FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] SIX MONTHS REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the six months period ended July 31, 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
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1621 North 3rd Street, Suite 1000, Coeur d'Alene, ID 83814
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(Address of principal executive office)
(208)-664-6757
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(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 July 31, 2000.
Common Stock, par value $.001 40,298,384
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Title of Class Number of Shares
Transitional Small Business Disclosure Format yes no x
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<PAGE>
Index
Exchange Rates.................................................................1
Conversion Table...............................................................1
Forward Looking Statements.....................................................1
Part 1 - Financial Statements..................................................1
1.1 Consolidated Balance Sheet..............................................2
1.4 Basis Of Presentation...................................................4
1.5 Inventories.............................................................4
1.6 Stockholders' Equity....................................................5
1.7 Commitments and contingencies...........................................5
Part 2 - Management's Discussion and Analysis or Plan of Operations............5
2.1 Organization And Business...............................................5
2.2 Liquidity and Capital Resources.........................................5
2.2.1 Short Term Liquidity...............................................5
2.2.2 Long Term Liquidity................................................6
2.3 Results of Operations...................................................6
2.4 Revenues................................................................6
2.5 Costs and Expenses......................................................6
2.6 Commitments and Contingencies...........................................7
2.7 Foreign Currency Exchange...............................................7
2.8 Going Concern Consideration.............................................7
2.9 Subsequent Events.......................................................8
2.10 Cautionary Note Regarding Forward-Looking Statements...................8
Part 3 - Other Information.....................................................8
3.1 Legal Proceedings.......................................................8
3.2 Changes in Securities...................................................8
3.4 Submission of Matters to a Vote of Security Holders.....................8
3.5 Other information.......................................................9
3.6 Exhibits and Reports on Form 8-K........................................9
ii
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Exchange Rates
Except as otherwise indicated, all dollar amounts described in this Report are
expressed in United States (US) dollars.
Conversion Table
For ease of reference, the following conversion factors are provided:
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1 mile = 1.6093 kilometers 1 metric tonne = 2,204.6 pounds
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1 foot = 0.305 meters 1 ounce (troy) = 31.1035 grams
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1 acre = 0.4047 hectare 1 imperial gallon = 4.5546 liters
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1 long ton = 2,240 pounds 1 liter = 1.057 U.S. quarts
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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.
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FISCHER-WATT GOLD COMPANY, INC. AND SUBSIDIARIES
Part 1 - Financial Statements
1.1 Consolidated Balance Sheet
Fischer-Watt Gold Company, Inc. and Subsidiaries
Consolidated Balance Sheet
July 31, 2000
ASSETS
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Current assets:
Cash $ 7,361
Accounts receivable 162,091
Inventory 313,649
Other current assets 36,062
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Total current assets 519,163
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Mineral interests, net 172,541
Property and equipment, net 268,349
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440,890
$ 960,053
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LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
Current liabilities:
Accounts payable $ 2,047,248
Accounts payable and accrued expenses - shareholders 555,980
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Total current liabilities 2,603,228
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Note payable - shareholder 183,150
Stockholders' (Deficit):
Preferred stock, non-voting, convertible,
$2 par value, 250,000 shares authorized,
none outstanding --
Common stock, $.001 par value, 50,000,000
shares authorized, 40,298,384 shares
issued and outstanding 40,300
Additional paid-in capital 14,186,020
Capital stock subscribed 78,750
Accumulated deficit (16,880,097)
Accumulated other comprehensive income:
Currency translation adjustment 748,702
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(1,826,325)
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$ 960,053
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See the accompanying notes to the consolidated financial statements.
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<TABLE>
<CAPTION>
Fischer-Watt Gold Company, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months and Six Months Ended July 31, 1999 and 2000
(Unaudited)
Three Months Six Months
------------ ----------
1999 2000 1999 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales of precious metals $ 337,009 $ -- $ 825,183 $ 14,859
Costs applicable to sales 272,275 -- 773,180 74,987
------------ ------------ ------------ ------------
Income (loss) from mining operations 64,734 -- 52,003 (60,128)
Costs and expenses:
Exploration 58,675 -- 154,551 --
General and administrative 21,404 272,362 109,116 480,891
------------ ------------ ------------ ------------
80,079 272,362 263,667 480,891
(Loss) from operations (15,345) (272,362) (211,664) (541,019)
Other income and (expense):
Interest expense (25,000) -- (50,000) --
Currency exchange (loss) (46,962) -- (107,245) --
Other income (expense) (39,665) 106,957 343,580 108,822
------------ ------------ ------------ ------------
(111,627) 106,957 186,335 108,822
Net (loss) before income taxes (126,972) (165,405) (25,329) (432,197)
Income taxes (benefit) 14,857 4,372 31,392 14,668
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Net (loss) (141,829) (169,777) (56,721) (446,865)
Other comprehensive income:
Foreign currency translation adjustment (340,098) 129,535 (107,362) 173,125
------------ ------------ ------------ ------------
Comprehensive (loss) $ (481,927) $ (40,242) $ (164,083) $ (273,740)
============ ============ ============ ============
Per share information - basic and fully diluted
Net (loss) per share $ (0.00) $ (0.00) $ (0.00) $ (0.01)
============ ============ ============ ============
Weighted average shares outstanding 38,188,384 40,298,384 38,188,384 40,298,384
============ ============ ============ ============
</TABLE>
See the accompanying notes to the consolidated financial statements.
3
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<TABLE>
<CAPTION>
Fischer-Watt Gold Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Three Months and Six Months Ended July 31, 1999 and 2000
(Unaudited)
1999 2000
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Cash flows from operating activities:
<S> <C> <C>
Net cash provided by (used in) operating activities $(184,671) $ (91,974)
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Cash flows from investing activities:
Net cash provided by (used in) investing activities (20,337) --
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Cash flows from financing activities:
Net cash provided by (used in) financing activities 100,003 93,150
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Increase (decrease) in cash and cash equivalents (105,005) 1,176
Cash and cash equivalents, beginning of period 166,882 6,185
--------- ---------
Cash and cash equivalents, end of period $ 61,877 $ 7,361
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</TABLE>
See the accompanying notes to the consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 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.
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 July 31, 2000 the Company issued no shares of common
stock.
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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 six months ended July
31, 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 and Central Mexico.
The Company's current operational focus is its Oronorte properties, a producing
gold mine near Zaragosa, Colombia and development properties in Mexico.
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 July 31, 2000, the Company had $7,400 in cash and accounts payable and
accrued expenses of $2.6 million.
On July 31, 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 six months. Every effort is being made to eliminate these
problems but success can not be assured.
Fischer-Watt incurred net loss of $57,000 for the first six months of 1999 and a
net loss of $447,000 for the period ended July 31, 2000. For the three months
ending in July 1999 and 2000 the net loss was $142,000 and $170,000
respectively. The loss was due to the lack of production at the Oronorte mine.
On July 31, 2000 the accumulated deficit was $16.9 million.
Throughout most of last year and the entire first six months 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 six months 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.
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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 $447,000 ($0.01 per share) compared to net loss of
$57,000 ($nil per share) in the six months's ended July 31, 2000 and 1999,
respectively. For the comparable three months the net loss was $170,000 ($nil
per share) and $142,000 ($nil per share).
2.4 Revenues
The Company had sales of precious metals of $15,000 and $0 for the six months
and three months ended July 31, 2000. The Company had sales of precious metals
of $825,000 and $337,000 for the six and three months ended July 31, 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 $773,000 for the six month period ended
July 31, 2000, and July 31, 1999, respectively. For the comparable three month
period the costs were $0 and $272,000.
The cost of abandoned mineral interests was $-0- in six and three months ending
July 31, 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.
Selling, general and administrative costs increased from $109,000 for the six
months ending July 31, 1999 to $481,000 for the six months ending July 31, 2000.
For the comparable three month period the costs were $21,000 and $272,000. This
increase is due primarily the restatement of unpaid officers salaries which were
not accrued in the previous fiscal year. This accrual was brought current. Also,
the increase was partially 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 six months of fiscal 2000 from
$155,000 in the first six months of fiscal 1999. For the comparable three months
period the costs decreased to $0 from $59,000. This decrease is due to the
elimination of all exploration in the United States and Colombia.
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Net interest expense decreased from $50,000 during the six months ended July 31,
1999 to $0 during the six months ended July 31, 2000. For the comparable three
months period the costs decreased to $0 from $25,000. 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 $109,000 for the six months ending July 31, 2000 and
$344,000 for the same period in 1999. For the comparable three months period the
costs were $107,000 and ($40,000). 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 $16.9 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
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.
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.
8
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2.9 Subsequent Events
In August, 2000, the Mexican government issued the Company the rights to a
series of contagious mining concessions. The concessions cover approximately 500
hectares and are located 9 km north of Lazaro Cardenas, Michoacan. Work done by
previous concession holders include 42 diamond drill holes, 35 percussion drill
holes and a preliminary feasibility study. The concession contains a total
mineral resource of 2.8 million tonnes of 1.32% Cu calculated at a cutoff of
0.15% Cu. Metallurgical testing done by Metcon Research of Tucson, Arizona,
indicates that the copper can be recovered by heap leaching and a SX-EW
processing. Financing for this project has been arranged contingent upon
completion of a bankable feasibility study.
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
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.
9
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SIGNATURES
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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.
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Date: August 14, 1999 By: /s/George Beattie
---------------------
George Beattie, President,
Chief Executive Officer
(Principal Executive Officer)
