1
1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the period ended AprilJuly 1, 1995
Commission File Number 1-7241
ALASKA GOLD COMPANY
(exact name of registrant as specified in its charter)
Delaware 13-2774390
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2959 NORTH ROCK ROAD
WICHITA, KANSAS 67226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (316) 636-6316
Indicate by a 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
As of April 28,August 7, 1995, 5,000,000 shares of the Registrant's common stock were
outstanding.
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ALASKA GOLD COMPANY
FORM 10-Q
For the Period Ended AprilJuly 1, 1995
INDEX
Part I. Financial Information Page
Item 1. Financial Statements (Unaudited)
a.) Statements of Operations
for the quarters and six-months ended AprilJuly 1, 1995
and March 26, 1994.......................................................3June 25, 1994....................................................3
b.) Balance Sheets
as of AprilJuly 1, 1995 and December 31, 1994............................41994.............................4
c.) Statements of Cash Flows
for the quarterssix-months ended AprilJuly 1, 1995 and
March 26, 1994.......................................................5June 25, 1994........................................................5
d.) Notes to Financial Statements........................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................7
Part II. Other Information
Signatures..................................................................9
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALASKA GOLD COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
For the Quarter Ended AprilFor the Six-Months Ended
July 1, June 25, July 1, June 25,
1995 March 26,1994 1995 1994
Net sales $ -509 $ 61152 $ 509 $ 213
Sales to Mueller - - ---------- ----------- -
------- ------- ------- -------
Total sales - 61509 152 509 213
Cost of sales 179 2801,133 621 1,312 901
General and administrative
expenses 226 163
---------- ----------174 192 400 355
------- ------- ------- -------
Operating loss (405) (382)(798) (661) (1,203) (1,043)
Interest expense:
Mueller (1,114) (628)(1,119) (818) (2,233) (1,446)
Other (43)(41) - (84) -
Other income, net 451 139
---------- ----------53 486 504 625
------- ------- ------- -------
Loss before income taxes (1,111) (871)(1,905) (993) (3,016) (1,864)
Income tax expense - - ---------- ----------- -
------- ------- ------- -------
Net loss $ (1,111)(1,905) $ (871)
========== ==========(993) $ (3,016) $ (1,864)
======= ======= ======= =======
Number of common shares
outstanding 5,000 5,000 ========== ==========5,000 5,000
======= ======= ======= =======
Net loss per share $ (0.22)(0.38) $ (0.17)
========== ==========(0.20) $ (0.60) $ (0.37)
======= ======= ======= =======
See accompanying notes to financial statements.
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ALASKA GOLD COMPANY
BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
AprilJuly 1, 1995 December 31, 1994
Assets
Current assets:
Cash and cash equivalents $ 36417 $ 542
Gold inventory 8941 233
Due from affiliate 183 191
Prepaid preparation costs 2,9942,254 1,568
---------- ----------
Total current assets 3,2213,795 2,534
Properties,Property and equipment, net 3,8913,658 4,155
Other assets 25 25
---------- ----------
$ 7,1377,478 $ 6,714
========== ==========
Liabilities and Stockholders' Deficit
Current liabilities:
Current portion of long-term debt $ 496 $ 486
Accounts payable 271117 239
Accrued expenses 441394 314
Term loans and advances payable to
Mueller 92,82793,893 91,334
---------- ----------
Total current liabilities 94,03594,900 92,373
Long-term debt:
Notes payable to Mueller 3,4004,900 3,400
Other 1,4301,311 1,558
Environmental reserve 1,800 1,800
Restructuring reserve 1,436 1,436
---------- ----------
Total liabilities 102,101104,347 100,567
---------- ----------
Stockholders' deficit:
Common stock, $.10 par value;
10,000,000 shares authorized;
5,000,000 shares issued and
outstanding 500 500
Additional paid-in capital 4,897 4,897
Accumulated deficit (100,361)(102,266) (99,250)
---------- ----------
Total stockholders' deficit (94,964)(96,869) (93,853)
Commitments and contingencies - -
---------- ----------
$ 7,1377,478 $ 6,714
========== ==========
See accompanying notes to financial statements.
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ALASKA GOLD COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the QuarterSix Months Ended
AprilJuly 1, 1995 March 26,June 25, 1994
Cash flows from operating activities:
Net loss $ (1,111)(3,016) $ (871)(1,864)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Interest not paid on
Mueller borrowings 1,114 6282,075 1,445
Depreciation 538 25
Gain on sales of land (49) (92) (554)
Changes in assets and liabilities:
Receivables - 112113
Inventories 225 57(708) (1,124)
Due from affiliate 8 36
Prepaid preparation costs (1,165) (1,049)
Other assets 19 10(686) (1,047)
Current liabilities 159 (78)(42) 219
Other - 3
---------- ----------
Net cash used in operating
activities (808) (1,283)(1,923) (2,748)
---------- ----------
Cash flows from investing activities:
Capital expenditures (8) (14)(41) (299)
Proceeds from sales of properties 49 9392 555
---------- ----------
Net cash provided by
investing activities 41 7951 256
---------- ----------
Cash flows from financing activities:
Net principal repayments and advances
from Mueller 379 118484 247
Repayment of long-term debt (118)(237) -
Issuance of note payable to Mueller - 2,0001,500 2,600
---------- ----------
Net cash provided by
financing activities 261 2,1181,747 2,847
---------- ----------
Increase (decrease) in cash
(506) 914and cash equivalents (125) 355
Cash and cash equivalents at the
beginning of the period 542 350
---------- ----------
Cash and cash equivalents at the
end of the period $ 36417 $ 1,264705
========== ==========
See accompanying notes to financial statements.
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ALASKA GOLD COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Financial Statements
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. This quarterly report on Form 10-Q
should be read in conjunction with the Alaska Gold Company's ("the Company")
Annual Report on Form 10-K, including the annual financial statements
incorporated therein.
The accompanying unaudited interim financial statements include all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. Certain amounts
in the 1994 quarterly financial statements have been reclassified to conform
with current period presentation.
Operations of the Company are seasonal in nature because of the climatic
conditions in Alaska. In addition, the Company sells gold based upon gold
market conditions and cash needs and does not necessarily sell gold in any
given period, quarter, or year. Accordingly, the results of operations for
any interim period are not necessarily indicative of the results for any other
periods or for a full year.
Note 2 - Sales to Mueller
On August 29, 1994, the Company granted to Mueller Industries, Inc.
("Mueller"), the Company's majority stockholder, an option to purchase gold
produced or received as royalties. Terms of the option include establishing
the method of pricing the Mueller purchase as the average of the London PM price for gold for the
first ten days following shipment to the refiner. During the first quartersix-months
of 1995, no produced gold was sold.sold to Mueller. However, in February 1995,
Mueller purchased $505,000 of gold received as royalties by the Company.
Note 3 - Prepaid Preparation Costs
Expenditures related to open pit mining and removal of overburden and pay
gravel in preparation for 1995 operations are classified as prepaid
preparation costs. These expenditures are capitalized as inventory when the
gold-bearing material is processed through the wash plant.
Note 4 - Commitments and Contingencies
The Company is subject to normal environmental standards imposed by
federal, state and local environmental laws and regulations. Management
believes that the outcome of pending environmental matters will not materially
affect the overall financial position of the Company.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company's operating capital requirements are subject to significant
fluctuation because of the seasonal nature of operations. Total aggregate
operating costs during the first quartersix-months of 1995 were approximately
$1,570,000$2,398,000 of which $1,165,000$686,000 were capitalized as prepaid preparation costs.
Open Pit
The Company commenced full scale open pit operations during the winter of
1994-95 at its Nome properties. For more detail on the open pit mining
operation, reference is made to the Company's Form 10-Ks for 1994, 1993 and
1992. Implementation of a full scale operation required the Company to obtain
additional equipment during the latter part of 1994. Although a later than
anticipated delivery of equipment delayed start up of the larger scale
operation in the fall of 1994, the Company has been able to proceed with its
winter operations according to plan. ProductionThe Company had originally planned to
conduct open pit mining only through the winter months. However, production
and removal of the overburden and pay gravel are expected to be substantially completed inhave continued into the summer of
1995.
Wash plant operations commenced on May 25, 1995, and will continue
through October 1995. Through AprilJune 30, 1995, over 210,000an estimated 4,784 troy ounces
of gold were recovered from 82,036 cubic yards of pay gravel have been stockpiled
for processing throughprocessed during
the wash plant from May through September 1995.second quarter. The gold recovery per yard of pay gravel compares
favorably to the Company's projection. Total pay gravel to be processed in
1995 is estimated to be 275,000 cubic yards.
Preliminary exploratory drilling studies by management and independent
consultants indicate that there may be scattered gold reserve blocks available
that contain necessary grades to support open pit mining for up to ten years.
Dredging
The Company's only remaining operating dredge, Dredge 5, operated in
naturally thawed, low grade ground during 1994. At the end of the 1994
dredging season, Dredge 5 was operating in an area where the pay grades were
marginal. During the winter of 1994-95, an assay drilling program was
undertaken to determine if further operations arewere economically feasible. The
assays indicateindicated the pay grade adjacent to the dredge is potentially
sufficient to support limited mining duringmining. However, additional exploration is
being undertaken to confirm that the summergrade is mineable. If the results of 1995. More drilling will be performed to
determine if further mining is feasible.the
additional tests are favorable, Dredge 5 may resume operations in the spring
of 1996.
Lode Mining
In July 1994, the Company entered into an Exploration and Option
Agreement ("Agreement") with Bering Straits Native Corp. (d.b.a. Golden
Glacier, Inc., ("GGI")), and Kennecott Exploration Company ("Kennecott") to
allow Kennecott to explore the lode mining potential of certain lands in the
Nome area. The Company and GGI jointly committed lands to an area of interest
which Kennecott believes may contain gold bearing ore. Kennecott has
substantial exploration operations now in progress near Nome working on this
area of interest as well as on adjacent lands. It is anticipated that
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Kennecott will continue increasing its exploration operations on these lands.
The committed area contains approximately 10,000 acres of which 9,100 acres
are controlled by GGI, and 900 acres are owned by the Company. For more
detail on the lode mining Agreement with Kennecott, reference is made to the
Company's Form 10-K for 1994.
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Other
Subsequent toDuring the end of the firstsecond quarter of 1995, the Company borrowed an additional
$1,500,000 from Mueller (the Notes). Proceeds will beare being used to continue open
pit operations until the pay gravel can be processed and sold. The Notes
include interest at eight and three quarters percent (8.75%) payable quarterly
beginning June 30, 1995. Principal on the Notes is due December 31, 2001, and
is secured by an interest in substantially all assets of the Company.
In May 1995, the Company selected a realtor to assist in developing and
implementing a marketing plan for sale of land owned by the Company,
especially in the Fairbanks area. An agreement was reached whereby the
Company reserves all rights to market properties on its own.
The continued viability of the Company as a going concern is dependent
upon its ability to generate sufficient working capital through future
profitable operations and sales of assets, including land owned by the
Company, and to maintain or restructure its existing financing from Mueller in
a manner acceptable to both Mueller and the Company. The Company's ability to
attain and maintain profitable operations depends in part upon the market
price of gold and production yield. If the Company were unable to generate or
obtain sufficient working capital or if demand were made for the payment of
loans and advances made to it by Mueller, the Company's management may have no
choice other than to file for protection under the Federal Bankruptcy Code.
In that event, it is likely that the Company's stockholders, other than
Mueller as the holder of the Company's debt, would receive no distribution
with respect to their shares from the Company's bankruptcy estate.
Results of Operations
Activity in the firstsecond quarter was limitedconsisted primarily toof excavation of
overburden and pay gravel from the open pit.
No produced gold has been sold bypit and start up of the Company inwash plant.
During the first quartersix-months of 1995, the Company's sales were $509,000
(1,302 ounces) compared to $61,000 (153$213,000 (554 ounces) in the first quarter of 1994. Cost of sales
consisting of expenditures not directly relatedincreased to open pit
preparation, decreased to $179,000$1,312,000 in 1995 compared to $280,000$901,000 in 1994. The
reductionThis increase
is principally dueprimarily attributable to the reduction of sales.increase in ounces sold. General and
administrative expenses increased to $226,000$400,000 in 1995 compared to $163,000 in
1994. This increase is principally due to increased payroll and employment
costs.
Interest expense increased to $1,114,000 in 1995 compared to $628,000 in
1994. This increase is primarily due to increases in interest rates, in
addition to increased borrowings. Other income, net, increased in 1995 to
$451,000 compared to $139,000$335,000 in
1994. This increase is due to increased receiptspayroll and employment costs
primarily incurred in the first quarter of gold royalties, offset by1995 since mining is taking place
during winter months.
Interest expense increased to $2,317,000 in 1995 compared to $1,446,000
in 1994. This increase in interest is due to increased interest rates and
increased borrowings in 1995. Other income, net decreased to $504,000 in 1995
compared to $625,000 in 1994. This decrease is due to a reduction in gains
from land sales, of
properties.partially offset by increases in royalty income.
PART II. OTHER INFORMATION
Items 1, 2, 3, 4, 5, and 6 are not applicable and have been omitted.
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ALASKA GOLD COMPANY
SIGNATURES
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, on May 3,August 7, 1995.
ALASKA GOLD COMPANY
/s/ Gary L. Barker
Gary L. Barker
President
/s/ Richard W. Corman
Richard W. Corman
Treasurer, Chief Financial
Officer and Chief Accounting
Officer