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 June 30, 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 201,
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 June 30, 1998: 1,870,050
PART I. - FINANCIAL INFORMATION
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
BALANCE SHEETS
June 30, December 31,
1998 1997
(Unaudited)
_________ _________
Assets
_________________________________________
Current assets:
Cash and cash equivalents $ 218,824 $ 11,095
Short-term investments 1,604,909 1,937,736
Interest receivable and other
current assets 29,088 20,686
_________ _________
Total current assets 1,852,821 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 94,993 57,582
Furniture and fixtures 9,442 8,303
Machinery and equipment 49,272 49,492
_________ _________
156,071 117,741
Less accumulated depreciation (34,622) (31,785)
_________ _________
121,449 85,956
Other assets 3,407 5,394
Investment in mining joint venture (Note 2) - -
_________ _________
Total assets $ 2,343,926 $ 2,427,116
Liabilities and Shareholders' Equity
_________________________________________
Accounts payable and accrued liabilities $ 3,173 $ 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 (6,605,786) (6,552,025)
Accumulated comprehensive loss (33,151) (27,901)
_________ _________
Total shareholders' equity 2,340,753 2,399,764
_________ _________
$ 2,343,926 $ 2,427,116
<FN>
See Accompanying Notes to Financial Statements
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS
AND ACCUMULATED DEFICIT
FOR THE THREE AND SIX MONTHS ENDED
June 30, 1998 and 1997
(Unaudited)
Three Months Ended
June 30,
____________________
1998
1997
_________ _________
Revenue:
Distribution from mining joint
venture in excess of
carrying value $ - $ -
_________ _________
Total operating revenue - -
Expenses:
General and administrative (191,920) (231,396)
_________ _________
Operating loss (191,920) (231,396)
Other income:
Interest and other income 22,099 26,326
Gain on asset sold - 1,000
_________ _________
Total other income 22,099 27,326
_________ _________
Net loss $ (169,821) $ (204,070)
_________ _________
Other comprehensive loss
Foreign currency translation
adjustments (5,250) -
_________ _________
Comprehensive loss $ (175,071) $ (204,070)
_________ _________
Loss per share $ (0.09) $ (0.11)
Weighted average common
shares outstanding 1,870,050 1,870,050
ACCUMULATED DEFICIT:
Beginning of period $(6,435,965) $(6,152,970)
_________ _________
End of Period (6,605,786) (6,357,040)
<FN>
See Accompanying Notes to Financial Statements
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS
AND ACCUMULATED DEFICIT
FOR THE THREE AND SIX MONTHS ENDED
June 30, 1998 and 1997
(Unaudited)
Six Months Ended
June 30,
____________________
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 (352,253) (404,198)
_________ _________
Operating loss (102,253) (154,198)
Other income:
Interest and other income 48,492 54,862
Gain on asset sold - 1,000
_________ _________
Total other income 48,492 55,862
_________ _________
Net loss $ (53,761) $ (98,336)
_________ _________
Other comprehensive loss
Foreign currency translation
adjustments (5,250) -
_________ _________
Comprehensive loss $ (59,011) $ (98,336)
_________ _________
Loss per share $ (0.03) $ (0.05)
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 (6,605,786) (6,357,040)
<FN>
See Accompanying Notes to Financial Statements
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
June 30, 1998 and 1997
(Unaudited)
1998 1997
__________ __________
Cash flows from operating activities:
Net Loss $ (53,761) $ (98,336)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation expense 3,446 4,833
Increase in interest receivable
and other current assets (8,402) (9,539)
Increase (decrease) in accounts payable
and accrued liabilities (24,179) 5,550
__________ __________
Net cash used in
operating activities (82,896) (97,492)
__________ __________
Cash flows provided from investing activities:
Decrease in short-term
investments, net 332,827 118,974
Exploration & development costs (42,403) -
Decrease (increase) in other assets 1,987 (2,348)
Purchases of property and equipment, net (1,528) (40,927)
__________ __________
Net cash provided by investing
activities 290,883 75,699
__________ __________
Cash flows used in financing activity:
Costs of issuance of Common Stock - (273)
__________ __________
Effect of exchange rate changes on cash (258) -
Net increase (decrease) in
cash and cash equivalents 207,729 (22,066)
Cash and cash equivalents, beginning of period 11,095 36,268
__________ __________
Cash and cash equivalents, end of period $ 218,824 $ 14,202
<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 June 30, 1998, the Company's share
of accumulated unrecorded losses from the Joint Venture was $7,513,258.
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
$152.6 million were outstanding at June 30, 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 used by operations was approximately $83,000 and $97,000 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 used by operations during the 1998 period decreased from the 1997
period by approximately $14,000 primarily due to reduced general and
administrative expenses.
The Company's working capital was approximately $1,850,000 at June 30,
1998 compared to $2,196,000 at June 30, 1997. Working capital decreased by
approximately $346,000 at June 30, 1998 compared to June 30, 1997. The
decrease was primarily due to continuing exploration activity and 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 Benguet and Golden Cycle Philippines Inc. Agreement
("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 (approximately $241,000). Consequently all
exploration expenditures under Amendment 2 to the BGA are capitalized.
During the first six months of 1998, GCPI expended approximately
$54,000
in continuing its search for additional promising mineral properties, and
approximately $37,000 continuing its initial exploration of SAR 1-5 claims
under Amendment 2 to the BGA, and incurred a foreign currency translation
loss of approximately $5,000.
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 loss, for the six months ended June 30, of
approximately $54,000 in 1998, compared to net loss of approximately $98,000
in the 1997 period.
The decrease in net loss for the first six 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 received, 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 June 30, 1998, the Company's share of accumulated unrecorded losses from
the Joint Venture was $7,513,258.
The Joint Venture incurred a net loss of $6.6 million for the six
months
ended June 30, 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. (See Investment in Joint Venture, above.)
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
August 7, 1998