FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 or organization) Identification No.)
1621 North 3rd Street, Suite 1000, Coeur d'Alene, ID 83814
----------------------------------------------------------
(Address of principal executive office)
(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 outstanding of each of Issuer's classes of common equity as
of April 30, 2000.
Common Stock, par value $.001 40,298,384
----------------------------- ----------
Title of Class Number of Shares
Transitional Small Business Disclosure Format yes [ ] no [X]
<PAGE>
Index
Part 1 - Financial Statements...............................................1
1.1 Consolidated Balance Sheet...........................................2
1.2 Consolidated Statement of Operations.................................3
1.3 Consolidated Statements of Cash Flows................................5
1.4 Basis Of Presentation................................................5
1.5 Inventories..........................................................6
1.6 Stockholders' Equity.................................................6
1.7 Commitments and contingencies........................................6
Part 2 - Management's Discussion and Analysis or Plan of Operations.........6
2.1 Organization And Business............................................6
2.2 Liquidity and Capital Resources......................................6
2.2.1 Short Term Liquidity............................................6
2.2.2 Long Term Liquidity.............................................7
2.3 Results of Operations................................................7
2.4 Revenues.............................................................7
2.5 Costs and Expenses...................................................7
2.6 Commitments and Contingencies........................................8
2.7 Foreign Currency Exchange............................................8
2.8 Going Concern Consideration..........................................8
2.9 Subsequent Events....................................................9
2.10 Cautionary Note Regarding Forward-Looking Statements................9
Part 3 - Other Information..................................................9
3.1 Legal Proceedings....................................................9
3.2 Changes in Securities................................................9
3.4 Submission of Matters to a Vote of Security Holders..................9
3.5 Other information....................................................9
3.6 Exhibits and Reports on Form 8-K....................................10
<PAGE>
EXCHANGE RATES
Except as otherwise indicated, all dollar amounts described in this Form 10(k)
Annual Report are expressed in United States (US) dollars.
CONVERSION TABLE
For ease of reference, the following conversion factors are provided:
1 mile = 1.6093 kilometers 1 metric tonne = 2,204.6 pounds
1 foot = 0.305 meters 1 ounce (troy) = 31.1035 grams
1 acre = 0.4047 hectare 1 imperial gallon = 4.5546 liters
1 long ton = 2,240 pounds 1 liter = 1.057 U.S. quarts
FORWARD LOOKING STATEMENTS
The Company desires to take advantage of the "safe harbor" provisions contained
in Section 27A of the Securities Act of 1933, as amended (the "1933 Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and is including this statement herein in order to do so:
From time to time, the Company's management or persons acting on the Company's
behalf may wish to make, either orally or in writing, forward-looking statements
(which may come within the meaning of Section 27A of the 1933 Act and Section
21E of the 1934 Act), to inform existing and potential security holders
regarding various matters including, without limitation, projections regarding
financial matters, timing regarding transfer of licenses and receipts of
government approvals, effects of regulation and completion of work programs.
Such forward-looking statements are generally accompanied by words such as
"estimate," "project," "predict," "believes," "expect," "anticipate," "goal" or
other words that convey the uncertainty of future events or outcomes.
Forward-looking statements by their nature are subject to certain risks,
uncertainties and assumptions and will be influenced by various factors. Should
one or more of these forecasts or underlying assumptions prove incorrect, actual
results could vary materially.
FISCHER-WATT GOLD COMPANY, INC. AND SUBSIDIARIES
Part 1 - Financial Statements
1
<PAGE>
1.1 Consolidated Balance Sheet
April 30, 2000 (Unaudited)
ASSETS
------
Current assets:
Cash $ 6,338
Accounts receivable 173,671
Inventory 313,649
Other current assets 36,061
------------
Total current assets 529,719
------------
Mineral interests, net 172,541
Property and equipment, net 268,349
------------
440,890
------------
$ 970,609
------------
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
Current liabilities:
Accounts payable $ 2,143,062
Accounts payable and accrued expenses - shareholders 493,630
------------
Total current liabilities 2,636,692
------------
Note payable - shareholder 120,000
Stockholders' (Deficit):
Preferred stock, non-voting, convertible,
$2 par value, 250,000 shares authorized,
none outstanding --
Common stock, $.001 par value, 50,000,000
shares authorized, 40,298,384 shares
issued and outstanding 40,300
Additional paid-in capital 14,186,020
Capital stock subscribed 78,750
Accumulated deficit (16,710,320)
Accumulated other comprehensive income:
Currency translation adjustment 619,167
------------
(1,786,083)
------------
$ 970,609
============
2
<PAGE>
1.2 Consolidated Statement of Operations
Three Months Ended April 30, 1999 and 2000
(Unaudited)
1999 2000
------------ ------------
Sales of precious metals $ 488,174 $ 14,859
Costs applicable to sales 500,905 74,987
------------ ------------
Income (loss) from mining operations (12,731) (60,128)
Costs and expenses:
Exploration 95,876 --
General and administrative 87,712 208,529
------------ ------------
183,588 208,529
(Loss) from operations (196,319) (268,657)
Other income and (expense):
Interest expense (25,000) --
Currency exchange (loss) (60,283) --
Other income (expense) 383,245 1,865
------------ ------------
297,962 1,865
Net income (loss) before income taxes 101,643 (266,792)
Income taxes (benefit) 16,525 10,296
------------ ------------
Net income (loss) 85,118 (277,088)
Other comprehensive income:
Foreign currency translation adjustment 232,726 43,590
------------ ------------
Comprehensive income (loss) $ 317,844 $ (233,498)
============ ============
Per share information - basic and fully diluted
Net (loss) per share $ 0.00 $ (0.01)
============ ============
Weighted average shares outstanding 38,188,384 40,298,384
============ ============
See the accompanying notes to the consolidated financial statements.
3
<PAGE>
1.3 Consolidated Statements of Cash Flows
Three Months Ended April 30, 1999 and 2000
(Unaudited)
1999 2000
-------- --------
Cash flows from operating activities:
Net cash provided by (used in) operating activities $ (7,397) $(29,847)
-------- --------
Cash flows from investing activities:
Disposition of property and equipment 20,363 --
-------- --------
Net cash provided by (used in) investing activities 20,363 --
-------- --------
Cash flows from financing activities:
Proceeds from sale of common shares -- 10,000
Proceeds from note payable -- 20,000
-------- --------
Net cash provided by (used in) financing activities -- 30,000
-------- --------
Increase (decrease) in cash and cash equivalents 12,966 153
Cash and cash equivalents, beginning of period 18,736 6,185
-------- --------
Cash and cash equivalents, end of period $ 31,702 $ 6,338
======== ========
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000 (UNAUDITED)
1.4 Basis Of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") for interim financial
information and Item 310(b) of Regulation SB. They do not include all of the
information and footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the financial statements of the Company as of January 31,
2000 and for the two years then ended, including notes thereto included in the
Company's Form 10-KSB.
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. Intercompany transactions and balances have been
eliminated in consolidation.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
APRIL 30, 2000 (UNAUDITED)
Loss per share
Basic loss per common share was computed using the weighted average number of
common shares outstanding for the periods presented. Diluted information is not
presented as the effect of common stock equivalents would be anti-dilutive
1.5 Inventories
Inventories consist of gold and silver produced by the Company's Colombian
mining operations, work in process, raw materials used in the production process
and operating supplies. Gold and silver inventories are stated at their selling
prices reduced by the estimated cost of disposal. Raw materials and operating
supplies used in the production process are stated at the lower of cost or
replacement value. Production expenses are included in work in process
inventories using an average cost of production method and work in process
inventories are stated at their lower of cost or net realizable value.
1.6 Stockholders' Equity
During the period ended April 30, 2000 the Company accepted subscriptions for
200,000 shares of common stock for cash aggregating $10,000.
1.7 Commitments and contingencies
Oronorte is currently the defendant in several claims relating to labor
contracts and employee termination's which occurred during a labor strike. This
strike and the resulting termination's took place during the former ownership of
Oronorte. The estimated amount of the claims against Oronorte totals
approximately $200,000.
Part 2 - Management's Discussion and Analysis or Plan of Operations.
The following discussion and analysis covers material changes in financial
condition since January 31, 2000 and material changes in the results of
operations for the three months ended April 30, 2000, as compared to the same
period in 1999. This discussion and analysis should be read in conjunction with
"Management's Discussion and Analysis and Results of Operations" included in the
Company's Form 10-KSB for the year ended January 31, 2000.
2.1 Organization And Business
Fischer-Watt Gold Company, Inc. ("Fischer-Watt" or the "Company"), its
subsidiaries, and joint ventures are engaged in the business of mining and
mineral exploration. Operating activities of the Company include locating,
acquiring, exploring, developing, improving, selling, leasing and operating
mineral interests, principally those involving precious metals. The Company
presently has mineral interests in North Central Colombia. The Company's current
operational focus is its Oronorte properties, a producing gold mine near
Zaragosa, Colombia.
The Company, together with its consolidated subsidiaries, currently operates in
one business segment, mining.
2.2 Liquidity and Capital Resources
2.2.1 Short Term Liquidity
As of April 30, 2000, the Company had $6,000 in cash and accounts payable and
accrued expenses of $2.6 million.
6
<PAGE>
On April 30, 2000, the Company's current ratio of current assets to current
liabilities was less than 1:1 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 year and due and
payable within the next fiscal year. The management intends to sell or joint
venture the Colombian operations and concentrate its efforts in Mexico. The
Colombian operations have experienced labor strikes, work slow downs and general
unrest for the entire quarter. Every effort is being made to eliminate these
problems but success can not be assured.
Fischer-Watt incurred net income of $85,000 for the first three months of 1999
and a net loss of $234,000 for the period ended April 30, 2000. The loss was due
to the lack of production at the Oronorte mine. On April 30, 2000 the
accumulated deficit was $16.7 million.
Throughout the most of last year and the entire first quarter of this year the
Company has been beset by labor problems at its Oronorte Mine. This resulted in
strikes and numerous work stoppages and slow work situations during the rest of
the year. This situation is the result of political instability in the country
and agitation of the work force by outside interests. This is not expected to
change in the near future. As a result of the Colombian situation, and the
depressed selling price of gold, the Company decreased the value of its
Colombian assets by $2.4 million at the end of last fiscal year. This situation
has continued during this quarter and the production has been minimal. The
Company has had discussions with several Colombian companies concerning a
possible sale and/or joint venture operation of the mine.
2.2.2 Long Term Liquidity
It is likely that the Company will need to supplement anticipated cash from
operations with future debt or equity financing and dispositions of or joint
ventures with respect to mineral properties to fully fund its future business
plan which includes exploration projects and property development. While the
Company has been successful in capital raising endeavors in the past, there can
be no assurance that its future efforts will be successful. There can be no
assurance that the Company will be able to conclude transactions with respect to
its mineral properties or additional debt or equity financing or that such
capital raising opportunities will be available on terms acceptable to the
Company, or at all.
2.3 Results of Operations
The Company had net loss of $234,000 ($0.01 per share) compared to net income of
$85,000 ($.00 per share) in the quarter's ended April 30, 2000 and 1999,
respectively.
2.4 Revenues
The Company had sales of precious metals of $15,000 in the quarter ended April
30, 2000. The Company had sales of precious metals of $489,000 during the
quarter ended April 30, 1999. The Company does not presently employ forward
sales contracts or engage in any hedging activities. Again, the decline in sales
was due to labor and related production problems at the El Limon Mine.
2.5 Costs and Expenses
Production costs totaled $75,000 and $501,000 for the three month period ended
April 30, 2000, and April 30, 1999, respectively. The improvement of
approximately $426,000 from the prior year relates to reduction in staff and
operating expenses as the result of labor problems and lack of production.
The cost of abandoned mineral interests was $-0- in quarters ended April 30,
2000 and 1999, respectively.
Abandonment's are a natural result of the Company's ongoing program of
acquisition, exploration and evaluation of mineral properties. When the Company
determines that a property lacks continuing economic value, it is abandoned. It
cannot be determined at this time when or if any of the Company's current
property interests will be abandoned.
7
<PAGE>
Selling, general and administrative costs increased $121,000 from $88,000 in
quarter ended April 30, 1999 to $209,000 in the quarter ending April 30, 2000.
This increase was the result certain fixed costs, which would normally be
charged to operating expenses, being charged to G & A due to a lack of
production.
Exploration expense decreased to $0 in the first quarter of fiscal 1999 from
$96,000 in the first quarter of fiscal 1998. This decrease is due to the
elimination of all exploration in the United States and Colombia.
Net interest expense decreased from $25,000 during the quarter ended April 30,
1999 to $0 during the quarter ended April 30, 2000. This decrease was due to the
elimination of note due a third party in fiscal year 1999. Also, certain short
term loans and lines of credit in Colombia were eliminated.
The Company is subject to inflationary pressures of the Colombian economy.
During the past year the rate of inflation in Colombia was approximately 20%,
wherein the currency exchange rate of the U.S. dollar to the Colombian peso
increased by only 8%. The Company is striving to implement cost-cutting measures
in an effort to reduce per unit production costs and increase production
efficiencies. These cost-cutting measures include overhead reduction at both the
mine and Medellin office, and improved grade control. However, there can be no
assurance that the Company will be able to achieve such cost cutting measures
and production efficiencies. In addition, the Company cannot anticipate what the
future inflation and exchange rates will be and therefore cannot accurately
predict the aggregate effect of these factors.
Other income (expenses) was $2,000 for the quarter ending April 30, 2000 and
$383,000 for the same period in 1999. The change reflects that a large capital
item was sold in 1999.
2.6 Commitments and Contingencies
Oronorte is currently the defendant in several claims relating to labor
contracts and employee termination's which occurred during a labor strike. This
strike and the resulting termination's took place during the former ownership of
Oronorte. The estimated amount of the claims against Oronorte totals
approximately $200,000.
2.7 Foreign Currency Exchange
The Company accounts for foreign currency translation in accordance with the
provisions of Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation" ("SFAS No.52"). The assets and liabilities of the
Colombian unit are translated at the rate of exchange in effect at the balance
sheet date. Income and expenses are translated using the weighted average rates
of exchange prevailing during the period. The related translation adjustments
are reflected in the accumulated translation adjustment section of shareholders'
equity.
2.8 Going Concern Consideration
As the independent certified public accountants have indicated in their report
on the financial statements for the year ended January 31, 2000, and as shown in
the financial statements, the Company has experienced significant operating
losses which have resulted in an accumulated deficits of $16.7 million. These
conditions raise doubt about the Company's ability to continue as a going
concern.
The ability of the Company to achieve its operating goals and thus positive cash
flows from operations is dependent upon the future market price of gold, future
capital raising efforts, and the ability to achieve future operating
efficiencies anticipated with increased production levels. Management's plans
will require additional financing, reduced exploration activity, or disposition
of or joint ventures with respect to mineral properties. While the Company has
been successful in these capital raising endeavors in the past, there can be no
8
<PAGE>
assurance that its future efforts, and anticipated operating improvements will
be successful. The Company does not currently have adequate capital to continue
its contemplated business plan beyond the early part of fiscal 2000. The Company
is presently investigating all of the alternatives identified above to meet its
short-term liquidity needs. The Company believes that it can arrange a
transaction or transactions to meet its short-term liquidity needs, however
there can be no assurance that any such transactions will be concluded or that
if concluded they will be on terms favorable to the Company.
2.9 Subsequent Events
On June 7, 2000, the Company announced that it had signed a letter on intent to
sell the Oronorte operations to Groupo de Bullet, a Colombian Company. This sale
included the El Limon mine and its related support facilities as well as all of
companies the exploration and development properties in the country. The sale
price was US$3.7 million which will be paid as a 3% NSR. If Groupe de Bullet
vends the property to a third party within two years the full amount will due
upon sale, less a sales commission.
2.10 Cautionary Note Regarding Forward-Looking Statements
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made by
or on behalf of the Company herein or orally, whether in presentations, in
response to questions or otherwise. Any statements that express, or involve
discussions as to expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words or
phrases such as "will result", "are expected to", "will continue", "is
anticipated", "estimated", "projection" and "outlook") are not historical facts
and may be forward-looking and, accordingly, such statements involve estimates,
assumptions, and uncertainties which could cause actual results to differ
materially from those expressed in the forward-looking statements. Such
uncertainties include, among other, the following: (i) the Company's ability to
obtain additional financing to implement its business strategy; (ii) adverse
weather conditions and other conditions beyond the control of the Company; (iii)
imposition of new regulatory requirements affecting the Company; (iv) a downturn
in general or local economic conditions where the Company operates; (v) effect
of uninsured loss and (vi) other factors which are described in further detail
in the Company's filings with the Securities and Exchange Commission.
The Company cautions that actual results or outcomes could differ materially
from those expressed in any forward-looking statements made by or on behalf of
the Company. Any forward-looking statement speaks only as of the date on which
such statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for management to predict all of such factors. Further, management
cannot assess the impact of each such factor on the business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
Part 3 - Other Information
3.1 Legal Proceedings
None
3.2 Changes in Securities
None.
3.4 Submission of Matters to a Vote of Security Holders
None
3.5 Other information
None
9
<PAGE>
3.6 Exhibits and Reports on Form 8-K
A. Exhibits
27.1 Financial Data Schedule (For SEC purposes only)
B. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FISCHER-WATT GOLD COMPANY, INC.
-------------------------------
Date: June 19, 1999 By:/s/George Beattie
------------------- --------------------
George Beattie, President,
Chief Executive Officer
(Principal Executive Officer)
