FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ---------- to ------------.
Commission File Number 2-2274
ALTA GOLD CO.
------------
(Exact Name of Registrant as specified in its charter)
Nevada 87-0259249
------ ----------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
601 WHITNEY RANCH DRIVE, SUITE 10
HENDERSON, NEVADA 89014
--------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(702) 433-8525
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 the Registrant's Common Stock as of
March 31, 1996 was 28,503,613.
-1-
ALTA GOLD CO.
INDEX
Page
PART I Financial Information Number
Item 1 Financial Statements
Condensed Balance Sheets as of
March 31, 1996 and December 31, 1995 . . . . . . 3
Condensed Statements of Operations for the
Three Months Ended March 31, 1996 and 1995 . . . . 5
Condensed Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 . . . . 6
Notes to Condensed Financial Statements . . . . . 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations . . 10
PART II Other Information
Item 6 Exhibits and Reports on Form 8-K . . . . . . . 13
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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ALTA GOLD CO.
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CONDENSED BALANCE SHEETS
-----------------------
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
March 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 804,000 $ 369,000
Receivables 109,000 110,000
Inventories 3,552,000 4,251,000
Prepaid expenses and other 134,000 91,000
------------- ------------
Total current assets 4,599,000 4,821,000
PROPERTY, BUILDINGS AND EQUIPMENT, net
Mining properties and claims 18,567,000 18,550,000
Buildings and equipment 15,273,000 15,063,000
------------- ------------
33,840,000 33,613,000
Less - accumulated depreciation ( 8,691,000) ( 8,049,000)
------------- -----------
Total property and equipment, net 25,149,000 25,564,000
DEFERRED MINE DEVELOPMENT COSTS, net 9,751,000 9,178,000
OTHER ASSETS 925,000 836,000
----------- -----------
Total assets $40,424,000 $40,399,000
=========== ============
</TABLE>
The accompanying notes to condensed financial statements are an integral part
of these statements.
-3-
ALTA GOLD CO.
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CONDENSED BALANCE SHEETS (continued)
-----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
March, 31, December 31,
1996 1995
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 339,000 $1,064,000
Accrued liabilities 1,111,000 1,149,000
Current portion of long-term debt 3,055,000 2,920,000
------------ -----------
Total current liabilities 4,505,000 5,133,000
LONG-TERM DEBT, net of current portion 3,258,000 3,297,000
DEFERRED INCOME TAXES 755,000 755,000
OTHER LONG-TERM LIABILITIES 705,000 826,000
------------ -----------
Total liabilities 9,223,000 10,011,000
------------ -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; authorized
40,000,000 shares, issued 28,503,613 and
28,452,780 shares, respectively 29,000 28,000
Additional capital 42,439,000 42,360,000
Accumulated deficit ( 11,267,000) ( 12,000,000)
----------- ------------
Total stockholders' equity 31,201,000 30,388,000
------------ ------------
Total liabilities and stockholders'
equity $40,424,000 $40,399,000
============ ============
</TABLE>
The accompanying notes to condensed financial statements are an integral
part of these statements.
-4-
ALTA GOLD CO.
--------------
CONDENSED STATEMENTS OF OPERATIONS
-----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1996 1995
------- ------
<S> <C> <C>
REVENUE:
Sales of gold and other metals $5,185,000 $2,695,000
----------- -----------
OPERATING COSTS AND EXPENSES:
Direct mining, production and
holding costs 3,260,000 1,826,000
General and administrative 373,000 365,000
Exploration 2,000 9,000
Depreciation, depletion and amortization 774,000 344,000
------------ ------------
4,409,000 2,544,000
------------ ------------
Income from operations 776,000 151,000
------------ ------------
OTHER INCOME (EXPENSE), net:
Gain on sale of assets - 2,425,000
Interest income and other 28,000 46,000
Interest expense and other ( 71,000) ( 83,000)
------------- -----------
( 43,000) 2,388,000
------------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 733,000 2,539,000
PROVISION FOR INCOME TAXES - -
------------- ------------
NET INCOME $ 733,000 $2,539,000
============= ============
NET INCOME PER SHARE:
Primary $ 0.02 $ 0.09
============= ============
Fully diluted $ 0.02 $ 0.09
============= ============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary 31,335,582 28,953,911
============= ============
Fully diluted 31,509,315 29,073,140
============= ============
</TABLE>
The accompanying notes to condensed financial statements are an integral
part of these statements.
-5-
ALTA GOLD CO.
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CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 733,000 $2,539,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation, depletion and
amortization 774,000 344,000
Net gain on sale of assets - ( 2,425,000)
Stock compensation 80,000 47,000
Decrease (increase) in:
Short-term investments - ( 88,000)
Receivables 1,000 322,000
Inventories 699,000 ( 704,000)
Prepaid expenses and other ( 132,000) ( 226,000)
Increase (decrease) in:
Accounts payable ( 725,000) ( 1,450,000)
Accrued and other liabilities ( 189,000) 372,000
---------- ----------
Net cash provided by (used in)
operating activities 1,241,000 ( 1,269,000)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment ( 227,000) ( 526,000)
Additions to deferred mine development costs ( 646,000) ( 693,000)
Proceeds from sale of property, buildings
and equipment - 2,425,000
---------- -----------
Net cash provided by (used in)
investing activities ( 873,000) 1,206,000
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 500,000 1,250,000
Payment on debt ( 433,000) ( 1,000,000)
---------- ----------
Net cash provided by financing activities 67,000 250,000
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 435,000 187,000
CASH AND CASH EQUIVALENTS, beginning of period 369,000 471,000
---------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 804,000 $ 658,000
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest, net of
amount capitalized $ 71,000 $ 49,000
Cash paid during the period for income taxes $ 10,000 $ 45,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
During the three months ended March 31, 1996 and 1995, the
Company capitalized interest of $29,000 and $26,000, respectively, on
zero coupon debentures to deferred mine development costs.
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
-6-
ALTA GOLD CO.
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NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
(Unaudited)
Note 1. Interim Financial Statement Policies and Disclosures
- -------------------------------------------------------------
The unaudited, condensed financial statements of Alta Gold Co.
(the "Company") included herein have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally required in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading.
These interim, unaudited, condensed financial statements should
be read in conjunction with the Company's Annual Report on Form 10-
K for the year ended December 31, 1995, as filed with the Securities
and Exchange Commission. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1996.
Cash and Cash Equivalents
- -------------------------
For purposes of the balance sheets and statements of cash flows,
the Company considers all investments with an original maturity of
three months or less to be cash equivalents.
Reclamation Costs
- -----------------
Minimum standards for mine reclamation have been established by
various governmental agencies which affect certain operations of the
Company. The Company's general policy is to accrue estimated
reclamation costs during each property's productive life based on
estimated reserves using the units of production method. As of March
31, 1996 and December 31, 1995, the Company had reserved
approximately $1,361,000 and $1,596,000, respectively, for reclamation
activities of which approximately $456,000 is expected to be expended
during the last nine months of 1996.
Income Taxes
- ------------
No provision for income taxes was required in either 1996 or 1995
because of the utilization of net operating loss carryforwards. As of
March 31, 1996, the Company estimates that it has approximately
$18,250,000 in remaining net operating loss carryforwards. These net
operating loss carryforwards are scheduled to expire during the period
2005 to 2009.
-7-
Net Income per Share
- --------------------
Net income per share is computed based on the weighted-average
number of shares and common stock equivalents, if dilutive, actually
outstanding during the period.
On a primary basis, net income per share is based on common
stock equivalents adjusted to reflect additional shares that would be
outstanding using the treasury stock method assuming exercise of
dilutive stock warrants and stock options having exercise prices less
than the average market price plus additional shares assumed to be
issued upon conversion of the 6% convertible debentures for all periods
presented (when the period end market price is greater than $4.00).
On a fully diluted basis, net income per share is based on common
stock equivalents adjusted to reflect additional shares that would be
outstanding using the treasury stock method assuming exercise of
dilutive stock warrants and stock options having exercise prices less
than the period end market price (when greater than the average
market price) plus additional shares assumed to be issued upon
conversion of the 6% convertible debentures for all periods presented
(when the period end market price is greater than $4.00).
Note 2. Inventories
- --------------------
<TABLE>
<CAPTION>
Inventories consist of the following:
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Precious metals:
Refined products $ 73,000 $ 238,000
In process 3,300,000 3,765,000
Consumable supplies 179,000 248,000
---------- ----------
$3,552,000 $4,251,000
========== ==========
</TABLE>
Inventories of in-process metals and consumable supplies are
valued at the lower of cost (using the first-in, first-out method) or
market. Inventories of refined products are valued at market.
-8-
Note 3 - Long-Term Debt
- -------------------------
<TABLE>
<CAPTION>
Long-term debt is summarized as follows:
March 31, December 31,
1996 1995
--------- -----------
<S> <C> <C>
Notes payable; interest at 16.1%; due at various
dates between April 1998 and June 1998;
secured by equipment $615,000 $673,000
Amount due under a bank credit facility; interest
at prime plus 2%; due September 1996;
secured by equipment
750,000 1,125,000
Note payable; interest at 10%; due September 1996;
unsecured
50,000 50,000
Note payable to a bank; interest at 12%;
due December 31, 1996; secured by property
and equipment
500,000 -
6% Subordinated convertible debenture payable to
Gold Express; due June 1996
1,500,000 1,500,000
6% Subordinated convertible debenture payable to
Gold Express; due June 1998
1,500,000 1,500,000
Zero coupon $4,000,000 subordinated debenture
payable to Gold Express; discounted at an
imputed rate of 9%; due June 2008
1,398,000 1,369,000
----------- ----------
6,313,000 6,217,000
Less - current portion (3,055,000) (2,920,000)
----------- -----------
Total long-term debt $3,258,000 $3,297,000
=========== ===========
</TABLE>
The 6% subordinated convertible debentures are convertible at the
option of the holder into common stock at any time prior to maturity or
earlier redemption at a conversion price of $4.00 per share of the
Company's common stock. The debentures may be prepaid and
redeemed by the Company without penalty or premium at any time
prior to maturity. The debentures are subject to a right of offset in the
event that the Company suffers any loss, cost, damage, injury or
expense as a result of a breach by Gold Express of any provision of
the asset purchase agreement under which the debentures were
issued. The Company has identified several breaches made by Gold
Express and has notified Gold Express that it intends to exercise this
right of offset. The amounts involved and the ultimate resolution of this
matter have not yet been determined.
-9-
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 provides a
'safe harbor' for forward-looking statements. Certain information
included herein contains statements that are forward-looking, such as
statements relating to plans for future production and development
activities as well as other capital spending, financing sources and the
effects of regulation. Such forward-looking information involves
important risks and uncertanties that could significantly affect
anticipated results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements made
herein. These risks and uncertainties include, but are not limited to,
those relating to the market price of metals, production rates,
production costs, the availability of financing, the ability to obtain and
maintain all of the permits necessary to put and keep properties in
production, development and construction activities and dependence
on existing management. The Company cautions readers not
to place undue reliance on any such forward-looking statements, and
such statements speak only as of the date made.
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THREE-MONTH PERIODS ENDED MARCH 31,
1996 and MARCH 31, 1995.
In the first quarter of 1996, the Company had $5,185,000 in
revenue from the sale of 12,900 ounces of gold at an average price of
$402/oz, as compared to $2,695,000 in revenue in 1995 from the sale
of 6,900 ounces of gold at an average price of $390/oz. In the first
quarter of 1996, the Company produced 12,417 ounces of gold,
11,092 ounces from Kinsley at an average cash cost of $243/oz and
1,325 ounces from pad-rinsing at Easy Junior. In 1995, the Company
produced 6,911 ounces of gold, 2,859 ounces from Kinsley at an
average cash cost of $231/oz and 4,052 ounces from Easy Junior at
an average cash cost of $274/oz. The increase in cash production
costs at Kinsley from $231/oz to $243/oz between comparable periods
is principally due to mobilization, de-mobilization and stripping costs
incurred in the first quarter of 1996 associated with shifting production
from the Main deposit, which has been depleted, to the Upper and the
Access deposits.
Gold production at Kinsley began in late January 1995. Mining at
Easy Junior was completed in the third quarter of 1994; however, gold
production is expected to continue through June 1996, as the
remaining mined ore is processed and the leach pad is rinsed. The
increase in revenue from $2,695,000 to $5,185,000 between
comparable quarters is principally due to having Kinsley in production
for the entire first quarter of 1996, as partially offset by the winding
down of production at Easy Junior. The increase in direct mining,
production and holding costs from $1,826,000 to $3,260,000 between
comparable periods is directly related to the increase in production.
The changes in general and administrative expenses and
exploration expenses between comparable periods were immaterial.
General and administrative expenses increased slightly from $365,000
to $373,000 and exploration expenses decreased from $9,000 to
$2,000. As the result of the Company's focus on developing
Olinghouse, Copper Flat and Griffon, exploration expense was de
minimis in the first quarter of both 1996 and 1995.
The increase in depreciation, depletion and amortization from
$344,000 in 1995 to $774,000 in 1996 is principally due to the
depreciation, depletion and amortization of various costs associated
with Kinsley, which was in production for the entire first quarter of
1996.
-10-
In the first quarter of 1995, the Company sold its remaining royalty
interest in the Robinson Copper Property for a net gain of $2,425,000;
there were no similar transactions in 1996. Interest income and other
decreased from $46,000 in 1995 to $28,000 in 1996 principally as the
result of lower average balances of cash available for investment in
1996. Interest expense and other decreased from $83,000 in 1995 to
$71,000 in 1996 principally due to financing fees incurred in 1995.
No provision for income taxes was required in either 1996 or 1995
because of the utilization of net operating loss carryforwards. As of
March 31, 1996, the Company estimates that it has approximately
$18,250,000 in remaining net operating loss carryforwards. These net
operating loss carryforwards are scheduled to expire during the period
2005 to 2009.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of March 31, 1996, the Company had $94,000 in working
capital, a $406,000 improvement from the December 31, 1995 working
capital deficit of $312,000. This improvement was expected and is
principally due to internal funds generated from gold production at
Kinsley. The Company believes that production from Kinsley will
provide adequate liquidity for the Company's operational needs during
the remainder of 1996. Outside financing, whether from debt or equity
or through joint ventures or similar arrangements, will be required to
begin site development and construction at Olinghouse and Copper
Flat. See 'Outlook' below.
INVESTING AND FINANCING ACTIVITIES
- ----------------------------------
During the first quarter of 1996, the Company expended $227,000,
principally for equipment at Kinsley, and $646,000 for the development
of Olinghouse, Copper Flat and Griffon. During the same period,
the Company received $500,000 in short-term financing and retired
$433,000 of debt.
OUTLOOK
- -------
During the remainder of 1996, the Company has budgeted cash
expenditures of $2,200,000 for mine development, excluding site
development and construction, of Olinghouse, Copper Flat and Griffon,
$1,500,000 for debt repayments and $456,000 for reclamation. These
expenditures are expected to be funded from revenues generated from
gold production at Kinsley
As reported in the Company's report on Form 10-K for the year
ended December 31, 1995, the Company at that time had tentatively
budgetd an additional $17,000,000 in expenditures during 1996 for site
development and construction at Olinghouse and Copper Flat. Since
that time the Company has been informed by the Bureau of Land
Management that the scheduled final approval of the Environmental
Impact Statement for Copper Flat has been deferred from August to
November 1996. As a result of this change in schedule, the
Company's 1996 estimate has been reduced to $10,000,000 --
$5,000,000 for Olinghouse and $5,000,000 for Copper Flat. At
Olinghouse, these expenditures would primarily be for development
drilling. At Copper Flat, these expenditures would primarily be for site
preparation, equipment purchases and plant construction. The
Company is currently in the process of permitting both Olinghouse and
Copper Flat and investigating potential sources of financing. The
Company expects to be able to obtain all of the necessary permits and
the necessary financing; however, there is no assurance that the
Company will be able to find external sources of capital or that the
necessary permits will be obtained.
-11-
Budgeted cash expenditures are estimates, subject to certain
assumptions regarding future events which cannot be predicted with
total accuracy and which may be beyond the control of the Company.
Nevertheless, the Company expects to meet its obligations.
As of March 31, 1996, the Company had sold forward 15,000
ounces of gold for delivery during the remainder of 1996 at an average
price of $400 per ounce.
The Company's business is subject to various risk factors, some of
which are discussed in the Company's report on Form 10-K for the
year ended December 31, 1995, "Items 1 and 2. Business and
Properties - Risk Factors."
-12-
PART II OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None.
(b) No reports were filed on Form 8-K during the three-month period
ended March 31, 1996.
-13-
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALTA GOLD CO.
------------
(Registrant)
May 9, 1996 BY: /s/ John A. Bielun
- ----------- ------------------------
(Date) John A. Bielun
Chief Financial Officer and
Principal Accounting Officer
-14-
