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, 2002
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.)
1515 South Tejon, Suite 201, Colorado Springs, Colorado 80906
- -------------------------------------------------------------------------------
(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, 2002: 1,888,450
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
BALANCE SHEETS
<Table>
<Caption>
June 30,
2002 December 31,
(unaudited) 2001
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 346,086 $ 570,842
Short-term investments 1,096,276 877,304
Interest receivable and other current assets 55,328 42,261
-------------- --------------
Total current assets 1,497,690 1,490,407
Assets held for sale - water rights (net) 132,680 132,680
Property and equipment, at cost:
Land 2,025 2,025
Mineral property development costs 20,657 16,076
Furniture and fixtures 11,626 7,988
-------------- --------------
Machinery and equipment 33,651 33,651
67,959 59,740
-------------- --------------
Less accumulated depreciation (35,587) (33,919)
-------------- --------------
32,372 25,821
Total assets $ 1,662,742 $ 1,648,908
============== ==============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 17,619 $ 25,932
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 (30,715) (30,715)
-------------- --------------
Accumulated deficit (7,368,502) (7,390,649)
-------------- --------------
Total shareholders' equity 1,645,123 1,622,976
$ 1,662,742 $ 1,648,908
============== ==============
</Table>
2
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS
AND ACCUMULATED DEFICIT
FOR THE THREE AND SIX MONTHS ENDED
June 30, 2002 and 2001
(Unaudited)
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
Revenue:
Distribution from mining
joint venture in excess
of carrying value $ -- $ -- $ 250,000 $ 250,000
------------- ------------- ------------- -------------
Total operating revenue -- -- 250,000 250,000
Expenses:
Exploration (36,026) (14,463) (54,070) (18,463)
General and administrative (114,537) (99,517) (192,805) (187,535)
------------- ------------- ------------- -------------
Total expenses (150,563) (113,980) (246,874) (205,998)
------------- ------------- ------------- -------------
Operating income (150,563) (113,980) 3,126 44,002
Other income and (expense):
Interest and other income 8,399 19,575 19,021 43,083
------------- ------------- ------------- -------------
Net income $ (142,164) $ (94,405) $ 22,147 $ 87,085
------------- ------------- ------------- -------------
Income per share $ (0.08) $ (0.05) $ 0.01 $ 0.05
============= ============= ============= =============
Weighted average common
shares outstanding 1,888,450 1,888,450 1,888,450 1,888,450
============= ============= ============= =============
ACCUMULATED DEFICIT:
Beginning of period $ (7,226,338) $ (7,115,677) $ (7,390,649) $ (7,297,167)
------------- ------------- ------------- -------------
End of period $ (7,368,502) $ (7,210,082) $ (7,368,502) $ (7,210,082)
============= ============= ============= =============
</Table>
3
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
June 30, 2002 and 2001
(Unaudited)
<Table>
<Caption>
2002 2001
-------------- --------------
Cash flows from operating activities:
Net income $ 22,147 $ 87,085
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 1,668 1,256
Decrease (increase) in interest receivable
and other current assets (13,067) 24,371
Decrease in accounts payable
and accrued liabilities (8,313) (2,932)
-------------- --------------
Net cash provided by
operating activities 2,435 109,780
-------------- --------------
Net cash provided by investing activities:
Increase in short-term investments (218,972) (34,297)
Mineral property development costs (4,581) --
Purchase of property and equipment (3,638) --
-------------- --------------
Net cash used in
investing activities (227,191) (34,297)
-------------- --------------
Net increase (decrease) in cash and
cash equivalents (224,756) 75,483
Cash and cash equivalents, beginning of period 570,842 91,591
-------------- --------------
Cash and cash equivalents, end of period $ 346,086 $ 167,074
============== ==============
</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, 2001. 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 June 30, 2002, the Company's share of accumulated unrecorded
losses from the Joint Venture was $17,772,458.
(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 175,000 shares of dilutive securities outstanding during the
six months ended June 30, 2002. There were no dilutive securities outstanding
during the three months ended March 31, 2002 or March 31, 2001, or during the
six months ended June 30, 2001.
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 $325 million
were outstanding at June 30, 2002. 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 $2,000 and $110,000 in
the 2002 and 2001 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, 2002. No
further distributions are expected from the Joint Venture during the remainder
of 2002.
The Company's working capital was approximately $1,480,000 at June 30,
2002 compared to $1,464,000 at December 31, 2001. Working capital increased by
approximately $16,000 at June 30, 2002 compared to December 31, 2001.
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 2002 which will
provide additional working capital. The Company anticipates that its Philippine
subsidiary will hold all work on a standby basis until the MPSA is awarded to
the claim owner. If opportunities to economically pursue or expand Philippine or
Nevada operations, or any other opportunity are available, and the Company
elects to pursue them,
6
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 six months ended June 30, of
approximately $22,000 in 2002, compared to net income of approximately $87,000
in the comparable 2001 period.
The decrease in net income for the first six months of 2002 compared
with the corresponding period in 2001 was due to increased exploration
activities and slightly increased general and administrative expenses during the
2002 period, and markedly decreased interest revenue from investments due to
lower prevailing interest rates during 2002 to date.
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,
2002, the Company's share of accumulated unrecorded losses from the Joint
Venture was $17,772,458.
The Manager reported that the Joint Venture incurred a net loss of
approximately $8.7 million for the six months ended June 30, 2002 as compared to
a net loss of $8.3 million for the corresponding period in 2001. 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.
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
7
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)
CERTIFICATION OF PERIODIC REPORT
I, R. Herbert Hampton, Chief Executive Officer of Golden Cycle Gold Corporation
(the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350, that:
(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period
ended June 30, 2002 (the "Report") fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d); and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/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)
August 13, 2002
8