UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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 0-11226
GOLDEN CYCLE GOLD CORPORATION
(Exact name of registrant as specified in its charter)
COLORADO 84-0630963
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2340 Robinson Street, Suite 209,
Colorado Springs, Colorado 80904
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 471-9013
_____________________________________________________________________
(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
the filing requirements for the past 90 days. YES XX NO
Number of Shares outstanding at May 11, 1998: 1,870,050
PART I. - FINANCIAL INFORMATION
GOLDEN CYCLE GOLD CORPORATION
BALANCE SHEETS
March 31, December 31,
1998 1997
(Unaudited)
_________ _________
Assets
_________________________________________
Current assets:
Cash and cash equivalents $ 103,462 $ 11,095
Short-term investments 1,922,838 1,937,736
Interest receivable and other
current assets 23,198 20,686
_________ _________
Total current assets 2,049,498 1,969,517
Note receivable 233,569 233,569
Assets held for sale (net) 132,680 132,680
Property and equipment, at cost:
Land 2,364 2,364
Mineral property development costs 77,345 57,582
Furniture and fixtures 9,524 8,303
Machinery and equipment 49,689 49,492
_________ _________
138,922 117,741
Less accumulated depreciation (33,495) (31,785)
_________ _________
105,427 85,956
Other assets 3,535 5,394
Investment in mining joint venture (Note 2) - -
_________ _________
Total assets $ 2,524,709 $ 2,427,116
Liabilities and Shareholders' Equity
_________________________________________
Accounts payable and accrued liabilities $ 8,885 $ 27,352
Shareholders' equity:
Common Stock - no par value.
Authorized 3,500,000 shares;
issued and outstanding
1,870,050 shares 7,051,954
7,051,954
Additional paid-in capital 1,927,736 1,927,736
Accumulated deficit (6,435,965) (6,552,025)
Accumulated comprehensive loss (27,901) (27,901)
_________ _________
Total shareholders' equity 2,515,824 2,399,764
_________ _________
$ 2,524,709 $ 2,427,116
<FN>
See Accompanying Notes to Financial Statements
GOLDEN CYCLE GOLD CORPORATION
STATEMENTS OF OPERATION AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS ENDED
March 31, 1998 and 1997
(Unaudited)
Three Months Ended
March 31,
____________________
1998
1997
_________ _________
Revenue:
Distribution from mining joint
venture in excess of
carrying value $ 250,000 $ 250,000
_________ _________
Total operating revenue 250,000 250,000
Expenses:
General and administrative (160,333) (172,803)
_________ _________
Operating income 89,667 77,197
Other income:
Interest and other income 26,393 28,536
_________ _________
Net income $ 116,060 $ 105,733
_________ _________
Income (loss) per share $ 0.06 $ 0.06
Weighted average common
shares outstanding 1,870,050 1,870,050
ACCUMULATED DEFICIT:
Beginning of period $(6,552,025) $(6,258,703)
_________ _________
End of Period (6,435,965) (6,152,970)
<FN>
See Accompanying Notes to Financial Statements
GOLDEN CYCLE GOLD CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
March 31, 1998 and 1997
(Unaudited)
1998 1997
__________ __________
Cash flows from operating activities:
Net Income $ 116,060 $ 105,733
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense 1,710 2,344
Increase in interest receivable
and other current assets (2,512) (10,367)
Decrease in accounts payable
and accrued liabilities (18,467) (3,537)
__________ __________
Net cash provided by
operating activities 96,791 94,174
__________ __________
Cash flows provided (used) by investing activities:
Decrease (increase) in short-term
investments, net 14,898 (74,207)
Exploration & development costs (19,763) -
Decrease in other assets 1,859 -
Purchases of property and equipment, net (1,418) (40,705)
__________ __________
Net cash used by investing
activities (4,424) (114,912)
__________ __________
Net increase (decrease) in
cash and cash equivalents 92,367 (20,738)
Cash and cash equivalents, beginning of three months 11,095 36,268
__________ __________
Cash and cash equivalents, end of three months $ 103,462 $ 15,530
<FN>
See Accompanying Notes to Financial Statements
GOLDEN CYCLE GOLD CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements (other than the Balance Sheet at
December 31, 1997) are unaudited but, in the opinion of management, include
all adjustments, consisting solely of normal recurring items, necessary for
a fair presentation. Interim results are not necessarily indicative of
results for a full year.
These financial statements should be read in conjunction with the
financial statements and notes thereto which are included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. The
accounting policies set forth in those annual financial statements are the
same as the accounting policies utilized in the preparation of these
financial statements, except as modified for appropriate interim financial
statement presentation.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income,
(Statement No. 130), effective for years beginning after December 15, 1997.
Statement No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company adopted Statement No. 130 effective
January 1, 1998 and there was no significant impact on the Company's
financial statements.
(2) INVESTMENT IN JOINT VENTURE
The Company accounts for its investment in the Cripple Creek & Victor
Gold Mining Company (the "Joint Venture") on the equity method. During 1992,
the Company's investment balance in the Joint Venture was reduced to zero.
Joint Venture distributions in excess of the investment carrying value are
recorded as income, as the Company is not required to finance the Joint
Venture's operating losses or capital expenditures. Correspondingly, the
Company does not record its share of Joint Venture losses incurred subsequent
to the reduction of its investment balance to zero. To the extent the Joint
Venture is subsequently profitable, the Company will not record its share of
equity income until the cumulative amount of previously unrecorded Joint
Venture losses has been recouped. As of March 31, 1998, the Company's share
of accumulated unrecorded losses from the Joint Venture was $6,919,258.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company's principal mining investment and source of cash flows has
been its interest in the Joint Venture. The Joint Venture engages in gold
mining activity in the Cripple Creek area of Colorado. The Company's Joint
Venture co-venturer is Pikes Peak Mining Company ("Pikes Peak"), a
wholly-owned subsidiary of Independence Mining Company.
The Company's rights and obligations relating to its Joint Venture
interest are governed by the Joint Venture Agreement. The Joint Venture is
currently operating in the Initial Phase, as defined. In accordance with the
Joint Venture Agreement, Pikes Peak manages the Joint Venture, and is
required to finance all operations and capital expenditures during the
Initial Phase.
The Initial Phase will terminate after Initial Loans, as defined, have
been repaid and Net Proceeds (defined generally as gross revenues less
operating costs including Pikes Peak's administrative fees) of $58 million
have been distributed to the venture participants in the proportion of 80%
to Pikes Peak and 20% to the Company. Initial Loans generally constitute
funds loaned to the Joint Venture, and interest thereon, to finance
operations and mine development by either Pikes Peak or third-party
financial institutions and are repayable prior to distributions to the
venture participants. The Manager reported that Initial Loans, payable to
Pikes Peak, of approximately $148.2 million were outstanding at March 31,
1998. Under the Agreement as amended in 1991, the Joint Venture has not
earned or distributed any Net Proceeds.
After the Initial Phase, the Joint Venture will distribute metal in
kind
in the proportion of 67% to Pikes Peak and 33% to the Company, and the
venture participants will be responsible for their proportionate share of the
Joint Venture costs.
During the Initial Phase, the Company is entitled to receive a Minimum
Annual Distribution of $250,000. Minimum Annual Distributions received after
1993 constitute an advance of Net Proceeds. Accordingly, such Net Proceeds
advances will be recouped from future Net Proceeds distributions allocable
to the Company. Based on the amount of Initial Loans payable to the Manager
and the recurring operating losses incurred by the Joint Venture, management
of the Company believes that, absent a significant and sustained increase in
the prevailing market prices for gold, it is unlikely that the Company will
receive more than the Minimum Annual Distribution from the Joint Venture in
the foreseeable future.
Cash provided by operations was approximately $97,000 and $94,000 in
the 1998 and 1997 periods respectively. Prior to 1993, the $250,000 Minimum
Annual Distribution was classified as an investing cash flow; beginning in
1993, the Minimum Annual Distribution was reflected as an operating cash flow
by reason of the fact that the Joint Venture investment balance was reduced
to zero during 1992, as discussed below under "Results of Operations". The
Minimum Annual Distribution was received from the Joint Venture January 15,
1998. No further distributions are expected from the Joint Venture during
the remainder of 1998.
Cash provided by operations during the 1998 period increased from the
1997 period by approximately $3,000 primarily due to reduced general and
administrative expenses.
The Company's working capital was approximately $2,041,000 at March 31,
1998 compared to $2,401,000 at March 31, 1997. Working capital decreased by
approximately $360,000 at March 31, 1998 compared to March 31, 1997. The
decrease was primarily due to commencement of exploration activity, the
establishment of office facilities and staffing in the Philippines by the
Company's Philippine subsidiary, Golden Cycle Philippines, Inc. ("GCPI").
During 1997, the Company began exploration activities in the
Philippines
through GCPI. During 1997 the Company expended approximately $77,000 to
support GCPI operations, and incurred a foreign currency translation loss of
approximately $29,000. GCPI expended an additional $134,000 in searching
for promising mineral properties and in evaluating and negotiating for
certain properties in the Republic of the Philippines. Further, GCPI
expended approximately $58,000 conducting initial exploration of the
SAR 1-5 claims under Amendment 2 to the BGA. Amendment 2 to the BGA is an
exploration buy-in under which the Company will earn a 50% interest in the
claims for the expenditure of Philippines peso 10 million. Consequently all
exploration expenditures under Amendment 2 to the BGA are capitalized.
During the first three months of 1998, GCPI expended approximately
$44,000 in continuing its search for additional promising mineral properties,
and approximately $20,000 continuing its initial exploration of SAR 1-5
claims under Amendment 2 to the BGA.
The Company anticipates that GCPI will continue exploration and
development activities in the Philippines in 1998. During 1998, the Company
has budgeted approximately $175,000 to support GCPI in its search for gold
and copper mining opportunities in the Philippines. If opportunities to
economically expand the Philippine operations are available and the Company
elects to pursue them, the Company will seek outside financing which may
dilute its interest in GCPI. There is no assurance that the Company will be
able to obtain such additional capital, if required. Furthermore, if such
operations are commenced, it is unlikely they would generate positive cash
flow and/or profit for several years.
Results of Operations
The Company had net income, for the three months ended March 31, of
approximately $116,000 in 1998, compared to net income of approximately
$106,000 in the 1997 period.
The increase in net income for the first three months of 1998 compared
with the corresponding period in 1997 was due to decreased general and
administrative expenses during the 1998 period.
The Company accounts for its investment in the Joint Venture on the
equity method. During 1992, the Company's investment balance in the Joint
Venture was reduced to zero. Joint Venture distributions in excess of the
investment carrying value are recorded as income, as the Company is not
required to finance the Joint Venture's operating losses or capital
expenditures. Correspondingly, the Company does not record its share of
Joint Venture losses incurred subsequent to the reduction of its investment
balance to zero. To the extent the Joint Venture is subsequently profitable,
the Company will not record its share of equity income until the cumulative
amount of previously unrecorded Joint Venture losses has been recouped. As
of March 31, 1998, the Company's share of accumulated unrecorded losses from
the Joint Venture was $6,919,258.
The Joint Venture incurred a net loss of $3.7 million for the three
months ended March 31, 1998. The Joint Venture incurred net loss of $10.8
million for the year ended December 31, 1997. The Joint Venture recorded
net income of $1.9 million for the year ended December 31, 1996 and net loss
of $3.7 million in 1995.
PART II - OTHER INFORMATION
Item 1 through 4 are not being reported due to a lack of circumstances
that require a response.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
None.
SIGNATURES
Pursuant to 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.
THE GOLDEN CYCLE GOLD CORPORATION
(Registrant)
/s/ Birl W. Worley Jr.
Birl W. Worley Jr.
President & C.E.O.
/s/ R. Herbert Hampton
R. Herbert Hampton,
Vice President, Finance
May 11, 1998