<PAGE>
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: September 30, 1999
-----------------------------
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 of (I.R.S. Employer
incorporation or organization) Identification No.)
3663 E. Sunset Road, Suite 507, Las Vegas, Nevada 89120
- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(702) 433-8525
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- -----------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
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
------- -------
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No Not Applicable X
------- -------- -------
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
The number of shares outstanding of the registrant's common stock
as of November 10, 1999 was 34,595,108
<PAGE>
ALTA GOLD CO.
(DEBTOR-IN-POSSESSION)
TABLE OF CONTENTS
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of
September 30, 1999 and December 31, 1998 3
Condensed Statements of Operations for the
Three Months Ended September 30, 1999 and 1998 5
Nine Months Ended September 30, 1999 and 1998 6
Condensed Statements of Cash Flows for the
Nine Months Ended September 30, 1999 and 1998 7
Notes to Condensed Financial Statements 9
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 3: Quantitative and Qualitative Disclosures About
Market Risks 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURE 23
EXHIBIT INDEX 24
2
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
(DEBTOR-IN-POSSESSION)
CONDENSED BALANCE SHEETS
ASSETS
September 30,
1999 December 31,
(Unaudited) 1998
------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $290,000 $953,000
Inventories 6,794,000 7,020,000
Prepaid expenses and other 314,000 951,000
------------- ------------
Total current assets 7,398,000 8,924,000
PROPERTY AND EQUIPMENT, net
Mining properties and claims 17,185,000 17,185,000
Buildings and equipment 25,920,000 29,491,000
------------- ------------
43,105,000 46,676,000
Less - accumulated depreciation (8,723,000) (9,033,000)
------------- ------------
Total property and equipment, net 34,382,000 37,643,000
DEFERRED MINE DEVELOPMENT COSTS, net 23,100,000 24,185,000
DEFERRED FINANCING COSTS 2,034,000 2,790,000
OTHER ASSETS 638,000 950,000
------------- ------------
Total Assets $67,552,000 $74,492,000
============= ============
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
3
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
(DEBTOR-IN-POSSESSION)
CONDENSED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30,
1999 December 31,
(Unaudited) 1998
-------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $420,000 $4,403,000
Accrued liabilities 1,388,000 1,273,000
Current portion of long-term debt 15,435,000 4,821,000
-------------- --------------
Total current liabilities 17,243,000 10,497,000
-------------- --------------
LONG-TERM LIABILITIES:
Long-term debt, net of current portion 9,334,000 24,381,000
Deferred income taxes 662,000 662,000
Other long-term liabilities 362,000 995,000
-------------- --------------
Total long-term liabilities 10,358,000 26,038,000
-------------- --------------
LIABILITIES SUBJECT TO COMPROMISE 9,501,000 -
-------------- --------------
Total liabilities 37,102,000 36,535,000
-------------- --------------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value: authorized
60,000,000 shares, issued 34,595,108 and
33,478,000 shares, respectively 35,000 34,000
Additional capital 53,286,000 53,184,000
Accumulated deficit (22,871,000) (15,261,000)
-------------- --------------
Total stockholders' equity 30,450,000 37,957,000
-------------- --------------
Total liabilities and stockholders' equity $67,552,000 $74,492,000
============== ==============
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
4
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
(DEBTOR-IN-POSSESSION)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
--------------------------------
1999 1998
-------------- ------------
<S> <C> <C>
REVENUE $3,000,000 $5,237,000
-------------- ------------
OPERATING COSTS AND EXPENSES:
Direct mining, production, reclamation
and maintenance costs 4,857,000 3,987,000
General and administrative 325,000 327,000
Exploration - 118,000
Impairment of assets 2,168,000 -
-------------- ------------
7,350,000 4,432,000
-------------- ------------
INCOME (LOSS) FROM OPERATING (4,350,000) 805,000
-------------- ------------
OTHER INCOME (EXPENSE):
Interest and other income - 18,000
Loss on disposal of assets - (127,000)
Interest expense (contractual interest -
$770,000 and $0, respectively) (737,000) -
-------------- ------------
(737,000) (109,000)
-------------- ------------
INCOME (LOSS) BEFORE REORGANIZATION ITEMS
AND PROVISION FOR INCOME TAXES (5,087,000) 696,000
REORGANIZATION ITEMS (404,000) -
-------------- ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES (5,491,000) 696,000
PROVISION FOR INCOME TAXES - -
-------------- ------------
NET INCOME (LOSS) ($5,491,000) $696,000
============== ============
NET INCOME (LOSS) PER SHARE:
Basic ($0.16) $0.02
Diluted ($0.16) $0.02
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 33,850,366 32,824,085
Diluted 33,850,366 35,466,474
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
5
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
(DEBTOR-IN-POSSESSION)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended September 30,
--------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
REVENUE $16,730,000 $12,082,000
-------------- --------------
OPERATING COSTS AND EXPENSES:
Direct mining, production, reclamation
and maintenance costs 18,014,000 9,549,000
General and administrative 947,000 1,035,000
Exploration 212,000 234,000
Impairment of assets 2,168,000 -
-------------- --------------
21,341,000 10,818,000
-------------- --------------
INCOME (LOSS) FROM OPERATING (4,611,000) 1,264,000
-------------- --------------
OTHER INCOME (EXPENSE):
Interest and other income 33,000 80,000
Loss on disposal of assets - (168,000)
Interest expense (contractual interest -
$2,346,000 and $0, respectively) and other (2,285,000) -
-------------- --------------
(2,252,000) (88,000)
-------------- --------------
INCOME (LOSS) BEFORE REORGANIZATION ITEMS
AND PROVISION FOR INCOME TAXES (6,863,000) 1,176,000
REORGANIZATION ITEMS (747,000) -
-------------- --------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES (7,610,000) 1,176,000
PROVISION FOR INCOME TAXES - -
-------------- --------------
NET INCOME (LOSS) ($7,610,000) $1,176,000
============== ==============
NET INCOME (LOSS) PER SHARE:
Basic ($0.23) $0.04
Diluted ($0.23) $0.03
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 33,602,108 32,257,285
Diluted 33,602,108 35,738,870
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
6
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
(DEBTOR-IN-POSSESSION)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
---------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) ($7,610,000) $1,176,000
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation, depletion and amortization 5,953,000 2,734,000
Impairment of assets 2,168,000 -
Reorganization items 747,000 -
Loss on disposal of assets - 168,000
Decrease (increase) in -
Inventories (1,043,000) (1,854,000)
Prepaid expenses and other 631,000 (321,000)
Increase (decrease) in -
Accounts payable (pre-petition) 383,000 480,000
Accounts payable (post-petition) 420,000 -
Accrued and other liabilities (pre-petition) (797,000) 160,000
Accrued and other liabilities (post-petition) 738,000 -
-------------- -------------
Net cash provided by operating activities
before reorganization items 1,590,000 2,543,000
Net cash used by reorganization items (82,000) -
-------------- -------------
Net cash provided by operating activities 1,508,000 2,543,000
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment (759,000) (12,907,000)
Additions to deferred mine development costs (442,000) (2,568,000)
Proceeds from sale of property and equipment 113,000 45,000
-------------- -------------
Net cash used in investing activities (1,088,000) (15,430,000)
-------------- -------------
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
7
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
(DEBTOR-IN-POSSESSION)
CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Nine Months Ended September 30,
---------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt - 21,465,000
Payments on debt (1,083,000) (9,255,000)
Financing costs - (2,280,000)
-------------- -------------
Net cash provided by (used in) in financing activities (1,083,000) 9,930,000
-------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (663,000) (2,957,000)
CASH AND CASH EQUIVALENTS, beginning of period 953,000 3,330,000
-------------- -------------
CASH AND CASH EQUIVALENTS, end of period $290,000 $373,000
============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest, net of
amount capitalized $1,114,000 $ -
Cash paid during the period for income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Debt retired with common stock $ 91,000 $4,850,000
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
8
<PAGE>
ALTA GOLD CO.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENT POLICIES AND DISCLOSURES
The interim, 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.
On April 14, 1999 (the "Petition Date"), the Company filed a
voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code ("Bankruptcy Code") in order to facilitate
the reorganization of the Company's business and the
restructuring of its long-term debt and other liabilities. The
petition was filed in the United States Bankruptcy Court for the
District of Nevada ("Bankruptcy Court"). On the Petition Date,
the Bankruptcy Court assumed jurisdiction over the assets of the
Company. The Company is acting as debtor-in-possession on behalf
of its bankruptcy estate, and is authorized as such to operate
its business subject to Bankruptcy Court supervision. No
assurance can be given that the Company will remain a debtor-in-
possession or that a trustee will not be appointed to operate the
Company's business. The interim, unaudited, condensed financial
statements have been prepared assuming that the Company will
continue as a going concern. Accordingly, the interim,
unaudited, condensed financial statements do not include any
adjustments that might result if the Company is unable to emerge
successfully from bankruptcy and continue as a going concern.
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, 1998, 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 nine months ended
September 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999.
As a result of the commencement of its Chapter 11 bankruptcy
proceedings, the Company has implemented the guidance provided by
the American Institute of Public Accountants' Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code," in the preparation of these interim,
unaudited, condensed financial statements.
NOTE 2. CHAPTER 11 BANKRUPTCY PROCEEDINGS
As the result of having received an offer from a potential
investor to buy a 40% interest in Olinghouse, on August 4, 1999,
the Company filed with the Bankruptcy Court a Conditional Motion
to Dismiss the Chapter 11 bankruptcy proceeding. At the
September 8, 1999 Bankruptcy Court hearing on the Conditional
Motion to Dismiss, the Company withdrew the motion. On August 6,
1999, due to deteriorating liquidity, the Company suspended
mining, crushing and milling operations at Olinghouse in order to
conserve cash.
9
<PAGE>
The Bankruptcy Code provides that, unless the Bankruptcy
Court appoints a trustee, a debtor has the exclusive right to
file a plan of reorganization for the first 120 days subsequent
to the filing of the petition (or for such longer or shorter
period as the Bankruptcy Court may permit). The Company has not
yet submitted a plan of reorganization. No assurance can be
given that the Company will ever be in a position to file a plan
of reorganization. On August 10, 1999, the Company filed a
request with the Bankruptcy Court to extend the bankruptcy
exclusivity period from August 12, 1999 to October 11, 1999. The
Bankruptcy Court denied this request on September 8, 1999, which
denial allows any creditor or party in interest to file its own
plan of reorganization.
The most recently issued cash collateral order approved by
the Bankruptcy Court expired on October 16, 1999. The secured
lenders, however, have consented, without a written order of the
Bankruptcy Court, to the Company's continued use of cash
collateral solely for the Company's limited operations related to
gold production from the existing ore on its heap leach pads.
On September 8, 1999, the Bankruptcy Court approved the
retention of Warrior, a division of Standard New York Trading
Corp. ("Warrior"), to act as special sales agent/financial
advisor to the Company and both its secured and unsecured
lenders. Warrior has been given the specific assignment to
(1) solicit, (2) evaluate and (3) assist in negotiation of, a
transaction or combination of transactions pertaining to a
disposition, by means of a sale, merger, consolidation or
otherwise, of all or a substantial part of the assets of the
Company. The Company's own efforts to sell an interest in
Olinghouse are continuing. No assurance can be given that either
Warrior or the Company will be able to complete the necessary
transactions to allow the Company to resume mining operations.
In the event such transactions are not consummated within a very
short period of time, the Company is not expected to be able to
continue as a going concern.
During the pendency of its Chapter 11 proceedings, the
Company's policy is to expense reorganization costs as incurred.
Through September 30, 1999, the Company has incurred $747,000 in
reorganization expenses, including $728,000 in professional fees,
of which $78,000 had been paid as of September 30, 1999. All
professional fees incurred subsequent to the Petition Date (and
in connection with the Company's reorganization efforts) require
approval by the Bankruptcy Court prior to the Company making
payment.
Under Chapter 11 bankruptcy proceedings, actions to enforce
claims against the Company or the Company's property are stayed
pending further order of the Bankruptcy Court if those claims
arose, or are based on events that occurred, on or before the
Petition Date, and such claims cannot be paid or restructured
prior to the conclusion of the Chapter 11 proceedings or approval
of the Bankruptcy Court. The Bankruptcy Court established
August 16, 1999 as the bar date for filing claims; however late-
filed claims may be considered by the Bankruptcy Court. All
undisputed pre-petition claims are reported as Liabilities
Subject to Compromise in the accompanying September 30, 1999
Condensed Balance Sheet. Any additional liabilities, which may
arise as the result of the rejection of executory contracts or
the Bankruptcy Court's resolution of claims for contingencies and
other disputed amounts, cannot be determined at this time.
10
<PAGE>
NOTE 3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Precious metals:
Refined products $ 311,000 $ 946,000
In process 6,392,000 5,945,000
Consumable supplies 91,000 129,000
------------- -------------
$ 6,794,000 $ 7,020,000
============= =============
</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.
NOTE 4. WRITE-DOWN OF ASSETS
In the third quarter of 1999, the Company recorded a
$2,168,000 write-down related to an asset impairment loss on
Griffon. The write-down was necessitated by an unanticipated and
precipitous deterioration in the recovery rate of the ore on the
leach pad. The asset impairment loss included an inventory write-
down of $1,269,000, a property and equipment write-down of
$480,000, a deferred mine development cost write-down of $266,000
and a $153,000 increase in accrued reclamation costs.
NOTE 5. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
Term loan with Standard Chartered Bank,
Credit Agricole Indosuez and Gerald
Metals; interest at LIBOR plus 2%; due
December 31, 2001; principal payments
payable in 11 equal quarterly
installments, commencing June 30, 1999;
secured by a first priority mortgage lien
on Olinghouse, Griffon, Copper Flat and
Kinsley $11,000,000<F1> $11,000,000
Revolving credit loan with Standard
Chartered Bank, Credit Agricole Indosuez
and Gerald Metals; interest at LIBOR plus
2%; due October 31, 1999; secured by a
first priority mortgage lien on
Olinghouse, Griffon, Copper Flat and
Kinsley 6,000,000<F1> 6,000,000
Note payable; interest at 12% payable
quarterly; due January 2, 2000; secured
by property 1,400,000<F2> 1,400,000
Convertible debentures; interest at 4%
payable quarterly; due April 14, 2000;
unsecured -<F3> 3,350,000
Notes payable; interest at various rates
of 7.6 % to 9.1%; due at various dates
between July 2000 and June 2002; secured
by equipment 6,369,000<F4> 7,452,000
-------------- -------------
24,769,000<F5> 29,202,000
Less - current portion (15,435,000) (4,821,000)
-------------- -------------
Total long-term debt $9,334,000 $24,381,000
============== =============
__________________________
<FN>
<F1> The revolving credit and term loans contain certain
financial covenants including requirements for Minimum Net
Worth, Minimum Current Ratio, Maximum Leverage Ratio,
Minimum EBITDA to Interest Expense, Minimum EBITDA to
Interest Expense and Principal and Maximum Allowable
Capital Expenditures, as defined. As of September 30,
1999, the Company was not in compliance with any of the
financial covenants except for the financial covenant
pertaining to Maximum Allowable Expenditures. In
addition, the Company was unable to pay the $1,000,000
quarterly principal installments which became due on
June 30, 1999 and September 30, 1999 and the $316,000
quarterly interest payment which also became due on
September 30, 1999.
<F2> The Company was unable to pay the $42,000 quarterly
interest payments which became due on June 30, 1999 and
September 30, 1999.
<F3> Reclassified under "Liabilities Subject to Compromise."
<F4> The Company was unable to pay $44,000 in installment
obligations that came due in July 1999, $188,000 that
became due in August 1999 and another $188,000 that became
due in September 1999; the result of which has made the
underlying collateral subject to foreclosure.
<F5> In addition to all of the above, the Company's Chapter 11
bankruptcy petition that was filed on April 14, 1999 also
triggered events of default under all of the Company's
indebtedness.
</FN>
</TABLE>
NOTE 6. LIABILITIES SUBJECT TO COMPROMISE
Liabilities subject to compromise under the reorganization
proceedings consist of the following as of:
<TABLE>
<CAPTION>
September 30,
1999
--------------
<S> <C>
Accounts payable $4,786,000
Accrued expenses 1,456,000
Convertible debentures 3,259,000
--------------
$9,501,000
==============
</TABLE>
12
<PAGE>
The Company ceased accruing interest on the convertible
debentures (the "Debentures") as of the Petition Date.
NOTE 7. REORGANIZATION ITEMS
Reorganization Items consist of the following for the nine
month period ended:
<TABLE>
<CAPTION>
September 30, 1999
-------------------
<S> <C>
Professional fees $728,000
Loss on disposal of assets 15,000
Bankruptcy Trustee Fees 10,000
Other expenses 7,000
Interest income (post-petition) (13,000)
-------------------
$747,000
===================
</TABLE>
Net cash used by Reorganization Items include the following
for the nine month period ended:
<TABLE>
<CAPTION>
September 30, 1999
------------------
<S> <C>
Professional fees $78,000
Bankruptcy Trustee Fees 10,000
Other expenses 7,000
Interest income (post-petition) (13,000)
------------------
$82,000
==================
</TABLE>
Costs and expenses related to the reorganization of the
Company have been separately classified as Reorganization Items
in the Condensed Statements of Operations and Condensed
Statements of Cash Flows for the period subsequent to the
Petition Date. Prior to the Petition Date, certain similar costs
and expenses (if any) are classified as general and
administrative expenses in the Condensed Statements of
Operations.
NOTE 8. COMMITMENTS AND CONTINGENCIES
On April 1, 1999, a complaint was filed in the Second
Judicial District Court of the State of Nevada for the County of
Washoe (Mitchell W. Fanning, et al. v. Alta Gold Co., et al.)
against the Company. The complaint purports to seek relief on
behalf of a group of individuals doing business as "Babe Mines"
who leased to the Company certain mining claims which constitute
an integral part of the Olinghouse mine. Specifically, the
complaint seeks (i) a judicial declaration that the lease of
mining claims to the Company has been terminated, (ii) money
damages for alleged trespass and conversion, and (iii) a judicial
declaration that plaintiffs own an ore body within a mining claim
owned by the Company by reason of "extralateral rights" pursuant
to 30 U.S.C. Sec. 26 (1994). Following the Company's filing of a
Chapter 11 petition, the plaintiffs removed the action to the
Bankruptcy Court. The Company has filed an answer to the
complaint, as well as a counter-claim against the plaintiffs, and
has joined as third-party defendants its other lessors at
Olinghouse in order to avoid piecemeal litigation and to address
potential boundary disputes and claims of "extralateral rights"
by the other lessors. Discovery in the litigation has just
commenced and a ten-day trial is
13
<PAGE>
tentatively scheduled to begin on August 7, 2000. No assurance
can be given that the Company will prevail or otherwise obtain a
satisfactory result in this matter.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 PROVIDES
A "SAFE HARBOR" FOR FORWARD-LOOKING STATEMENTS. CERTAIN
INFORMATION INCLUDED HEREIN CONTAINS STATEMENTS THAT ARE FORWARD-
LOOKING, SUCH AS STATEMENTS REGARDING MANAGEMENT'S EXPECTATIONS
REGARDING THE COMPANY'S ABILITY TO FILE A PLAN OF REORGANIZATION
OR TO EMERGE SUCCESSFULLY FROM CHAPTER 11 BANKRUPTCY PROCEEDINGS,
TO SELL ANY ASSETS OR AN INTEREST IN ANY ASSETS, TO RESUME MINING
OPERATIONS, OR TO CONTINUE OPERATING AS A GOING CONCERN. SUCH
FORWARD-LOOKING INFORMATION INVOLVES IMPORTANT RISKS AND
UNCERTAINTIES 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 SOURCES OF CASH NECESSARY TO MEET
OBLIGATIONS, THE MARKET PRICE OF METALS, PRODUCTION RATES,
PRODUCTION COSTS, THE SUCCESSFUL PREPARATION AND APPROVAL OF A
PLAN OF REORGANIZATION FOR THE COMPANY, 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, DEPENDENCE ON EXISTING MANAGEMENT
AND WEATHER CONDITIONS. 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.
OVERVIEW
On April 14, 1999 (the "Petition Date"), the Company filed a
voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code ("Bankruptcy Code"). Since the Petition
Date, the Company has functioned as a debtor-in-possession on
behalf of the bankruptcy estate, and as such, is authorized to
operate its business subject to Bankruptcy Court supervision. No
assurance can be given that the Company will remain a debtor-in-
possession or that a trustee will not be appointed to operate the
Company's business.
As the result of having received an offer from a potential
investor to buy a 40% interest in Olinghouse, on August 4, 1999,
the Company filed with the Bankruptcy Court a Conditional Motion
to Dismiss the Chapter 11 bankruptcy proceeding. At the
September 8, 1999 Bankruptcy Court hearing on the Conditional
Motion to Dismiss, the Company withdrew the motion.
On August 6, 1999, due to deteriorating liquidity, the
Company temporarily suspended mining, crushing and milling
operations at Olinghouse in order to conserve cash; however, no
assurance can be given that the Company will ever be in a
position to resume mining operations. Until the suspension of
mining operations, Olinghouse was the Company's only fully
operational mine. Mining operations at Griffon ceased in April
1999, but gold production is expected to continue at Griffon in
declining amounts through year-end 1999. Due to an unanticipated
and precipitous deterioration in the recovery rate of the ore on
the leach pad, the Company recorded an asset impairment loss on
Griffon in the third quarter.
The Bankruptcy Code provides that, unless the Bankruptcy
Court appoints a trustee, a debtor has the exclusive right to
file a plan of reorganization for the first 120 days subsequent
to the filing of the petition (or for such longer or shorter
period as the Bankruptcy Court may permit). The Company has not
yet submitted a plan of reorganization. No assurance can be
given that the
14
<PAGE>
Company will ever be in a position to file a plan of
reorganization. On August 10, 1999, the Company filed with the
Bankruptcy Court a request to extend the bankruptcy exclusivity
period from August 12, 1999 to October 11, 1999. The Bankruptcy
Court denied this request on September 8, 1999, which denial
allows any creditor or party in interest to file its own plan of
reorganization.
The Bankruptcy Court established August 16, 1999 as the bar
date for filing claims; however, late-filed claims may be
considered by the Bankruptcy Court. All undisputed pre-petition
claims are reported as Liabilities Subject to Compromise in the
accompanying September 30, 1999 Condensed Balance Sheet. Any
additional liabilities, which may arise as the result of the
rejection of executory contracts or the Bankruptcy Court's
resolution of claims for contingencies and other disputed
amounts, cannot be determined at this time.
The most recently issued cash collateral order approved by
the Bankruptcy Court expired on October 16, 1999. The secured
lenders, however, have consented, without a written order of the
Bankruptcy Court, to the Company's continued use of cash
collateral solely for the Company's limited operations related to
gold production from the existing ore on its heap leach pads.
On September 8, 1999, the Bankruptcy Court approved the
retention of Warrior, a division of Standard New York Trading
Corp. ("Warrior"), to act as special sales agent/financial
advisor to the Company as well as both of its secured and
unsecured lenders. Warrior has been given the specific
assignment to (1) solicit, (2) evaluate and (3) assist in
negotiation of a transaction or combination of transactions
pertaining to a disposition, by means of a sale, merger,
consolidation or otherwise, of all or a substantial part of the
assets of the Company. The Company's own efforts to sell an
interest in Olinghouse are continuing. No assurance can be given
that either Warrior or the Company will be able to complete the
necessary transactions to allow the Company to resume mining
operations. In the event such transactions are not consummated
within a very short period of time, the Company is not expected
to be able to continue as a going concern.
RESULT OF OPERATIONS
COMPARISON OF THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND
1998
In the third quarter of 1999, the Company had $3,000,000 in
revenue from the sale of 10,700 ounces of gold at an average
price of $280/oz., as compared to $5,237,000 in revenue from the
sale of 15,600 ounces of gold at an average price of $336/oz. in
the third quarter of 1998. In the third quarter of 1999, the
Company (1) mined 120,000 tons of ore at Olinghouse with an
average grade of 0.0410 oz./ton gold containing 4,942 ounces of
gold and (2) produced 9,272 ounces of gold, including 6,456
ounces of gold from Olinghouse at an average cash cost of
$355/oz., 2,305 ounces of gold from Griffon at an average cash
cost of $252/oz., and 511 ounces of gold from Kinsley at an
average cash cost of $302/oz. In the third quarter of 1998, the
Company (1) mined 679,000 tons of ore at Griffon with an average
grade of 0.0301 oz./ton gold containing 20,470 ounces of gold,
(2) mined 118,000 tons of ore at Olinghouse with an average grade
of 0.0262 oz./ton gold containing 3,082 ounces of gold, and
(3) produced 15,035 ounces of gold, including 12,901 ounces of
gold from Griffon at an average cash cost of $133/oz., 2,127
ounces of gold from Kinsley at an average cash cost of $320/oz.,
and seven ounces of gold from the initial shakedown run of the
mill at Olinghouse. Mining at Griffon began in September 1997
and was suspended in April 1999, with production of refined gold
beginning in January 1998 and expected to continue in declining
amounts through year-end 1999. Mining at Olinghouse began in
July 1998 and production of refined gold from the initial
shakedown run of the mill began in September 1998 and from the
leach pad in December 1998. On
15
<PAGE>
August 6, 1999, the Company suspended mining, crushing and
milling activities at Olinghouse due to liquidity problems.
Mining at Kinsley was completed in early March 1998, with gold
production from pad rinsing expected to be essentially done by
year-end 1999.
The decrease in revenue from $5,237,000 in the third quarter
of 1998 to $3,000,000 in the third quarter of 1999 is primarily
due to (1) the decrease in the average selling price of gold,
from $336/oz. in the third quarter of 1998 to $280/oz. in the
third quarter of 1999, (2) the completion of mining at Griffon in
April 1999, and (3) the completion of mining at Kinsley in March
1998, as partially offset by the partial ramp-up in production at
Olinghouse. The decrease in the average selling price is due to
the Company using up all of its $335/oz. gold hedges in early May
1999 and having to revert to using its $280/oz. gold hedges
thereafter, as compelled by the deterioration of the price of
gold. The average spot price of gold decreased from $288/oz. in
the third quarter of 1998 to $259/oz. in the third quarter of
1999.
Direct mining, production, reclamation and maintenance costs
increased from $3,987,000 in the third quarter of 1998 to
$4,857,000 in the third quarter of 1999 primarily as the result
of (1) continuing production problems at Olinghouse and (2) an
unexpected increase in unit production costs at Griffon, from
$133/oz. in the third quarter of 1998 to $252/oz. in the third
quarter of 1999. Direct mining, production, reclamation and
maintenance costs for the third quarter of 1999 exceeded revenues
by $1,857,000 principally because of (1) lower than expected gold
production at both Olinghouse and Griffon and (2) the higher than
average fixed costs associated with operating and maintaining
Olinghouse.
The decrease in general and administrative expenses from
$327,000 in the third quarter of 1998 to $325,000 in the third
quarter of 1999 is de minimus. The decrease in exploration costs
from $118,000 in the third quarter of 1998 to $0 in the third
quarter of 1999 resulted from the Company's decision in 1999 to
cease exploration in order to conserve cash.
In the third quarter of 1999, the Company recorded a non-
cash charge of $2,168,000 for an asset impairment loss on
Griffon. The write-down was necessitated by an unanticipated and
precipitous deterioration in the recovery rate of the ore on the
leach pad.
Interest and other income decreased from $18,000 in the
third quarter of 1998 to $10,000 (which amount has been
classified as a Reorganization Item) in the third quarter of 1999
as the result of less funds being available for investment in
1999. The $737,000 charge for interest expense and other in the
third quarter of 1999 represents the expensing of Olinghouse debt-
related costs. Similar costs incurred in 1998, prior to the
initiation of gold production at Olinghouse, were capitalized.
The $404,000 charge for reorganization items in the third
quarter of 1999 includes expenses incurred by the Company in
connection with its efforts to reorganize under Chapter 11 of the
Bankruptcy Code.
No provision for income taxes was required in either the
third quarter of 1999 or the third quarter of 1998 because of the
loss incurred in the third quarter of 1999 and the utilization of
tax loss carryforwards in the third quarter of 1998,
respectively. As of September 30, 1999, the Company estimates
that it has approximately $41,778,000 in net operating loss
carryforwards. These net operating loss carryforwards are
scheduled to expire during the period from 2005 to 2018. The
availability of these net operating loss carryforwards is subject
to the tax consequences (if any) of the resolution of the
Company's Chapter 11 bankruptcy proceedings.
16
<PAGE>
The deterioration of the profitability of the Company, from
$696,000 in net income in the third quarter of 1998 to a net loss
of $5,491,000 in the third quarter of 1999 is due to multiple
factors, including: (1) the asset impairment loss on Griffon,
(2) the expensing of Olinghouse debt-related costs subsequent to
the initiation of gold production, (3) the lower than expected
rate of gold production at Olinghouse due to continuing
production problems, (4) the greater than expected decrease in
gold production from post-mining, heap leaching operations at
Griffon, (5) the high cost of producing gold at Olinghouse,
(6) the deterioration of the price of gold, and (7) the costs
incurred in the third quarter of 1999 associated with the
Company's April 14, 1999 filing of a voluntary petition to
reorganize under Chapter 11 of the Bankruptcy Code.
COMPARISON OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND
1998
During the first nine months of 1999, the Company has
$16,730,000 in revenue from the sale of 52,900 ounces of gold at
an average price of $316/oz., as compared to $12,082,000 in
revenue from the sale of 36,000 ounces of gold at an average
price of $336/oz. during the first nine months of 1998. During
the first nine months of 1999, the Company (1) mined 1,092,000
tons of ore at Olinghouse with an average grade of 0.0432 oz./ton
gold containing 47,155 ounces of gold, (2) mined 595,000 tons of
ore at Griffon with an average grade of 0.0290 oz./ton gold
containing 17,262 ounces of gold and (3) produced 51,126 ounces
of gold, including 25,741 ounces from Olinghouse at an average
cash cost of $291/oz., 23,059 ounces from Griffon at an average
cash cost of $160/oz. and 2,326 ounces from Kinsley at an average
cash cost of $256/oz. During the first nine months of 1998, the
Company (1) mined 1,489,000 tons of ore at Griffon with an
average grade of 0.0321 oz./ton gold containing 47,775 ounces of
gold, (2) mined 118,000 tons of ore at Olinghouse with an average
grade of 0.0262 oz./ton gold containing 3,082 ounces of gold and
(3) produced 35,652 ounces of gold, including 27,581 ounces of
gold from Griffon at an average cash cost of $138/oz., 8,064
ounces of gold from Kinsley at an average cash cost of $296/oz.,
and seven ounces of gold from the initial shakedown run of the
mill at Olinghouse. Mining at Griffon began in September 1997
and was suspended in April 1999, with production of refined gold
beginning in January 1998 and expected to continue in declining
amounts through year-end 1999. Mining at Olinghouse began in
July 1998 and production of refined gold from the initial
shakedown run of the mill began in September 1998 and from the
leach pad in December 1998. On August 6, 1999, the Company
suspended mining, crushing and milling activities at Olinghouse
due to liquidity problems. Mining at Kinsley was completed in
early March 1998, with gold production from pad rinsing expected
to be essentially done by year-end 1999.
The increase in revenue from $12,082,000 during the first
nine months of 1998 to $16,730,000 during the first nine months
of 1999 is due primarily to the initiation of gold production at
Olinghouse in September 1998 as partially offset by (1) the
decrease in the average selling price of gold, from $336/oz.
during the first nine months of 1998 to $316/oz. during the first
nine months of 1999 and (2) the decrease in gold production at
both Griffon and Kinsley. The decrease in the average selling
price of gold is due to the Company using up all of its $335/oz.
gold hedges in early May 1999 and having to revert to using its
$280/oz. gold hedges thereafter, as compelled by the
deterioration of the price of gold. The average spot price of
gold decreased from $294/oz. during the first nine months of 1998
to $274/oz. during the first nine months of 1999.
Direct mining, production, reclamation and maintenance costs
increased from $9,549,000 during the first nine months of 1998 to
$18,014,000 during the first nine months of 1999 primarily as the
result of the initiation of gold production at Olinghouse in
September 1998, as partially offset by
17
<PAGE>
the suspension of mining at Griffon in April 1999 and the
completion of mining at Kinsley in March 1998.
The decrease in general and administrative expenses from
$1,035,000 during the first nine months of 1998 to $947,000
during the first nine months of 1999 is primarily due to the
deferral in 1999 of the annual stockholders meeting and the
associated publication and distribution of the Company's annual
report. The decrease in exploration expense from $234,000 during
the first nine months of 1998 to $212,000 during the first nine
months of 1998 is de minimus.
During the first nine months of 1999, the Company recorded a
non-cash charge of $2,168,000 for an asset impairment loss on
Griffon. The write-down was necessitated by an unanticipated and
precipitous deterioration in the recovery rate of the ore on the
lead pad.
Interest and other income decreased from $80,000 in the
first nine months of 1998 to $46,000 ($13,000 of which has been
classified as a Reorganization Item) in the first nine months of
1999 as the result of less funds being available for investment
in 1999. The $2,285,000 charge for interest expense and other in
the first nine months of 1999 represents the expensing of
Olinghouse debt-related costs. Similar costs incurred in the
first nine months of 1998, prior to the initiation of gold
production at Olinghouse, were capitalized.
The $747,000 charge for reorganization items during the
first nine months of 1999 includes expenses incurred by the
Company in connection with its efforts to reorganize under
Chapter 11 of the Bankruptcy Code.
No provision for income taxes was required during either the
first nine months of 1999 or the first nine months of 1998
because of the loss incurred during the first nine months of 1999
and the utilization of tax loss carryforwards during the first
nine months of 1998, respectfully. As of September 30, 1999, the
Company estimates that it has approximately $41,778,000 in net
operating loss carryforwards. These net operating loss
carryforwards are scheduled to expire during the period from 2005
to 2018. The availability of these net operating loss
carryforwards is subject to the tax consequences (if any) of the
resolution of the Company's Chapter 11 bankruptcy proceedings.
The deterioration in the profitability of the Company, from
$1,176,000 in net income during the first nine months of 1998 to
a net loss of $7,610,000 during the first nine months of 1999 is
due to multiple factors, including: (1) the expensing of
Olinghouse debt-related costs subsequent to the initiation of
gold production at Olinghouse, (2) the asset impairment loss on
Griffon, (3) the lower than expected rate of gold production at
Olinghouse primarily due to continuing production problems,
(4) the greater than expected decrease in gold production from
post-mining, heap leaching operations at Griffon, (5) the high
cost of producing gold at Olinghouse, (6) the deterioration of
the price of gold and (7) the costs incurred in the first nine
months of 1999 associated with the Company's April 14, 1999
filing of a voluntary petition to reorganize under Chapter 11 of
the Bankruptcy Code.
LIQUIDITY AND CAPITAL RESOURCES
On April 14, 1999, the Company filed a voluntary petition to
reorganize under Chapter 11 of the Bankruptcy Code. The Company
experienced continuing production problems at Olinghouse and a
greater than expected decrease in gold production from post-
mining, heap leaching operations at Griffon. The Company's
liquidity deteriorated to the point where the Company was
compelled on
18
<PAGE>
August 6, 1999 to temporarily suspend mining, crushing and
milling operations at Olinghouse in order to preserve its
liquidity; however, no assurance can be given that the Company
will ever be in a position to resume mining operations. The
Company does not expect any additional gold production at Griffon
to be material.
The Company believes that the only source of additional
capital which may be available to the Company given the Company's
current financial condition is from a sale of some or all of its
assets or a sale of an interest in some or all of its assets. In
the event that the Company does not consummate a sale or obtain
financing within the near future, the Company is not expected to
continue as a going concern. No assurance can be given that any
asset sale will be consummated in a timely manner or that the
Company will be able to continue as a going concern.
INVESTING AND FINANCING ACTIVITIES
During the first nine months of 1999, the Company expended
$759,000 for site development, construction and equipment at
Olinghouse and $442,000 for the permitting of Copper Flat, and
realized $113,000 from the disposal of non-essential property and
equipment. In addition, during the first nine months of 1999,
the Company retired $1,083,000 in outstanding debt.
OTHER
The approach of the year 2000 has become a potential problem
for businesses utilizing computers in their operations since many
computer programs are date sensitive and will only recognize the
last two digits of the year, thereby recognizing the year 2000 as
the year 1900 or not at all (the "Year 2000 Issue"). Management
has made an assessment of the Company's exposure to the Year 2000
Issue and what will be required to ensure that the Company is
Year 2000 compliant. The primary computer programs utilized in
the Company's operations and financial reporting systems have
been acquired from independent software vendors. All of these
vendors have been formally contacted to determine whether their
systems are Year 2000 compliant, and, if not, timelines have been
or will be established as to when the Company will receive the
required upgrades that assure that these systems will be Year
2000 compliant. Maintenance or modification costs associated
with the Year 2000 Issue will be expensed as incurred, while the
cost of any new software will be capitalized and amortized over
the software's useful life. The Company does not expect to incur
costs in connection with the Year 2000 Issue that would have a
material impact on operations. Although the Company presently
believes that all of its software programs will be Year 2000
compliant, there can be no assurances that the Company will not
be adversely affected by the Year 2000 Issue.
OUTLOOK
The future viability of the Company is completely dependent
upon the Company's ability to obtain sufficient capital, through
asset sales or otherwise, in a very short period of time to be
able to satisfy its financial obligations and to be able to
emerge successfully from bankruptcy, either by dismissal or a
plan of reorganization. No assurance can be given that any asset
sale will be consummated in a timely manner or that the Company
will be able to emerge successfully from the bankruptcy
proceedings or be able to continue as a going concern.
19
<PAGE>
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS
GOLD PRICE
The Company's profitability is significantly impacted by
changes in the market price of gold. Gold prices may fluctuate
widely. On August 25, 1999, the market price of gold declined to
$252/oz., its lowest price in 20 years, and has been below
$300/oz. for most of 1999.
In order to mitigate the detrimental effects of significant
decreases in the price of gold, the Company has historically
hedged all or a portion of its anticipated gold production. As
of September 30, 1999, the Company had in place the following
hedges:
<TABLE>
<CAPTION>
EXPECTED MATURITY OR TRANSACTION YEAR
--------------------------------------
1999 2000 2001
--------- --------- ----------
<S> <C> <C> <C>
PUT OPTIONS OWNED:
Ounces 6,000 132,000 64,400
Average Price ($/oz.) $280 $280 $280
</TABLE>
As of December 31, 1998, the Company had in place the
following hedges:
<TABLE>
<CAPTION>
EXPECTED MATURITY OR TRANSACTION YEAR
---------------------------------------
1999 2000 2001
---------- ---------- ----------
<S> <C> <C> <C>
FORWARD SALES CONTRACTS:
Ounces 25,800 - -
Average Price ($/oz.) $339 - -
PUT OPTIONS OWNED:
Ounces 133,400 132,000 82,800
Average Price ($/oz.) $283 $280 $280
</TABLE>
INTEREST RATES
At September 30, 1999, the Company's outstanding debt
included $17.0 million in variable rate debt with a weighted
average interest rate of 7.4% and $11.0 million in fixed rate
debt with a weighted average interest rate of 7.3%, compared with
$17.0 million in variable rate debt with a weighted average
interest rate of 7.1% and $12.2 million in fixed rate debt with a
weighted average interest rate of 7.4% as of December 31, 1998.
Every hypothetical one percentage increase or decrease in the
variable interest rate would result in a corresponding $0.2
million increase or decrease in both annual net income and annual
net cash flow.
FOREIGN CURRENCY
The price of gold is denominated in United States dollars
and all of the Company's operations and expenses are incurred in
United States dollars. Accordingly, the Company has no direct
foreign currency exposure.
20
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 1, 1999, a complaint was filed in the Second
Judicial District Court of the State of Nevada for the County of
Washoe (Mitchell W. Fanning, et al. v. Alta Gold Co., et al.)
against the Company. The complaint purports to seek relief on
behalf of a group of individuals doing business as "Babe Mines"
who leased to the Company certain mining claims which constitute
an integral part of the Olinghouse mine. Specifically, the
complaint seeks (i) a judicial declaration that the lease of
mining claims to the Company has been terminated, (ii) money
damages for alleged trespass and conversion, and (iii) a judicial
declaration that plaintiffs own an ore body within a mining claim
owned by the Company by reason of "extralateral rights" pursuant
to 30 U.S.C. Sec. 26 (1994). Following the Company's filing of a
Chapter 11 petition, the plaintiffs removed the action to the
Bankruptcy Court. The Company has filed an answer to the
complaint, as well as a counter-claim against the plaintiffs, and
has joined as third-party defendants its other lessors at
Olinghouse in order to avoid piecemeal litigation and to address
potential boundary disputes and claims of "extralateral rights"
by the other lessors. Discovery in the litigation has just
commenced and a ten-day trial is tentatively scheduled to
commence on August 7, 2000. No assurance can be given that the
Company will prevail or otherwise obtain a satisfactory result in
this matter.
On April 14, 1999, the Company filed a voluntary petition to
reorganize under Chapter 11 of the Bankruptcy Code to facilitate
the reorganization of the Company's business and the
restructuring of its long-term debt and other liabilities. The
petition was filed in United States Bankruptcy Court in Reno,
Nevada (the "Bankruptcy Court") on April 14, 1999. As of that
date, the United States Bankruptcy Court for the District of
Nevada assumed jurisdiction over the assets of the Company. The
Company is acting as debtor-in-possession on behalf of its
bankruptcy estate, and is authorized as such to operate its
business subject to bankruptcy court supervision. On August 4,
1999, the Company filed a Conditional Motion to Dismiss the
Chapter 11 bankruptcy proceeding. At the September 8, 1999
Bankruptcy Court hearing on the Conditional Motion to Discuss,
the Company withdrew the motion. The Bankruptcy Code provides
that, unless the Bankruptcy Court appoints a trustee, a debtor
has the exclusive right to file a plan of reorganization for the
first 120 days subsequent to the filing of the petition (or for
such longer or shorter period as the Bankruptcy Court may
permit). The Company has not yet submitted a plan of
reorganization. No assurance can be given that the Company will
ever be in a position to file a plan of reorganization. On
August 10, 1999, the Company filed a request with the Bankruptcy
Court to extend the bankruptcy exclusivity period from August 12,
1999 to October 11, 1999. The Bankruptcy Court denied this
request on September 8, 1999, which denial allows any creditor or
party in interest to file its own plan of reorganization. The
Bankruptcy Court has established August 16, 1999 as the bar date
for filing claims; however, late-filed claims may be considered
by the Bankruptcy Court. The most recently issued cash
collateral order approved by the Bankruptcy Court expired
October 16, 1999. The secured lenders, however, have consented,
without a written order of the Bankruptcy Court, to the Company's
continued use of cash collateral solely for the Company's limited
operations related to gold production from the existing ore on
its heap leach pads.
ITEM 2. CHANGES IN SECURITIES
By letter dated July 30, 1999, certain holders of the
Debentures notified the Company of their election to convert
$91,000 principal amount of the Debentures into 1,117,108 shares
of the Company's common stock, based on a conversion price of
$.08325 (90% of the average closing bid
21
<PAGE>
price of the Company's common stock for the five trading days
preceding July 30, 1999 or $.09250). By letter dated August 3,
1999, the Company advised such holders that the Company would not
honor such election to convert such debentures because it
believed that such elections were stayed by the automatic stay
issued in the Company's Chapter 11 bankruptcy proceeding. Prior
to a hearing on the issue in Bankruptcy Court, the parties
announced a resolution which permitted the conversion. The
holders of the Debentures are prohibited from making any further
conversion, subject to certain conditions, including the timing
of a plan of reorganization. As a result of this resolution, the
conversion was completed effective August 31, 1999.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company's revolving credit and term loans with Standard
Chartered Bank, Credit Agricole Indosuez and Gerald Metal, Inc.
contains certain financial covenants. As of September 30, 1999,
the Company was not in compliance with the financial covenants
covering Minimum Net Worth, Minimum Current Ratio, Maximum
Leverage Ratio, Minimum EBITDA to Interest Expense and Minimum
EBITDA to Interest Expense and Principal, as defined by the
credit facility. The Company has also been unable to meet the
$1,000,000 quarterly principal payments due on June 30 and
September 30, 1999, and the $316,000 quarterly interest payment
due on September 30, 1999, as required by the revolving credit
and term loans.
The Company is also in arrears on all of its equipment
loans, having been unable to meet $44,000 in installment
obligations that became due in July 1999, $188,000 that became
due in August 1999 and another $188,000 that became due in
September 1999.
In addition to all of the above, the Company's Chapter 11
bankruptcy petition that was filed on April 14, 1999 also
triggered events of default under all of the Company's
indebtedness.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.01 Financial Data Schedule
(b) Reports on Form 8-K:
None
22
<PAGE>
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)
Date: November 11, 1999 By: /s/ John A. Bielun
----------------------------
John A. Bielun
Chief Financial Officer and
Chief Accounting Officer
(Duly authorized officer,
principal financial officer and
chief accounting officer)
23
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
NUMBER NUMBER
- --------- ------------------------------------------ --------
27.01 Financial Data Schedule 25
24
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 290
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 6,794
<CURRENT-ASSETS> 7,398
<PP&E> 43,105
<DEPRECIATION> 8,723
<TOTAL-ASSETS> 67,552
<CURRENT-LIABILITIES> 17,243
<BONDS> 12,593
0
0
<COMMON> 35
<OTHER-SE> 30,415
<TOTAL-LIABILITY-AND-EQUITY> 67,552
<SALES> 16,730
<TOTAL-REVENUES> 16,730
<CGS> 18,014
<TOTAL-COSTS> 19,173
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,168
<INTEREST-EXPENSE> 2,285
<INCOME-PRETAX> (7,610)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,610)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,610)
<EPS-BASIC> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
