U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1995
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 0-17386
FISCHER-WATT GOLD COMPANY, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0227654
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1410 Cherrywood Drive, Coeur d'Alene, ID 83814
(Address of principal executive offices)
(208) 664-6757
(Issuer's telephone number, including area code)
Check whether the issuer (1) 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 [ ]
The number of shares of Common Stock, $0.001 par value,
outstanding as of September 1, 1995 was 12,344,000
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
Part 1 - Financial Information
Item 1. Financial Statements
FISCHER-WATT GOLD COMPANY, INC.
BALANCE SHEETS
July 31, January 31,
ASSETS 1995 1995
(Unaudited)
CURRENT ASSETS:
Cash $124,000 $ 6,000
Trading securities 346,000 358,000
Accounts receivable 2,000 2,000
Other current assets 5,000 6,000
------- -------
Total current assets 477,000 372,000
MINERAL INTERESTS 192,000 387,000
MINING AND OTHER EQUIPMENT 51,000 50,000
LESS DEPRECIATION, DEPLETION
AND AMORTIZATION ( 36,000) ( 36,000)
------- -------
207,000 401,000
INVESTMENT IN HONDURAN CORPORATION 100,000 91,000
INVESTMENT IN MEXICAN CORPORATION 16,000 -
OTHER ASSETS 27,000 27,000
------- -------
Total assets $ 827,000 $ 891,000
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 85,000 $ 89,000
Notes payable - 500,000
Accrued payroll and benefits 32,000 59,000
Accrued interest expense 3,000 51,000
Other accrued liabilities 42,000 31,000
------- -------
Total current liabilities 162,000 730,000
LONG TERM LIABILITIES:
Nonrecourse debt (Note 5) 100,000 87,000
Total liabilities 262,000 817,000
COMMITMENTS AND CONTINGENCIES,
Notes 1,3, 6
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, $0.001 par value,
50,000,000 shares authorized;
12,344,000 shares outstanding
at July and January 1995 12,000 12,000
Additional paid-in capital 5,773,000 5,773,000
Deficit (5,220,000) (5,711,000)
--------- ---------
Total shareholders' equity 565,000 74,000
--------- --------
Total liabilities and
shareholders' equity $ 827,000 $ 891,000
-------- --------
The accompanying notes are an integral part of these balance
sheets.
FISCHER-WATT GOLD COMPANY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
[CAPTION]
Three Months Ended Six Months Ended
July 31, July 31,
1995 1994 1995 1994
_______ _______ _______ _______
REVENUES:
Gain on sale of mineral interest $641,000 $ - $641,000 $109,000
COSTS AND EXPENSES:
Abandoned properties and
prospects 157,000 197,000 179,000 197,000
Generative exploration expense - - 3,000 -
Operating and administrative 71,000 54,000 119,000 127,000
Public company costs 23,000 2,000 44,000 23,000
_______ _______ _______ _______
251,000 253,000 345,000 347,000
OTHER INCOME (EXPENSE):
Interest expense ( 2,000) (20,000) (24,000) (39,000)
Unrealized gain on
trading securities 156,000 - 206,000 -
Other income 35,000 - 24,000 21,000
_______ _______ _______ _______
189,000 (20,000) 206,000 (18,000)
Net income (loss) before
tax provision 579,000 (273,000) 502,000 (256,000)
TAX PROVISION (10,000) - (11,000) (1,000)
_______ _______ _______ _______
NET INCOME (LOSS) $569,000 $(273,000) $491,000 $(257,000)
INCOME (LOSS) PER SHARE AND
COMMON EQUIVALENT $ .05 $ (.02) $ .04 $ (.02)
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 12,588,000 12,344,000 12,588,000 12,344,000
The accompanying notes are an integral part of these statements.
FISCHER-WATT GOLD COMPANY, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
July 31,
1995 1994
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 491,000 $(257,000)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities-
Unrealized gain on trading securities (206,000) -
Gain on sale of mineral interest (641,000) (109,000)
Abandoned properties and prospects 180,000 197,000
Generative exploration expensed 3,000 -
Depreciation and amortization 1,000 2,000
Accrued interest added to
principal balance - 40,000
(Increase) decrease in receivables and
other current assets - (3,000)
Gain on sale of equipment - ( 20,000)
Proceeds from sale of trading securities 238,000 -
Gain on sale of trading securities (20,000) -
Increase (decrease) in accounts payable
and accrued liabilities 2,000 ( 89,000)
-------- --------
Net cash provided by (used in)
operating activities 48,000 (239,000)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of
mineral interest 150,000 105,000
Property acquisition and development costs(63,000) 4,000
Bonuses applied to reduce cost basis - 33,000
Investment in Honduran Corporation ( 9,000) -
Investment in Mexican Corporation (15,000) ( 4,000)
Equipment acquired ( 2,000) ( 3,000)
-------- --------
Net cash provided by
investing activities 61,000 135,000
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 9,000 -
-------- --------
Net cash provided by
financing activities 9,000 -
-------- --------
NET INCREASE (DECREASE) IN CASH 118,000 (104,000)
CASH, at beginning of period 6,000 106,000
CASH, at end of period $124,000 $ 2,000
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $2,000 $ 2,000
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT
NONCASH ACTIVITIES:
Application of bonus on unproven
property to offset accrued
interest expense $ 25,000 $ 25,000
Cost basis of trading securities
sold in connection with loss on
trading securities $218,000 -
Application of reclamation bond to
offset cost basis of mineral property $ - $ 40,000
Short-term debt eliminated in
connection with sale of
mineral interest $500,000 $ 90,000
Accrued interest eliminated in
connection with sale of
mineral interest $ 42,000 $ -
Cost basis in mineral interest
sold in connection with short-
term debt eliminated $ 51,000 $ 86,000
Purchase of stock in Honduran
corporation paid for in August 1994 $ - $ 81,000
Fair market value of vehicles and
office equipment offset against
wages and expenses due to
former employees $ - $ 33,000
The accompanying notes are an integral part of these statements.
FISCHER-WATT GOLD COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) FINANCIAL STATEMENT ADJUSTMENTS AND FOOTNOTES DISCLOSURES
The accompanying financial statements are unaudited; however, in
the opinion of management, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation have
been made. These financial statements and notes thereto should
be read in conjunction with the financial statements and related
notes included in Fischer-Watt Gold Company, Inc.'s
("Fischer-Watt" or the "Company") Annual Report on Form 10-K for
the year ended January 31, 1995 ("Form 10-K").
Future Financing and Realization
While Fischer-Watt was profitable in the latest fiscal year, it
had
negative cash flow from operations in the latest fiscal year and
suffered losses from operations and negative cash flow from
operations in each of its prior years. The entire profit was
attributable to a sale of a mineral interest. Since the Company
has no sustaining income or cash flow from operations, it is
currently funding its operations from proceeds of property sales
and the sale of stock received as part of the sale price of a
mineral interest. The ability of the Company to continue as a
going concern is dependent upon establishing successful future
operations or additional financing, or disposition of some of the
Company's assets. While the Company has been successful in
raising cash from these sources in the past, there can be no
assurance that its cash raising efforts will succeed. (See Item
2 Management's Discussion and Analysis or Plan of Operation -
"Subsequent Events".)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Gain on Sale of Mineral Interest--Gain on sale of mineral
interests
represents the excess of the proceeds realized from the sale of a
mineral interest over the Company's cost basis in that property.
On February 28, 1995, Tombstone Explorations Co. Ltd.
("Tombstone"),a Vancouver-based mining and exploration company
entered into a letter agreement with Fischer-Watt to purchase
Fischer-Watt's interest in the Minas de Oro property in Honduras.
Minas de Oro was joint ventured with Kennecott Exploration
Company ("Kennecott") who had an 80 percent working interest.
Tombstone agreed to buy the Kennecott interest and to acquire
Fischer-Watt's $500,000 promissory note to Kennecott, as well as
Fischer-Watt's interest in the property. Tombstone paid
Fischer-Watt $150,000 in cash and delivered for cancellation,
Fischer-Watt's $500,000 promissory note to Kennecott plus all
accrued interest. The transaction closed on May 16, 1995 with the
sale of the Minas de Oro interests to Cerenex Financial A. V. V.,
a subsidiary of Tombstone. The sale resulted in
a gain of $641,000. (See Note 4.)
In March 1994, Fischer-Watt optioned its interest in the San
Andres mineral property in Honduras to Greenstone Resources Ltd.
("Greenstone"). Fischer-Watt's gross proceeds from the sale of
this option were $195,000 ($105,000 in cash plus elimination of
$90,000 of its $94,000 debt to Greenstone. Fischer-Watt's cost
basis in the property optioned was $86,000 resulting in a
realized gain of $109,000 from the sale of the option. The
balance of the purchase price was recognized as income when the
option was exercised on October 31, 1994. (See Note 5.)
Bonuses--As an incentive to enter into a joint exploration and
development agreement, Fischer-Watt may receive bonus payments.
The bonus payments are recognized as revenue if the agreement
entered into relates to a proven property. For unproven
properties, bonus payments are first applied as a reduction of
the cost basis of the property with any excess being recognized
as revenue.
Trading Securities
Shares of Greenstone Resources Ltd.--The Company received 427,300
restricted shares of Greenstone Resources Ltd. ("Greenstone"),
common stock upon exercise of the San Andres option (Note 5).
These shares were valued at $700,000 which was the average of the
daily closing price on the Toronto Stock Exchange for the five
trading days preceding the exercise date of the option, adjusted
to United States dollars.
The Company has adopted Statement of Financial Accounting
Standards ("SFAS ") No. 115 which applies to certain investments
in equity securities. At July 31, 1995, the Company held 142,300
shares of Greenstone stock. Since the shares are listed on both
NASDAQ and the Toronto Stock Exchange, the average closing price
(converted to United States dollars) of the two exchanges was
used to determine the fair value. The fair value was determined
to be $346,000 which resulted in an unrealized gain on trading
securities of $206,000. The gain is included in the statements of
operations.
In the quarter ended July 31, 1995, the Company sold 66,000
shares and received net proceeds of $121,000 which resulted in a
gain on the sale of trading securities of $20,000 which is shown
on the statement of operations.
In the quarter ended April 30, 1995, the Company sold 119,000
shares and received net proceeds of $117,000 which resulted in a
loss on the sale of trading securities of $13,000 which is shown
on the statement of operations.
Abandonment of Mineral Interests
Mineral Interests in unproven properties are evaluated on a
quarterly basis for possible impairment. Management evaluation
considers all the facts and circumstances known about each
property including: the results of drilling and other
exploration activities to date; the desirability and likelihood
that additional future exploration activities will be undertaken
by the Company or by others; the land holding costs including
work commitments, rental and royalty payments and other lease and
claim maintenance commitments; the expiration date of the lease
including any earlier dates by which notice of intent to
terminate the lease must be given in order to avoid work
commitments; the accessibility of the property; the ability and
likelihood to joint venture the property with others; and, if
producing, the cost and revenue of operation.
Unproven properties are considered fully or partially impaired,
and are fully or partially abandoned, at the earliest of the time
that: geologic mapping, surface sample assays or drilling results
fail to confirm the geologic concepts involved at the time the
property was acquired; a decision is made not to perform the work
commitments or to make the lease payments required to retain the
property; the Company discontinues its efforts to find a joint
venture partner to fund future exploration activities and has
decided not to fund those costs itself; or, the time the property
interest terminates by contract or by operation of law.
Reclamation Liabilities
Reclamation liabilities are recorded as liabilities (and as a
cost of the related property) in the period in which the drilling
or mining activity which generates the reclamation requirement
occurs.
Generative Exploration Expense
The costs of generative exploration activities that do not result
in the acquisition of mineral interests are expensed.
Income Taxes
Because of the Company's exploration activities and net operating
loss carryovers, the Federal tax rate for the year ended January
31, 1995 was zero. Accordingly, no provision for Federal Income
taxes was made in the statement of operations for the quarter
ended July 31, 1995. Because of the Company's gain on the sale
of mineral interest, the provision for State income taxes,
primarily for the State of Idaho, was increased from $1,000 to
$11,000.
Earnings Per Share
Net income (loss) per common share has been computed on the basis
of the weighted average number of common shares outstanding
during each period using the modified treasury stock method.
Since the number of shares of common stock obtainable upon
exercise of outstanding options exceeds 20% of the number of
common shares outstanding, the treasury stock method has been
modified to assume exercise of all outstanding options. In these
circumstances, the assumed proceeds are first applied to share
repurchase, next to reduction of debt and the remaining balance
of the proceeds are invested in U.S. Government securities with
appropriate recognition of any income tax effect. The net result
of this calculation is that the effect of the options in
non-dilutive.
(3) PROPERTY AND EQUIPMENT
A summary of the cost basis of mineral properties and prospects
as of July 31 and January 31, 1995, is:
July 31 January 31
Oatman (United Western), Arizona $ 10,000 $ 136,000
Modoc, California 72,000 72,000
Minas de Oro, Honduras - 59,000
Tuscarora, Nevada 45,000 77,000
America Mine, California 18,000 16,000
La Victoria, Honduras 5,000 -
Other mineral interests
(each less than $40,000) 42,000 27,000
------- -------
$ 192,000 $ 387,000
The Company's property interests require minimum payments to be
made, or work commitments to be satisfied, to maintain ownership
of the property. However, all of these payments may be avoided
by timely forfeiture of the related property interest. If the
joint venture partner, or the Company, fails to meet these
commitments,the Company could lose its rights to explore, develop
or mine the property. The table below lists the various
properties and the required financial commitments.
PROPERTY COMMITMENTS
For the year ending July 31, 1996
Lease Work J.V. Net FWG
Property Payments Commit. Total Share Cost
-------- -------- -------- -------- -------- --------
America $48,000 $102,000 $152,000 $152,000 $ -
La Victoria 10,000 25,000 35,000 - 35,000
Tuscarora - 2,000 2,000 2,000 -
Modoc 26,000 - 26,000 26,000 -
Oatman - - - - -
Other 48,000 193,000 241,000 191,000 50,000
------ -------- -------- -------- -------
Totals $132,000 $324,000 $456,000 $371,000 $85,000
(4) NOTES PAYABLE
Kennecott Loan
In March 1992, Kennecott loaned Fischer-Watt $500,000. Principal
and interest on this loan were repayable in monthly installments
of $100,000 beginning August 1, 1992. The loan bore interest at
the higher of 10% or prime plus 5% and was secured by the
Company's interest in the America Mine property. The Company was
in default as to payment of principal and interest on this loan
from August 1,1992 until May 16, 1995 when the note and
associated interest were canceled in conjunction with the sale of
the Company's mineral interest in the Minas de Oro, Honduras
property. (See Item 2 Management's Discussion and Analysis or
Plan of Operation -"Liquidity and Financial Position".)
(5) GREENSTONE RESOURCES TRANSACTIONS
On November 2, 1993, the Company signed a letter of intent to be
acquired by Greenstone Resources Ltd. During the due diligence
period, Greenstone advanced funds to the Company for current
operations. The proposed merger was terminated by Greenstone in
February 1994. Greenstone advanced $94,000 during that period.
In March 1994, Fischer-Watt accepted an offer from Greenstone to
acquire an option to purchase all of Fischer-Watt's interests in
the San Andres project in Honduras. As consideration for the
option, Greenstone paid Fischer-Watt $105,000 and forgave $90,000
of a $94,000 loan provided to Fischer-Watt pursuant to the
terminated merger transaction. At April 30, 1994, the Company
recognized a gain of $109,000 on this transaction.
Greenstone exercised its option on October 31, 1994 by forgiving
the remaining loan balance of $4,000, paying Fischer-Watt a
further $56,000 and issuing it $700,000 worth of Greenstone
common stock, valued at the time of exercise. Upon exercise of
the option, Greenstone was assigned Fischer-Watt's option to
acquire 51% of Compania Minerales de Copan, S.A. de C.V. from
Milner Consolidated Silver Mines (25.5%) and North American
Palladium Resources (25.5%) as well as all of Fischer-Watt's
other rights and interest in the San Andres project subject to
the shares described below. Minerales de Copan owns the San
Andres project and is currently producing gold from a small open
pit, heap leach operation within the project boundaries.
On August 4, 1994, the Company received the first instalment of a
loan from Greenstone Resources Canada Ltd. The loan was
negotiated as part of the San Andres option agreement. The loan
is to provide all of the funds to purchase up to nine percent of
the shares of Compania Minerales de Copan S.A. de C.V. ("Copan").
The Company believes that the total loan amount may eventually
exceed $250,000. The loan is nonrecourse as to both principal and
interest to the Company and is to be repaid out of dividends, if
any, from the Copan shares. The shares are pledged to Greenstone
as collateral for the loan which is due on or before December 31,
1999. At July 31, 1995 this loan plus associated accrued
interest totaled $100,000. At July 31, 1995, the Company owned,
or had options to purchase, seven percent of the outstanding
shares of Copan.
On August 28, 1995, the Company agreed to convey all of these
shares and options to acquire additional shares as part of the
purchase price for the for the shares of Greenstone of Colombia.
Under the terms of the agreement, the nonrecourse debt and
accrued interest associated with this debt will be forgiven.
(See Item 2 Management's Discussion and Analysis or Plan of
Operation -"Subsequent Events".)
(6) COMMITMENTS
Property Leases
The Company's property interests require minimum payments to be
made, or work commitments to be satisfied, to maintain ownership
of the property. However, all of these payments may be avoided
by timely forfeiture of the related property interest. (See Note
3 and Item 2 "Subsequent Events".)
Item 2. Management's Discussion and Analysis or Plan of
Operation
The following is a discussion of Fischer-Watt Gold Company,
Inc.'s ("Fischer-Watt" or the "Company") current financial
condition as well as its operations for the three months and six
months ended July 31, 1995 (fiscal 1996) and July 31, 1994
(fiscal 1995). This discussion should be read in conjunction
with the Financial Statements in Item 1 of this report as well as
the Financial Statements in Form 10-K for the fiscal year ended
January 31, 1995 on file with the Securities and Exchange
Commission, as the discussion set forth below is qualified in its
entirety by reference thereto.
LIQUIDITY AND FINANCIAL POSITION
As of September 1, 1995, the Company had $29,000 in cash and
accounts payable of $88,000. The Company also has 122,300 shares
of Greenstone common stock that had an approximate market value
of $321,000 that could be sold to provide funds for operations.
In March 1992, Kennecott loaned Fischer-Watt $500,000. Principal
and interest on this loan were repayable in monthly installments
of $100,000 beginning August 1, 1992. The loan bore interest at
the higher of 10% or prime plus 5% and was secured by the
Company's interest in the America Mine property. The Company was
in default as to payment of principal and interest on this loan
from August 1, 1992 until May 16, 1995 when the note and
associated interest were canceled in conjunction with the sale of
the Company's mineral interest in the Minas de Oro, Honduras
property. (See Note 4 to Financial Statements.)
Subsequent Events
On August 28, 1995, the Company signed an agreement to purchase
100% of Greenstone Resources Ltd.'s wholly-owned Colombian
branch, Greenstone of Colombia ("GOC"). Greenstone of Colombia
owns 94.9% of Compania Minera Oronorte S. A. ("Oronorte"). Under
the terms of the agreement, Fischer-Watt will convey all rights
and interests it holds in Compania Minerales de Copan S.A. de
C.V. ("Copan") to Greenstone Resources Ltd.. In return,
Fischer-Watt will acquire all ownership rights of GOC which
include GOC's interest in Oronorte which owns an operating gold
mine and related cash and receivables and saleable gold in
inventory of not less than $450,000, subject to certain
liabilities not exceeding $1,000,000 and equipment lease
obligations not exceeding $375,000. Fischer-Watt has taken
operating control of GOC and its subsidiaries and their
respective operations.
The Oronorte is an underground mine in northern Colombia. It
produces gold concentrates that are shipped to Japan for
smelting. It has produced an average of 8,800 ounces of gold for
the past four years. The mine has recently been losing
approximately $75,000 per month. The Company recently assumed
operation of the mine and is conducting engineering studies to
explore the feasibility of expanding production, improving
operating efficiency and reducing costs. The Company is
searching for funds to subsidize operations until planned changes
in operations can take effect. At September 1, 1995, the Company
had only enough cash and trading securities that could be sold
to fund the next three months of operations.
On August 28, 1995, the Company signed a letter of intent to
enter into a business combination with Great Basin Management
Company, Inc. ("GBM") GBM is a privately held minerals
exploration company based in Reno, Nevada. GBM owns Great Basin
Exploration and Mining Company, Inc. ("GBEM") which has several
mineral properties in Nevada's Battle Mountain - Eureka Trend, a
major gold producing district in central Nevada in addition to
mineral interests in Arizona and Canada. Under the terms of the
letter of intent, GBM and Fischer-Watt shall combine through the
merger of GBM with and into a newly formed, wholly-owned
subsidiary of Fischer-Watt Gold Company, Inc. GBM is actively
negotiating with prospective joint venture partners on several of
its properties and evaluating other mineral prospects. At the
closing, as to be defined in a definitive agreement, Fischer-Watt
will issue shares of its common stock representing, immediately
after such issuance, 25% of the outstanding shares of common
stock of Fischer-Watt. The letter of intent is subject to each
party's due diligence and obtaining any necessary approvals.
Either party may terminate the letter of intent if the definitive
agreement has not been executed by October 31. 1995.
On August 28, 1995, the Company agreed to loan GBM up to $108,000
for specified purposes in connection with maintaining certain
mineral property positions. There are no plans to loan GBM any
additional funds. As of September 1, 1995, $97,000 of the loan
had been funded. The loan is secured by all of GBM's interest to
all of the outstanding shares of GBEM. There is no requirement
to repay the loan or any interest thereon unless the proposed
merger between the Company and GBM has not occurred by November
1, 1995, in which event the entire amount of the loan and accrued
interest shall be due and payable on December 1, 1995.
Short-Term Liquidity
While Fischer-Watt was profitable in the latest fiscal year, it
had negative cash flow from operations in the latest fiscal year
and suffered losses from operations and negative cash flow from
operations in each of its prior years. The entire profit was
attributable to a sale of a mineral interest. Since the Company
has no sustaining income or cash flow from operations, it is
currently funding its operations from proceeds of the sale of a
mineral interest and the sale of stock received as part of the
sale price of a mineral interest. The ability of the Company to
continue as a going concern is dependent upon establishing
successful future operations or additional financing, or
disposition of some of the Company's assets. There can be no
assurance that its cash raising efforts will succeed.
The principal assets of the Company consists of investments in
mineral properties and in the common stock of Greenstone
Resources Ltd. The ability of the Company to ultimately realize
the value of these investments is dependent upon successful
future operations and additional financing, or disposition of
assets, since the Company's properties are not projected to
generate cash from mining operations during fiscal 1996.
The Company's net cash provided by operating activities during
the first six months of fiscal 1996 was $48,000 compared to
$239,000 used during the first six months of the prior year.
This increase in cash provided of $287,000 is due primarily to
the Company's net income of $491,000 compared to a loss of
$257,000 in the first six months of the prior year as adjusted to
eliminate noncash items. In the first six months of fiscal 1996,
the Company had gain on sale of mineral interest of $641,000
compared to a $109,000 gain in the first six months of fiscal
1995. The Company had an unrealized gain on trading securities
of $206,000 in the six months ended July 31, 1995. The Company
had proceeds from sales of trading securities of $238,000 during
the first six months of fiscal 1996. There was no comparable gain
or proceeds in the six months ended July 31, 1994 as the Company
had no trading securities. Accrued interest decreased from
$40,000 in the prior year to none in the current fiscal period
due to the cancellation of the Kennecott loan on May 16, 1995.
There was no gain on the sale of equipment in the current period
compared to a $20,000 gain in the six months ended July 31, 1994
which was attributable to sales of vehicles and equipment
pursuant to settlement agreements with former employees.
The change in accounts payable of $91,000 was attributable to the
Company's acquiring $81,000 of stock in a Honduran corporation
during the six months ended July 31, 1994 but not paying for it
until August 1994. (See Note 5 to Financial Statements.)
Net cash provided by investing activities was $61,000 in the
first six months of fiscal 1996 compared to $135,000 in the first
six months of fiscal 1995. This decrease of $74,000 results
primarily from the larger proceeds of the sale of mineral
property offset by an increase in the Company's expenditures for
property acquisition costs. In the six months ended July 31,
1994, the property acquisition and development costs were
unusual in that cash was provided by the return of a reclamation
bond to offset property costs coupled with a very low level of
property acquisition and development activity due to a shortage
of available funds.
Net cash provided by financing activities was $9,000 in the six
months ended July 31, 1995. This was the receipt of a portion of
the nonrecourse loan from Greenstone Resources in conjunction
with the Copan share purchase. (See Note 5 to Financial
Statements.) There was no net cash provided by, or used for,
financing activities in the first quarter of fiscal 1995.
On July 31, 1995, Fischer-Watt's current ratio was 2.9:1 based on
current assets of $477,000 and current liabilities of $162,000.
On January 31, 1995, its current ratio was .5:1 based upon
current assets of $372,000 and current liabilities of $730,000.
The main reason for this improvement was the elimination of the
$500,000 Kennecott loan and accrued interest.
A current ratio of less than 1:1 indicates that the Company does
not have sufficient cash and other current assets to pay its
bills and other liabilities incurred at the end of its fiscal
period which are due and payable within the next 12 months.
Long-Term Liquidity
The Company plans to continue its search for long-term debt or
equity capital to fund its operating and exploration activities
until these activities can be funded from production of mineral
resources.
At July 31, 1995, the Company's long-term debt consisted
entirely of a nonrecourse loan from Greenstone Resources Canada
Ltd. The loan was negotiated as part of the San Andres option
agreement. The loan was to provide all of the funds to purchase
up to nine percent of the shares of Compania Minerales de Copan
S.A. de C.V.("Copan"). The loan was nonrecourse as to both
principal and interest to the Company and was to be repaid out of
dividends, if any, from the Copan shares. At July 31, 1995, this
loan plus associated accrued interest totaled $100,000. On August
28, 1995, the Company signed an agreement to convey all of the
stock and options to acquire stock to Greenstone. Under the
terms of the agreement, the nonrecourse debt and accrued interest
associated with this debt will be forgiven. (See "Subsequent
Events" and Note 5 to Financial Statements.)
RESULTS OF OPERATIONS
Three Months Ended July 31, 1995 Compared with Three Months Ended
July 31, 1994
Fischer-Watt had net income of $569,000, or $.05 per share in the
quarter ended July 31, 1995 compared with a net loss of $273,000,
or $.02 per share, in the quarter ended July 31, 1994. This net
income is attributable to a $641,000 gain on the sale of a
mineral interest and an unrecognized gain of $156,000 on trading
securities. In the quarter ended July 31, 1994, there were no
sales of mineral interests nor any gain on trading securities.
This net income was reduced by higher levels of operating and
administrative and public company costs in the quarter from the
prior year's abnormally low levels. Abandoned properties and
prospects decreased from $197,000 in the three months ended July
31, 1994 to $157,000 in the three months ended July 31, 1995.
Copan Share Purchase
On August 4, 1994, the Company received the first instalment of a
loan from Greenstone Resources Canada Ltd. The loan was
negotiated for in the San Andres option agreement. The loan is
to provide all of the funds to purchase up to nine percent of the
shares of Compania Minerales de Copan S.A. de C.V.(Copan). The
loan is non-recourse as to both principal and interest to the
Company and is to be repaid out of dividends, if any, from the
Copan shares. The shares are pledged to Greenstone as collateral
for the loan which is due on or before December 31, 1999.
On August 28, 1995, the Company signed an agreement to convey all
of the stock and options to acquire stock to Greenstone. Under
the terms of the agreement, the nonrecourse debt and accrued
interest associated with this debt will be forgiven.(See
"Subsequent Events" and Note 5 to Financial Statements.)
Other items
Abandonments in the quarter ended July 31, 1995 were $157,000
compared with $197,000 in the second quarter of fiscal 1995. The
Oatman property in Arizona was partially abandoned after an
independent evaluation indicated that it was unlikely that its
cost would be fully recovered based on the current mineral lease
on the property. The $125,000 writedown reduced its basis to
$10,000. Tuscarora was partially abandoned in the amount of
$32,000 based on the results of the same independent evaluation
leaving the remaining basis at $45,000. In the prior year
quarter ended July 31, 1994, Sukut, Costa Rica, having a cost
basis of $197,000 was the only property abandoned.
Operating and administrative costs increased from $54,000 in the
second quarter of fiscal 1995 to $71,000 in the first quarter of
fiscal 1996. This increase reflects the Company's ability to
resume a more normal level of operations due to its improved cash
position compared to the prior year. The prior year costs did
not reflect normal operations due to the severe cash position of
the Company.
Public company costs increased from $2,000 in the second quarter
of fiscal 1995 to $23,000 in the second quarter of fiscal 1996.
This $18,000 increase is due to the resumption of more normal
levels of corporate relations with the investment community and
due to reimbursing members of the Board of Directors for their
expenses in connection with their services.
Interest expense decreased to $2,000 in the second quarter of
fiscal 1996 from $20,000 in the second quarter of fiscal 1995.
This decrease is due primarily to elimination of accrued interest
expense on the $500,000 Kennecott loan which was canceled in
conjunction with the sale of the Minas de Oro sale. (See above
and Note 4 to Financial Statements.)
Other income increased from none in the second quarter of fiscal
1995 to $35,000 in the second quarter of fiscal 1996. This
$35,000 increase is due primarily to a $32,000 gain on the sale
of trading securities in the current quarter. There were no
comparable sales in the prior year quarter.
Six Months Ended July 31, 1995 Compared with Six Months ended
July 31, 1994
Fischer-Watt had a net income of $491,000, $.04 per share, in the
six months ended July 31, 1995 compared to net loss of $257,000,
$.02 per share, in the six months ended July 31, 1994. This
difference of $748,000 is due primarily to a $641,000 gain from
the sale of Fischer-Watt's interest in the Minas de Oro property
in Honduras coupled with an unrealized gain of $206,000 on
trading securities.
Sale of Minas de Oro mineral interest
On February 28, 1995, Tombstone Explorations Co. Ltd.
("Tombstone"), a Vancouver-based mining and exploration company
entered into a letter agreement with Fischer-Watt to purchase
Fischer-Watt's interest in the Minas de Oro property in Honduras.
Minas de Oro was joint ventured with Kennecott Exploration
Company ("Kennecott") who had an 80 percent working interest.
Tombstone agreed to buy the Kennecott interest and to acquire
Fischer-Watt's $500,000 promissory note to Kennecott, as well as
Fischer-Watt's interest in the property. Tombstone paid
Fischer-Watt $150,000 in cash and delivered for cancellation,
Fischer-Watt's $500,000 promissory note to Kennecott plus all
accrued interest. The transaction closed on May 16, 1995 with the
sale of the Minas de Oro interests to Cerenex Financial A. V. V.,
a subsidiary of Tombstone. The sale resulted in a gain of
$641,000. (See Note 4 to Financial Statements)
Sale of Option on San Andres
In the six months ended July 31, 1994, a gain of $109,000 was
realized from the sale of an option to purchase Fischer-Watt's
interest in the San Andres property.
Other items
Abandonments decreased from $197,000 in the first six months of
fiscal 1995 to $179,000 in the first six months of fiscal 1996.
The Oatman property in Arizona was partially abandoned after an
independent evaluation indicated that it was unlikely that its
cost would be fully recovered based on the current mineral lease
on the property. The $125,000 writedown reduced its net cost
basis to $10,000. The Tuscarora mineral interest in Nevada was
partially abandoned in the amount of $32,000 based on the results
of the same independent evaluation leaving the remaining basis at
$45,000. The Rio Tinto property in Honduras was abandoned when an
exploration program conducted at the end of fiscal 1995 and the
beginning of fiscal 1996 could not confirm mineral values
discovered under earlier exploration programs. Rio Tinto had a
cost basis of $22,000. An additional $3,000 of generative
exploration expense was incurred when a prospect in Nevada was
abandoned when the Company decided not to fund the work needed to
perfect its mining claims. In the six months ended July 31,
1994, Sukut, Costa Rica, having a cost basis of $197,000 was the
only property abandoned.
Operating and administrative costs decreased from $127,000 in the
first six months of fiscal 1995 to $119,000 in the first six
months of fiscal 1996. This $8,000 decrease is primarily due to
lower office occupancy costs in fiscal 1996 resulting from the
closure of the Company's office in Nevada.
Public company costs increased from $23,000 in the first six
months of fiscal 1995 to $44,000 in the first six months of
fiscal 1996. This increase resulted primarily from the Company's
resumption of more normal levels of corporate relations with the
investment community and due to reimbursing members of the Board
of Directors for their expenses in connection with their
services.
Interest on recourse debt decreased to $24,000 in the first six
months of fiscal 1996 from $39,000 in the first six months of
fiscal 1995. This decrease is due primarily to elimination of
interest accrued on the $500,000 Kennecott loan which was
canceled in conjunction with the May 1995 sale of the Minas de
Oro mineral interests. (See above and Note 4 to Financial
Statements.)
Interest and other income increased from$21,000 in the first six
months of fiscal 1995 to $24,000 in the first six months of
fiscal 1996. The income in the current six month period is
attributable to a gain on the sale of trading securities whereas
the gain in the first six months of fiscal 1995 was due to the
Company's $20,000 gain on the sale of vehicles and equipment to
former employees pursuant to employee settlement agreements.
Part II - Other Information
Item 3. Defaults Upon Senior Securities
In March 1992, Kennecott Exploration Company loaned Fischer-Watt
$500,000. Principle and interest on this loan was repayable in
monthly installments of $100,000 beginning August 1, 1992. The
loan bore interest at the higher of 10% or prime plus 5% and was
secured by the Company's interest in the America Mine property.
On May 16, 1995 the note and associated interest were canceled in
conjunction with the sale of the Company's mineral interest in
the Minas de Oro, Honduras property thus curing the default.
(See above and Note 4 to Financial Statements.)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit Item 601
No. Category Exhibit
1 2 Letter of Intent dated August 28, 1995 whereby Fischer-
Watt Gold Company, Inc., and Great Basin Management
Company, Inc., agree to form a business combination.
2 2 August 28, 1995 agreement between Fischer-Watt Gold
Company, Inc., and Greenstone Resources Ltd., whereby
Fischer-Watt agrees to purchase 100% of Greenstone
Resources Ltd.'s wholly-owned Colombian branch,
Greenstone of Colombia ("GOC").
3 3 Articles of Incorporation dated October 20, 1986 filed
as Exhibit 3.1 to Form 10 filed December 22, 1988, and
incorporated herein by reference.
4 3 By-Laws of the Corporation, filed as Exhibit 3.2 to
Form 10 filed December 22, 1988, and incorporated
herein by reference.
5 3 Certificate of Amendment of Articles of Incorporation
of Fischer-Watt Gold Company, Inc., dated February 8,
1987,filed as Exhibit 3.3 to Form 10 filed December 22,
1988, and incorporated herein by reference.
6 10 Letter Agreement between BMR Gold Corporation and
Fischer-Watt Gold Company, Inc., regarding the America
Mine Property effective September 20, 1989, and filed
as Exhibit 19.1 to Form 10-Q filed November 20, 1989
and incorporated herein by reference.
7 10 Fischer-Watt Gold Company, Inc., non-qualified stock
option plan of May 1987 and filed as Exhibit 36.10 to
Form 10-K filed April 23, 1991 and incorporated herein
by reference.
8 10 Greenstone Letter Agreement dated November 2, 1993
whereby Greenstone Resources Ltd., and Fischer-Watt
Gold Company, Inc. agree to a merger of Fischer-Watt
Gold Company, Inc., with a wholly-owned subsidiary of
Greenstone and filed as Exhibit 49.10 to Form 10-Q
filed December 10, 1993 and incorporated herein by
reference.
9 10 Employment Agreement effective September 1, 1993
between Fischer-Watt Gold Company, Inc., and George
Beattie whereby Fischer-Watt agrees to employ Mr.
Beattie for a two-year period as Chief Executive
Officer and filed as Exhibit 20.10 to Form 10-K filed
May 11, 1994 and incorporated herein by reference.
10 10 Loan Agreement dated November 12, 1993 between Fischer-
Watt Gold Company, Inc., and Greenstone Resources Ltd.,
whereby Greenstone agreed to lend Fischer-Watt working
capital during the prospective merger's due diligence
period and filed as Exhibit 21.10 to Form 10-K filed
May 11, 1994 and incorporated herein by reference.
11 10 Letter from Greenstone Resources Ltd., dated
February 1,1994 to Fischer-Watt Gold Company, Inc.,
whereby Greenstone advised that the merger agreement
dated November 2, 1993 between Greenstone and
Fischer-Watt Gold is terminated as of that date and
filed as Exhibit 22.10 to Form 10-K filed May 11, 1994
and incorporated herein by reference.
12 10 Option Agreement between Greenstone Resources Ltd., and
Fischer-Watt Gold Company, Inc., dated March 24, 1994,
whereby Greenstone has the right to purchase all of
Fischer-Watt's interest in the San Andres property in
Honduras and filed as Exhibit 23.10 to Form 10-K filed
May 11, 1994 and incorporated herein by reference.
13 10 Exploration Agreement between Fischer-Watt Gold
Company, Inc.'s 50% owned Mexican company, Minera
Montoro S.A. de C.V., and Gatro South America Holdings
Limited (GSA) dated March 25, 1994, whereby GSA funds
a Generative Exploration program in Baja California,
Mexico and filed as Exhibit 24.10 to Form 10-K filed
May 11, 1994 and incorporated herein by reference.
14 10 Compromise Wage and Expense Settlement Agreement dated
March 22, 1994 between Fischer-Watt Gold Company, Inc.,
and W. Perry Durning, a former employee, whereby terms
for payment of unpaid wages and expenses were accepted
by the parties and filed as Exhibit 25.10 to Form 10-K
filed May 11, 1994 and incorporated herein by
reference.
15 10 Compromise Wage and Expense Settlement Agreement dated
March 22, 1994 between Fischer-Watt Gold Company, Inc.,
and Joel Heath, a former employee, whereby terms for
payment of unpaid wages and expenses were accepted by
the parties and filed as Exhibit 26.10 to Form 10-K
filed May 11, 1994 and incorporated herein by
reference.
16 10 Compromise Wage and Expense Settlement Agreement dated
March 22, 1994 between Fischer-Watt Gold Company, Inc.,
and Robert Gordon, a former employee, whereby terms for
payment of unpaid wages and expenses were accepted by
the parties and filed as Exhibit 27.10 to Form 10-K
filed May 11, 1994 and incorporated herein by
reference.
17 10 Compromise Wage and Expense Settlement Agreement dated
March 22, 1994 between Fischer-Watt Gold Company, Inc.,
and Frank L. Hillemeyer, a former employee, whereby
terms for payment of unpaid wages and expenses were
accepted by the parties and filed as Exhibit 28.10 to
Form 10-K filed May 11, 1994 and incorporated herein by
reference.
18 10 Compromise Wage and Expense Settlement Agreement dated
March 22, 1994 between Fischer-Watt Gold Company, Inc.,
and Michael D. Johnson, a former employee, whereby
terms for payment of unpaid wages and expenses were
accepted by the parties and filed as Exhibit 29.10 to
Form 10-Q filed June 14, 1994 and incorporated herein
by reference.
19 10 Agreement to Assign Leases dated July 7, 1994 between
Fischer-Watt Gold Company, Inc., and Kennecott
Exploration Company whereby Fischer-Watt agrees to
assign its interests in the Modoc property located in
Imperial County, California to Kennecott, reserving a
Net Smelter Return royalty. This agreement was filed
as Exhibit 22.10 to Form 10-Q filed September 13, 1994
and incorporated herein by reference.
20 10 Letter agreement between Fischer-Watt Gold Company,
Inc., and La Cuesta International (LCI) dated August
11, 1994 whereby LCI agrees to lease the Oatman
property located in Mohave County, Arizona. This
agreement was filed as Exhibit 23.10 to Form 10-Q filed
September 13, 1994 and incorporated herein by
reference.
21 10 Stock Pledge Agreement between Fischer-Watt Gold
Company, Inc., and Greenstone Resources Canada Ltd.,
dated July 31, 1994 whereby Fischer-Watt grants a
security interest in shares of Compania Minerales de
Copan S.A. de C.V., acquired under Stock Loans, to
Greenstone. This agreement was filed as Exhibit 24.10
to Form 10-Q filed September 13, 1994 and incorporated
herein by reference.
22 10 Option Agreement - Lock-up Agreement between Fischer-
Watt Gold Company, Inc., and Greenstone Resources Ltd.,
dated October 17, 1994 whereby the San Andres option
agreement was amended to provide for an early advance
of $50,000 as partial payment of the option in exchange
for restrictions on the disposition of Greenstone
shares. This agreement was filed as Exhibit 22.10 to
Form 10-Q filed December 14, 1994 and incorporated
herein by reference.
23 10 English translation of an Exploration Agreement between
Fischer-Watt's Mexican subsidiary, Minera Montoro, S.A.
de C.V. and Minera Cuicuilco, S.A. de C.V. dated
October 18, 1994 whereby Minera Cuicuilco is granted
the rights to explore the Cerrito property in Baja
California, Mexico and was filed as Exhibit 23.10 to
Form 10-Q filed December 14, 1994 and incorporated
herein by reference.
24 10 Acquisition agreement dated November 10, 1994 among
Greenstone Resources Canada Ltd., Greenstone Resources
Ltd., and Fischer-Watt Gold Company, Inc., whereby the
parties finalize the Option Agreement of March 24, 1994
to purchase the San Andres property in Honduras and
modify the Lock-Up Agreement dated October 17, 1994.
This agreement was filed as Exhibit 29.10 to Form 10-K
filed May 15, 1995 and incorporated herein by
reference.
25 10 Letter agreement dated February 28, 1995 between
Tombstone Explorations Co. Ltd., and Fischer-Watt Gold
Company, Inc., whereby Tombstone agrees to purchase all
of Fischer-Watt's rights to the Minas de Oro property
in Honduras. This agreement was filed as Exhibit
30.10 to Form 10-K filed May 15, 1995 and incorporated
herein by reference.
26 10 Letter agreement dated April 13, 1995 between Begeyge
Minera Limitada and Fischer-Watt Gold Company, Inc.,
whereby Fischer-Watt will acquire rights to the
La Victoria, Honduras property. This agreement was
filed as Exhibit 31.10 to Form 10-K filed May 15, 1995
and incorporated herein by reference.
27 10 Option whereby Fischer-Watt Gold Company, Inc., grants
Gerald D. Helgeson an option to purchase 100,000 shares
of Fischer-Watt restricted common stock. This option
was filed as Exhibit 32.10 to Form 10-K filed May 15,
1995 and incorporated herein by reference.
28 10 Option whereby Fischer-Watt Gold Company, Inc., grants
Larry J. Buchanan an option to purchase 100,000 shares
of Fischer-Watt restricted common stock. This option
was filed as Exhibit 33.10 to Form 10-K filed May 15,
1995 and incorporated herein by reference.
29 10 Amendment dated April 20, 1995 to Agreement to Assign
Leases dated July 7, 1994 between Fischer-Watt Gold
Company, Inc., and Kennecott Exploration Company
whereby Fischer-Watt agrees to assign its interests
in the Modoc property located in Imperial County,
California to Kennecott and filed as Exhibit 28.10 to
Form 10-QSB filed June 14, 1995 and incorporated herein
by reference.
30 10 Asset Purchase Agreement dated May 16, 1995 between
Fischer-Watt Gold Company, Inc., and Cerenex Financial
A. V. V., whereby the February 28, 1995 sale of Minas
de Oro is closed and filed as Exhibit 29.10 to Form
10-QSB filed June 14, 1995 and incorporated herein by
reference.
31 10 Option effective June 1, 1995, replacing an option
filed as Exhibit 26.10 to Form 10-QSB filed June 14,
1995, whereby Fischer-Watt Gold Company, Inc., grants
Gerald D.Helgeson an option to purchase 200,000 shares
of Fischer-Watt restricted common stock.
32 10 Option effective June 1, 1995, replacing an option
filed as Exhibit 27.10 to Form 10-QSB filed June 14,
1995, whereby Fischer-Watt Gold Company, Inc., grants
Larry J. Buchanan an option to purchase 100,000 shares
of Fischer-Watt restricted common stock.
33 10 Option effective June 1, 1995 whereby Fischer-Watt
Gold Company, Inc., grants Anthony P. Taylor an option
to purchase 100,000 shares of Fischer-Watt restricted
common stock.
34 10 Option effective June 1, 1995 whereby Fischer-Watt
Gold Company, Inc., grants Kelly Boatright an option
to purchase 25,000 shares of Fischer-Watt restricted
common stock.
35 10 Option effective June 1, 1995 whereby Fischer-Watt Gold
Company, Inc., grants Donald N. Lawrence III an option
to purchase 100,000 shares of Fischer-Watt restricted
common stock.
36 10 Loan agreement dated August 28, 1995, between Fischer-
Watt Gold Company, Inc., and Great Basin Management
Company, Inc., whereby Fischer-Watt agrees to loan
Great Basin Management Company, Inc., up to $108,000.
37 11 Statement regarding per share earnings for the
quarterly period ended July 31, 1995.
38 27 Financial Data Schedule for the quarterly period ended
April 30, 1995 and filed as Exhibit 30.10 to Form
10-QSB filed June 14, 1995 and incorporated herein by
reference.
39 27 Financial Data Schedule for the six month period ended
July 31,1995.
40 99 Promissory Note from Fischer-Watt Gold Company, Inc.
to Kennecott Exploration Company in the amount of
$500,000 dated March 25, 1992 and filed as Exhibit
44.28 to Form 10-K filed April 22, 1993 and
incorporated herein by reference.
41 99 Minutes of Special Meeting of Board of Directors of
Fischer-Watt Gold Company, Inc., dated October 19,
1994, whereby George Beattie's employment contract
dated September 1, 1993 is extended to September 1,
1997. These minutes were filed as Exhibit 28.99 to
Form 10-K filed May 15, 1995 and incorporated herein
by reference.
(b) Reports on Form 8-K - NONE
SIGNATURES
In accordance with the requirements of the Exchange Act the
Registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FISCHER-WATT GOLD COMPANY, INC.
September 13, 1995 By /s/ George Beattie
George Beattie, President,
Chief Executive Officer
(Principal Executive Officer),
Chief Financial Officer
(Principal Financial Officer),
Chairman of the Board
and Director