<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: June 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 August 13, 1999 was 33,478,000
<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
June 30, 1999 and December 31, 1998..............3
Condensed Statements of Operations for the
Three Months Ended June 30, 1999 and 1998........5
Six Months Ended June 30, 1999 and 1998..........6
Condensed Statements of Cash Flows for the
Six Months Ended June 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..................................22
Item 1. Legal Proceedings...............................22
Item 2. Changes in Securities...........................23
Item 3. Defaults Upon Senior Securities.................23
Item 6. Exhibits and Reports on Form 8-K................23
SIGNATURE....................................................24
EXHIBIT INDEX................................................25
2
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
(DEBTOR-IN-POSSESSION)
CONDENSED BALANCE SHEETS
ASSETS
June 30, 1999 December 31,
(Unaudited) 1998
--------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $655,000 $953,000
Inventories 8,955,000 7,020,000
Prepaid expenses and other 210,000 951,000
--------------- --------------
Total current assets 9,820,000 8,924,000
PROPERTY AND EQUIPMENT, net
Mining properties and claims 17,185,000 17,185,000
Buildings and equipment 29,676,000 29,491,000
--------------- --------------
46,861,000 46,676,000
Less - accumulated depreciation (11,102,000) (9,033,000)
--------------- --------------
Total property and equipment, net 35,759,000 37,643,000
DEFERRED MINE DEVELOPMENT COSTS, net 23,582,000 24,185,000
DEFERRED FINANCING COSTS 2,261,000 2,790,000
OTHER ASSETS 638,000 950,000
--------------- --------------
Total Assets $72,060,000 $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
June 30, 1999 December 31,
(Unaudited) 1998
--------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $134,000 $4,403,000
Accrued liabilities 716,000 1,273,000
Current portion of long-term debt 8,191,000 4,821,000
--------------- --------------
Total current liabilities 9,041,000 10,497,000
--------------- --------------
LONG-TERM LIABILITIES:
Long-term debt, net of current portion 16,722,000 24,381,000
Deferred income taxes 662,000 662,000
Other long-term liabilities 372,000 995,000
--------------- --------------
Total long-term liabilities 17,756,000 26,038,000
--------------- --------------
LIABILITIES SUBJECT TO COMPROMISE 9,425,000 -
--------------- --------------
Total liabilities 36,222,000 36,535,000
--------------- --------------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value: authorized 60,000,000
shares, issued 33,478,000 shares 34,000 34,000
Additional capital 53,184,000 53,184,000
Accumulated deficit (17,380,000) (15,261,000)
--------------- --------------
Total stockholders' equity 35,838,000 37,957,000
--------------- --------------
Total liabilities and stockholders' equity $72,060,000 $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 June 30,
------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
REVENUE $7,058,000 $3,221,000
-------------- --------------
OPERATING COSTS AND EXPENSES:
Direct mining, production, reclamation and maintenance
costs 7,743,000 2,618,000
General and administrative 274,000 401,000
Exploration 106,000 67,000
-------------- --------------
8,123,000 3,086,000
-------------- --------------
INCOME (LOSS) FROM OPERATING (1,065,000) 135,000
-------------- --------------
OTHER INCOME (EXPENSE):
Interest and other income - 20,000
Loss on disposal of assets - (41,000)
Interest expense (contractual interest -$769,000 and $0,
respectively) (741,000) -
-------------- --------------
(741,000) (21,000)
-------------- --------------
INCOME (LOSS) BEFORE REORGANIZATION ITEMS
AND PROVISION FOR INCOME TAXES (1,806,000) 114,000
REORGANIZATION ITEMS (343,000) -
-------------- --------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES (2,149,000) 114,000
PROVISION FOR INCOME TAXES - -
-------------- --------------
NET INCOME (LOSS) ($2,149,000) $114,000
============== ==============
NET INCOME (LOSS) PER SHARE:
Basic ($0.06) $0.00
Diluted ($0.06) $0.00
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 33,478,000 32,515,538
Diluted 33,478,000 35,548,666
</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)
Six Months Ended June 30,
---------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
REVENUE $13,730,000 $6,845,000
-------------- -------------
OPERATING COSTS AND EXPENSES:
Direct mining, production, reclamation and maintenance
costs 13,157,000 5,562,000
General and administrative 622,000 708,000
Exploration 212,000 116,000
-------------- -------------
13,991,000 6,386,000
-------------- -------------
INCOME (LOSS) FROM OPERATING (261,000) 459,000
-------------- -------------
OTHER INCOME (EXPENSE):
Interest and other income 33,000 62,000
Loss on disposal of assets - (41,000)
Interest expense (contractual interest - $1,576,000 and $0,
respectively) and other (1,548,000) -
-------------- -------------
(1,515,000) 21,000
-------------- -------------
INCOME (LOSS) BEFORE REORGANIZATION ITEMS
AND PROVISION FOR INCOME TAXES (1,776,000) 480,000
REORGANIZATION ITEMS (343,000) -
-------------- -------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES (2,119,000) 480,000
PROVISION FOR INCOME TAXES - -
-------------- -------------
NET INCOME (LOSS) ($2,119,000) $480,000
============== =============
NET INCOME (LOSS) PER SHARE:
Basic ($0.06) $0.02
Diluted ($0.06) $0.01
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 33,477,995 31,973,852
Diluted 33,477,995 35,421,320
</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)
Six Months Ended June 30,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) ($2,119,000) $480,000
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation, depletion and amortization 4,453,000 1,526,000
Reorganization items 343,000 -
Loss on disposal of assets - 41,000
Decrease (increase) in -
Inventories (1,935,000) (612,000)
Prepaid expenses and other 735,000 145,000
Increase (decrease) in -
Accounts payable (pre-petition) 383,000 -
Accounts payable (post-petition) 134,000 -
Accrued and other liabilities (pre-petition) (781,000) -
Accrued and other liabilities (post-petition) 466,000 27,000
------------ ------------
Net cash provided by operating activities before
reorganization items 1,679,000 1,607,000
Net cash used by reorganization items (78,000) -
------------ ------------
Net cash provided by operating activities 1,601,000 1,607,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment (735,000) (7,453,000)
Additions to deferred mine development costs (338,000) (1,670,000)
Proceeds from sale of property and equipment 113,000 -
------------ ------------
Net cash used in investing activities (960,000) (9,123,000)
------------ ------------
</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)
Six Months Ended June 30,
-------------------------------
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt - 17,215,000
Payments on debt (939,000) (8,961,000)
Financing costs - (2,280,000)
------------- -------------
Net cash provided by (used in) in financing activities (939,000) 5,974,000
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (298,000) (1,542,000)
CASH AND CASH EQUIVALENTS, beginning of period 953,000 3,330,000
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $655,000 $1,788,000
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest, net of amount
capitalized $1,076,000 $ -
Cash paid during the period for income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Debt retired with common stock $ - $3,550,000
</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 six months ended June 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 (see Note 8 to
Condensed Financial Statements), on August 4, 1999, the Company
filed with the Bankruptcy Court a Conditional Motion to Dismiss
the Chapter 11 bankruptcy proceeding. The Bankruptcy Court
established August 31, 1999 as the date on which a
hearing on the Conditional Motion to Dismiss will be
held. On August 6, 1999, due to deteriorating liquidity,
the Company temporarily suspended mining, crushing and milling
operations at Olinghouse in order to conserve
9
<PAGE>
cash pending the hearing on the Conditional Motion to Dismiss.
No assurance can be given that the Conditional Motion to Dismiss
will be granted or that the proposed sale of an interest in
Olinghouse will be consummated. In the event that the proposed
sale is not consummated or the Company is unable to obtain
financing from other sources within a very short period of time,
the Company's ability to continue operating is in doubt.
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. 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 set the hearing on this request for
September 8, 1999. If the Company is unable to obtain an
extension of the exclusivity period and the exclusivity period
lapses, any creditor or party in interest may file a its own
plan of reorganization. The Bankruptcy Court established
August 16, 1999 as the bar date for filing claims. The most
recently issued cash collateral order approved by the
Bankruptcy Court extends through and including September 3,
1999. The Company breached the terms of such cash collateral
order due to its failure to reach at least 75% of the projected
revenue as provided in a related budget. The secured lenders,
however, have consented to the Company's continued use of cash
collateral solely for its limited operations related to gold
production from the existing ore on its heap leach pads.
During the pendency of its Chapter 11 proceedings, the
Company's policy is to expense reorganization costs as incurred.
Through June 30, 1999, the Company has incurred $343,000 in
reorganization expenses, including $326,000 in professional fees,
of which $76,000 had been paid as of June 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. Other liabilities may arise or be
subject to compromise as a result of rejection of executory
contracts, including leases, or the Bankruptcy Court's resolution
of claims for contingencies and other disputed amounts.
Liabilities subject to compromise included in the accompanying
June 30, 1999 Condensed Balance Sheet represent the Company's
estimate of its pre-petition liabilities which are subject to
compromise. The June 30, 1999 Condensed Balance Sheet does not
reflect all of the claims that may ultimately be filed against
the Company in connection with its Chapter 11 bankruptcy
proceedings since a reasonable estimate of the allowed amount of
such claims cannot be readily determined at this time.
10
<PAGE>
NOTE 3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- --------------
<S> <C> <C>
Precious metals:
Refined products $ 725,000 $ 946,000
In process 8,136,000 5,945,000
Consumable supplies 94,000 129,000
------------- --------------
$ 8,955,000 $ 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. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
June 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 1,400,000
Convertible debentures; interest at 4% payable
quarterly; due April 14, 2000; unsecured --<F2> 3,350,000
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------------- --------------
<S> <C> <C>
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 6,513,000 7,452,000
---------------- --------------
24,913,000 29,202,000
Less - current portion (8,191,000) (4,821,000)
---------------- --------------
Total long-term debt $16,722,000 $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 June 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
installment that became due on June 30, 1999 under the
provisions of the term loan. In addition, the Company's
Chapter 11 bankruptcy petition filed on April 14, 1999
triggered events of default under all of the Company's
indebtedness.
<F2>Reclassified under "Liabilities Subject to Compromise."
</FN>
</TABLE>
NOTE 5. LIABILITIES SUBJECT TO COMPROMISE
Liabilities subject to compromise under the reorganization
proceedings consist of the following as of:
<TABLE>
<CAPTION>
June 30, 1999
---------------
<S> <C>
Accounts payable $4,786,000
Accrued expenses 1,289,000
Convertible debentures 3,350,000
---------------
$9,425,000
===============
</TABLE>
The Company ceased accruing interest on the convertible
debentures (the "Debentures") as of the Petition Date.
12
<PAGE>
NOTE 6. REORGANIZATION ITEMS
Reorganization Items consist of the following for the six
month period ended:
<TABLE>
<CAPTION>
June 30, 1999
---------------
<S> <C>
Professional fees $326,000
Loss on disposal of assets 15,000
Other expenses 5,000
Interest income (post-petition) (3,000)
---------------
$343,000
===============
</TABLE>
Net cash used by Reorganization Items include the following
for the six month period ended:
<TABLE>
<CAPTION>
June 30, 1999
---------------
<S> <C>
Professional fees $76,000
Other expenses 5,000
Interest income (post-petition) (3,000)
---------------
$78,000
===============
</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 7. 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. Section 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. The pleadings have not yet closed in this
action, but the Company believes that it should eventually
prevail therein. A scheduling conference is presently scheduled
for August 18, 1999. No assurance can be given that the Company
will prevail or otherwise obtain a satisfactory result in this
matter.
13
<PAGE>
NOTE 8. SUBSEQUENT EVENTS
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 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 because it believes that such elections are stayed by the
automatic stay issued in the Company's Chapter 11 bankruptcy
proceeding. On August 9, 1999, the holders threatened to file a
motion with the Bankruptcy Court to compel the conversion of the
Debentures into shares of the Company's common stock. The
Company intends to oppose any such motion. No assurance can
be given that the Bankruptcy Court will not grant any such motion
to compel conversion of the Debentures.
On August 2, 1999, the Company received an offer from a
potential investor to purchase a 40% interest in Olinghouse. The
proposed sale of an interest in Olinghouse is subject to numerous
conditions, including the completion of definitive documentation,
approval by the Bankruptcy Court of the Company's Conditional
Motion to Dismiss, and the receipt by the proposed investor of
adequate financing to consummate such transaction. No assurance
can be given that the Bankruptcy Court will grant the Conditional
Motion to Dismiss or that the proposed sale will be consummated
in a timely manner. The Company has also had discussions with
other potential investors, but no such transaction appears
imminent. In the event that the Company does not consummate a
sale or obtain financing from other sources within a very
short period of time, the Company's ability to continue operating
is in doubt.
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 EMERGE SUCCESSFULLY FROM
CHAPTER 11 BANKRUPTCY PROCEEDINGS, TO OBTAIN ANY FINANCING OR TO
SELL AN INTEREST IN OLINGHOUSE, OR TO CONTINUE OPERATING.
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
14
<PAGE>
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 (see Note 8 to
Condensed Financial Statements), on August 4, 1999, the Company
filed with the Bankruptcy Court a Conditional Motion to Dismiss
the Chapter 11 bankruptcy proceeding. The Bankruptcy Court
established August 31, 1999 as the date on which a hearing on the
Conditional Motion to Dismiss will be held. No assurance can be
given that the Conditional Motion to Dismiss will be granted or
that the proposed sale of an interest in Olinghouse will be
consummated. In the event that the proposed sale is not
consummated or the Company is unable to obtain financing from
other sources within a very short period of time, the Company's
ability to continue operating is in doubt.
On August 6, 1999, due to deteriorating liquidity, the
Company temporarily suspended mining, crushing and milling
operations at Olinghouse in order to conserve cash pending
the hearing on the Conditional Motion to Dismiss. 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.
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. 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 set the hearing on this request for September 8, 1999.
The Bankruptcy Court established August 16, 1999
as the bar date for filing claims. The most recently issued cash
collateral order approved by the Bankruptcy Court extends through
and including September 3, 1999. The Company breached the terms
of such cash collateral order due to its failure to reach at
least 75% of the projected revenue as provided in a related
budget. The secured lenders, however, have consented to the
Company's continued use of cash collateral solely for its
limited operations related to gold production from the existing
ore on its heap leach pads.
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THREE MONTH PERIODS ENDED JUNE 30, 1999 AND
JUNE 30, 1998
In the second quarter of 1999, the Company had $7,058,000 in
revenue from the sale of 22,500 ounces of gold at an average
price of $314/oz., as compared to $3,221,000 in revenue from the
sale of 9,600 ounces of gold at an average price of $336/oz. in
the second quarter of 1998. In the second quarter of 1999, the
Company (1) mined 281,000 tons of ore at Olinghouse with an
average grade of 0.0583 oz./ton gold containing 16,376 ounces of
gold, (2) mined 147,000 tons of ore at Griffon with an average
grade of 0.0301 oz./ton gold containing 4,418 ounces of gold and
(3) produced 17,551 ounces of gold, including 7,945 ounces of
gold from Olinghouse at an average cash cost of $273/oz., 8,524
ounces of gold from Griffon at an average cash cost of $156/oz.
and 1,082 ounces of gold from Kinsley at an average cash cost of
$191/oz. In the second quarter of 1998, the Company mined
402,000 tons of ore at Griffon with an average grade of 0.0336
oz./ton gold containing 13,483 ounces of gold and produced 10,007
ounces of gold, including 7,590 ounces of gold from Griffon at an
average cash cost of $142/oz. and 2,417 ounces of gold from
Kinsley at an average cash cost of $307/oz. 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
15
<PAGE>
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 temporarily 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 continue in declining amounts
through year-end 1999. The decrease in gold production at
Kinsley from 2,417 ounces of gold in the second quarter of 1998
to 1,082 ounces of gold in the second quarter of 1999 is due to
the completion of mining at Kinsley in March 1998.
The increase in revenue from $3,221,000 in the second
quarter of 1998 to $7,058,000 in the second quarter of 1999 is
due primarily to the initiation of gold production at Olinghouse
in September 1998, as partially offset by the decrease in the
average selling price realized, from $336/oz. in the second
quarter of 1998 to $314/oz. in the second quarter of 1999, and
the decrease in gold production at Kinsley. The decrease in the
average selling price is due to the Company fully 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 $300/oz. in the second quarter of 1998 to
$274/oz. in the second quarter of 1999.
Direct mining, production, reclamation and maintenance costs
increased from $2,618,000 in the second quarter of 1998 to
$7,743,000 in the second quarter of 1999 primarily as the result
of the initiation of gold production at Olinghouse in September
1998, as partially offset by the suspension of mining at Griffon
in April 1999. Direct mining, production and maintenance
costs for the second quarter of 1999 exceeded revenues
by $685,000 principally because of continuing problems
at Olinghouse with the operation of the mill and
ADR plant, as well as the higher than average stripping
ratio which the Company is presently faced with at the current
phase of the mine plan for Olinghouse.
The decrease in general and administrative expenses from
$401,000 in the second quarter of 1998 to $274,000 in the second
quarter of 1999 is primarily due to the deferral in the second
quarter of 1999 of the annual stockholders meeting and the
associated publication and distribution of the Company's annual
report. The increase in exploration expense from $67,000 in the
second quarter of 1998 to $106,000 in the second quarter of 1999
is due to a temporary lull in exploration efforts in the second
quarter of 1998.
Interest and other income decreased from $20,000 in the
second quarter of 1998 to $3,000 (which amount has been
classified as a Reorganization Item) in the second quarter of
1999 as the result of less funds being available for investment
in 1999. The $741,000 charge for interest expense and other in
the second 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 $343,000 charge for reorganization items in the second
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
second quarter of 1999 or the second quarter of 1998 because of
the loss incurred in the second quarter of 1999 and the
utilization of tax loss carryforwards in the second quarter of
1998, respectively. As of June 30, 1999, the
16
<PAGE>
Company estimates that it has approximately $38,455,000 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 of the profitability of the Company, from
$114,000 in net income in the second quarter of 1998 to a net
loss of $2,149,000 in the second quarter of 1999 is due to
multiple factors, including: (i) the expensing of Olinghouse
debt-related costs subsequent to the initiation of gold
production, (ii) the lower than expected rate of gold
production at Olinghouse due to continuing production problems,
(iii) the greater than expected decrease in gold production from
post-mining, heap leaching operations at Griffon, (iv) the
high cost of producing gold at Olinghouse, (v) the deterioration
of the price of gold, and (vi) the costs incurred in the second
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 SIX MONTH PERIODS ENDED JUNE 30, 1999 AND
JUNE 30, 1998
In the first half of 1999, the Company had $13,730,000 in
revenue from the sale of 42,200 ounces of gold at an average
price of $325/oz., as compared to $6,845,000 in revenue from the
sale of 20,400 ounces of gold at an average price of $336/oz. in
the first half of 1998. In the first half of 1999, the Company
(i) mined 971,000 tons of ore at Olinghouse with an average grade
of 0.0435 oz./ton gold containing 42,213 ounces of gold,
(ii) 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
(iii) produced 41,853 ounces of gold, including 19,285 ounces of
gold from Olinghouse at an average cash cost of $270/oz., 20,753
ounces of gold from Griffon at an average cash cost of $149/oz.
and 1,815 ounces of gold from Kinsley at an average cash cost of
$212/oz. In the first half of 1998, the Company
(i) mined 810,000 tons of ore at Griffon with an average grade of
0.0337 oz./ton gold containing 27,305 ounces of gold, (ii) mined
94,000 tons of ore at Kinsley with an average grade of 0.0334
oz./ton gold containing 3,135 ounces of gold and (iii) produced
20,617 ounces of gold, including 14,680 ounces of gold from
Griffon at an average cash cost of $144/oz. and 5,937 ounces of
gold from Kinsley at an average cash cost of $288/oz. 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 temporarily 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 continue in
declining amounts through year-end 1999. The decrease in gold
production at Kinsley from 5,937 ounces of gold in the first half
of 1998 to 1,815 ounces of gold in the first half of 1999 is due
to the completion of mining at Kinsley in March 1998. The
increase in gold production at Griffon from 14,680 ounces of gold
in the first half of 1998 to 20,753 ounces of gold in the first
half of 1999 is due to the first half of 1999 being preceded by
over fifteen months of mining as compared to the first half of
1998 being preceded by less than four months of mining, as
partially offset by the suspension of mining in April 1999.
The increase in revenue from $6,845,000 in the first half of
1998 to $13,730,000 in the first half of 1999 is due primarily to
the initiation of gold production at Olinghouse in September 1998
and the increase in gold production at Griffon, as partially
offset by the decrease in the average selling price realized,
from $336/oz. in the first half of 1998 to $325/oz. in the first
half of 1999, and
17
<PAGE>
the decrease in gold production at Kinsley. The decrease in the
average selling price is due to the Company fully 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 $297/oz. in the first half of
1998 to $280/oz. in the first half of 1999, falling as low as
$270/oz. in the months of May and June 1999.
Direct mining, production, reclamation and maintenance costs
increased from $5,562,000 in the first half of 1998 to
$13,157,000 in the first half of 1999 primarily as the result of
the initiation of gold production at Olinghouse in September
1998, as partially offset by 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
$708,000 in the first half of 1998 to $622,000 in the first half
of 1999 is primarily due to the deferral in the first half of
1999 of the annual stockholders meeting and the associated
publication and distribution of the Company's annual report. The
increase in exploration expense from $116,000 in the first half
of 1998 to $212,000 in the first half of 1999 is due to a
temporary lull in exploration efforts in the first half of 1998.
Interest and other income decreased from $62,000 in the
first half of 1998 to $36,000 ($3,000 of which has been
classified as a Reorganization Item) in the first half of 1999 as
the result of less funds being available for investment in 1999.
The $1,548,000 charge for interest expense and other in the first
half of 1999 represents the expensing of Olinghouse debt-related
costs. Similar costs incurred in the first half of 1998, prior
to the initiation of gold production at Olinghouse, were
capitalized.
The $343,000 charge for reorganization items in the first
half 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
first half of 1999 or the first half of 1998 because of the loss
incurred in the first half of 1999 and the utilization of tax
loss carryforwards in the first half of 1998, respectfully. As
of June 30, 1999, the Company estimates that it has
approximately $38,455,000 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
$480,000 in net income in the first half of 1998 to a net loss of
$2,119,000 in the first half of 1999 is due to multiple factors,
including: (i) the expensing of Olinghouse debt-related costs
subsequent to the initiation of gold production at Olinghouse,
(ii) the lower than expected rate of gold production at
Olinghouse primarily due to continuing production problems,
(iii) the greater than expected decrease in gold production from
post-mining, heap leaching operations at Griffon, (iv) the high
cost of producing gold at Olinghouse, (v) the deterioration of
the price of gold and (vi) the costs incurred in the first half
of 1999 associated with the Company's April 14, 1999 filing of a
voluntary petition to reorganize under Chapter 11 of the
Bankruptcy Code.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On April 14, 1999, the Company filed a voluntary petition to
reorganize under Chapter 11 of the Bankruptcy Code.
Subsequently, as a result of, among other things described
herein, 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 August 6, 1999 to temporarily suspend mining,
crushing and milling operations at Olinghouse in order to
preserve its liquidity on a short-term basis.
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 an interest in
Olinghouse (see Note 8 to Condensed Financial Statements). In
the event that the Company does not consummate a sale or obtain
financing from other sources within a very short period of time,
the Company's ability to continue operating is in doubt. No
assurance can be given that any sale will be consummated in a
timely manner or that the Company will be able to continue to
operate.
INVESTING AND FINANCING ACTIVITIES
- ----------------------------------
During the first half of 1999, the Company expended
$735,000 for site development, construction and equipment at
Olinghouse and $338,000 for the permitting of Copper Flat,
and realized $113,000 from the disposal of non-essential
property and equipment. In addition, during the first six months
of 1999, the Company retired $939,000 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 outside financing
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.
There is no assurance that the Company will be able to obtain
adequate financing in
19
<PAGE>
a timely manner or that the Company will be able to emerge
successfully from the bankruptcy proceedings.
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 June 16, 1999, the market price of gold declined to
$259/oz., its lowest price in 20 years, and has been below
$300/oz. for all of 1999.
In order to mitigate the detrimental effects of significant
decreases in the price of gold, the Company has historically
hedged all or a portion of its anticipated gold production. As
of June 30, 1999, the Company had in place the following hedges
which cover in full the Company's projected future gold
production through September 2001:
<TABLE>
<CAPTION>
EXPECTED MATURITY OR TRANSACTION YEAR
<S> ------------------------------------------
1999 2000 2001
---------- ---------- -----------
<S> <C> <C> <C>
FORWARD SALES CONTRACTS:
Ounces 8,800 -- --
Average Price ($/oz.) $281 -- --
PUT OPTIONS OWNED:
Ounces 66,000 132,000 82,800
Average Price ($/oz.) $280 $280 $280
</TABLE>
As of December 31, 1998, the Company had in place the
following hedges which cover in full the Company's projected
future gold production through September 2001:
<TABLE>
<CAPTION>
EXPECTED MATURITY OR TRANSACTION YEAR
------------------------------------------
1999 2000 2001
---------- ---------- ------------
<S> <C> <C> <C>
FORWARD SALES CONTRACTS:
Ounces 25,800 -- --
Average Price ($/oz.) $339 -- --
PUT OPTIONS OWNED:
Ounces 133,400 132,000 82,800
Average Price ($/oz.) $283 $280 $280
</TABLE>
Based on the Company's estimated production for 1999, every
$10 increase in the price of gold above $280/oz. would result in
an increase of approximately $0.4 million in both net income and
net cash flow.
INTEREST RATES
At June 30, 1999, the Company's outstanding debt included
$17.0 million in variable rate debt with a weighted average
interest rate of 7.1% and $11.3 million in fixed rate debt with a
weighted average interest rate of 7.4%, 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 in 1999 would result in a corresponding $0.2
million increase or decrease in both net income and net cash
flow.
20
<PAGE>
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.
21
<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. Section 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. The pleadings have not yet closed in this
action, but the Company believes that it should eventually
prevail therein. A scheduling conference is presently scheduled
for August 18, 1999. 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. The Bankruptcy Court
established August 31, 1999 as the date on which the hearing on
the Conditional Motion to Dismiss will be held. 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. 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 set the hearing on this request for September 8,
1999. If the Company is unable to obtain an extension of the
exclusivity period and the exclusivity period lapses, any
creditor or party in interest may file its own plan of
reorganization. The Bankruptcy Court has established August 16,
1999 as the bar date for filing claims. The most recently issued
cash collateral order approved by the Bankruptcy Court
extends through and including September 3, 1999. The Company
breached the terms of such cash collateral order due to its
failure to reach at least 75% of the projected revenue as
provided in a related budget. The secured lenders, however, have
consented to the Company's continued use of cash collateral
solely for its limited operations related to gold production from
the existing ore on its heap leach pads.
22
<PAGE>
ITEM 2. CHANGES IN SECURITIES
In response to the Company's filing for reorganization under
Chapter 11 of the Bankruptcy Code and as a result of the
Company's inability to comply with one of Nasdaq's
continued listing criteria, effective June 23, 1999,
Nasdaq delisted the Company's common stock from
the Nasdaq National Market. By letter dated July 5, 1999,
the Company appealed the decision to delist to the
Nasdaq Listing and Hearing Review Council. The Company has been
advised that the Nasdaq Listing and Hearing Review Council will
likely issue its decision in December 1999.
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 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 believes that such elections
are stayed by the automatic stay issued in the Company's
Chapter 11 bankruptcy proceeding. On August 9, 1999, the holders
threatened to file a motion with the Bankruptcy Court to compel
the conversion of the Debentures into shares of the Company's
common stock. The Company intends to oppose any such motion.
No assurance can be given that the Bankruptcy Court will not
grant any such motion to compel conversion of the Debentures.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company's revolving credit and term loans with Standard
Chartered Bank, Credit Agriole Indosuez and Gerald Metal, Inc.
contains certain financial covenants. As of June 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 was also unable to pay the
$1,000,000 quarterly principal installment that became due on
June 30, 1999 under the provisions of the term loan. In
addition, the Company's Chapter 11 petition filed on April 14,
1999 triggered events of default under all of the Company's
indebtedness.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
27.01 Financial Data Schedule
Reports on Form 8-K:
Forms 8-K (Items 3 and 7) and 8-K/A (Items 3 and 5)
dated April 14, 1999, reporting the filing of a
voluntary petition to reorganize under Chapter 11 of
the Bankruptcy Code and the consequent probable
delisting of the Company's common stock from the Nasdaq
National Market.
23
<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: August 16, 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)
24
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page
NUMBER DESCRIPTION NUMBER
-------- ----------- ------------
27.01 Financial Data Schedule 26
25
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 655
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 8,955
<CURRENT-ASSETS> 9,820
<PP&E> 46,861
<DEPRECIATION> 11,102
<TOTAL-ASSETS> 72,060
<CURRENT-LIABILITIES> 9,041
<BONDS> 20,072
0
0
<COMMON> 34
<OTHER-SE> 35,804
<TOTAL-LIABILITY-AND-EQUITY> 72,060
<SALES> 13,730
<TOTAL-REVENUES> 13,730
<CGS> 13,991
<TOTAL-COSTS> 13,991
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,549
<INCOME-PRETAX> (2,119)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,119)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,119)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
