3,708
Other 58,020 14,547
------- -------
Ps 734,240 488,605
======= =======
15
<PAGE>
(3) Operations with related parties
--------------------------------
The following is a summary of the balances with related parties as of December
31 :
1995 1994
---- ----
Greenstone Resources Canada Ps 3,218,962 3,259,172
Fischer Watt Gold 746,289 --
--------- ---------
Ps 3,965,251 3,259,172
========= =========
(4) Inventories
-----------
Inventories consist of the following:
1995 1994
Finished products and
products in process Ps 338,209 203,929
Supplies, material and spare parts 360,540 374,807
Material and spare parts in transit 7,430 586
------- -------
Ps 706,179 579,322
Less - Allowance 160,000 --
------- -------
546,179 579,322
======= =======
(5) Depletable assets
-----------------
Depletable assets consist of the following:
1995 1994
---- ----
Capitalized exploration and
development cost Ps 4,896,891 4,741,269
Less accumulated depletion 3,255,468 2,462,753
--------- ---------
Ps 1,641,423 2,278,516
========= =========
Depletion expense was Ps 28,424 and Ps 307,256 for the year ended December 31,
1995 and year ended December 31, 1994, respectively.
(6) Property, plant and equipment
-----------------------------
Property, plant and equipment consist of the following:
1995 1994
---- ----
Land Ps 35,988 35,973
Buildings 1,160,263 1,250,639
Machinery and equipment 3,551,572 3,517,340
Furniture and fixtures 175,535 169,483
Transportation equipment 53,987 52,305
16
<PAGE>
Machinery in transit 42,696 --
--------- ---------
5,020,041 5,025,740
Less accumulated depreciation 3,060,902 2,513,918
--------- ---------
Ps 1,959,139 2,511,822
========= =========
Depreciation expense was Ps 700.832 and Ps 624,764 for the year ended December
31, 1995 and year ended December 31, 1994, respectivyle.
(7) Long - term debt
----------------
Long - term debt consists of the following:
1995 1994
---- ----
Loans payable to banks and
corporations in Colombian pesos,
interest rate between 26% and 39%,
maturing in 1996 Ps 59,250 634,030
Loan payable to bank in Colombian
pesos with interest of 36.31%,
collateralized by certain equipment. -- 62,126
------- --------
59,250 696,156
Less current installments 59,250 634,030
------- -------
Long-term debt , excluding
current installments Ps -- 62,126
======= =======
(8) Accounts payable and accrued expenses
-------------------------------------
Accounts payable and accrued expenses consist of the following:
1995 1994
---- ----
Suppliers Ps 326,753 95,794
Interest -- 8,504
Professional fees 12,139 37,082
Technical services 13,275 10,317
Insurance 36,518 10,415
Labor liabilities 35,282 20,486
Withholding taxes 97,766 --
Royalties 41,709 --
Other 335,934 272,411
------- ------
Ps 899,376 455,009
======= =======
17
<PAGE>
(9) Assigned capital
----------------
In accordance with current regulations, the Branch will be required to maintain
a legal reserve, setting aside a minimum of 10% of net income each year until
the reserve reaches 50% of the subscribed capital. Amounts appropriated to legal
reserve cannot be reduced below 50% of the subscribed capital unless they are
applied to cover losses in excess of retained earnings.
In accordance with exchange control provisions in effect, there is no limit on
dividend remittances abroad. Article 133 of the law 6 of 1992 established a rate
of 8% withholding at source on remittance of dividends or equity earned by
companies or other foreign entities without a domicile in the country. This rate
was effective through 1995, decreased to 7% for 1996 and thereafter.
(10) Commitments and contingencies
-----------------------------
The Branch has signed financial leasing agreements with purchase options for the
acquisition of drilling equipment. with maturities up to the year 1998. The
minimum leasing payments as of December 31, 1995 are as follows:
1996 Ps 186,012
1997 172,796
1998 26,679
-------
Ps 385,487
The Branch is subject to various legal proceedings, claims and liabilities which
arise in the ordinary course of its business amounting to Ps 45,000
approximately for labor claims. In the opinion of management, the amount of the
ultimate liability with respect to these actions will not have a material
adverse effect on the Branch's results of operations, cash flow or financial
position.
The tax return for the taxable years 1993, 1994 and 1995, and the exchange
declarations for exchange currency corresponding to the years 1995, 1994, 1993
and part of the year 1992, are subject to inspection by the tax authorities.
(11) Monetary Correction
-------------------
The effect of inflation on the affected accounts in the financial statements
during the years ended December 31, follows:
1995 1994
Balance sheets:
Inventories Ps 113,947 130,490
Property, plant and equipment,net 523,520 321,096
Deferred charges and depletable
assets, net 577,667 247,680
Revaluation of branch's equity (7,840) (1,023,497)
--------- ---------
1,207,294 (324,231)
Operations:
Revenues (109,528) (511,742)
Cost and expenses 397,716 463,392
--------- ---------
Income (expense), net Ps 1,495,482 (372,581)
========= =========
18
<PAGE>
(12) Summary of the Significant Differences between Colombian and
------------------------------------------------------------
United States Accounting Principles
- -----------------------------------
The Branch's financial statements are prepared in accordance with Colombian
generally accepted accounting principles (Colombian GAAP), which differ in
certain significant respects from accounting principles generally accepted in
the United States (US GAAP) as described below. The effects of price - level
adjustments have not been eliminated in the reconciliation to US GAAP not has
the Branch reflected monetary gains or losses associated with the various US
GAAP adjustments.
All material differences between Colombian GAAP and US GAAP and the effect on
net loss and total Branch's equity are presented below. The explanation of the
adjustments is described after the effect on the branch's equity.
(a) Reconciliation of net loss
--------------------------
1995 1994
---- ----
Net loss reported under
Colombian GAAP Ps 145,882 2,734,024
US GAAP adjustments for:
(a) Deferred charges -- (388,384)
(b) Lease properties (158,080) (35,623)
(c) Depletable assets (231,076) 53,565
(d) Deferred taxes (255,106) --
Less provision 255,106 --
-------- ---------
Net (income) loss under US GAAP Ps (243,275) 2,363,582
======== =========
(b) Reconciliation of Branch's equity
---------------------------------
1995 1994
---- ----
Branch's equity reported under
Colombian GAAP Ps (231,301) 1,013,089
US GAAP adjustments for:
(a) Inflation adjustments 33,201 184,935
(b) Deferred charges -- --
(c) Lease properties 196,041 37,961
(d) Depletable assets 663,371 432,295
-------- ---------
Branch's equity under US GAAP Ps 661,312 1,668,280
======== =========
19
<PAGE>
(c) Analysis of changes in Branch's equity
--------------------------------------
1995 1994
---- ----
Balance at beginning of period Ps 1,668,280 4,218,258
Effects of constant peso restatement (1,250,243) (186,396)
Net income (loss) 243,275 (2,363,582)
---------- ---------
Balance at end of period Ps 661,312 1,668,280
========== =========
(a) Inflation adjustments
---------------------
In accordance with Colombian GAAP, accounting for the effects of inflation has
been required and regulated by Colombian law since January 1, 1992. The balances
of non monetary assets as well as the balances of equity and statement of income
accounts, must be adjusted in accordance with changes in the country's general
consumer price index. Financial statements are adjusted for inflation under US
GAAP when an entity operates in a hyperinflationary environment. The US GAAP
adjustment required represents providing the cumulative inflation adjustment on
the entity's non monetary assets for inflation occurring prior to January 1,
1992.
(b) Deferred Charges
----------------
The Branch has capitalized certain costs as deferred charges. Under US GAAP such
costs would be expensed as incurred.
(c) Capital Leases
--------------
Under Colombian GAAP, lease payments are recorded as expense. The total
liability under lease contracts is recorded in memorandum accounts. The leased
asset is only recorded when the purchase option is exercised.
Under US GAAP, the cost of equipment under capital leases is recorded as an
asset and a liability is recorded for the present value of minimum lease
payments at the inception of the lease. This equipment is depreciated over the
estimated useful life of the asset.
(d) Depletion
---------
Under Colombian GAAP, depletion of depletable assets is determinated by
reference to the ratio of units produced to total estimated proved reserves
production.
Under US GAAP, depletion is determinated by reference to the ratio of units
produced to total estimated proven and probable reserves production.
(e) Deferred Tax
------------
The Branch has not recorded deferred income tax for its recurring losses due to
the question of its ability to continue as a going concern.
20
<PAGE>
Effect of Constant Peso Restatement
- -----------------------------------
To give effect to the change in the constant peso restatement to reflect the
changes in beginning and ending Branch's equity.
Additional Requirements required by US GAAP
- -------------------------------------------
(a) Concentration of Credit Risk
----------------------------
Financial instruments which potentially subject the Branch to concentration of
credit risk consist principally of accounts receivable resulting from the single
customer. The Branch does not require collateral or other security to support
receivables. The balance of receivables as of December 31, 1995 was collected
during 1996.
(b) Accounting for Impairment of Long-lived Assets and for
-------------------------------------------------------Long-lived
assets to be Disposed of
- -----------------------------------
Effective for fiscal years beginning after December 15, 1995 SFAS No.121
requires that long-lived assets and certain identifiable intangibles held by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The Branch
after quantifying the impact of SFAS 121, will not required to record an
impairment loss, given that their expected future cash flows will cover the
carrying amount of their long-lived assets.
(c) Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of cash and cash equivalents, trade and other receivables
and accounts payables approximate fair value because of the short maturity of
these instruments.
21
<PAGE>
<TABLE>
<CAPTION>
Fischer-Watt Gold Company, Inc.
Pro Forma Condensed Consolidated Balance Sheets
(unaudited)
January 31, 1996
HISTORICAL PRO FORMA
--------------------------- ---------------------------
FWG GRC ADJUSTMENTS COMBINED
(A)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash ....................................................... $ 126,000 $ 140,000 $ $ 266,000
Accounts receivable ........................................ 33,000 743,000 776,000
Due from related parties ................................... 853,000 -- (755,000)(2) 98,000
Inventories ................................................ -- 553,000 52,000(4) 605,000
Other current assets ....................................... 8,000 11,000 19,000
------------ ----------- -----------
Total current assets ................................ 1,020,000 1,447,000 1,764,000
MINERAL ASSETS ............................................... 1,661,000 1,662,000 (122,000)(1,3) 3,201,000
(4)
PROPERTY, PLANT & EQUIPMENT
Equipment .................................................. 50,000 2,000,000 (461,000)(1,4) 1,589,000
Less: Accumulated
depreciation ............................................... (32,000) (17,000) 17,000 (3,4) (32,000)
------------ ----------- -----------
Property, plant and
equipment, net ......................................... 18,000 1,984,000 1,557,000
OTHER ASSETS
Investments ................................................ 1,257,000 -- (1,257,000)(2) --
Other ...................................................... 27,000 1,000 23,000 (4) 51,000
------------ ----------- -----------
Total assets: ....................................... $ 3,983,000 $ 5,093,000 $ 6,573,000
------------ ----------- -----------
CURRENT LIABILITIES:
Accounts payable and
accrued expenses ......................................... $ 628,000 $ 911,000 593,000(1,4) $ 2,132,000
Intercompany payables ...................................... -- 4,015,000 (3,715,000)(1,2,4 ) 300,000
Notes payable to others .................................... 125,000 -- 125,000
Notes payable to banks ..................................... -- 60,000 60,000
Income payable ............................................. 96,000 -- 96,000
------------ ----------- -----------
Total liabilities: .................................. $ 849,000 $ 4,986,000 $ 2,713,000
------------ ----------- -----------
Minority Interest ............................................ -- 342,000 (342,000)(1,4) --
SHAREHOLDER'S EQUITY
(DEFICIT) ........................................... $ 3,134,000 $ (235,000) $ 961,000(1,2) $ 3,860,000
----------- ----------- (3,4) ----------
Total liabilities and
shareholder's equity ....................................... $ 3,983,000 $ 5,093,000 $ 6,573,000
------------ ----------- -----------
</TABLE>
See notes to Pro Forma Condensed Consolidated Financial Statements (unaudited).
22
<PAGE>
<TABLE>
<CAPTION>
Fischer-Watt Gold Company, Inc.
Pro Forma Condensed Consolidated Statement of Operations
(unaudited)
January 31, 1996
HISTORICAL PRO FORMA
---------------------------- -------------------------
FWG GRC ADJUSTMENTS COMBINED
(A)
<S> <C> <C> <C> <C>
REVENUES:
SALES OF PRECIOUS METALS .............................................. $ -- $ 3,150,000 192,000(4) $3,342,000
COSTS APPLICABLE TO SALES ............................................. -- 3,956,000 (320,000)(2) 3,636,000
(3,4)
GAIN ON SALE OF MINERAL
INTERESTS ............................................................. 1,528,000 -- 1,528,000
COSTS & EXPENSES:
Abandoned and impaired
mineral interests ................................................. 267,000 267,000
Selling, general
and administrative ................................................ 241,000 532,000 (211,000)(2,4) 562,000
Exploration ......................................................... 3,000 -- 3,000
Other expense (net) .................................................. 74,000 402,000 (163,000)(4) 313,000
------------ ------------ ----------
INCOME (LOSS)FROM OPERATIONS .......................................... 943,000 (1,740,000) 89,000
------------ ------------ ----------
OTHER INCOME (EXPENSE):
Gain(loss) on sale of
trading securities ................................................. 206,000 206,000
Interest expense, net ................................................ (26,000) 1,514,000 (1,561,000)(4) (73,000)
Currency exchange
gains, net .......................................................... -- 292,000 158,000(2,4) 450,000
------------ ------------ ----------
NET INCOME (LOSS) BEFORE TAXES ........................................ 1,123,000 66,000 672,000
TAX PROVISION ......................................................... (93,000) (214,000) 149,000 (158,000)
------------ ------------ ----------
NET INCOME (LOSS) ..................................................... $ 1,030,000 $ (148,000) $ 514,000
------------ ------------ ----------
EARNINGS PER SHARE .................................................... $ .07 -- $ .03
WEIGHTED AVERAGE ...................................................... 14,883,000 -- 14,883,000
SHARES OUTSTANDING
</TABLE>
See notes to Pro Forma Condensed Consolidated Financial Statements (unaudited).
23
<PAGE>
Fischer-Watt Gold Company, Inc.
Notes to Pro-Forma Condensed Consolidated Financial Statements
(unaudited)
Note A- Pro-Forma Adjustments
(1) To reflect the acquistion of GRC and the allocation of the purchase
price on the basis of the fair values of the assets acquired and
liabilities assumed. The components of the purchase price and its
allocation to the assets and liabilities of GRC are as follows:
<TABLE>
<CAPTION>
<S> <C>
Components of purchase price:
Value of net interests in Minerales de Copan, S.A. de C.V. $ 885,000
Note payable assumed 300,000
Acquistion and organization costs incurred 72,000
---------
Total purchase price $1,257,000
=========
Allocation of purchase price:
Reduction in mineral interests $ (546,000)
Reduction in equipment (636,000)
Increase in contingent reserves (500,000)
Reduction in intercompany payables 2,765,000
Reduction in minority interest 552,000
Elimination of shareholder's deficit (378,000)
----------
Allocated Purchase Price $1,257,000
=========
(2) Elimination of intercompany balances:
Intercompany payables 755,000
Intercompany receivables (755,000)
Common Stock 1,257,000
Investments (1,257,000)
Intercompany payables 198,000
Selling, general, and administrative (68,000)
Currency exchange gains, net (130,000)
(3) Reduction of depletion and depreciation for purchase price allocation adjustment
over 14 years:
Mineral interests 67,000
Accumulated depreciation 16,000
Costs applicable to sales (83,000)
(4) Adjustment to reflect restatement of GRC amounts discovered after purchase:
Balance Sheet:
Inventories $ 52,000
Mineral interests 357,000
Equipment 175,000
Accumulated depreciation 1,000
Other assets 23,000
Accounts payable (93,000)
24
<PAGE>
Intercompany payables (3,000)
Minority interest (210,000)
Shareholder's equity (951,000)
Statement of Operations:
Sales of precious metals (192,000)
Costs applicable to sales (169,000)
Selling, general, and administrative (211,000)
Other expense (163,000)
Interest expense, net 1,561,000
Currency exchange gains, net (28,000)
Tax provision (149,000)
</TABLE>
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 hereunto duly authorized.
Fischer-Watt Gold Company, Inc.
/s/ Michele D. Wood
---------------------------------------
Dated May 27, 1997 Michele D. Wood, Chief Financial Officer
25
