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 September 30, 2001
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
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<Table>
COLORADO 84-0630963 .
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(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1515 South Tejon, Suite 201 , Colorado Springs, Colorado 80906
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</Table>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (719) 471-9013
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(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 September 30, 2001: 1,888,450
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
BALANCE SHEETS
<Table>
<Caption>
September 30,
2001 December 31,
(unaudited) 2000
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 354,825 $ 91,591
Short-term investments 970,101 1,226,100
Interest receivable and other current assets 68,285 72,853
Note receivable from sale of water rights 190,156 190,156
------------ ------------
Total current assets 1,583,367 1,580,700
Assets held for sale - water rights (net) 132,680 132,680
Property and equipment, at cost:
Land 8,100 2,025
Furniture and fixtures 8,014 8,014
Machinery and equipment 33,225 33,225
------------ ------------
49,339 43,264
Less accumulated depreciation (31,997) (30,114)
------------ ------------
17,342 13,150
------------ ------------
Total assets $ 1,733,389 $ 1,726,530
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 5,567 $ 9,790
Shareholders' equity:
Authorized 3,500,000 shares; issued
and outstanding 1,888,450 shares 7,116,604 7,116,604
Additional paid-in capital 1,927,736 1,927,736
Accumulated comprehensive loss (30,433) (30,433)
Accumulated deficit (7,286,085) (7,297,167)
------------ ------------
Total shareholders' equity 1,727,822 1,716,740
------------ ------------
$ 1,733,389 $ 1,726,530
============ ============
</Table>
2
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS
AND ACCUMULATED DEFICIT
FOR THE THREE AND NINE MONTHS ENDED
September 30, 2001 and 2000
(Unaudited)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
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 (91,474) (63,761) (297,472) (243,447)
------------ ------------ ------------ ------------
Operating income (91,474) (63,761) (47,472) 6,553
Other income and (expense):
Interest and other income 15,471 27,390 58,554 66,764
------------ ------------ ------------ ------------
Net income $ (76,004) $ (36,371) $ 11,082 $ 73,317
------------ ------------ ------------ ------------
Income per share $ (0.04) $ (0.02) $ 0.01 $ 0.04
============ ============ ============ ============
Weighted average common
shares outstanding 1,888,450 1,888,450 1,888,450 1,888,450
============ ============ ============ ============
ACCUMULATED DEFICIT:
Beginning of period $ (7,210,082) $ (7,221,811) $ (7,297,167) $ (7,331,499)
------------ ------------ ------------ ------------
End of period $ (7,286,085) $ (7,258,182) $ (7,286,085) $ (7,258,182)
============ ============ ============ ============
</Table>
3
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
September 30, 2001 and 2000
(Unaudited)
<Table>
<Caption>
2001 2000
---------- ----------
Cash flows from operating activities:
Net income $ 11,082 $ 73,317
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 1,883 (3,692)
Decrease (increase) in interest receivable
and other current assets 4,568 (43,292)
Decrease in accounts payable
and accrued liabilities (4,223) (7,603)
---------- ----------
Net cash provided by
operating activities 13,310 18,730
---------- ----------
Cash flows from investing activities, net
Decrease (increase) in short-term investments 255,999 (60,271)
Purchase of property and equipment (6,075) (2,989)
---------- ----------
Net cash provided by (used in)
investing activities 249,924 (63,260)
---------- ----------
Net increase (decrease) in cash and
cash equivalents 263,234 (44,530)
Cash and cash equivalents, beginning of period 91,591 152,581
---------- ----------
Cash and cash equivalents, end of period $ 354,825 $ 108,051
========== ==========
</Table>
4
GOLDEN CYCLE GOLD CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements 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, 2000. 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.
(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 September 30, 2001, the Company's share of accumulated
unrecorded losses from the Joint Venture was $14,999,858.
(3) EARNINGS PER SHARE
Earnings per share are computed by dividing net earnings by the weighted
average number of shares of common stock outstanding during each period. There
are no dilutive securities outstanding in either period.
5
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 AngloGold Colorado Inc. ("AngloGold", formerly Pikes Peak Mining
Company), a wholly-owned subsidiary of AngloGold North America Inc., which is a
wholly owned subsidiary of AngloGold Ltd.
The Company's rights and obligations relating to its Joint Venture interest
are governed by the Joint Venture Agreement. The Joint Venture is currently, and
for the foreseeable future will be, operating in the Initial Phase, as defined.
In accordance with the Joint Venture Agreement, AngloGold 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 AngloGold's administrative fees) of $58 million have been
distributed to the venture participants in the proportion of 80% to AngloGold
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 AngloGold or third-party financial institutions and are repayable
prior to distributions to the venture participants. AngloGold (the "Manager")
reported that Initial Loans, payable to AngloGold, of approximately $234 million
were outstanding at September 30, 2001. Under the Agreement, as amended, 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 AngloGold 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 $13,000 and $19,000 in the
nine months ended September 2001 and 2000 respectively. Prior to 1993, the
$250,000
6
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, 2001. No
further distributions are expected from the Joint Venture during the remainder
of 2001.
The Company's working capital was approximately $1,578,000 at September 30,
2001 compared to $1,571,000 at December 31, 2000. Working capital increased by
approximately $7,000 at September 30, 2001 compared to December 31, 2000.
Management believes that the Company's working capital, augmented by the
Minimum Annual Distribution, is adequate to support operations at the current
level for the coming year, barring unforeseen events. Although there can be no
assurance, the Company anticipates the closure of its sale of certain Water
Rights to the City of Cripple Creek during the year 2001 which will provide
additional working capital. The Company anticipates that its Philippine
subsidiary will hold all work on a standby basis until the Mineral Profit
Sharing Agreement is awarded to the claim owner. If opportunities to
economically pursue or expand operations in the Republic of the Philippines, or
in Nevada with the Table Top or Illipah properties, or any other opportunity are
available, and the Company elects to pursue them, additional working capital may
also be required. There is no assurance that the Company will be able to obtain
such additional capital, if required, or that such capital would be available to
the Company on terms that would be acceptable. Furthermore, if any such
operations are commenced, it is not presently known when or if a positive cash
flow could be derived from the properties.
Results of Operations
The Company had net income, for the nine months ended September 30, of
approximately $11,000 in 2001, compared to net income of approximately $73,000
in the 2000 period.
The decrease in net income for the first nine months of 2001 compared with
the corresponding period in 2000 was due primarily to increased general and
administrative expenses.
The Company announced October 3, 2001 that it has acquired the "Table Top"
gold prospect in Humboldt County, Nevada. The Table Top claim group lies within
the Basin and Range province of north-central Nevada, which over the past forty
years has become one of the world's premier gold producing regions. The Table
Top property can be interpreted to lie within the "Midas" gold bearing zone
striking northeast across Nevada, and also as a part of a north-south trend
containing the Sleeper Mine, Sandman, Florida Canyon, Rochester and Relief
Canyon. The property is located ten miles west of Winnemucca, Nevada.
7
The Table Top claims cover a gold bearing brecciated and silicified
sediment that is poorly exposed and has only been unsystematically explored and
partially drill tested in the past. The key gold mineralized feature on the
property is a hydrothermal breccia, which contains anomalous gold, arsenic,
antimony and mercury.
Goldfields Mining Corporation first staked the Table Top property in 1986
while conducting surface exploration for an open pit type operation. A limited
rock chip sampling and reverse circulation drilling program indicated the
presence of a gold mineralized system. Golden Cycle Gold's intended exploration
target will be the discovery of a high grade mineralized gold vein system at
depth, to be developed by a phased exploration program.
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 September
30, 2001, the Company's share of accumulated unrecorded losses from the Joint
Venture was $14,999,858.
The Joint Venture incurred net losses of approximately $3.6 million and
$11.7 million for the three and nine months ended September 30, 2001
respectively, as compared to net losses of $2.6 million and $9.5 million for the
corresponding periods in 2000. The Joint Venture recorded a net loss of $13.1
million for the year ended December 31, 2000 compared to net losses of $7.4
million and $11.8 million for the years ended December 31, 1999 and 1998
respectively. There is no assurance that the Joint Venture will be able to
achieve profitability in any subsequent period or to sustain profitability for
an extended period. The ability of the Joint Venture to sustain profitability is
dependent upon a number of factors, including without limitation, the market
price of gold, which is currently near recent historically low levels, volatile
and subject to speculative movement, a variety of factors beyond the Joint
Venture's control, and the efficiency of the Cresson mining operation.
Whether future gold prices and the results of the Joint Venture's
operations will reach and maintain a level necessary to repay the Initial Loans,
complete the Initial Phase, and thereafter generate net income cannot be
assured. Based on the amount of Initial Loans payable to the Manager and the
uncertainty of future operating revenues, management of the Company believes
that, without a significant and sustained increase in the prevailing market
price for gold, it is unlikely that the Company will receive more than the
Minimum Annual Distribution from the Joint Venture in the foreseeable future.
8
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/ R. HERBERT HAMPTON
----------------------------------------------------
R. Herbert Hampton
President, C.E.O. and Treasurer
(as both a duly authorized officer of Registrant and
as principal financial officer of Registrant)
November 13, 2001
9